Myanmar’s beauty market poised for growth

Myanmar’s cosmetics market is expected to grow significantly in coming years, however consumer sophistication and spending power remains low compared with many countries in the region.

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Published in Cosmetics Business on 31 August 2016

But can multinationals compete with the popularity of local super-substance thanaka?

Thanaka on display at a cosmetics fair in Yangon July 2016
Thanaka on display at a cosmetics fair in Yangon July 2016

Myanmar’s cosmetics market is expected to grow significantly in coming years. It boasts one of Southeast Asia’s largest populations (53 million people) and a growing middle class. However, consumer sophistication and spending power remains low compared with many countries in the region – its 2014 gross national income per head was US$1,280, according to the World Bank.

According to a 2014 report by researcher Euromonitor International, Myanmar was identified as one of 20 countries that will offer the most opportunities for consumer goods companies globally.

It has a mean age of 30 years, which is below average for the Asia Pacific region, noted Euromonitor.

“Growing middle class and increasing consumer sophistication bolstered sales of non-essential products, such as beauty and personal care, tissue and hygiene and home care products. Beauty and personal care reached a market value of $318m in 2013, after growing at a CAGR [compound annual growth rate] of 14% since 2009,” states the report.

However, for now at least, spending power in Myanmar is among the lowest in the Association of Southeast Asian Nations (ASEAN) block. According to survey findings released on 7 July by the Myanmar Rice Traders’ Association, 51% of household income is spent on food. That marks a fall from 64% in 2012, according to the country’s Central Statistical Organisation, but indicates that further economic growth – which the Asian Development Bank forecasted to be 8.4% in 2016 – is needed for the cosmetics and personal care sectors to grow.

What is thanaka?

If this happens, Khine Linn, Executive Director at the Shwe Pyi Nann Group of Companies will benefit. It is the largest manufacturer of Myanmar’s traditional cosmetic thanaka, a cosmetic paste made of ground bark that adds a yellow colouring to the face, notably the cheeks. His company also distributes personal care brands St Ives Swiss Formula (of Unilever) and South Korean cosmetics brand Nature Republic.

“Nothing can beat thanaka,” he said, while noting that Myanmar consumers were increasingly interested in foreign brands. He said European brands are trusted highly and that “‘made in the US’ is very, very popular”. Moreover, Korean products are “number one because of the popular Korean TV dramas that have elevated people’s expectations of beauty”.

Part of the ground floor at the high-end Parkson Department Store in downtown Yangon stocks cosmetics displays featuring products from Clinique and Kanebo, while the largest supermarket chain City Mart has dedicated customer service teams at each of its stores for displays from Yves Rocher, L’Oréal and Revlon.

Linn said there are also thousands of Chinese brands on the market, especially in rural areas, but these tend to be low-end items with a poor reputation: “It’s usually a one-time use because the quality isn’t good, so consumers aren’t happy and change to another product.”

Foreign brands need to note, however, said Linn, that after thanaka, powders and foundations are the two most popular cosmetics items in Myanmar. “Women have been using pressed powders for years. Lipstick is a lot less popular. Women don’t know how to use lipstick properly and they only know a few colours. Most are scared to try colour cosmetics,” he noted. Whitening products are also a “huge industry”, although many consumers struggle to source such products.

Building consumer trust

Consumers may also be wary of unfamiliar brands due to a number of scandals in recent times, such as when two whitening skin care products being sold by the popular Thai ‘Forever Young’ company were found to contain clobetasol propionate, a topical steroid that is banned in several countries due its harmful side-effects. The company had failed to secure a Myanmar Food & Drug Administration certificate and the health ministry ordered a sales ban and destruction of these products, citing a 1972 Public Health Law after a public outcry on social media.

One problem is that consumers who developed sores on their face after discontinuing use were unable to seek redress through official channels. Consumer protection is nascent in Myanmar, although a Myanmar Consumers Union was formed in mid-2015 and is a rival to the Consumer Protection Association, which, according to The Myanmar Times, “has a fraught relationship with government officials due to its willingness to criticise their perceived failure to protect Myanmar consumers”. Products which feature endorsed safety-tested labels are therefore likely to gain currency in Myanmar.

Linn said that one of the biggest challenges new brands face in gaining market share is dealing with retail bottlenecks.

“We go to the stores but the manager can’t make a decision right away – they say they have to speak to the owner. It’s really frustrating and the bigger the retail store is, the worse it is. New brands aren’t treated well,” he told cosmeticsbusiness.com.

Thai national Nook Kamonntip launched her cosmetics and personal care product brand Sarna a year ago and already has ten dedicated stores selling her lines. She said that the highest purchasing power is in Yangon, while the cities of Mandalay, Nay Pyi Taw and Taunggyi together with Yangon comprise 70% of Myanmar’s market share, as rural spending power is very low.

Every item in the Sarna range contains thanaka sourced from Myanmar, although the actual products are manufactured in Bangkok due to lower manufacturing costs. The company is half Thai, half Myanmar-owned.

“Women of all ages love thanaka and I realised that there weren’t any brands tapping into that except for producing tubs of thanaka. Myanmar has quite a lot of international brands here now, but it still doesn’t have many natural products because people lack awareness,” she said.

Naturals market takes off

Meanwhile, a market for natural cosmetics products is starting to take off. Yalee Azani is business development manager at Israel-based Tag International Development, which founded the fair trade Plan Bee range of honey and beeswax by-products such as lip balm and beeswax infused with essential oils. The company is seeking sales in Myanmar. Azani said that Plan Bee’s range is limited to tourist-orientated stores around the country, as well as artisan and health stores in Yangon.

“We are slowly expanding our client base, but there’s not a huge market for natural products yet. It’s a challenge and it will only grow through awareness. People tend to say, ‘why would I would a product with beeswax in it?’ It’s not something that people are familiar with and Myanmar people tend to view honey and its by-products as medicine.”

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