Paul Cochrane discovers how Syria’s civil war and refugees are affecting the cosmetics sector
Soap, Perfumery and Cosmetics magazine - www.cosmeticsbusiness.com
The conflict in Syria, now in its fourth year, has had a major impact on the cosmetic market and industry, both in the troubled country itself and the neighbouring region. Exports to Syria and the distribution of cosmetics have been severely hampered by the civil war, while the conflict’s spillover is impacting other countries, compounded by the 2.9 million Syrian refugees currently registered in Lebanon, Jordan, Turkey and Iraq.
“Syria was a good market before the crisis and Jordanian manufacturers depended on exports to Syria and Iraq. But due to the crisis the border with Syria is often closed and goods cannot easily enter, which is the same with Iraq now. Most manufacturers are feeling the pinch,” said Ifani Igboanugo, owner of Ransel Industries in Jordan, which manufactures its own line of cosmetics for Middle Eastern and African markets.
Despite 600,000 refugees having fled to Jordan, it is only sales of low cost cosmetics that have been bolstered. “Refugees do not buy branded cosmetics, just cheap items, while the NGOs [non governmental organisations] and the United Nations are providing them with low cost shampoos and soaps. Some of it is sourced from Jordan, but it is a very small boost as margins are very low,” added Igboanugo. Lebanon has been particularly hard hit, losing a profitable export market and also sales from tourists who have been frightened away (Beirut is just 52 miles from Damascus). The conflict has caused economic losses in Lebanon of US$7.5bn, according to World Bank figures. “Gulf Arab tourists were always good for turnover and we’re affected even more by the absence of Lebanese expatriates, as they would consume a lot on their trips. The loss of both segments has made a big difference to the market,” said Fadi Sawaya, CEO of Beirut based Sawaya Group.
Over one million Syrians have fled to Lebanon, equivalent to 25% of the population, but the cosmetics market has not prospered as a result. “When the Syrians came to Lebanon we thought we would benefit from the additional population, but unfortunately that has not been the case as Syrians are getting aid from the NGOs. Very few Lebanese manufacturers have collaborated with the NGOs to provide needed items. It is not the Syrians’ fault, as the Lebanese government did not negotiate with NGOs to require them to source locally,” said Joanne Chehab, General Manager of Lebanese cosmetics firm Ch. Sarraf & Co., part of the Malia Group, which has its own line of cosmetics, Cosmaline.
The firm is still exporting to Syria, however. “We invested in brands and don’t want to withdraw as we know retailers are struggling to get foreign brands in Syria, and we wanted to ensure the continuity of our brand in the market, as we intend to come back strongly as soon as the situation
settles down,” added Chehab.
Her company is also manufacturing for Syrian companies that had to close facilities in the country due to the conflict and a shortage of raw materials. “Syrian manufacturers either brought machinery to Lebanon or outsourced production.
Although they’re competition, [we thought] if we didn’t produce at our plant, they would just go elsewhere. So we have manufacturing profits and don’t lose out on the market,” said Chehab.
Cosmetics manufacturers in Turkey have also indirectly benefited from Syrian companies closing down and being unable to meet domestic demand. In 2011, Turkish cosmetics exports were estimated at $6.6m, but in 2012 – as the conflict worsened in Syria, particularly in the north, which borders Turkey – exports dropped to $4m.
In the first half of this year, exports reached $5.8m, according to figures from the Istanbul Chemicals and Chemical Products Exporters’ Association (IKMIB). “We will close the year at $12m,” said Murat Akyüz, IKMIB Chairman. He added that figures are probably higher as cosmetics products
exported to Iraq and Iran may be re-exported to Syria. Turkish exports to both markets have surged in recent years, with exports to Iran going from $68m in 2011 to $77m last year, and in Iraq from $150m to $180m in the same period.
Syrian cosmetics manufacturers have not relocated to Turkey due to laws based on European Union cosmetics regulations. “This is why Syrian producers are not able to produce here, as Syrian and Turkish regulations are totally different, so it is not easy to set up the same facility and get a production licence,” said Akyüz.
As the conflict continues, Akyüz expects Syrians will start manufacturing in Turkey and will be forced to adopt EU specifications, which would have long-term benefits. “If Syrians set up here, they will improve production quality and this will have a positive impact on the Syrian cosmetics market in the future,” he said.