An analysis of the brand landscape in the GCC

Alshaya has been active in bringing new international brands to the Middle East, including Etude House

Local brands and indies have been giving major international players a run for their money

As an increasingly informed consumer base switches to younger, digitally native and locally tailored brands, the landscape in the GCC is shifting, and this is eating into the market share of traditional players, especially in the prestige segment. Certain consumers, feeling the pinch of reduced purchasing power, are also switching to mass and masstige brands, which are growing their presence on the market.

Huda Beauty is a case in point—appealing to local consumer tastes and with a massive online following, the brand has succeeded in building its business in the make-up segment across the GCC. “The stellar trajectory of Huda Beauty certainly is an inspiration: In 2017, Huda Beauty was ranked in the top 10 make-up brands in GCC stores (alongside MAC, Make Up For Ever and Benefit),” distributor and retailer Chalhoub wrote in its most recent white paper. “These brands have strongly taken the lead, as no three-axis player was even among the top five anymore.”

But despite this, on a group level, the majors continue to lead the market, with LVMH accounting for a 28% share, followed by Estée Lauder Companies with 14%, according to industry players.

More space for indies
While online buzz has been key to growing demand for new brands in the market among consumers who are heavy make-up users and keen to try out new products and trends, they are increasingly being allocated space at retail in the region too. Sephora is said to be reassigning space from commercial fragrances to trendy color and accessories brands. Chalhoub’s Tryano store in Abu Dhabi’s Yas Mall has a space called Beauty Nation devoted to a curated selection of innovative brands targeted to regional tastes. The space is currently dedicated to make-up, but plans to offer fragrance and skincare in the future.

While retailers have been allocating increased space to local and international indie brands, homegrown local players with a mass and masstige positioning have also been expanding in the market. Local brand Mikyajy, created by Kamal Osman Jamjoom Group, the Saudi Arabian franchisee for The Body Shop in Western Saudi and Neal’s Yard Remedies across the GCC, continues to grow its presence in the region, with around 180 stores currently in operation. Mikyajy’s new Glamour Girl store concept was launched last year, and has seen strong results, according to the company. “This upcoming year will see an accelerated refurbishment rollout to ensure the stores continue to be destinations of choice thereby growing our market share,” stated group chairman Kamal Osman Jamjoom.

In a similar way, local brand Oud Milano, launched by fragrance specialist Abdul Samad Al Qurashi Co in Saudi Arabia in 2017, now has around 30 stores across the region. Such brands, by tapping into local consumers’ tastes and offering an alternative to international players, are reportedly taking market share from the beauty majors.

Other international brands are also looking to tap into the market. Brazil’s O Boticário entered the UAE via a partnership with investment firm Millennial Capital last year, with plans to open five stores there before expanding to the rest of the GCC. The agreement also includes wholesale distribution to online retailers, department stores and pharmacies in the region.

Kuwait-based distribution company Alshaya has meanwhile been active in bringing new international brands to the Middle East over the past few years. Amorepacific’s Etude House, L’Oréal’s NYX Professional Makeup and Charlotte Tilbury have all recently entered the region with standalone stores operated by Alshaya, while the firm has also been instrumental in expanding the presence of brands including Tom Ford, Urban Decay and Huda Beauty through its Debenhams stores in the region.

Strong demand for oriental fragrance
In fragrance, which remains the region’s largest category, demand for local brands is as strong as ever, but is also evolving to include younger indie brands. Sources suggest that international players’ attempts to tap into regional consumers’ tastes a few years ago with oud-based scents have had little if any impact on the market.

On the oriental fragrance market, estimated to be worth around $1.5bn in the GCC, meanwhile, new players are emerging with a more modern positioning aiming to tap into the younger consumer base. “There is a big demand for oriental [fragrances]—there is more demand than supply,” observes Mohammed Ne’emah, founder and creative director of the Ne’emah brand in 2007 and a descendant of a family of perfumers in Kuwait. “Every month there are two or three new local companies opening with new brands and entering the market for fragrance,” he observes. “Before, the market was shared by around 20 companies, everyone took their own slice. Now it is more than 100 companies.” Despite the increased competition in the category, he says that the brand’s sales continue to grow year-on-year.

Niche fragrance continues to generate strong demand too, with department stores in particular dedicating more space to the category and seeing the results of this, despite the overall decline of the fragrance category over the past three years. “Consumers and thus retailers are demanding fragrance products that offer a different mix,” observes Interparfums area export manager Olivier Demaison. “Given fragrance is the majority of the beauty business in the area, this is currently the focus of many brands.”

Skincare still small
While skincare remains the smallest of the core beauty categories in the GCC, and has seen significant challenges, players targeting local specificities and harnessing traditional skincare rituals from the region are emerging.

Local consumers continue to prioritize fast results over long-term regimens, and education on skincare remains an issue for many beauty players, which has hampered the growth of international companies in the category. Local skincare players include Kuwait-based Prismologie, launched in 2014, which offers bodycare based on gemstones that claims to enhance the mood, Dubai-based Izil Beauty, based on traditional Moroccan remedies, and Dubai-based Shiffa, a dermatology brand inspired by ancient Arabian remedies with a strong presence at Sephora in the Middle East. Products that bridge the gap between skincare and make-up are seen as having strong potential on the market, observers note.

Penetration rates for younger brands across the region vary, meanwhile. The UAE, particularly Dubai, has traditionally been a launchpad for new brands in the region, which has been particularly relevant in make-up, according to Chalhoub Beauty chief operating officer Hani Jabbour. He sees Kuwait as a market apart, meanwhile. “Kuwait is often ahead in terms of trends and brands due to its globetrotting population, receptive to international beauty news. As a result of this, several local brands—launched by local entrepreneurs—have emerged.” Saudi Arabia remains more traditional in its brand landscape, he says. “Nevertheless, indie brands are shaking things up, notably in make-up and fragrance.” He anticipates that this will continue thanks to the emergence of new retail players in the kingdom.

Majors change tack
As the brand landscape in the GCC shifts, it is likely that international players will continue to see their market shares challenged by international “indie” brands, local brands perceived as offering solutions better targeted to the region’s consumer tastes and masstige solutions. Nonetheless, says Jabbour, “We are starting to see the major players shake things up based on what they are learning from younger players. This is being translated into some of them regaining market share, and we anticipate that this will continue in the coming years.” The fierce competition in the market shows no sign of easing.