beauty and wellness - wesgro and wellness fs.pdf · over the period 2003 – 2015, fdi into south...

Beauty and Wellness 20 September 2016

Executive Summary

This sector fact sheet provides key trade and investment related statistics for both the global and South African

beauty and wellness sector. Specifically, it shows global trade and investment flows, and includes an analysis of

top beauty and wellness markets and products, both globally and for South Africa and the Western Cape. It also

highlights the largest and fastest growing products and subsectors within the beauty sector. Key sector findings

are summarised below.

TRADE

In spite of challenging economic conditions, the global beauty and wellness sector remained strong at an

estimated value of $163.72bn in 2015. While relatively lower than seen in previous years –$176.75bn and

$170.56bn in 2014 and 2013, respectively – this stands to reason given the slowdown in economic output

in a number of developed and developing/emerging economies, with the latter grouping in particular of

increasing importance in the beauty and wellness sector.

In turn, a slowing economy and the resultant squeeze on disposable income notwithstanding, South

Africa’s beauty and wellness sector continued on its upward trajectory in 2015, surging to an estimated

value of R8.23bn, up from R8.18bn in 2014 and R7.01bn in 2013. (In contrast, the dollar value of South

Africa’s beauty and wellness sector fell to $0.65bn in 2015, down from $0.76bn in 2014 and $0.73bn in

2013. The incongruent trend in growth can, in part, be attributed to the weakening of the local currency,

the Rand (ZAR) against the US dollar.)

From a regional perspective, the value of the Western Cape’s beauty and wellness sector surged to record

highs in 2015, escalating to an estimated value of R2.08bn, an increase of 20.5% on the R1.73bn recorded

in 2014. While attributable to broad-based growth across a number of sub-sectors within the industry,

three products recorded notable growth in the period: Beauty or make-up preparations including

sunscreen or sun tan preparations at a value of R1.28bn, an increase of 28.4% on 2014s value of

R1.03bn; Personal deodorants and antiperspirants at a value of R101.8m, up from R94.3m recorded in

2013 (7.9% increase y-o-y); and Organic surface active products and preparations for washing the skin,

in the form of liquid or cream at a value of R93m, some 32.4% higher than 2014s value of R70.05m.

In terms of key source markets, globally Indonesia remained the largest exporter of beauty and wellness

products in 2015, at an estimated value of $17.67bn. This equated to approximately 10.8% of the total

global value of beauty and wellness exports in 2015. China followed closely at a value of $15.19bn,

equivalent to 9.28% of global beauty and wellness exports in 2015, followed by France at $14.70bn

(8.98%). South Africa ranked as the 40th largest export of the said products in 2015 with a total export

value of $0.65bn (0.40%).

Turning to key global destination markets, the United States was the largest importer of beauty and

wellness products in 2015 at a value of $16.89bn, equivalent to 10.19% of globally imported beauty and

wellness products in the year. China trailed in second place at a value $9.9bn (equivalent to 5.98% of

global beauty and wellness imports in 2015), followed closely by India at $9.66bn (5.84%). South Africa

was the 48th largest importer of beauty and wellness products at a value of $0.78bn (0.47%) in 2015.

Staying with South Africa, the lion’s share – close on 63.7% – of domestically produced beauty and

wellness products exported in 2015 were destined for the African continent, with eight out of the top ten

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destination markets being African countries. To this end, Namibia remained the dominant destination

market, followed closely by Zimbabwe. Botswana was in third place.

From a regional and more specifically local perspective, key destination markets for Western Cape

manufactured beauty and wellness exports in 2015 were more diverse in nature. Specifically, while

Namibia remained the most prominent export market, other key export markets included the United

Kingdom, the United States, Japan, Australia and Germany.

INVESTMENT

While the number of new global investment projects in the beauty and wellness sector increased in 2015,

the total capital expenditure (capex) associated with these was notably lower than in recent years. To this

end, global foreign direct investment (FDI) in the sector totalled ZAR19.36bn in 2015, down from

ZAR24.12bn recorded in 2014 and a high of ZAR32.24bn recorded in 2012. FDI into the South African

beauty and wellness sector totalled an estimated ZAR190.98m in 2015, underpinned predominantly by

an investment by the Indian-domiciled personal care focused company, VVF.

Over the period 2003 – 2015, FDI into South Africa’s beauty and wellness sector totalled ZAR3.85bn,

positioning the country as the 18th largest destination market for global FDI projects in terms of capex,

and the 31st largest market in terms of number of FDI projects.

The ZAR2.04bn investment by Proctor & Gamble (P&G) into the South African beauty and wellness sector

in March 2013 has been the largest in the sub-sector to-date. From a local perspective, Herbalife’s

ZAR29.76m investment into the Western Cape in May 2006 has been of the largest to-date.

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1. Sector Overview

The global beauty and wellness industry consists of any commodity purchased by households to satisfy their beauty

and wellness wants and needs. Beauty and wellness products are mainly non-durable goods purchased for

immediate or almost immediate consumption and have a life span ranging from minutes to three years. Examples

of non-durable goods in this sector include perfumes, lip make-up, eye make-up, skin care products, shampoos,

essential oils and other ingredients for beauty products.

Wellness is defined as the overall process of maintaining a general state of good health, it involves conscious

decisions on the part of the individual towards healthier food consumption, physical fitness and avoiding potentially

harmful products or behaviour. Products in the wellness category include products such as vitamins.

1.1 The Global Beauty and Wellness Sector

“Health is a state of complete physical, mental and social well-being and not merely the absence of disease of

infirmity.”

(Definition of Health, World Health Organisation, 1948)

In spite of challenging global economic conditions, growth in the global beauty and wellness industry remains

relatively strong, with the said industry valued at $465bn in 2014, some $23bn higher than in 2013 according to

Euromonitor. Most recently, growth in the global beauty and wellness sector was maintained at a relatively steady

4.5% in 2015 according to Euromonitor. This comes despite a notable weakening of growth in key emerging

markets; that of Brazil and China in particular, with the former the largest contributor to the downward revision of

future growth prospects for emerging markets.

From a consumer perspective, of interest is that the power shift to emerging markets continues despite the

economic slowdown in a number of developing economies, that of China and Brazil in particular. To this end, in

2009 emerging markets accounted for 41% of the total value of the global beauty industry, with developed markets

accounting for the balance (59%). By 2014, the emerging markets proportion had increased to 46%. By 2019 the

expectation is that emerging markets will account for 51% of the global beauty industry, as new growth prospects

and opportunities beyond China and Brazil arise.

This stands to reason when considering the changing dynamics seen in global growth patterns in recent years,

with the sources of economic growth increasingly tilted toward emerging economies. Indeed, whereas advanced

economies generated two-thirds of global GDP at the start of this decade, the expectation is that developing and

emerging economies will contribute an outsized share of growth in the future. According to global consultancy Bain

& Company, Inc., by 2020, the advanced economies’ proportion of world GDP will drop to 58%; a notable change

over a relatively short period of time. In addition, the world population is forecast to boom by an additional 750

million by 2020, with the majority of this originating in developing and emerging economies.

From an African perspective – with the continent home to a number of developing economies – factor in

demographic and social change, with 50% of the world’s population growth between 2015 and 2050 expected to

come from Africa; rapid urbanisation with the continent set to house some of the biggest cities in the world by 2025

including Lagos, Kinshasa and Abidijan; and the fact that Africa has the fastest growing middle class population in

the world, with some 313 million people belonging to the middle class in 2010.

Together with the expected increase in wealth in a number of other emerging economies globally, this will see a

large number of consumers cross over into the middle-class consumer category, resulting in a sharp increase in

consumers across a wide range of consumer products; that of the beauty and wellness sector included.

Trade patterns affirm the shift in balance of power towards emerging markets in the global beauty and wellness

space, with China and India in the top 10 global importers of beauty and wellness products in 2015. In this regard,

Brazil, Russia, India, China and South Africa (BRICs) have been the battleground among beauty and personal care

multinationals for market presence and value growth over the past decade due to an increasing trend towards

premium products and brands. That said however, the deterioration of Brazil’s economy in recent years - with GDP

growth recorded at -3.8% in 2015 and with forecasts of -3.3% and 0.5% in 2016 and 2017, respectively - will weigh

heavily on the country’s beauty sector in the near future. Slowing economic growth in China stands to further

impede the global beauty sector, although better than anticipated economic growth in H1 2016 suggests that

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economic growth in the Asian powerhouse may have possibly bottomed out. The International Monetary Fund

(IMF) in its most recent World Economic Outlook (WEO) published in July 2016 forecast China’s real GDP at 6.4%

and 6.3% in 2016 and 2017, respectively; a far cry from the 7.3% and 6.9% recorded in 2014 and 2015. That said,

much potential still exists in a number of other developing economies, with Indonesia, India and Turkey seen as

key additional growth markets going forward. Of particular and growing interest to global beauty powerhouses are

developments in India, with forecasts projecting that 100 million people will join the middle class in this country by

2020. The resultant expectation is that a greater share of the consumer wallet will shift towards discretionary

spending; that with a beauty focus in particular.

In terms of global product sales, skin care continues to be the sub-sector’s key revenue driver, with global skin

care sales exceeding $111bn in 2014 according to Euromonitor. By 2019, Euromonitor projects that global value

sales will exceed $131bn, driven mainly by emerging markets in Asia Pacific, including China, Indonesia, South

Korea and India as the influence of Asian-inspired skincare products and Asian brands expand to the West. In turn,

the United States will remain a key market, while Turkey is likely to remain a key driver of growth in Western

Europe.

Staying with sales, market diversity requires companies to alter product portfolios or distribution channels, in order

to advance successfully in this sector. Some global wellness trends include:

Certified organic food & beverages;

Growth in the men’s’ grooming market;

Commercialised spas and retreats;

Stevia used as a sugar replacement;

Crossfit exercise;

Low meat and no meat diets; and

Super-foods such as goji-berries and omega 3.

Water-saving beauty solutions -wipes, dry shampoos, non-rinse body washes etc.

Reinvention in beauty also occurs through tapping into a range of niche growth drivers, including subcategories,

consumer segments or regional customisation opportunities for example: multicultural beauty; tailored hair care

ranges in the Middle East and women with veiled hair. Innovation and product customisation have also become

key focuses, with some of the most recent customisations including new product formats, textures and functions.

A move toward natural based ingredients has also become evident. The beauty retailing landscape has also shown

certain shifts in distribution power, as selective outlets have faced increasing pressure from mass-market channels

and the internet sales boom. Retailers have become more competitive by adopting novel in-store concepts, while

also expanding their outlets globally to reach out to a wider range of customers and connect with existing ones in

a more experiential way.

1.2 South African Beauty and Wellness Sector

Notwithstanding economic headwinds, South Africa’s beauty and wellness sector remains robust. Indeed, despite

a probable downturn in disposable income following a cumulative 0.5 percentage point increase in the key repo

rate to 6.25% in 2015, the value of beauty and personal care sales totalled ZAR45,058m last year, up from

ZAR40,593.9m in 2014 according to Euromonitor. This stemmed primarily from strong growth in the grooming trend

with consumers increasingly focused on looks and fragrances. Of interest however was the nature of sales, with

evidence suggesting that in a bid to economise amid financial constraints, consumers shifted either towards buying

bulk packs of certain products or larger sizes of products, or shifted towards buying lower priced products in the

same areas. As a result, the value of the mass beauty and personal care sector was significantly higher (some

300%) than that of the premium beauty and personal care sector.

While South Africa is home to a number of key global players in the beauty and wellness sector, a strong push by

local multinationals to establish competitive house brand products is providing notable price competition to the

global players. Consumers’ price-sensitivity has further benefitted local brands, many of which have been

developed specifically for the local South African market. Indeed, the leading players in beauty and personal care

increasingly compete by offering products which provide value for money.

In terms of products traded, South Africa’s highest trade in the beauty and wellness sector is that of the beauty or

make-up preparations; sunscreen or sun tan preparations category. Although attitudes towards tanning vary,

consumers are increasingly looking to avoid sun damage, with rising levels of skin cancer awareness driving sun

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protection sales. With the lines blurring between skin care and sun care, sun care needs to keep health benefits at

the forefront of development and marketing, while delivering the beauty benefits of skin care. The sub-category

personal deodorants and antiperspirants, which have experienced strong growth in recent years, are the second

most traded product.

In spite of on-going economic uncertainties, the grooming trend in South Africa is expected to intensify. This stems

from a number of factors including an increasing number of entrants into the job market and therefore the need to

be perceived as well groomed and professional, and a strong and growing following of fashion and beauty trends

as access to social media and the internet grows amongst others. Accordingly, the aggressive competition and

heavy price promotion seen amongst competitors across various categories is likely to continue. South African

beauty and wellness retailers include Clicks, Dischem and Wellness Warehouse, while most of the supermarket

chains such as Shoprite Checkers and Pick n Pay also increasingly stock beauty and wellness products.

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2. Trade

2.1 Global Trade in the Beauty and Wellness Sector

In contrast to the upward trend in growth seen in 2013 and 2014, 2015 heralded a sharp downturn in the value of

globally traded beauty and wellness products. Notwithstanding the downturn in year-on-year growth however, at a

value of $163.72bn, the global beauty and wellness sector remained strong when considering ubiquitous economic

challenges faced in 2015, both in developed and emerging economies. Key trade developments underpinning the

decline in global trade values included a 14% drop in the value of palm oil and its fractions, an 11% decline in the

value of perfumes and toilet waters, and a 14% fall in the value of crude palm oil traded.

Source: TradeMap, 2016

Key Beauty and Wellness Markets

In terms of key source markets within the global beauty and wellness sphere, as tabled below, Indonesia was the

leading source market for beauty and wellness products in 2015, with beauty and wellness exports totalling

$17.67bn last year. China placed second with its beauty and wellness exports totalling $15.19bn, followed by

France with said exports valued at $14.7bn in 2015. Other top source markets included the United States ($12bn)

and Malaysia ($10.54bn). The presence of three Asia Pacific countries in the top five ranked global beauty and

wellness exporting countries by value in 2015 affirms the growing importance of both emerging markets and the

Asian region in the global beauty and wellness industry.

Turning to global destination markets, as reflected in the table below, the United States maintained its position as

the leading global destination market for beauty and wellness products in 2015, with imports of the said products

valued at $16.88bn. China followed at a distant second, with the value of its beauty and wellness imports totalling

$9.9bn in 2015. India was the third largest importer of the said products at a value of $9.66bn in 2015. Other top

destination markets included Germany ($8.96bn) and the United Kingdom ($7.33bn). Looking ahead, India is

forecast to be a key growth market for the likes of make-up, skin care and colour cosmetics as consumer income

growth accelerates.

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

USDbn 89.96 113.26 139.49 119.12 140.25 168.89 166.37 170.56 176.75 163.72

Growth (%) 13.14 25.90 23.15 -14.61 17.74 20.42 -1.49 2.51 3.63 -7.37

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100

120

140

160

180

200

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(%)

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US

Dbn)

GLOBAL TRADE OF BEAUTY & WELLNESS, 2006-2015

TOP 10 GLOBAL IMPORTING MARKETS FOR BEAUTY & WELLNESS, 2015

RANK DESTINATION MARKETS VALUE 2015 (USDbn) % GROWTH 2011-2015

1 United States of America 16.88 6.73

2 China 9.90 3.88

3 India 9.66 9.97

4 Germany 8.96 2.34

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Key Beauty and Wellness Products

In terms of the top globally traded beauty and wellness products represented in the table below, beauty or make-

up preparations including sunscreen was the largest globally traded beauty product in 2015 at a value of $27.41bn.

Although ranked second in terms of value, refined palm oil and its fractions was the largest globally exported beauty

and wellness ingredient in 2015, at a value of $20.67bn. (Palm oil is also used for cooking and in the manufacture

of processed foods and is therefore an indirect beauty and wellness product). Perfumes and eu de toilette were

ranked 3rd overall at a value of $16.23bn, followed by crude palm oil ($10.81bn), with the latter ranking as the

second largest indirect beauty and wellness product. Other indirect products include crude soya bean oil, virgin

olive oil and black tea.

While still impressive in terms of value in 2015, the rates of growth recorded in the values traded of these products

was modest to negative across most product categories last year. This was in line with the downtrend seen in the

total value of the global beauty industry in 2015. The trend over the period 2011-15 was more positive however,

with the beauty or make-up preparations including sunscreen category growing by an average of 7.32% over the

said period. In turn, growth in the refined palm oil and its fractions subsector averaged 4.81% in the same period,

while perfumes and toilet waters averaged 3.98%.

TOP 10 GLOBALLY TRADED BEAUTY & WELLNESS PRODUCTS, 2015

RANK PRODUCT VALUE 2015 (USDbn) % GROWTH 2011-2015

1 Beauty or make-up preparations including sunscreen 27.41 7.32

2* Refined palm oil and its fractions 20.67 4.81

3 Perfumes and toilet waters 16.23 3.98

4* Crude palm oil 10.81 -0.56

5* Soya-bean oil crude, whether or not degummed 8.09 2.40

6 Hair preparations, nes 7.10 4.22

7* Olive oil, virgin 6.29 7.73

8 Hair shampoos 4.82 3.09

9 Eye make-up preparations 4.10 7.40

10 Personal deodorants & antiperspirants 3.61 3.69

TOP 10 GLOBALLY TRADED BEAUTY & WELLNESS EXPORTS 165.54 4.05

*Indirect beauty and wellness products, used as ingredients in the manufacture of these products

Source: TradeMap 2016

5 United Kingdom 7.33 2.42

6 Italy 5.89 2.87

7 Netherlands 5.46 5.88

8 France 5.41 2.63

9 Hong Kong (China) 4.65 12.71

10 Japan 4.36 0.20

54 South Africa 0.78 -1.38

TOTAL GLOBAL BEAUTY & WELLNESS IMPORTS 165.54 4.05


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2.2 South Africa’s Trade in Beauty and Wellness Products

South Africa: Beauty and Wellness Trade Overview

Despite a sharp increase in the value of beauty and wellness products exported by South Africa in recent years,

on balance, the country remains a net importer of beauty and wellness products.

Staying with exports, the trend in export growth has been consistently positive over the ten year period analysed,

with export values surging from ZAR1.39bn in 2006 to ZAR8.23bn in 2015, an increase of 492.09% over the ten

year period. While having increased from ZAR3.66bn in 2006 to ZAR9.90bn in 2015, imports have oscillated

intermittently throughout the period, resulting in a fluctuation of the beauty and wellness trade deficit over the ten

year period. Of interest is the sharp narrowing of the said trade deficit in 2015, underpinned by a combination of

rising export earnings and diminishing import costs. The net effect being a 51.45% decline in the trade deficit to a

value of ZAR1.67 in 2015.

Source: TradeMap, 2016

South Africa: Key Beauty and Wellness Markets

In terms of key destination markets for South African produced beauty and wellness exports, Namibia maintained

its position as the leading destination market for the said exports in 2015 at a value of ZAR1.38bn. Zimbabwe and

Botswana ranked second and third at ZAR1.29bn and ZAR0.78bn, respectively. Of interest is that eight out of the

top ten export destination markets for South African beauty and wellness products in 2015 were other African

economies. Staying with the key African destination markets, over the five-year period 2011-15 the largest dollar-

based growth was recorded in Mozambique (10.4%), Zimbabwe (9.07%) and Zambia (7.96%).

In turn, key source markets for beauty and wellness imports by South Africa in 2015 included Indonesia at a value

of ZAR1.11bn, followed by the United States (ZAR0.99bn) and China (ZAR0.93bn). Over the period 2011-2015,

strong dollar-term growth was recorded with the United States (6.05%), Spain (9.34%), Italy (4.58%) and Argentina

(53.65%) with the latter’s trade values fluctuating significantly over the five year period.

SOUTH AFRICA'S TOP 10 EXPORT MARKET

DESTINATIONS, BEAUTY & WELLNESS PRODUCTS,

2015

SOUTH AFRICA’S TOP 10 IMPORT SOURCE MARKETS,

BEAUTY & WELLNESS PRODUCTS, 2015

RANK DESTINATION

MARKETS

VALUE

2015

(ZAR m)

%

GROWTH

2011-

2015

(USD)

RANK SOURCE MARKETS

VALUE

2015

(ZAR m)

%

GROWTH

2011-

2015

(USD)

1 Namibia 1,375.94 0.34 1 Indonesia 1,115.87 1.86

2 Zimbabwe 1,289.23 9.07 2 United States 990.07 6.05

3 Botswana 783.33 -6.94 3 China 963.14 -0.63

4 Swaziland 437.81 0.89 4 Malaysia 914.20 -7.24

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Exports (ZAR bn) 1.39 1.49 2.16 2.17 4.40 5.00 5.62 7.01 8.18 8.23

Imports (ZAR bn) 3.66 4.93 7.04 6.13 6.57 8.12 9.09 10.04 11.62 9.90

Trade Balance (ZAR bn) -2.28 -3.44 -4.88 -3.96 -2.17 -3.13 -3.48 -3.04 -3.44 -1.67

-6.00

-4.00

-2.00

0.00

2.00

4.00

6.00

8.00

10.00

12.00

14.00

Valu

e (

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R b

n)

VALUE OF SOUTH AFRICAN TRADE OF BEAUTY & WELLNESS, 2006-2015 (ZAR bn)

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SOUTH AFRICA'S TOP 10 EXPORT MARKET

DESTINATIONS, BEAUTY & WELLNESS PRODUCTS,

2015

SOUTH AFRICA’S TOP 10 IMPORT SOURCE MARKETS,

BEAUTY & WELLNESS PRODUCTS, 2015

RANK DESTINATION

MARKETS

VALUE

2015

(ZAR m)

%

GROWTH

2011-

2015

(USD)

RANK SOURCE MARKETS

VALUE

2015

(ZAR m)

%

GROWTH

2011-

2015

(USD)

5 United Kingdom 381.96 6.59 5 France 886.06 -0.84

6 Lesotho 376.80 -4.45 6 Germany 659.00 1.35

7 Zambia 354.93 7.96 7 United Kingdom 570.20 0.25

8 Angola 313.25 -0.35 8 Spain 454.17 9.34

9 Mozambique 308.17 10.40 9 Argentina 388.99 53.65

10 United States 284.27 7.19 10 Italy 386.54 4.58

TOTAL BEAUTY EXPORTS 8,226.05 1.91 TOTAL BEAUTY IMPORTS 9,900.44 -1.38


South Africa: Key Beauty and Wellness Products

At a product level, as tabled below the beauty or make up preparations category was South Africa’s leading beauty

and wellness export product in 2015 at a value of ZAR2.49bn. This was followed by personal deodorants and

antiperspirants at a value of ZAR0.66bn, with crude soya-bean oil in third position at a value of ZAR0.63bn. Over

the five-year period 2011-15, the highest dollar-based growth amongst beauty and wellness exports was recorded

by the crude soya-bean oil category, which grew by an exponential 533%. In turn, the vitamins and their derivatives

category posted reasonable growth of 18.39% in the period, followed by perfumes and toilet water (8.56%) and

beauty or make up preparations (7.41%).

In turn, the leading beauty and wellness import product into South Africa in 2015 was refined palm oil at a value of

ZAR1.86bn. The beauty or make up preparations category followed at a value of ZAR1.43bn, with perfumes and

toilet water in third position at a value of ZAR1.00bn. Over the five-year period 2011-15, the highest dollar-based

growth amongst beauty and wellness imports into the country was recorded by the personal deodorants and

antiperspirants category which grew by 20.69% in the period. The wigs, false beards, eyebrows and the like of

other materials category followed at a rate of 17.6%, while false beards, eyebrows and the like, of synthetic textile

materials grew by 14.08% over the five year period.

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SOUTH AFRICA'S TOP 10 BEAUTY & WELLNESS EXPORT PRODUCTS, 2015

SOUTH AFRICA'S TOP 10 BEAUTY & WELLNESS IMPORT PRODUCTS, 2015

RANK PRODUCT VALUE

2015 (ZAR m)

% GROWTH 2011-2015

(USD)

RANK PRODUCT VALUE

2015 (ZAR m)

% GROWTH 2011-2015

(USD)

1 Beauty or make-up preparations nes; sunscreen or sun tan preparations

2,485.78 7.41 1 Palm oil and its fractions refined but not chemically modified*

1,861.46 -6.55

2 Personal deodorants & antiperspirants

659.41 3.40 2 Beauty or make-up preparations nes; sunscreen or sun tan preparations

1,430.34 3.14

3 Soya-bean oil crude, whether or not degummed*

629.00 533.25 3 Perfumes and toilet waters 1,001.87 5.84

4 Soap nes 620.44 -6.66 4 Black tea (fermented) & partly fermented tea in packages exceeding 3 kg*

536.36 -0.33

5

Soap & organic surf prep,shaped,nes;papers & nonwovens impreg w soap/prep,nes

586.50 -2.43 5 Personal deodorants & antiperspirants

455.65 20.69

6 Hair preparations, nes 356.17 -9.45 6 Soya-bean oil crude, whether or not degummed*

421.03 -3.03

7 Hair waving or straightening preparations

219.90 -11.87 7 Hair preparations, nes 369.83 -4.83

8 Perfumes and toilet waters 205.87 8.56 8 Wigs, false beards, eyebrows and the like, of other materials

367.68 17.60

9 Vitamins nes, and their derivatives, unmixed

183.43 18.39 9 False beard,eyebrows and the like,of synthetic textile materials,nes

277.32 14.08

10 Black tea (fermented) & partly fermented tea in packages exceeding 3 kg*

169.49 -2.07 10 Eye make-up preparations 225.53 4.08

TOTAL VALUE BEAUTY EXPORTS 8,226.05 1.91 TOTAL VALUE BEAUTY IMPORTS 9,900.44 -1.38

Source: TradeMap 2016 * Indirect beauty products

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2.3 Western Cape

Western Cape: Beauty and Wellness Trade Overview

Regionally, the Western Cape has seen strong growth in beauty and wellness exports in recent years, with 2013

being a watershed for the Province’s beauty and wellness trade balance. To this end, the beauty and wellness

trade deficit snuck back into positive territory to a surplus of ZAR134.61m in 2013; the first time this trade balance

has been in the black since 2003. Belying this was a significant increase in the export value of the beauty or make

up preparations category, which surged by 46% to a value of ZAR825.47m in 2013, up from ZAR565.31m exported

in 2012.

The trend has continued to date, with the Western Cape remaining a net exporter of beauty and wellness products

in both 2014 and 2015, with the said trade surplus increasing to a value of ZAR661.49m and ZAR967.19m in 2014

and 2015, respectively.

In turn, beauty and wellness imports into the Western Cape have not increased with the same velocity as

corresponding exports in recent years. From a value of ZAR364.29m in 2006, the region’s beauty and wellness

import costs totalled ZAR1.11bn in 2015, significantly lower than beauty and wellness export receipts earned by

the region in 2015 to the sum of ZAR2.08bn.

Source: Quantec, 2016

Western Cape: Key Beauty and Wellness Markets

Turning to key markets for beauty and wellness exports from the Western Cape, Namibia maintained its position

as the lead destination market for said exports from the Western Cape in 2015. At a value of ZAR363m, this was

some 17.84% higher than the value of ZAR308.05m exported in 2014. From a dollar perspective however, the

difference in export earnings in the period was marginal with the said export earnings equating to $28.46m and

$28.41m in 2015 and 2014, respectively. Accordingly, the growth in dollar terms over the two year period (2014-

15) was marginal at 0.22%.

Other key destination markets include the United Kingdom which consumed ZAR233.47 worth of local beauty and

wellness exports in 2015, followed by the United States (ZAR200.64m), Botswana (ZAR115.27m) and Japan

(ZAR107.49m). When compared to key market destinations for South African beauty and wellness product exports,

the Western Cape’s destination markets are notably more diversified and include a number of developed

economies.

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ZA

R m

Western Cape Global Trade of Beauty & Wellness Products 2006 - 2015, (ZAR m)

Exports Imports Trade Balance

12

TOP 10 DESTINATION COUNTRIES FOR WESTERN CAPE’S EXPORTS OF BEAUTY AND WELLNESS PRODUCTS,

2015

RANK PRODUCT (HS4) VALUE 2015

(ZARm)

% GROWTH 2014-2015 ($

terms)

1 Namibia 363.00 0.22

2 United Kingdom 233.47 7.51

3 United States 200.64 17.66

4 Botswana 115.27 -8.52

5 Japan 107.49 5.15

6 Australia 93.96 25.41

7 Germany 89.48 15.94

8 Zimbabwe 88.07 23.21

9 France 74.68 -3.18

10 Swaziland 71.66 -9.34

TOTAL WESTERN CAPE BEAUTY EXPORTS 2015 2,078.95 2.45


When analysing key source markets for beauty and wellness products imported by the Western Cape in 2015,

China maintained its lead position on this front at a value of ZAR256.60m. The United States and the United

Kingdom ranked second and third respectively, at a value of ZAR141.17m and ZAR135.15m. While still strong in

nominal terms, the rate of growth in dollar terms fell in seven out of ten countries cited over the period 2014-15.

This can be attributed in part to the sharp depreciation of the local currency (ZAR) against the dollar in the period.

TOP 10 SOURCE COUNTRIES OF WESTERN CAPE’S IMPORTS OF BEAUTY AND WELLNESS PRODUCTS, 2015

RANK COUNTRY VALUE 2015 (ZARm) % GROWTH 2014-

2015 ($ terms)

1 China 256.60 -4.99

2 United States 141.17 -10.81

3 United Kingdom 135.15 -6.87

4 France 120.20 -29.17

5 Spain 116.21 0.53

6 Italy 102.29 -19.27

7 Germany 46.85 -18.72

8 India 18.25 -30.74

9 Malaysia 17.74 267.83

10 Switzerland 14.42 0.43

TOTAL WESTERN CAPE BEAUTY IMPORTS 2015 1,112.70 --11.10


Western Cape: Key Beauty and Wellness Products

Beauty, make-up and suntan preparations was the leading beauty and wellness export product from the Western

Cape in 2015, with related export receipts totalling ZAR1.28bn in the period. Personal deodorants and

antiperspirants exports followed at a distant second with earnings valued at ZAR101.76m in 2015, while the organic

surface-active products and preparations for washing the skin, in the form of liquid or cream and put up for retail

sale, whether or not containing soap category was the region’s third largest earner of beauty and wellness export

receipts in the year (ZAR93.02m). Strong growth in export earnings over the period 2014-15 was evident in a

number of export products, with the most notable being the plants & parts, (incl seeds & fruit) used in pharmacy,

perfume, insecticide use category, which grew by 77.32% y-o-y, and perfumes and toilet waters (50.02% y-o-y).

In turn, the leading beauty and wellness import product into the Western Cape in 2015 was the beauty, makeup

and suntan preparations category at a cost of ZAR176.65m last year. This was followed by the perfumes and eu

de toilette category at ZAR157.92m, and virgin olive oil (ZAR95.37m). The highest import growth in dollar terms in

the period was in the olive oil & its fractions refined but not chemically modified category at a rate of 50.81% y-o-

13

y, followed by soap; organic surface-active products and preparations for use as soap, in the form of bars, cakes,

moulded pieces or shapes at 27.56% y-o-y.

WESTERN CAPE'S TOP 10 EXPORTS OF BEAUTY AND WELLNESS PRODUCTS, 2015

WESTERN CAPE'S TOP 10 IMPORTS OF BEAUTY AND WELLNESS PRODUCTS, 2015

RANK PRODUCT VALUE

2015 (ZARm)

% GROWTH 2014-2015 ($ terms)

RANK PRODUCT VALUE

2015 (ZARm)

% GROWTH 2014-2015 ($ terms)

1 Beauty, makeup and suntan preparations nes

1,284.72 6.18 1 Beauty, makeup and suntan preparations nes

176.65 -4.54

2 Personal deodorants and antiperspirants

101.76 -8.25 2 Perfumes and toilet waters

157.92 -22.40

3

Organic surface-active products and preparations for washing the skin, in the form of liquid or cream and put up for retail sale, whether or not containing soap

93.02 12.62 3 Olive oil, virgin 95.37 -24.76

4 Plants & parts, (incl seeds & fruit) used in pharmacy, perfume, insecticide use nes

72.05 77.32 4 Hair preparations, nes 71.49 -4.20

5 Perfumes and toilet waters 62.92 50.02 5 Olive oil & its fractions refined but not chemically modified

62.34 50.81

6 Hair preparations, nes 43.89 -14.81 6

Soap; organic surface-active products and preparations for use as soap, in the form of bars, cakes, moulded pieces or shapes

58.09 27.56

7 Room perfuming or deodorising preparations nes

27.93 -8.11 7 Room perfuming or deodorising preparations nes

34.03 17.17

8 Perfumed bath salts and other bath preparations 27.29 -20.72 8 Lip make-up preparations 31.38 1.37

9

Soap; organic surface-active products and preparations for use as soap, in the form of bars, cakes, moulded pieces or shapes

27.05 -6.15 9

Organic surface-active products and preparations for washing the skin, in the form of liquid or cream and put up for retail sale, whether or not containing soap

29.23 -18.75

10 Essential oils of vetiver 26.20 -0.74 10 Eye make-up preparations 25.29 -11.82

TOTAL EXPORTS 2,080.67 2.49 TOTAL IMPORTS 1,113.65 -11.08


2.4. Trade Trends in Beauty and Wellness sub-Sectors in the Western Cape

A number of categories within the Western Cape’s beauty sector have demonstrated strong export growth in recent

years. These include amongst others, the Beauty, Makeup and Suntan Preparations category, the Personal

Deodorants & Antiperspirants category, and the Organic Surface Active Products & Preparations for Washing the

Skin category.

The graph below shows trends in the Western Cape’s trade flows of the dominant Beauty, Makeup and Suntan

Preparations category over the period 2006-15. Firstly, the region remains a net exporter in this category. Further,

while both import costs and export receipts for the said category experienced a clear upward trend in growth over

the period 2006-15, the pace at which differed greatly. Indeed, import costs for these products experienced a

compound annual growth rate (CAGR) of 13.06% over the ten year period, from a value of ZAR51.59m in 2006 to

ZAR176.65m in 2015. Export receipts earned from the said category over the same period experienced a CAGR

of 29.38%, growing from ZAR97.78m in 2006 to ZAR1,284.72m in 2015.

14


The second beauty sub-category analysed is that of the Western Cape’s trade in the Personal Deodorants &

Antiperspirants category over the period 2006-15.

As evidenced in the graph below, the Western Cape is a net exporter of Personal Deodorants and Antiperspirants.

Of particular interest is the sharp spike in exports receipts earned by the subsector in 2014 and 2015, which surged

more than five-fold to a value of ZAR94.33m in 2014, up from ZAR19.46m in 2013. Export receipts over the ten-

year period experienced a CAGR of 16.72% as a result, growing from ZAR21.69m in 2006 to ZAR101.76m in 2015.

Imports in turn experienced a CAGR of 2.94%, with the import bill growing from ZAR9.19m in 2006 to a value of

ZAR12.28m in 2015.


The third and final beauty sub-category analysed is that of the Western Cape’s trade in Organic Surface Active

Products & Preparations for Washing the Skin.

The graph below shows trends in the said sub sector over the period 2006-2015. While both import costs and

export receipts for the said category experienced growth over the period 2006-2015, the pace at which differed

greatly. Indeed, import costs for these products experienced a compound annual growth rate (CAGR) of 21.27%

over the ten year period, from a value of ZAR4.25m in 2006 to ZAR29.23m in 2015. Export receipts earned from

the said category over the same period experienced a more notable CAGR of 45.29%, growing from ZAR2.22m in

2006 to ZAR93.02m in 2015, with a sharp spike in earnings recorded in 2014 and 2015.

0

200

400

600

800

1000

1200

1400

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Val

ue

ZAR

m

Western Cape Trade of Beauty, Make-up & Skincare Preparations (HST330499), 2006-2015


0

20

40

60

80

100

120

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Val

ue

ZAR

m

Western Cape Trade of Personal Deodorants & Antiperspirants (HST330720), 2006-2015


15


3. Foreign Direct Investment

3.1 Global Foreign Direct Investment in Beauty and Wellness

Between January 2003 and December 2015, a total of 1,096 foreign direct investment (FDI) projects were recorded

into the global beauty and wellness sector. These projects represented a total capital investment of ZAR283.80bn,

which equated to an average investment of ZAR258.95m per project. During the period, a total of 209,365 jobs

were created.

Source: FDI Intelligence, 2016

Key FDI Markets

As indicated in the table below, the United States was the leading source market in terms of global investment

projects in the beauty and wellness space over the period 2003-2015, with 319 investment projects with total related

capital expenditure (capex) of ZAR84,324.8m. This accounted for 29.11% of total investment in the global beauty

and wellness sector in this period. The United Kingdom ranked second over the same period, with 199 projects

-40

-20

0

20

40

60

80

100

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Val

ue

ZAR

m

Western Cape Trade of Organic Surface Active Products & Preparations for Washing the Skin (HST340130), 2006 - 2015

Exports Imports

20

40

60

80

100

120

140

.0

5 000.0

10 000.0

15 000.0

20 000.0

25 000.0

30 000.0

35 000.0

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Pro

jectsV

alu

e ZA

R (

m)

GLOBAL FDI OF HEALTH & WELLNESS PRODUCTS, 2003 - 2015

Projects, (rhs) Capex, (lhs)

16

undertaken globally with related capex totalling ZAR42,663m. France followed, implementing 112 projects globally

with related capex totalling ZAR24,495.7m.

TOP 10 GLOBAL SOURCE MARKETS FOR FDI IN THE BEAUTY & WELLNESS SECTOR, JAN 2003-DEC 2015

RANK SOURCE MARKETS PROJECTS % PROJECTS CAPEX (ZARm) % CAPEX COMPANIES % COMPANIES

1 United States 319 29.11 84,328.8 29.71 121 21.92

2 United Kingdom 119 10.86 42,663.0 15.03 46 8.33

3 France 112 10.22 24,495.7 8.63 49 8.88

4 Germany 105 9.58 23,779.8 8.38 42 7.61

5 Japan 84 7.66 21,734.0 7.66 54 9.78

6 Spain 38 3.47 3,208.1 1.13 21 3.80

7 India 29 2.65 6,875.6 2.42 15 2.72

8 Switzerland 28 2.55 4,437.2 1.56 22 3.99

9 China 22 2.01 4,748.9 1.67 20 3.62

10 Sweden 21 1.92 6,017.9 2.12 7 1.27

TOTAL 1,096 100 283,795.3 100 552 100


In terms of key destination markets for beauty and wellness related investment projects over the period 2003-2015,

China dominated, being the recipient of 95 projects with a capex value of ZAR48,145bn. The United States followed

with 83 FDI projects undertaken in the country, with capex totalling ZAR23.12bn over the same period. India was

ranked third in terms of number of projects (71) with the related capex totalling ZAR15.51bn. From a capex

perspective however, Mexico would be in third position with a capex value of ZAR19.53bn; the country was home

to only 36 investment projects in the period however.

South Africa ranks 30th in terms of FDI projects with 9 projects in the period, however, South Africa is ranked 18th

in terms of capex investment, with this totalling ZAR3.85bn for the period.

TOP 10 GLOBAL DESTINATION MARKETS FOR FDI IN THE BEAUTY & WELLNESS SECTOR, JAN 2003-DEC 2015

RANK DESTINATION MARKETS PROJECTS % PROJECTS CAPEX (ZARm) % CAPEX COMPANIES % COMPANIES

1 China 95 8.67 48,147.7 16.97 74 13.41

2 United States 83 7.57 23,116.6 8.15 70 12.68

3 India 71 6.48 15,513.4 5.47 48 8.70

4 Germany 62 5.66 4,453.7 1.57 57 10.33

5 France 53 4.84 7,319.1 2.58 47 8.51

6 Russia 43 3.92 11,357.3 4.00 33 5.98

7 Mexico 36 3.28 19,527.6 6.88 28 5.07

8 United Kingdom 36 3.28 3,057.0 108 31 5.62

9 Brazil 35 3.19 7,660.6 2.70 28 5.07

10 Poland 33 3.01 14,151.9 4.99 23 4.17

30 South Africa 9 0.82 3,847.9 1.36 7 1.27

TOTAL 1,096 100 283,795.3 100 552 100


Procter and Gamble (P&G) was the leading global company investing in the beauty and wellness sector with 61

projects, followed by Unilever and L’Oreal with 32 projects and 31 projects respectively.

TOP 10 COMPANIES GLOBALLY INVESTING IN THE GLOBAL BEAUTY & WELLNESS SECTOR, 2003 - 2015

RANK INVESTING COMPANY NUMBER OF PROJECTS CAPEX (ZARm)

1 Procter and Gamble (P&G) 72 33,563.5

2 Unilever 64 32,575.8

17

TOP 10 COMPANIES GLOBALLY INVESTING IN THE GLOBAL BEAUTY & WELLNESS SECTOR, 2003 - 2015

RANK INVESTING COMPANY NUMBER OF PROJECTS CAPEX (ZARm)

3 L'Oreal 56 12,083.8

4 Henkel 38 5,628.9

5 Beiersdorf 22 5,457.8

6 Oriflame 21 6,674.0

7 Herbalife 17 3,918.2

8 Shiseido 17 3,504.6

9 Colgate-Palmolive 16 4,938.7

10 Avon Products 15 5,127.4

TOTAL 1,096 283,795.3


3.2 South Africa FDI in the Beauty and Wellness Sector

Between January 2003 and December 2015, a total of nine FDI projects were recorded into South Africa’s beauty

and wellness sector. These projects represented a total capital investment of ZAR3.85bn, which equated to an

average investment of ZAR427.67m per project. During the period, a total of 1,960 jobs were created.

Herbalife invested ZAR29.76m in the Western Cape in May 2006. The company opened a new regional sales

centre in Maitland, Cape Town, to support their growing network of independent distributors.

VVF (India) made the most recent investment in March 2015 worth ZAR190.00m, opening a new manufacturing

project in South Africa. VVF is a manufacturer of oleochemicals and personal care products.

In August 2013 L'Oreal established a new Professional African Salon Institute in South Africa. The centre provides

training to stylists on a variety of hair types and cosmetics with the aim of establishing a sustainable hairdressing

sector within South Africa. The investment totalled ZAR25.78m.

Procter and Gamble (P&G) was the leading company investing in the South African beauty and wellness sector

with 2 projects, equating to 3.2% of P&G’s global investment in this sector over this period. Unilever South Africa

and Unilever Africa followed with 1 project each.

SOURCE MARKETS FOR FDI INTO THE SOUTH AFRICAN BEAUTY & WELLNESS SECTOR, JAN 2003-DEC 2015

DATE INVESTING

COMPANY

SOURCE

COUNTRY

DESTINATI

ON STATE SUB-SECTOR

INDUSTRY

ACTIVITY

VALUE

(ZARm)

JO

BS

Mar 2015 VVF India -

Cosmetics, perfume,

personal care & household

products

Manufacturing 190.99 24

3

Aug 2013 L'Oreal France -

Cosmetics, perfume,


products

Education &

Training 25.78 94

Mar 2013

Procter &

Gamble

(P&G)

United

States -

Cosmetics, perfume,


products

Manufacturing 2,037.36 50

0

Jan 2013 Unilever

South Africa

United

Kingdom Gauteng

Cosmetics, perfume,


products

Manufacturing 1,053.48 74

1

May

2011 Dabur India India Gauteng

Cosmetics, perfume,


products

Manufacturing 190.99 24

3

May

2006 Herbalife

United

States

Western

Cape

Cosmetics, perfume,


products

Sales,

Marketing &

Support

51.55 18

May

2006

Procter &

Gamble

(P&G)

United

States Gauteng

Cosmetics, perfume,


products

Sales,

Marketing &

Support

51.55 18

18

SOURCE MARKETS FOR FDI INTO THE SOUTH AFRICAN BEAUTY & WELLNESS SECTOR, JAN 2003-DEC 2015

DATE INVESTING

COMPANY

SOURCE

COUNTRY

DESTINATI

ON STATE SUB-SECTOR

INDUSTRY

ACTIVITY

VALUE

(ZARm)

JO

BS

Sep 2003 Unilever

Africa

United

Kingdom

KwaZulu-

Natal

Cosmetics, perfume,


products

Headquarters 194.50 85

Jul 2003 L'Oreal France -

Cosmetics, perfume,


products

Sales,

Marketing &

Support

51.56 18


*There is no outward FDI from South Africa in the beauty and wellness sector, however, many beauty and wellness

retailers are expanding their operations into other sub-Saharan African countries. For example the Clicks Group

has expanded into Swaziland, Namibia and Botswana.

Sources

Accenture

Business Monitor International (BMI)

Euromonitor

FDI Intelligence

FDI Markets

International Monetary Fund (IMF)

KPMG

PwC

Quantec

Stats SA

Trademap

World Bank

World Health Organisation (WHO)

For more information on this publication and other Wesgro publications please contact [email protected]

or for more publications visit the Wesgro publications portal on our website at http://wesgro.co.za/publications

mailto:[email protected]

http://wesgro.co.za/publications

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