Booming cosmetics market

October 19, 2015


THE estimated domestic market for cosmetics and beauty-care products — including the huge informal and grey segments — exceeds Rs150bn and is expanding at an average rate of 15pc annually.

However, the booming sector does not surface in the government’s monitoring and accounting exercises. Market players blame incompetence, apathy and widespread corruption for the anomaly.

“How can they not see the expanding beauty-care product and service sector, with salons at every nook and corner across the country; sections of beauty-care products in stores; dedicated wholesale markets; small filling plants in low-income localities; the huge influx of big brands; and the range of products appearing on dressing tables in their homes, unless they decide not to take notice. Nothing but corruption and collusion explains it,” Atiqa Odho — an actress, fashion icon and the CEO and proprietor of Odho Cosmetics (launched in 2004) told Dawn.

The size of the market is derived on the basis of scattered commissioned reports by marketing research companies and Unilever Pakistan’s projected Rs80bn market for branded personal care products in the country.

But old veterans in the cosmetic and personal-care product industry find the projection unrealistically low, as they believe that formal production and imports add up to hardly 20pc of the total business, with the rest being informal and all cash-based. If one accepts their view as more credible, the size of the market will instantly shoot up to a whooping Rs400bn — i.e. Rs80bn (formal) and Rs320bn (informal).

Senior bureaucrats in the statistics, finance, customs, industry and commerce ministries and departments, as well as in the FBR and TDAP, fumbled when asked to shed light on the dimensions of this market, including its size; imports/exports; under-invoicing and smuggling; the size of the local industry and its problems; and retail and wholesale margins etc.

There was no mention of this sector in the Pakistan Economic Survey 2014-15. There was no research material available on the internet that would define even the broad contours of this sector.

But background research by this scribe brought to the fore some interesting facts that reflect the changing lifestyle and consumption patterns of households and the role of middle-class working women, who are assumed to be fairly aware and leading the trend.

Some players believe that women in Pakistan and similar societies with strong gender biases treat fashion and self-care as an expression of rebellion, where they can apply their personal choice and draw satisfaction and pleasure at affordable cost.

‘The government has done nothing for the industry, besides hounding businesses for taxes. The tax structure discourages local production and legal trade’

L’Oreal Pakistan Managing Director Musharaf Hai had stated sometime back that “along with economic indicators, social and lifestyle indicators are equally important to assess a society”.

Many trading houses and cosmetics manufacturers declined to comment as they said no credible data was available and no association exists to articulate their common issues.

Most business people, however, complained of the government’s apathy towards local industry and the widespread availability of counterfeited popular products, which have forced many to wrap up their production and open trading houses.

In response to this writer’s queries, Unilever Pakistan CEO Ehsan Malik

wrote: “Unilever Pakistan’s personal-care business spans skin cleansing, skin care, hair care and oral care products, including Lux, Sunsilk, Dove, Lifebuoy, Pond and Fair & Lovely. We are market leaders in most of these categories. The total branded market for these segments is more than Rs80bn in size, growing at approximately 15pc every year”.

Aslam Allawala and Khurram Nanitalwala, well-known names in the sector and pioneers and proprietors of household names Medora and Touch Me brands, were cautious. They were not too keen to share their experience or comment on business trends.

“There is no firmed up data available anywhere. The sector is fragmented, with no cosmetic manufacturers’ association. My observation is that the high-end dealers and shopping malls and superstores stack the products of multinationals and big brands, while we cater to the middle and lower middle classes through the network of medium and small retailers across the country,” Nanitalwala said over phone.

“The government has done nothing for the industry, besides hounding businesses for taxes. The tax structure discourages local production or legal trade,” he added.

Asif Bajwa, chief statistician of the Pakistan Bureau of Statistics, admitted that consolidated data on the sector was not available, but blamed other ministries and departments for not feeding the data.

“In the absence of data you are left with observations that can always be tainted. Yes, it is our responsibility to organise the data pooled in by different government organisations. The trade data is provided by the FBR and the industrial data by the industries ministry etc. The sector might be big but negligible in the context of the macroeconomy,” he said over phone.

The finance ministry’s joint Secretary, Waqar Ali Khetran, insisted that after devolution it is the responsibility of the provincial governments to monitor and regulate all sectors. “The role of the federal government is to facilitate. We respond when our intervention is sought by the private sector. As far as I know, we have not been approached by market players,” he vainly tried to defend the government’s lack of interest in the sector.

Federal industries secretary Arif Azeem blamed the key market players for the anomaly. “These people probably do not want to be documented and therefore it is not the government that is indifferent but the private sector, which abhors state attention for obvious reasons,” he made a point.

Younus Soomro, former president of custom agents and freight forwarder association hinted to a powerful ring of major players who control and manipulate the market to suit their interest. “No one can act in isolation. The network is too elaborate and strong. It is an open secret that everyone knows about but afraid to talk”, he commented over phone.

The FBR’s customs member Nisar Muhammad was too busy to spare time for comments, as were people in the commerce ministry. TDAP Chairman S.M. Munir was unable to give any sense of the size of the market or its export potential.

Published in Dawn, Business & Finance weekly, October 19th , 2015

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