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BUSINESS

Personal-Care Firms Uncover New Markets Henkel, Unilever Offer Shampoos for Hair Covered by Veils as P&G Sells Skin Lighteners in Persian Gulf

May 19, 2014 11:33 p.m. ET

Personal-care companies have discovered a hidden market: veiled hair.

German consumer-goods maker Henkel AG is touting its new Gliss Restore & Refresh shampoo as the

world's first hair-care product to address problems caused by the lack of ventilation under a head scarf,

including split ends, itchy scalp and unpleasant odor. British-Dutch rival Unilever PLC is also targeting the

market with its Sunsilk shampoo. And hair is just the start.

After years of pushing Western-designed shampoos and deodorants in the Middle East, the world's biggest

personal-care companies are changing course and selling products made specifically for local consumers'

tastes.

Henkel touts its Gliss sham poo as the world's first hair-care product to address problem s caused by

the lack of ventilation under a head scarf. Henkel

By PETER EVAN S a n d C AITL AN R EEG

From the Archiv e s

Procter & Gamble Co. 's Olay line targets Persian Gulf customers with skin-lightening creams. A recent

campaign by Beiersdorf AG 's Nivea brand collected love stories from mostly female Middle Eastern writers

to market its Sensual Musk body lotion.

Unilever, the world's second-largest consumer-products company, after P&G, has tweaked best-selling

products such as Axe deodorant and Sunsilk shampoo with local woody or sweet fragrances and made

some packaging shinier, the company said.

The goal is to woo young Middle Easterners with cash to spare. Consumer spending in developed markets,

by contrast, is still rebounding from the financial crisis.

"If you want to go with growth, you want to go with the Muslim market," said Shelina Janmohamed, vice

president at Ogilvy Noor, a London-based Muslim marketing agency owned by WPP PLC.

The global Halal market—products made to be permissible under Islamic law—is valued at $2.1 trillion,

according to a 2013 report by the Halal Industry Development Corp., a government-sponsored trade group

based in Malaysia. Roughly 9% of that goes to Halal cosmetic products, one of the fastest-growing

categories.

Halal cosmetic products are prohibited from containing any

What's a 'Camel Hump'? High-Rise Dubai

Hairdos Turn Heads (5/2/13) pork byproducts such as pig-fat derivatives, which are used

in some makeup brands, or the proteins used in some

shampoos. They also shouldn't contain alcohol, which is

forbidden under Islamic law.

Marketing by major personal-care companies directly to Muslim consumers is still in its infancy, according

to Ogilvy Noor's Ms. Janmohamed, who likens the situation to the untapped Hispanic market in the U.S. 20

years ago. Still, some campaigns have started to appear, including an ad for Unilever's Sunsilk shampoo in

which no hair was shown.

So far, much of the growth has come from small firms providing specialist products in one or two

countries. Now global companies are tapping the booming demand. Since 2008, Henkel's Middle East and

Africa business has grown three times as fast as the company overall. Regional sales increased 17.6% in

2013 from the previous year, and Henkel expects a similar performance this year.

"We have come from being, relatively, a very small player within the group," said Ashraf El Afifi, head of

Henkel's business in the Middle East and Africa. While mainstream Western products hyped on the Internet

and satellite TV have gained popularity in the region, for personal-care essentials, "the trend is local," he

said.

Still, the region poses many challenges. Executives say political uncertainty in the wake of the Arab Spring

makes planning extremely difficult. Tastes vary dramatically by country. In Beirut, for example, a high

penetration of Western brands means lines like Henkel's Restore & Refresh have been less successful

than in Egypt, where consumers have sought more locally tailored products.

"I do prefer if these products have a local twist or are especially made for my needs and my daily routine,"

said Salwa Saber, a 20-year-old university student in Cairo.

Competition is also intense from local suppliers able to produce imitation products at a fraction of the cost,

meaning some companies resort to discounting and special offers.

Ahmed el Amir, who owns a drugstore outside of Cairo, said Henkel offered a free veil when it launched

Gliss Restore & Refresh, and many women bought the shampoo to get the scarf. "From my experience, it

is very difficult to keep people interested in new products for a long time here because the competition is

very tough," Mr. Amir said.

The Middle East is also a lower priority for many companies than China, India or Africa, where enormous

population growth and low penetration of consumer goods has attracted greater investment.

The Middle East still "doesn't have a great impact" on the strategies of major consumer-products

companies, despite sales growth, said James Edwardes Jones, managing director at RBC Capital Markets

LLC.

But growth potential in some countries is big. In Saudi Arabia, for example, the beauty and personal-care

market will rise to roughly $7.5 billion in 2018 from $4.1 billion last year, predict analysts Euromonitor

International.

To better understand consumers and speed new-product marketing, Henkel recently relocated some of its

research-and-development team to Dubai. In less than eight months, the team was able to develop and

introduce a liquid-gel detergent under its Persil laundry-detergent brand that was aimed at low-income

customers who wash their clothes by hand, Mr. Afifi said.

Focusing on Middle Eastern consumers marks a strategic shift for Henkel and its rivals. Previously,

personal-care companies would release products designed for U.S. or European consumers and assume

Middle Easterners would buy them, industry officials say.

Rising Middle Eastern spending power has changed that. And since locally focused products are often

cheaper to make, they can generate higher profits than similar items sold world-wide—despite rising

competition for Middle Eastern customers among the world's biggest consumer companies.

That lesson has some Western executives realizing what they've been missing. "There are regions that we

could get far more out of by focusing our attention," Unilever Chief Executive Paul Polman said at an

investor conference in December.

—Summer Said contributed to this article.

Write to Peter Evans at [email protected] and Caitlan Reeg at [email protected]

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