Euromonitor: What the Iran Nuclear deal could mean for the cosmetics industry

This week, diplomats from the US, the UK, France, China, Russia and Germany completed the deal with Iran to prevent it from developing nuclear weapons, and in exchange, Iran will come out from under some economic sanctions while being allowed to continue a peaceful nuclear program.

While there seems to be a lot of political opinions dividing people on this matter, this article is to look at the issue from a beauty standpoint and the effects that it may have on the cosmetics and fragrance markets.

Proceed with caution​

The Western and U.N. sanctions against Iran over its nuclear program and other issues had stifled the country's economy; however, while cosmetics and fragrances can play a big role in the country, the success for manufacturers will not be an instant one, says Nicholas Micallef, Analyst – beauty and personal care at Euromonitor.

“As matters stand, Iran is still not a market that can be viewed as the next big beauty and fragrances market,”​ he explains.

“Political relations with the West remain weak, fragile and volatile, and the potential revenue gains that Western beauty companies can reap cannot be taken for granted, at least in the short-term.”​

Micallef compares Iran to Tunisia, which has only transitioned to democracy recently, and also raised hopes for a new growth market; but is a country which is still uncertain on the gains that Western companies may secure.

Fragrance and Colour Cosmetics​

The main markets for manufacturers to target in Iran would appear to be in colour cosmetics and fragrance.

According to Euromonitor figures, Iran’s projected absolute growth over 2014-2019 stands at $86 million in fragrances and $210 million in colour cosmetics, with both categories expanding at around 6-7% CAGR in real terms.

“At the very base the Iranian market needs to be looked at from a socio-cultural standpoint. In a country which enforces strict Islamic dress code, wearing make-up and perfume is a form of personal expression,”​ says Micallef.

“Given that the face is the only body part that women can reveal, make-up is a daily ritual and a form of empowerment for many women especially the young. Moreover, just like other Middle Eastern countries, the use of perfume is deeply ingrained in local culture as evidenced by the popularity of this product in bazaars.​

Iran has similar dynamics to Saudi Arabia and UAE, both with strong fragrance and colour cosmetics markets, and this could make things difficult for Western manufacturers to succeed.

“Local players tend to exert stronger influence on consumers because they are more established and know their potential consumers far better than their global rivals,” says the market analyst.

The saving grace, according to Micallef, is that Iran is also characterised by a young demographic with growing brand awareness, “especially of Western designer labels which fuels their aspirations to purchase more of such items,”​ he adds.