Cosmetics Industry Essay

1 An overview of the South African cosmetics industry

The cosmetics industry, which is also known as the cosmetics and personal care products manufacturing industry in some countries, consists of establishments mainly involved in the manufacturing of cosmetic products for skin cleansing, skincare, deodorisation, dental care and toiletries (FRIDGE, 2011). The South African cosmetics industry is structured as follows (Imrie, 2014):

• Multinationals which manufacture and also outsource, and are responsible for 90% of the sales in the market. International companies benefit from substantial marketing power, internationally recognised brands and readily available funds for research and development.

• A number of small, medium and large local companies who produce their own brands, or produce international brands under licence.

• Contract or third party manufacturers (TPMs) who are contracted by brand owners.

• Distributors focused on the import and export of products.

Many companies that are involved in the manufacturing of cosmetics products also produce products like household cleaning agents, since the processes involved are similar. More than 90% of the manufacturing is done by the large multinationals, Pfizer, Unilever, Johnson & Johnson, Procter &

Many of these raw materials are imported, putting South African manufacturers at a disadvantage. Accordingly, production takes place in coastal cities in order to lessen the cost of transporting raw ingredients and for logistical efficiencies. These cities include Cape Town, Durban, and East London (FRIDGE, 2011). Some cosmetic sector players are concerned about the fact that imported ingredients are subjected to an ad valorem ‘luxury’ tax of between 5% and 7% on top of excise