Personal-Care Firms Uncover New Markets

Personal-care companies have discovered a hidden market: veiled hair.

German consumer-goods maker Henkel AG is touting its new Gliss Restore & Refresh shampoo as the world’s first hair-care product to address problems caused by the lack of ventilation under a head scarf, including split ends, itchy scalp and unpleasant odor. British-Dutch rival Unilever PLC is also targeting the market with its Sunsilk shampoo. And hair is just the start.

After years of pushing Western-designed shampoos and deodorants in the Middle East, the world’s biggest personal-care companies are changing course and selling products made specifically for local consumers’ tastes.

Procter & Gamble Co.’s Olay line targets Persian Gulf customers with skin-lightening creams. A recent campaign by Beiersdorf AG’s Nivea brand collected love stories from mostly female Middle Eastern writers to market its Sensual Musk body lotion.

Unilever, the world’s second-largest consumer-products company, after P&G, has tweaked best-selling products such as Axe deodorant and Sunsilk shampoo with local woody or sweet fragrances and made some packaging shinier, the company said.

The goal is to woo young Middle Easterners with cash to spare. Consumer spending in developed markets, by contrast, is still rebounding from the financial crisis.

“If you want to go with growth, you want to go with the Muslim market,” said Shelina Janmohamed, vice president at Ogilvy Noor, a London-based Muslim marketing agency owned by WPP PLC.

The global Halal market—products made to be permissible under Islamic law—is valued at $2.1 trillion, according to a 2013 report by the Halal Industry Development Corp., a government-sponsored trade group based in Malaysia. Roughly 9% of that goes to Halal cosmetic products, one of the fastest-growing categories.

Halal cosmetic products are prohibited from containing any pork byproducts such as pig-fat derivatives, which are used in some makeup brands, or the proteins used in some shampoos. They also shouldn’t contain alcohol, which is forbidden under Islamic law.

Marketing by major personal-care companies directly to Muslim consumers is still in its infancy, according to Ogilvy Noor’s Ms. Janmohamed, who likens the situation to the untapped Hispanic market in the U.S. 20 years ago. Still, some campaigns have started to appear, including an ad for Unilever’s Sunsilk shampoo in which no hair was shown.

So far, much of the growth has come from small firms providing specialist products in one or two countries. Now global companies are tapping the booming demand. Since 2008, Henkel’s Middle East and Africa business has grown three times as fast as the company overall. Regional sales increased 17.6% in 2013 from the previous year, and Henkel expects a similar performance this year.

“We have come from being, relatively, a very small player within the group,” said Ashraf El Afifi, head of Henkel’s business in the Middle East and Africa. While mainstream Western products hyped on the Internet and satellite TV have gained popularity in the region, for personal-care essentials, “the trend is local,” he said.

Still, the region poses many challenges. Executives say political uncertainty in the wake of the Arab Spring makes planning extremely difficult. Tastes vary dramatically by country. In Beirut, for example, a high penetration of Western brands means lines like Henkel’s Restore & Refresh have been less successful than in Egypt, where consumers have sought more locally tailored products.

“I do prefer if these products have a local twist or are especially made for my needs and my daily routine,” said Salwa Saber, a 20-year-old university student in Cairo.

Competition is also intense from local suppliers able to produce imitation products at a fraction of the cost, meaning some companies resort to discounting and special offers.

Ahmed el Amir, who owns a drugstore outside of Cairo, said Henkel offered a free veil when it launched Gliss Restore & Refresh, and many women bought the shampoo to get the scarf. “From my experience, it is very difficult to keep people interested in new products for a long time here because the competition is very tough,” Mr. Amir said.

The Middle East is also a lower priority for many companies than China, India or Africa, where enormous population growth and low penetration of consumer goods has attracted greater investment.

The Middle East still “doesn’t have a great impact” on the strategies of major consumer-products companies, despite sales growth, said James Edwardes Jones, managing director at RBC Capital Markets LLC.

But growth potential in some countries is big. In Saudi Arabia, for example, the beauty and personal-care market will rise to roughly $7.5 billion in 2018 from $4.1 billion last year, predict analysts Euromonitor International.

To better understand consumers and speed new-product marketing, Henkel recently relocated some of its research-and-development team to Dubai. In less than eight months, the team was able to develop and introduce a liquid-gel detergent under its Persil laundry-detergent brand that was aimed at low-income customers who wash their clothes by hand, Mr. Afifi said.

Focusing on Middle Eastern consumers marks a strategic shift for Henkel and its rivals. Previously, personal-care companies would release products designed for U.S. or European consumers and assume Middle Easterners would buy them, industry officials say.

Rising Middle Eastern spending power has changed that. And since locally focused products are often cheaper to make, they can generate higher profits than similar items sold world-wide—despite rising competition for Middle Eastern customers among the world’s biggest consumer companies.

That lesson has some Western executives realizing what they’ve been missing. “There are regions that we could get far more out of by focusing our attention,” Unilever Chief Executive Paul Polman said at an investor conference in December.

*This article was originally published on The Wall Street Journal on 19 May 2014. Read the original article here.

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