Beauty businesses roiled by rising exchange rate

Beauty businesses in Myanmar, particularly those involved in importing cosmetics ranging from body moisturisers and hair gels to lipsticks and mascaras have been hit hard by the rising value of the US dollar versus the Myanmar kyat.

Around 90 percent of the Myanmar cosmetics market is dominated by imported brands manufactured by France’s L’Oreal and US-based Unilever. But with the dollar exchange rate up by more than 10pc in the past three months, foreign exchange losses are mounting for traders.

The rising exchange rate comes on the back of rising competition between the multitude of cosmetics brands in the local market. In recent years, demand for beauty products in Myanmar has skyrocketed, with users no longer confined to middle-aged, upper-class women.

“These days, teenagers and senior citizens are using cosmetics not just for beauty but for health as well. Most people have already discovered the benefits of skincare and developed routines for taking care of their skin and hair,” said Dr Su Hla Han, vice chair of Myanmar Cosmetics Association and managing director of Medi Myanmar Group Company.

“The current trend is such that the use of cosmetics is no longer a luxury but an everyday essential. Women rely on cosmetics and even men are using whitening creams and sunblocks over and above hair gels. There is hardly anyone, male or female, who does not use cosmetics today,” U Kyaw Min, chair of Myanmar Cosmetics Association.

That level of demand and potential for growth has heated up competition among cosmetics companies in the local market and that has made it difficult for many foreign brands to raise their product prices to cover rising import costs.

“The Myanmar kyat is depreciating but as there are many competitors for imported cosmetics, shelf prices cannot be raised to offset foreign exchange losses. Meanwhile, consumers are turning more cautions on spending. So we are being pummelled by declining sales and rising costs at the same time. Cash flows are dwindling and things have gotten worse this month,” said U Kyaw Min.

The high exchange rate presents an opportunity for some local cosmetics producers to grab market share from their foreign competitors. As Myanmar producers are likely to incur less costs, they would have more capacity to adjust their price points to suit local demand.

“Based on the income levels of the population, the cheaper products generate the most demand,” said Dr Su Hla Han.

According to data from the Myanmar Cosmetic Association, products priced under K10,000 are currently the most widely used in the country. These include some locally made products such as thanaka, which is produced from local sandalwood and applied on the skin as sunblock. Yet, even the low price segments of the market are struggling, U Kyaw Win said.

The main reason is the illegal trade of cheap cosmetics, which are smuggled into Myanmar via the Thai and China borders as well as some airports. Because these goods are not taxed, traders are able to undercut legit cosmetic businesses with cheaper prices.

“Because of this, the local cosmetic producers are not even able to garner up to 10pc in market share,” said U Kyaw Win. “This sector will need government support and new policies to control illegal trade to stay above water.”

With the dollar expected to stay volatile in the near future though, the bulk of the industry will need the Myanmar people to purchase a whole lot more high quality whitening creams, hair gels and eyeliners to remain in business.

Source: Myanmar Times

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