Acquisitions: The new trend in Kenya's cosmetic industry
The beauty and cosmetics industry has become Kenya’s new hub of investment that is pulling in big money to establish new lines of business and to snap up successful enterprises through multi-million shilling acquisition deals.
That statement was firmly made when Flame Tree Group acquired a local start-up Suzie Beauty in a deal estimated to be worth millions of shillings.
The Flame Tree Group said it made the acquisition as part of a larger plan to expand its fast moving consumer goods business, especially in cosmetics where it is already a big player.
“Suzie Beauty is a strong brand in Kenya with a niche target. Of the beauty products in our portfolio, all are mass market goods. Suzie Beauty is a niche product that gives us reach to the high-end market,” said Heril Bangera, chief executive officer of Flame Tree Group.
Suzie is the fourth acquisition that the Flame Tree Group has made since its 2014 listing on the Nairobi Securities Exchange.
The beauty products maker bought Miss Africa, Black Angel and Beauty plus hair brands from Beauty Plus Trading East Africa before taking in Monalisa skincare brand shortly thereafter.
Kenya’s colour cosmetics market is estimated to be worth Sh5.4 billion and is expected to grow to Sh6.6 billion by the end of 2018.
The Flame Tree Group’s annual report for 2014 says the cosmetics division, under the manufacturing arm, accounted for 74 per cent of the company’s portfolio with the rest going to the trading arm.
The Suzie Beauty takeover comes barely two years after French beauty and cosmetics giant L’Oreal acquired Nice & Lovely range of products from Paul Kinuthia startup InterConsumer in a deal worth more than Sh1.5 billion.
L’Oreal, one of the largest cosmetic groups in the world, purchased InterConsumer Products, targeting Kenya’s fast-growing lower end of the market, where it had no presence.
That gamble paid off when the company clocked 40 million units in sales after the acquisition, up from just 2 million the year before.
Kenya is about to hit a growth period, especially in the colour cosmetics field, as new brands enter the market. Due to its geographical position and relative market sophistication, Kenya is generally seen as a regional hub which provides entrance into the East African Community (EAC) region.
Mid-market cosmetic brands like Victoria’s Secret, Sleek, Petal Fresh, Freeman, Mary Kay, Simple, Bath & Body Work, Black Opal, Flori Roberts, Ombia (Austria) are popular in Kenya. Locally produced emerging brands include SuzieBeauty.
Popular haircare and hair accessories brands include Golden Perfect, Imaj, Fashion Idol, Hair Culture, Organics, Rio, Glitter & Glam, Africa’s Best, Alba Botanica, Avalon Organics, Lady Rainbow, Freeman, L’Oreal, Babyliss, Ceriotti. Grape and Eve. Kenya’s use of personal care cosmetic products ranks third behind South Africa and Nigeria in sub-Saharan Africa. In the coming 5 years, beauty and personal care market is expected to see a steady increase in volume, increased competition among local and international players and widening of product base to suit varying consumer profiles.
Distribution Channels
The increasing reach of retail outlets in residential areas and their ease of accessibility for local residents have made these the preferred channels of distribution to reach consumers in Kenya’s urban centres. In recent years, the rising popularity of mall-culture among the Kenya’s urban population has further strengthened the value of this important distribution channel to reach Kenya’s rising middle class. However, most middle- and lower income group consumers still purchase their products from outdoor markets and supermarkets, which stock a wide variety of products at affordable prices. The high-income consumer groups however prefers to do their buying at health and beauty retailers located in wealthier residential markets and shopping malls.
