All eyes on… Three emerging markets to watch for beauty and personal care growth in 2023
With a rapidly growing middle class and increasing demand for high quality products, Vietnam is one of the oft mentioned markets by brands who are interested in expanding their footprint in South East Asia – Swiss skin care brand Evenswiss is one of them.
Its journey in Asia started in China three years ago, which it penetrated through cross-border e-commerce channels. Over the last three years, China has become a stronghold for the brand, with business growing three to four times annually.
The company has now set its sights on SEA as its next target. In particular, it sees huge growth opportunities in Vietnam, where it has enjoyed encouraging success.
“Vietnam is now our second growth story,” said APAC regional lead Michelle Wee.
She added: “Countries like Vietnam are up and coming, with a skin care industry that is booming. Vietnam is the main target right now as we see the potential for it to become the second China for us.”
The company started growing its presence in Vietnam through the professional beauty channel, which consists of dermatology and aesthetic clinics.
“Because of our technology, clients can use it after surgery or laser treatments to boost skin recovery while also being gentle on the skin. That’s our strategy; we start off in the professional area, let the brand gain some awareness and credibility and then the next step we will move to B2C through retail or online,” said Wee.
Vietnam is also important as a bridge to neighbouring markets, she added. “Once you have Vietnam, you open the doors to Cambodia and Laos. That’s one cluster we want to focus on. We’ve just started with Vietnam, so once its stable we will work on that triangle.”
However, the market is not without its complications. “Even though it's a market with high potential, Vietnam is a market that’s hard to control,” said Wee.
She elaborated that many beauty companies, Evenswiss included, have trouble dealing with Vietnam’s infamous grey market. “It’s basically backdoor importing. They are able to skip the regulations and sell an expensive brand at cheaper prices.”
Wee elaborated that this usually happens once a brand starts to gain awareness in Vietnam and its popularity becomes a double-edged sword. Evenswiss encountered this very issue a couple of years ago after a very successful brand campaign which got it mentions on television.
“We had a lot of problems with the grey market once the brand got popular. Typically, when this happens, people from the grey market will pick it up and start selling through backdoor channels and then there will be a price war. You can imagine all the hard work that is done to build the brand up will be destroyed just like that.”
While controlling the grey market entirely is almost impossible, the brand put up safeguards to prevent what happened from repeating itself. For instance, it now has a stronger online presence to deter grey market sellers.
“When you have a lot of random grey market sellers on Lazada selling your product at half-price, it’s important to have an official store. If you don’t have a strong online presence, people can’t go back and compare to that as a benchmark and say: okay, this is the real deal,” Wee explained.
The Middle East presents burgeoning opportunity for beauty brands with growing demand for sophisticated cosmetics from the region’s young, affluent consumer base.
In 2022, CosmeticsDesign-Asia spoke to several beauty and personal care companies that have highlighted the Middle East as one of the most interesting markets in the beauty space right now.
Heure is a luxury skin care brand that is known for its proprietary encapsulated transdermal delivery system which works as a ‘drone’ that targets specific areas of the skin to deliver actives where they are really needed.
Managing director Han Lim told us that it was important to target demographics that can appreciate the sophisticated technology behind Heure – a technology that was 10 years in the making.
The Singapore-based company believes that the Middle East could be the perfect ground to plot part of its international expansion plans for Heure.
There are two things we zoom in on to find out if a market is compatible. First of course, is price point. The second thing that we look for is how amenable this demographic is to associations with science, technology and innovation. When all the stars align, then that’s a market we would really be interested in. And we found that the Middle East fits this profile,” said Lim.
Given its proximity to India, many of her rising beauty brands have their eye on the Middle East, including beauty unicorn The Good Glamm Group, which owns brands such as MyGlamm, St Botanica, and Sirona.
“The Middle East is a very unique proposition,” said Asad Raza Khan, the company’s global commercial officer.
“It has a very good mix of many nationalities, many cultures. And it’s the breeding ground for a lot of international brands. It's like the final frontier for a lot of international brands.”
The company said it would be working with larger retailers in the region to tackle the largely offline beauty market, while at the same time building up its online presence in the country.
The company kicked off its expansion in the region last year with the United Arab Emirates, Qatar, and Oman.
According to group founder and CEO Darpan Sanghvi, the Middle Eastern beauty market is still concentrated offline, which presents an interesting opportunity for the company, which specialises in the online direct-to-consumer space.
“Over 90% of the market is offline, this is unlike India for us, where offline came second to online. That also means there’s a large opportunity because online has yet to be cracked.”
Another Indian company that has its sights set on the Middle East is FSN E-Commerce Ventures is the parent company of prominent beauty and fashion e-tailer Nykaa.
In October 2022, the firm announced a strategic alliance with Middle Eastern company Apparel Group to tap into the Gulf markets to undertake an omnichannel, multi-branded beauty retail business.
“It is one of the most value-dense markets in the world when it comes to beauty. With the significant young population that is witnessing strong winds of positive change in terms of women’s right and women empowerment,” said Vikas Gupta CEO of Nykaa Distribution and Nykaa International.
Gupta also highlighted that the region’s online space holds a lot of opportunities for the company.
“The e-commerce segment is underpenetrated, but growing rapidly, ahead of the total market. We view this opportunity positively and believe we can build a strong sustainable business there with the Nykaa playbook and Nykaa energy.”
Another region that is emerging as a promising market for beauty and personal care businesses is Central Asia, which comprises of countries including Kazakhstan, Kyrgyz Republic, Tajikistan, Turkmenistan, and Uzbekistan.
The rapid economic expansion of neighbouring countries like China and Russia, have bolstered its economic growth, presenting ample opportunities for cosmetic companies.
The locals are familiar with the big brand names as well as a smattering of regional brands from countries like China and Russia. The region is home to a significant Muslim population, making halal certification a crucial selling point for products, including beauty and personal care.
Andy Ong, founder and managing director of oral care brand Pearlie White, had previously told CosmeticsDesign-Asia that the Singaporean company’s “core focus” over the next few years will be trying to break into the Central Asia markets.
In particular, the company is keen to break into Kazakhstan, the largest country in Central Asia
“It’s a very interesting market. Even though their currency isn’t so great, their GDP per capita is higher than Thailand and Indonesia, which are familiar markets to us where we are doing pretty good. The population is not too small – about 19 million – so that’s why we look at it as a potential opportunity.”
The beauty and personal care space in the region is still developing, said Ong. For instance, the natural beauty trend that is so ubiquitous to many of us, is still considered a novel concept in Central Asia.
“In our part of the world, everyone has gone into the whole natural everything already. Over there, it’s not really moving yet. They are still very much into using the typical oral care product. But they are starting to open up and read the labels.”
Ong added: “We like to go to countries where more and more consumers are starting to read the labels rather than just picking up whatever is on the shelf. I feel these are key markets that we should be looking into.”
However, the market is not without its challenges. While the adoption of e-commerce is growing with the presence of regional players, it is still not as easy for a foreign brand to establish its presence there.
“With Kazakhstan, it’s the biggest landlocked country in the world. This makes cross-border e-commerce quite tough for this reason alone. You would need a local fulfilment centre and you would need to ship truckloads for logistic costs to come down.”
As such, having a local partner would be crucial to enter the Central Asian market, Ong emphasised.
“Unless you have a local partner that stores your products, fulfils your products – literally a proper distributor – you have zero chance.”
Another challenge the company faces is the currency differences between Singapore and the countries in the region.
“Over COVID, the Singapore dollar or US dollar has appreciated 25% versus the Kazakhstani Tenge for instance. Everything is a lot more expensive than pre-COVID. This is a situation that has prevented many companies from going in. You can only target the higher income consumers and that segment may not be as large as what we would like for FMCG-type products.”
On the flipside, the region has been relatively unaffected by its proximity to the ongoing war Russo-Ukrainian War.
A 2022 report by the European Bank for Reconstruction and Development (EBRD) said it expected the region’s GDP to grow by and 4.9 per cent in 2023 despite the war. In fact, it noted that despite the geopolitical turmoil, it has shown strong resilience in the face of the adversities.