Halal cosmetics – The appeal of an ethical lifestyle

Eco-friendly, organic and vegan are now common themes in the cosmetics industry – but Halal products are the latest trend . Halal cosmetics sales are estimated at over USD 50 billion globally and forecasted to grow at 14.6 per cent a year from 2017 to 2021 . A quarter of the world’s population is Muslim, at 1.6 billion people in 2016 . Will Halal products become a pillar of the global beauty products industry?

What are Halal beauty products?

The word ‘Halal’ means ‘permissible’ in Islamic teaching. So such beauty products may not contain any alcohol ingredients, pork or animal blood. Food products prohibited under the Islamic Sharia Law need to be avoided during manufacture. Moreover, manufacturers of such products need to adhere to strict standards throughout the supply chain. This means right from the packaging to the storage; these products must qualify as Halal.

Aside from their religious appeal, Halal beauty products have also become known for quality assurance and purity. Every Halal product requires a Halal certification which acts as proof that it does not contain any prohibited substance.

Where do the market opportunities lie?

More beauty brand-owners are realizing the potential of Muslim customers and rushing to get Halal certification. Global spending on Halal cosmetics has been estimated at USD55 billion (AED205.5) a year (as of March 2017).

The factors that will drive growth potential for investors are:-

• Rise in the global Muslim population?

Muslims account for 1.6 billion people – 25 percent of the global population.

• Growing awareness among non-Muslim population

In 2015, expenditure of Muslims for cosmetics worldwide increased by 10 per cent. Moreover, growing health concerns due to the effects of harmful ingredients in cosmetics products are fueling demand for “special”, niche cosmetics.

• Untapped e-commerce platforms

Malaysia launched the first Shariah and Halal compliant e-commerce platform in 2016, run by the Aladdin Group of Companies.

Many organizations are keen on exploring online sales platforms for Halal-certified products. As the Muslim consumer base continues to expand, this still remains an untapped market.

For instance, Malaysia launched the first Shariah and Halal compliant e-commerce platform in 2016, run by the Aladdin Group of Companies, at an investment of USD5 million. This caters to both Business-to-Consumers (B2C) and Business-to-Business (B2B) communities across the Internet. It is also accessible via mobile applications globally.

• Improved standardization and certification

Halal cosmetics are popular among health-conscious consumers too. As more products become recognized by certification bodies, consumer confidence increases.

The major Halal certification bodies include the American Halal Foundation (AMF), the Indonesian Council of Ulama, Majlis Ugama Islam Singapura (MUIS) and Jakabatan Kemajuan Islam Malaysia (JAKIM) to name a few.

Emerging markets across the globe

As the global Muslim population rises and emerging countries with Muslim-majority populations in Africa and Asia grow wealthier, the Halal cosmetics market is poised to grow.

A few emerging markets to watch for are:-

• India

With 15 per cent of its population being Muslim, India is a lucrative market for Halal cosmetics. Cosmetics revenue is expected to reach USD39 billion by 2018.

For instance, Iba Halal Care is the first producer of cosmetic products with Halal certification. Conceptualized by two Jain sisters from Gujrat, it was launched in 2014. The line includes over 80 cosmetic products.

• The Middle East and Africa (MEA)

As the Halal cosmetics sector continues to grow at 6.4 per cent a year, the MEA region cosmetics market is valued at USD 25.4 billion. Saudi Arabia dominates the region, with an overall national expenditure on cosmetics of USD5.3 billion in 2015.

Needless to say, the region continues to attract players from Germany, the UK and the US, due to a lack of a universally accepted certification body in the region.

• USA

Muslims represent one per cent of the US population, or 3.3 million people. By the year 2050, this percentage is expected to rise to 2.1 per cent.

Although the Muslim population is relatively small, it represents a market opportunity for this demographic. For instance, Amara Cosmetics launched the first of its kind Halal-certified cosmetics in 2011. These were packaged in California with accreditation from the Islamic Food and Nutrition Council of America.

• Europe

The 2013 European Union ban on animal testing is one of the main reasons Halal cosmetics is picking up growth in Europe. For instance, the Halal Cosmetics Company launched its exclusive range of Halal skin cleaning and care products in May 2017 across 54 Asda supermarkets in the UK.

Challenges of selling Halal cosmetics

The Halal cosmetic market is not yet fully developed. What challenges and potential pitfalls should investors consider?

• The consumer market is heterogeneous in Asia

The consumer market in Asia is very complex. Asia – and indeed Asian Muslims – comprise of various social-cultural sub-groups who speak different languages with varying norms of custom and dress. Therefore, it is crucial to first develop hyper-local strategies for marketing in order to connect to Muslim consumers.

• Scope for uniform certification regulations

Halal certification is still not standardized across the world. The various certification bodies that operate globally do not use identical approaches from country to country. The certification process thus becomes more challenging when supply chains cross national borders.

• Ensure authenticity of product

Halal cosmetics vendors have to not only adopt marketing strategies to local needs but reassure consumers of their products’ authenticity. Consumers might not always be aware that global brands are Halal compliant as it is not often communicated or advertised.

• Reputational risk

Dealing with non-Halal claims can be a nightmare. This can cause harm to the reputation of certifiers overseas. For instance, Australia’s USD13 billion Halal industry suffered reputational damage due to claims of food being modified just to gain Halal status.

What lies ahead?

Non-Muslim consumers accounted for an estimated 30 per cent of sales of Halal cosmetics in 2016.

The market size of Halal cosmetics is expected to far exceed USD50 billion by 2020 and grow by approximately 15 per cent each year.

Due to purity, safety and hygiene factors, Halal cosmetics are now accepted by non-Muslim populations in countries like China and India. Non-Muslim consumers accounted for an estimated 30 per cent of sales of Halal cosmetics in 2016.

As the Halal cosmetics trend gathers steam, established manufacturers such as Avon and BASF have launched a range of Halal products. There is also a growing trend of start-ups entering the market, such as Amara Cosmetics and Iba Halal Care.

Furthermore, as more products flood the market, marketers are leveraging online channels for improved penetration. E-commerce and online retailing are popular platforms due to rising mobile internet usage. Halal cosmetics vendors can use these online platforms as a powerful tool to increase revenues and profitability.

Consumers around the world are increasingly considering organic and clean-label products. If Halal cosmetics manufacturers are able to market their products effectively as being pure, ethical and organic, there is a chance that Halal cosmetics will win even greater acceptance among non-Muslims.

https://www.spireresearch.com/spire-journal/2008-2/q2/halal-cosmetics-the-appeal-of-an-ethical-lifestyle/