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South Africa: country analysis Market watch: Africa Diamond in the rough South Africa may have its economic woes, but it is still seen as key for prestige players, both for the market itself and as a gateway to the rest of the continent by Alex Wynne espite rampant unemployment and Dan unstable currency that have shrunk purchasing power in South Africa in recent years, beauty players believe that the country’s status as a two-tier market—one emerging, the other emerged—still gives it plenty of potential for years to come, notably in prestige. “South Africa is an established market when it comes to product development and consumer sophistication, with premium seeing a rapid increase in recent years, in terms of brands that have entered the market and the rapid response of consumers,” says Euromonitor International research manager Izaskun Bengoechea. “ credit: istock To be successful in a market like this, you need to have in-store visibility, good around 5bn rand ($589m). Industry sources increases, rather than an increase in volume. However, wealthy consumers, less impacted report that fragrance represents around locations and visibility 60% of that fgure, with skincare accounting by the morose economic climate, continue in magazines; it’s a very for most of the rest. The prestige market is to spend on cosmetics. Some 10% of South interesting operation, but it growing at a rate of around 8% to date this Africans account for 47% of consumer year, according to industry sources. spending, according to estimates, suggesting requires a lot of investment are taking their toll on the market—the there is still plenty of potential for prestige. Nevertheless, infation and a falling currency and Africa Sébastien Gautier” South African rand has depreciated by 17% “Black Diamonds” boost demand against the US dollar since the beginning of Several players cite the emergence of Sisley regional director for the Middle East 2013, according to the African Development Bank. This has forced international brands to a consumer category dubbed “Black Diamonds”—wealthy black consumers who “While the overall market was up by 74% increase their prices by as much as 20%. are avid shoppers forf high-end products. between 2008 and 2013, premium products This has been a boon for the masstige “This group of people have money, but are grew by 84% in the same period and are segment, which is largely catered to by several less educated in terms of products, so they are expected to continue to perform strongly in retailers in the market, as certain consumers more show-off in terms of consumption,” says the next fve years,” adds Bengoechea. trade down. But it also means that much Sisley regional director for the Middle East and The prestige beauty market is estimated at of the market’s growth is driven by price Africa Sébastien Gautier. “Education is very 58 September-October 2014 - N°19 - BW Confidential