Photo: Women shop for cosmetics and face care products at a mall in Kuala Lumpur August 27, 2016. REUTERS/Edgar Su
Malaysia's halal cosmetics sector is looking good. While sales have yet to become mainstream, more brands are getting certified, and partnerships with Korean manufacturers are bolstering exports. In the background, Malaysia is also developing a halal standard for cosmetics.
|YOUR PAIN POINTS ADDRESSED
|Scenario: You are a manufacturer of personal care products seeking to better address the Muslim consumer’s needs.
How attractive is Malaysia’s halal cosmetics industry?
|What are the demand and growth dynamics for halal cosmetics produced in Malaysia?
|What are the challenges in addressing this opportunity?
|What are the opportunities for the market to expand and for cosmetics brands to thrive?
Malaysia was one of the early movers in halal cosmetics when it actively stepped in to promote the industry around 15 years ago. Sales and numbers of products have gradually risen since then, especially in the past five years, driven by greater adoption of halal cosmetics in Southeast Asia, where halal sales accounted for nearly 30 percent of the overall market, according to research company Future Market Insights.
The Malaysian halal cosmetics sector is estimated to be 3 billion ringgit ($726 million) out of the country’s overall cosmetics market of $1.72 billion in 2015.
This is a small proportion of the 10-member Association of Southeast Asian Nations (ASEAN) overall cosmetics market that is valued at $15 billion.
Thailand is the the largest market, at 27.5 percent; Indonesia at 24 percent; the Philippines at 20 percent; Malaysia at 11.5 percent; and Singapore at 7.8 percent (despite only having 1 percent of ASEAN’s population), according to cosmetics industry expert Alain Khaiat, who is president of Seers Consulting in Singapore.
However, although there are around 100 Malaysian halal cosmetics companies selling over 400 products, this is still a miniscule figure, as Khaiat noted, “Singapore is the most competitive regional market, and if you look at the number of new products introduced, based on notifications, it is 50,000 to 60,000 per year, and up to 40,000 in Thailand, Philippines, Malaysia, and Indonesia, so halal-certified products still have a small market presence.”
He added that the Singapore market is key for regional sales, as brands typically enter there first and then focus on the rest of ASEAN. But although Singapore is a regional retail hub and trendsetter, it is Malaysian certifier JAKIM (the Department of Islamic Advancement of Malaysia) that cosmetics companies are increasingly following to enter ASEAN markets.
“Malaysia, Indonesia, and Singapore have been strong markets for us,” said Jena Kinney, Regional Marketing Director Asia-Pacific at Croda Singapore, an ingredients manufacturer that has 350 halal-approved products from various certifying bodies around the world. “Halal-certified products really started in the food industry, but as we saw growth in the personal care and beauty market it became a focus a number of years ago. Our manufacturing site in Singapore is approved for Malaysia through JAKIM, and for Indonesia and Singapore.”
The growing demand for halal cosmetics has led local firms such as Wipro Unza (Malaysia) Sdn Bhd., Southern Lion Sdn. Bhd., and SimplySiti Sdn. Bhd. to get halal certification. Multinationals such as Johnson & Johnson Sdn. Bhd. and Colgate-Palmolive’s toothpaste and mouthwash brands have followed suit, and Japan’s Shiseido Company has certified 28 halal products under its Za brand. South Korea’s Talent Cosmetic Co. became the first Korean company to be halal-certified in Malaysia: 147 out of its 550 cosmetic products are now halal.
Organic, natural, and animal-free brands like Body Shop are also driving demand. “The Body Shop is doing very well in Malaysia as it appeals to Muslims but also to Malaysian Hindus as no bovine ingredients are used, which shows a wider appeal,” said Azmi Hassali, a professor at the School of Pharmaceutical Sciences, Universiti Sains Malaysia.
The lack of a universal halal standard for cosmetics is hindering growth, and at the regional level companies also have to get local certification to export to different markets. Indonesia is pushing the certification front in ASEAN, as the country will require all halal products to be labeled by 2019. As a result, regional cosmetics players and regulators are gearing up for more halal certification.
“I’d be shocked if we don’t see more regulation in this space, especially in Southeast Asia. Indonesia’s move will drive legislation activity, but how well companies respond to that with one-product-fits-all [for the whole ASEAN market] will be quite difficult,” said Kinney.
Malaysia is rising to the challenge by developing guidelines for halal cosmetics—a global first—similar to the MS2424:2012 Halal Pharmaceuticals General Guidelines.
“What JAKIM is planning to do is adopt MS2424 criteria for cosmetics as well. It will be implemented in about two years, and is part of the government’s strategy to be a halal hub for the world,” said Hassali.
While JAKIM’s move will improve consumer confidence in halal cosmetics, distribution is a factor that needs to be further developed, particularly to take advantage of the growing global demand for parallel products like organic and natural cosmetics.
“There is no specific distribution for organic and natural products in Asia. It will come, as it took time for distribution channels to be created in the U.S. and Europe,” said Khaiat. The latter two account for 80 percent of global demand in this segment.
One of the biggest opportunities in halal cosmetics lies in the cooperation between Malaysia and South Korea. Korean cosmetics have become increasingly popular around the world, and Korean halal manufacturers are following JAKIM standards.
Overall, Korea’s cosmetics exports to Organization of Islamic Cooperation (OIC) countries surged from $70 million in 2012 to $94 million in 2014, according to the Korea Institute of Halal Industry. Southeast Asia is the primary export market with 64 percent of exports, and Malaysia alone accounts for 50 percent.
In February the Malaysia External Trade Development Corp (Matrade) announced a partnership with South Korea’s ASEAN-Korea Centre to develop the Southeast Asian nation's cosmetics industry. The aim is to boost sales abroad, which in 2016 were valued at 1.25 billion ringgit ($0.3 billion) and ranked as a top five sector in the country's lifestyle exports.
Reflecting the bilateral cosmetics trade is Malaysian brand SimplySiti, which was founded by well-known Malaysian singer Siti Nurhaliza and whose products are manufactured in Korea.
“As a brand ambassador she has been able to get products into the international market; Nurhaliza is very popular in Indonesia,” said Hassali.
Such tie-ups are beneficial to the Malaysian cosmetics sector. “We continue to see Korea as a huge growth driver. This partnership is only going to drive the perceived consumer need for new and innovative products,” said Kinney. “We continue to see demand increasing, not just for halal cosmetics but in general.”
|SUGGESTED ROADMAP TO BETTER REACH MUSLIM CONSUMERS
|Consult: Learn about developments in Malaysia’s cosmetics standards, liaise with JAKIM, and determine the impact that certification will have on your operations.
|Innovate: Halal certification is the first step; learn about the target consumer and do primary research—using focus groups, for instance—to understand what they are looking for in products.
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