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Cosmetics Production, Imports Dwarfed by Smuggling
Cosmetics Production, Imports Dwarfed by Smuggling

Cosmetics Production, Imports Dwarfed by Smuggling

Iran’s cosmetics market is worth 86 trillion rials ($2.2 billion) per year

Cosmetics Production, Imports Dwarfed by Smuggling

The growing consumption of cosmetics and personal care products has turned the beauty sector into one of the most lucrative and exciting industries in the world. 
Although the most famous brands of beauty products come from the Americas and Western Europe, the highest consumption rates belong to East European and Middle Eastern states. With regard to consumption of beauty products, Iran ranks second in the Middle East after Saudi Arabia and seventh in the world. 
What’s more, Iranian cosmetics and health products account for only 30% of the domestic market and the remaining 70% are supplied by imports.
“Iran’s cosmetics market is worth 86 trillion rials ($2.2 billion) [per year],” Sormeh Company Managing Director Masoud Nilforoushan told Financial Tribune in an interview. 
Established in 1975, Sormeh Company is one of the leading manufacturers of cosmetics, health and skincare products in Iran. The company’s products are sold under the brand name of “Saviz” in the market.

 Fast Growing Demand
Referring to the fast growing demand of beauty products in the Iranian market, Nilforoushan regarded the declining average age of consumers (starting from 15 years) as the main reason for the rise in demand. He said consumption has increased 4-5 times compared to 20 years ago.
According to Nilforoushan, each Iranian family on average annually spends 7,000,000 rials ($186) on cosmetics.
Based on an Iranian study on cosmetics consumption in Iran, per capita spending of each household member (women of over 15 living in urban areas) on cosmetics had a 22% rise during the five years to March 20, 2015, rising from 46,600 rials ($1.2) in March 2010-11 to 108,870 rials ($2.8) in March 2015-16.
“Iran’s cosmetics and personal care products sector has the capacity to produce 25 trillion rials ($665.247 million) worth of products,” Nilforoushan said, adding that actual capacity stands at 90% of the figure. 
He said Turkey and the UAE have a 70% share in Iran’s cosmetics imports while the rest belongs to Europe and East Asia, especially China.
Latest statistics show some 9,985 tons of cosmetics and personal care products worth around $60 million were imported into the country during the six months to September 23, 2015. 
Skincare products topped the list of imports in terms of value with 2,363 tons worth $26 million, followed by shampoo with 4,485 tons worth $12 million, IRNA reported, citing Islamic Republic of Iran Customs Administration’s data.
Imports stood at 17,855 tons worth over $118 million for the fiscal 2014-15.
The massive size of the Iranian market and the relatively small amount of domestic production and official imports indicate the enormity of smuggling of cosmetics and personal care products into the country. Statistics point to the smuggling rate standing in the neighborhood of $1.5 billion per year.
“Contraband products hurt domestic production as well as employment. The volume of legal imports is also high and should be reduced,” he added. 

 Need to Empower Domestic Industry
Since the cost of production is high in Iran and Iranian products cannot compete with their foreign counterparts in terms of price, this sector’s exports are minimal, Nilforoushan said.
Noting that domestic cosmetics have a say in terms of quality vis-à-vis their foreign counterparts, he encouraged Iranians to use Iranian products, saying that an increase in the consumption of domestic products leads to increased domestic production and higher rate of job creation in local industries. 
“Some 50,000 people are working in Iran’s cosmetics industry,” he said. 
There are 500 small, mid-sized and large production units in the country, which are divided into active (those working at 80-90% of their capacity) and semi-active (30-40%) units. Sormeh Company currently has around 140 personnel. 
The global cosmetic market was worth $460 billion in 2014 and is estimated to reach $675 billion by 2020, growing at a rate of 6.4%, according to Research and Markets. 
The Asia-Pacific region leads the cosmetic industry with a market share of 35% in 2014, followed by Western Europe and North America. 

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