EghtesadOnline: A major Indian producer of beauty products Emami Group is set to enter Iran and scout for partners to begin operations at a time when the country may come under stress on account of impending US sanctions.
The company is in talks with five enterprises in Iran and may set up a manufacturing plant to cater to the local market. Products rolled out of this plant will be regionalized.
Initially, it will focus primarily on the skin and haircare segment and entry into other categories will be based on the performance of these two segments, according to Financial Tribune.
“We are planning to enter Iran by the end of this year, and from the first quarter of the coming fiscal year we intend to start selling our products,” Prashant Goenka, director at Emami, told Business Standard.
However, the company is yet to narrow down on the modus operandi or the nature of the partnership.
Goenka said options, including setting up a joint venture or a plant or opt for third-party manufacturing, like its Sri Lanka operations, was being considered.
The equity holding in case of a partnership is also being discussed.
“They have very stringent norms and we need to keep in mind this factor while narrowing down on a partner and how we will operate there,” he said, adding Emami was in the process of getting its products registered in Iran and African countries.
The decision to set up a facility in Iran follows from the company’s move, which evolved over the past two years, to target the local populace and offer regionally customized products for specific markets rather than merely exporting homogeneous products from its plants in Bangladesh and Assam.
When it ventured into Russia and other countries, Emami had primarily targeted the Indian diaspora.
According to Iran-based management consultancy firm Aryan Experts, working women in Iran of more than 15 years of age spend 30% of their income on cosmetics, toiletries and body care products.
Besides, almost 4.5% of the annual income of an Iranian household is spent on cosmetics and skincare products.
The beauty products market in Iran is estimated to be worth more than $2 billion—the second-largest in the West Asian region.
On the other hand, Iran’s domestic cosmetics industry can meet around 20% of the country’s annual needs while products are imported primarily from Turkey and the UAE. This opens up huge potential for cosmetics companies to enter this market.
The limitations for foreign companies range from high duty and stringent health certification policy.
Goenka expects an entry into Iran will open up a huge consumer segment despite US sanctions.
Aryan Experts says Iranian women have traditionally preferred European brands, but their falling purchasing power has compelled them to now consider Asian brands, mainly from South Korea and India.
Besides, more than 98% of the products sold in Iran are through specialized stores, while modern retail outlets are also expanding their reach via shopping centers.
In the last fiscal year (ended March 20, 2018), despite a poor showing in the first half in its key foreign markets in West Asia, Russia and others, Emami’s international business grew 14%.
Goenka expects a similar momentum in the current fiscal year.
Emami has nine foreign subsidiary companies operating in Australia, the UK, Bangladesh, the UAE, Egypt and Sri Lanka.