Africa’s Cosmetics Industry Is Developing In Manifolds – So Much That Two Local Firms Are Buy-Worthy For A German Multinational

In the last five years, South Africa’s cosmetic industry has experienced an estimated annual compound growth rate. Between 2015 and 2015, the sector recorded a growth of 4.6 percent.

The value sector, including the production of cosmetics, perfumes, and other personal care preparations, was reported to have grown to ZAR 27.35 Bn (USD 1,845,810,475) at the retail level and ZAR 19.69 Bn (USD 1,328,356,315) at the manufacturing level. 

More than 600,000 South Africans are employed in the country’s formal cosmetics sector, in which approximately 250 companies are operating. In 2016, the country exported cosmetics worth ZAR 7.84 Bn (USD 529,109,840), which accounted for a critical 35 percent increase compared to what was in 2013.

Makeup, skincare, and nail products recorded a 45 percent increase in exports, from 2013’s ZAR 2.3 Bn (USD 155,223,550) to ZAR 3.37 Bn (USD 227,436,245) in 2016. 

Africa is perhaps not the first place that comes to mind in cosmetic discussions. It’s possible for one to think there’s little value in the sector, but numbers upon numbers are pouring tremendous potential on the industry. The global personal care industry is valued at USD 400 Bn, a 3 percent share of which is represented by Africa. 

A BBC report shows that consumer spending is ballooning in Africa, encouraging cosmetic business from players such as BASF and L’Oreal to establish and develop a presence in the continent.

The confidence in African countries has been demonstrated by the expansion of players in different parts of the continent. South Africa’s Tiger Brands, for example, has experienced a 1 percent growth in group revenue for the four months that end on January 31 this year. 

European chemicals company BASF opened its Application Technology Laboratory for personal care in Lagos, Nigeria. According to BASF Managing Director for West Africa, Jean-Marc Rica, the expansion in the region is a vivid reflection of the company’s confidence in and commitment to Nigeria and West Africa at large.

Yesterday, it was announced that Brenntag AG, a global chemical distributor based in Essen, Germany, acquired Chemgrit Cosmetics Ltd, a Johannesburg-based cosmetic company for an unspecified financial consideration.

The South African company runs three warehouses, respectively in Johannesburg, Durban and Cape Town. With an in-house laboratory, the firm provides customers with a variety of value-added services, including mixing, refilling, redistribution, delivery, formulating, and testing of materials, among other technical supports. 

“With the acquisition of Chemgrit Cosmetics, we expand the industry segment and scope for Brenntag South Africa in specialties. The company’s cosmetics focus perfectly complements our existing national food and pharma business and supports our ambition to achieve a strong position and comprehensive offering in South Africa,” said Karsten Beckmann, Member of the Management Board of Brenntag Group and CEO Brenntag Europe, Middle East and Africa.

“Based on a dedicated structure and team, Chemgrit Cosmetics has a strong foothold in Personal Care, which is one of the fastest-growing market segments in South Africa and sub-Saharan Africa. Brenntag can use its existing structure in East and West Africa as well as the Maghreb to roll out the cosmetics business line in the region,” said Anthony Gerace, Brenntag Group’s Managing Director Mergers & Acquisitions.

In 2018, Chemgrit reportedly generated total sales of approximately ZAR 83 Mn. The financial details of the deal remain an inside knowledge, and the transaction is subject to certain contractual closing conditions. The buy is expected to close in Q3 2019, according to Brenntag.  

This is not the only African deal Brenntag has sealed in Africa. At the end of last month, the company bought Nairobi-headquartered chemical distribution company Desbro Group. The Kenyan firm which also has presence in the UAE, offers a portfolio of commodities and speciality chemical to diverse customer industries in East Africa and the Middle East.

Karsten Beckmann, Member of the Board of Management of Brenntag Group and CEO Brenntag Europe, Middle East and Africa (EMEA): “With Desbro we have acquired a leading and well-respected market player.

The company provides us the needed market expertise, organization and infrastructure to build on our strategy to claim outstanding Africa coverage. Combined with Brenntag’s knowhow and existing product and supplier portfolio we will create an overall presence and offering in both Africa and the Middle East.”

The German company also acquired Neuto Chemical, a Taipei-based distributor focused on supplying specialty and industry chemical products to industries including electronics, coatings, textile and metal working. The deal with the Taiwanese company is expected to be completed in H1 2019.

Sub-Saharan Africa’s cosmetics sector is expected to grow over the next two years. The African beauty and personal care market was estimated at over USD 10 Bn, and it’s currently climbing between 8 percent and 10 percent year on year on par with a global market growth rate of nearly 4 percent. The sector is expected to reach cross USD 13 Bn in 2020 when Africa’s fastest-growing population reaches 1.4 billion. 

Featured Image: The African Exponent