Thriving Market in the Black Might be a New Growth Opportunity for Cosmetics

Li Chunxia

Wilmar (China) Oleo Co.,Ltd.,Shanghai Branch Office,China

Over the recent years,with the outbreak of the“anti-racial discrimination” movement in society,the black group is gradually receiving attention in theincreasingly strong “racial equality” voice.Against this backdrop,the “needs” of the black people are constantly“seen”,and the capital also realizes that the black market has a certain development potential.According to public data,black people are mostly distributed in central and southern Africa,northwest Oceania and other places.Given historical and other factors,there are also some blacks living in the Americas.

1 More needs from the blacks attract many cosmetics companies

Although most people think of black people as being in the “third world”,the purchasing power and consumption level of black people have beenincreasing in recent years.According to data from the Selig Center,the U.S.black people's spending powerin 2019 is 1.4 trillion U.S.dollars (about 9.92 trillion yuan),a growth rate of 114%,exceeding the white people’s 89%,and it is expected that by 2024,it will be 1.8 trillion U.S.dollars (about 12.75 trillion yuan).And Nielsen data shows that nearly half (48 percent)of African-American households shop online in 2020,a figure that is 11 percent higher than the average for U.S.households.

In terms of beauty,black people’s demand for cosmetics is also rising,and the size of the market continues to expand.According to the U.S.Department of State’s Foreign Business Guide report,the cosmetics and cleaning products marketin South Africa alone has a capacity of about $1.15 billion (about RMB 8.148 billion),and the demand for the cosmetics market on the African continent is expanding at an annual growth rate of 30%.

In addition,the African Development Bank predicts that by 2060,the number of middle-class Africans will grow to 1.1 billion,equivalent to 42%of the entire population of Africa in that year.At the same time,capital has also seen the business opportunities of the black market.In recent years,a number of cosmetic companies have tested the waters or increased the black beauty track.2014,L’ Oréal acquisition of black founded hair care brand Carol’s Daughter (Carol’s Daughter),and in February 2023in France launched the brand,and planned to expandit to other parts of Europe within this year.

In 2017,Unilever acquired Sundial Brands,the parent company of Shea Moisture,for $1.6 billion.In 2020,Johnson &Johnson Innovations invested in Sunday II Sunday,a black hair care brand.In January 2023,Procter &Gamble announced the acquisition of Mielle Organics,a black hair care brand.Not only are beauty companies getting into the black cosmetics space,beauty retailers have also made moves.For example,Ulta Beauty spent $25 million to expand into the black market.In 2020,Sephora’s U.S.division became the first retailer to join the “15%Pledge” by reserving 15 percent of its selling space for black-owned brands.

When combined with the earnings reports of several cosmetic companies,all of the regions where the colored race is concentrated did well.Among them,Amore Pacific reported sales growth across allits brands in the EMEA region (Europe,Middle East,Africa) in the first quarter of 2023,with total sales up 94%.Coty Group’s net revenue in the EMEA region for the first quarter of 2023 was US$588 million(approximately RMB4,166 million),up 7% yearon-year,thanks to growth in the high-end beauty business and the mass consumption business and regional travel retail business.

In addition,L’ Oréal Group SAPMENA-SSA(South Asia Pacific,Middle East,North Africa,Sub-Saharan Africa) and Latin America sales all showed growth in the first quarter of 2023.The former saw a 26.7% year-on-year increase in sales to €840 million(roughly RMB 6.372 billion),while the latter saw a 22.3% year-on-year increase in sales to €680 million(roughly RMB 5.158 billion).

Although the rise in sales is affected by multiple factors,the above figures also reflect that the colored market has a certain vitality.

2 The advantages in the African market: population and raw materials

Looking at the entire African market,analyzing the population size,it is known that the fertility ratein Africa will be 4.2 in 2022,and the 20 countries with the highest birth rate are almost exclusively African countries.Population growth also means an expanding consumer base.In addition,about 70%of the population in Sub-Saharan Africa is less than 30 years old.Culture is also an important factor in the growth of beauty.With the African community gradually active on the screen,“Afrofuturism”also came into people’s view after the release of“Black Panther” in 2018.It is understood that“Afrofuturism (Afrofuturism)” was first proposed by Mark Dery,characterized by African traditional elements+technological futurism.Afrofuturism is not only embodied in painting and music,but also provides more choices for beauty “diversity” and“inclusiveness”,said Lisa Price,founder of Carol's Daughter.Lisa Price,founder of Carol’s Daughter,has said that the industry's current mindset is to try to fill gaps in the market,with too little shelf space and not enough diverse models and imagery,but “we need to think futuristically and create something new andinteresting from a place of fun rather than necessity”.

The rise and spread of culture has created demand in the market to a certain extent.However,companies also need a solid foundation to move from providing demand to creating it according to social and cultural trends.

Looking again at channels,according to the Brookings Institution study,as the country continues to develop,consumer spending has shifted frominformal markets (e.g.,roadside stalls) to more formal venues,such as department stores and supermarkets.This,in a way,also favors the sale of cosmetics.As for the online channel,according to the GSMA (Global System for Mobile Communications Association),it is expected that by 2025,615 million sub-Saharan Africans will subscribe to mobile services,28% will have a 4G connection and 3% will have a 5G connection.

Internet access is also one of the prerequisites for e-commerce development.In fact,mobile moneyis growing five times faster in Africa than in any other region,according to McKinsey &Company.In addition,the number of online shoppers in Africa has grown by at least 18% per year since 2014,according to the International Finance Corporation’s (IFC) Rise of African E-Commerce Women 2021 report.

In February 2023,Jendaya,a luxury e-commerce platform targeting the African market,which also sells categories that include high-end beauty and skincare products,secured a $1.2 million (roughly Rs.8,551,800) seed round of funding.And in recent years,domestic e-commerce platforms have also taken note of the African market,with the proportion of Chinese users in the list of active shopping apps in Africa at 60%,according to DataSparkle.

In the second half of 2022,Pinduoduo launched Temu in Africa;Egatee,an African B2B e-commerce platform,completed tens of millions of yuan of A round of financing,led by Yiwu Commodity City,and Banyan Tree Capital,the leading investor of the angel round,continued to increase its injection in the A round.At present,Egatee has opened country stations and city cloud warehouses in Nigeria,Uganda,Tanzania,Zimbabwe,etc.,and cumulatively serves more than 100,000 merchants overseas,covering a wide range of fields such as FMCG and beauty.Sinceits launch in January 2022,the platform’s transaction volume has reached nearly RMB 800 million.Egatee plans to open business in 15 sub-Saharan countries one after another in 2023 to help global brands landin the African market.

In terms of raw materials,African natural skincare ingredients are also gradually entering the beauty market,such as baobab oil,moringa oil,marula oil and argan oil,as well as shea butter.Therefore,Africa also has a certain advantage in the raw material market.As can be seen from the above,the African market is constantly “rising”,or become a new space for the development of beauty.

3 Supported by the Belt and Road Initiative,the African cosmetics market might be another opportunity

The relationship between Africa and China is also getting closer by the day.China adheres to the global governance concept of “common cause,common construction and sharing”,actively advocates the concept of win-win cooperation,and is committed to China-Africa friendship and cooperation,which to a certain extent also promotes the export of Chinese products.It has been nine years since the “Belt and Road” initiative was put forward,and China-Africa cooperation is getting closer.According to the data released by China’s General Administration of Customs,the import and export volume between China and African countries in 2022 will be RMB 18,786,004,000,000 yuan,an increase of 14.5%year-on-year,with the export volume of RMB 1,097,591,000,000 yuan,an increase of 14.8% year-onyear,and the import volume of RMB 781,014,000,000 yuan,an increase of 14.2% year-on-year.

The gradual deepening of trade can also boost beauty sales to a certain extent,and domestic beauty enterprises have already discovered the potential of the African market as early as 2018.In 2018,at the“China-Africa Beauty Summit -New Opportunities for the Beauty Industry in the African Market” conference,the Executive Chairman of the Greater China-Africa Chamber of Commerce of Hong Kong and China,Mr.Wang Zhenhua,said,“We will continue to promote the development of the beauty industry in Africa”.Xu Chuwu,Executive Chairman of the Greater China Africa Chamber of Commerce,introduced that the number of middle class in Africa is 360 million,and with the growing middle class in Africa,the beautyindustry in Africa has grown into a huge market of billions.Africans are very keen on make-up and skin care,and due to geographical factors,such as strong ultraviolet radiation,African consumers for skin care products,cosmetics demand is stronger,the demand for beauty products at an annual rate of 8% growth.However,according to the query,sea "Africa" of China's beauty business is not much,the national beauty is basically still focused on the domestic market,in recent years,the export region is also Europe,the Americas,ASEAN countries.

In addition,the main audience of national color cosmetics is still Asians,due to cultural conceptual differences and other factors,the possibilities available to black people are relatively few.Considering the international market,most of those who have entered the African market are large groups with a relatively strong power base,but the selling prices of their products are generally high,which is not favorable to the low-consumption population.Therefore,Africa’s low-end cosmetics market has some room for development.

Under the favorable policy,the sea “Africa”may be a new growth opportunity for corporate performance.However,for Chinese enterprises to go to the overseas,you need to start from many sides,fit the local market,adjust pricing according to local conditions,the introduction of black beauty categories,but also to improve technology to ensure product quality,in order to seize market share.