The GCC perfume market is worth Dh11 billion per annum, about 20 per cent of the Dh60bn worldwide market, says a recent report.
Per capita consumption of cosmetics and perfumes in the region ranks among the highest in the world, with average yearly purchases at around Dh1,225 per person, the report by Emirates Industrial Bank (EIB) said.
It said the size of the regional market is large enough to lead several manufacturers to set up subsidiaries in the Gulf to manage logistics, marketing and local distribution deals. International perfume manufacturers report the Middle East is accounting for a “significant part” of their growth. There are also plans for expansion by extending franchising throughout the region.
EIB, citing an international survey, found the market for beauty, grooming and other personal care products is growing by 12 per cent annually in the GCC region.
Saudi Arabia is the largest market, followed by the UAE. However, the UAE is the fastest expanding market, growing at rates much above the GCC averages, it said.
“The UAE plays an important role as a major retail centre in the world, as most leading brands find it necessary to showcase their products in Dubai,” the report said. According to retail experts, the entire region is now beginning to show the same trends as can be seen in the “showcase” Dubai shopping areas.
Net imports of perfumes in the UAE increased to Dh827.8 million in 2006 from Dh638.7m in 2005 – a growth of 29 per cent in one year alone, EIB said.
The entire cosmetic sector is experiencing unprecedented growth in the Emirates due to the growth in the population of working women with high disposable incomes, the influx of tourists and Dubai’s emergence as a major shopping destination.
Industry sources estimate an average Arab brings home a new bottle of scent every 90 days. Perfumes are cheaper in the UAE because of low taxes and duties compared to Europe and Asia where they attract high taxation as luxury products.
“All analysts agree that cosmetics and toiletries sales will continue to grow in the UAE because of rising incomes and shopper tourists,” the report said. “New fashion and trendy products are to grow at the cost of established brands and Arabian perfumes will profit from this.”
EIB figures show the largest source of imported perfumes is France, which enjoys a pre-eminence in the global perfume market. For example, France accounts for half of the perfume imports into the UAE. “Perfumes are one of the most important exports of France to the UAE. No other country comes even close,” it said.
France is followed by Italy and the United States. China and other Asian countries, which are strongly represented in consumer goods, have insignificant exports of perfumes. Perfume imports largely take place through Dubai, with small volumes imported by Abu Dhabi and Sharjah. Almost half of the imports are meant for re-export. Re-exports are growing at almost the same rate as imports and stood at Dh708m in 2006.
Perfumes lend themselves perfectly for re-exports. The international market is fragmented with a very large number of products and brands, so it is easier for regional retailers to survey and source the product from the large selection available at one source – in this case, Dubai. The product is also easily transported with low costs, making it almost ideal for re-distribution.
The report said although largely an importer of perfumes, the Middle East is still the largest producer of essential oils for the perfume sector. About 90 per cent of the essential fruit and flower oils produced in the Arab world are marked for export to Russia, France and Holland.
While the UAE perfume market heavily relies on imported products, there is substantial domestic perfume manufacturing. There are nine leading perfume manufacturers in UAE, three of which are located in Dubai, four in Sharjah and two in Ajman. Production ranges from Dh5m to Dh80m.
Combined annual production is estimated to be more than Dh450m. The surge in production is reflected in the import of glass bottles for perfumes – which jumped from 18,000 bottles in 2005 to 89,000 in 2006, EIB estimated. “Certain fragrances are specific to the Arab region and these are produced locally,” EIB noted. “Because of the popularity of the Arabian perfumes, domestic products and brands represent almost one-third of the market. Foreign brands, meanwhile, cater to the Arab population as well as expatriates and tourists.”
The Arabian perfume market is fairly crowded as well. In 2005 alone, 125 new Arabian fragrances were introduced. The introduction of Arab perfumes in spray format and the proliferation of perfume stores in shopping malls are helping the sale of Arabian perfumes to non-Arabs as well. “Arabia has a long tradition of producing perfumes and essence oils. In this respect, it is perhaps the only region outside of the Western world with a thriving perfume industry of its own,” it said.
The country is also a significant exporter of perfumes, sending out Dh133m worth of perfume products in 2006. A large proportion of exports are to Arab countries such as Saudi Arabia, Egypt, Lebanon and Libya. The leading export destination, however, is the US, followed by the UK.