semi- final perfume

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-Perfume Manufacturing

Feasibility Study

September 2011

Addis Ababa, Ethiopia


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TABLE OF CONTENTS

EXECUTIVE SUMMARY

1. Project Name Perfume Production Feasibility Study

2. Project Owners

3. Nationality

4. Project location Oromia

5. Project Composition Production of varieties of cosmetic products in addition to themain Product

1

6. Premises Required 5000m2

7. Startup Capital

8. Employment Opportunity

9. Benefits of the projectFor The region/ country

Foreign currency


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I. Introduction

Since the beginning of recorded history, humans have attempted to mask or enhance their own

odor by using perfume, which emulates nature's pleasant smells. Many natural and man-made

materials have been used to make perfume to apply to the skin and clothing, to put in cleaners

and cosmetics, or to scent the air. Because of differences in body chemistry, temperature, and

body odors, no perfume will smell exactly the same on any two people.

Perfume comes from the Latin "per" meaning "through" and "fumum," or "smoke." Extracting

natural oils made many ancient perfumes from plants through pressing and steaming. The oil was

then burned to scent the air. Today, most perfume is used to scent bar soaps. Some products are

even perfumed with industrial odorants to mask unpleasant smells or to appear "unscented."

While fragrant liquids used for the body are often considered perfume, true perfumes are defined

as extracts or essences and contain a percentage of oil distilled in alcohol. Water is also used.

The United States is the world's largest perfume market with annual sales totally several billions

of dollars.

The industry produces a wide range of cosmetic and toilet preparations. Hair preparation

products are the largest group, accounting for about 25% of total industry sales, followed by

body and bath products, and cosmetics.

Skincare products (included in the bath and body care product category) and cosmetic products

are key growth segments, while the male grooming product segment reflects the gradual

emergence of an increasingly image-conscious male population. Some of these new products

(both mass-market and premium products) promote specific ingredients or target particularconsumer concerns, such as ageing. In the skincare segment, one of the fast-growing

subcategories has been firming and anti-cellulite body care products.

Perfumes today are being made and used in different ways than in previous centuries. Perfumes

are being manufactured more and more frequently with synthetic chemicals rather than natural

oils. Less concentrated forms of perfume are also becoming increasingly popular. Combined,

these factors decrease the cost of the scents, encouraging more widespread and frequent, often

daily, use.

Using perfume to heal, make people feel good, and improve relationships between the sexes arethe new frontiers being explored by the industry. The sense of smell is considered a right brain

activity, which rules emotions, memory, and creativity. Aromatherapysmelling oils and

fragrances to cure physical and emotional problemsis being revived to help balance hormonal

and body energy. The theory behind aromatherapy states that using essential oils helps bolster

the immune system when inhaled or applied topically. Smelling sweet smells also affects one's

mood and can be used as a form of psychotherapy.


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1.1.Objective of the Study

The main objective of the study is to assess the feasibility of the manufacturing plant in Africa in

particular Ethiopia, Oromia Regional State.

1.2.Economic Significance

The intended project envisions economic benefits in the following ways:A. Technology Transfer: The manufacturing company will be the first and foremost in the

nation and pave the way for further investors in the area of production.

B. Source of Revenue: The production and distribution of essential oils (i

C.Employment Opportunity: Currently there is low level of employment status in the

country the opening of the firm will create job opportunity for both local and expatriate

employees.

D. Foreign ExchangeE. Benefit for the Local Community: Since most of the raw materials/inputs for the

production process takes situated on the farm at the place of cultivation thus making

essential oil production an attractive option for rural communities.

II. Market Study

2.1 Historical Development

According to the Bible, Three Wise Men visited the baby Jesus carrying myrrh and frankincense.

Ancient Egyptians burned incense called kyphi made of henna, myrrh, cinnamon, and

juniperas religious offerings. They soaked aromatic wood, gum, and resins in water and oil

and used the liquid as a fragrant body lotion. The early Egyptians also perfumed their dead and

often assigned specific fragrances to deities. Their word for perfume has been translated as"fragrance of the gods." It is said that the Moslem prophet Mohammed wrote, "Perfumes are

foods that reawaken the spirit."

Eventually Egyptian perfumery influenced the Greeks and the Romans. For hundreds of years

after the fall of Rome, perfume was primarily an Oriental art. It spread to Europe when 13th

century Crusaders brought back samples from Palestine to England, France, and Italy. Europeans

discovered the healing properties of fragrance during the 17th century. Doctors treating plague

victims covered their mouths and noses with leather pouches holding pungent cloves, cinnamon,

and spices which they thought would protect them from disease.

Perfume then came into widespread use among the monarchy. France's King Louis XIV used it

so much that he was called the "perfume king." His court contained a floral pavilion filled with

fragrances, and dried flowers were placed in bowls throughout the palace to freshen the air.

Royal guests bathed in goat's milk and rose petals. Visitors were often doused with perfume,

which also was sprayed on clothing, furniture, walls, and tableware. It was at this time that

Grasse, a region of southern France where many flowering plant varieties grow, became a


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leading producer of perfumes. Meanwhile, in England, aromatics were contained in lockets and

the hollow heads of canes to be sniffed by the owner. It was not until the late 1800s, when

synthetic chemicals were used, that perfumes could be mass marketed. The first synthetic

perfume was nitrobenzene, made from nitric acid and benzene. This synthetic mixture gave off

an almond smell and was often used to scent soaps. In 1868, Englishman William Perkin

synthesized coumarin from the South American tonka bean to create a fragrance that smelled like

freshly sown hay. Ferdinand Tiemann of the University of Berlin created synthetic violet and

vanilla. In the United States, Francis Despard Dodge created citronellolan alcohol with rose-

like odorby experimenting with citronella, which is derived from citronella oil and has a

lemon-like odor. In different variations, this synthetic compound gives off the scents of sweet

pea, lily of the valley, narcissus, and hyacinth.

Just as the art of perfumery progressed through the centuries, so did the art of the perfume bottle.

Perfume bottles were often as elaborate and exotic as the oils they contained. The earliest

specimens date back to about 1000 B.C. In ancient Egypt, newly invented glass bottles were

made largely to hold perfumes. The crafting of perfume bottles spread into Europe and reachedits peak in Venice in the 18th century, when glass containers assumed the shape of small animals

or had pastoral scenes painted on them. Today perfume bottles are designed by the manufacturer

to reflect the character of the fragrance inside, whether light and flowery or dark and musky.

III. Product Description and Application

3.1 The Beauty Business

The availability of vast range of products at competitive prices attracts African buyers to Dubai'sbooming cosmetics market. Africa presents one of the fastest developing markets in the world

and the demand for cosmetics is growing at a frantic pace. Not only is there a huge pent-updemand for upmarket products from Europe and North America but also for the entire range of

beauty and personal care products from major manufacturers around the world.

When it comes to looking, their best at all times, Africans are second to none. As such, there is ahuge demand for products such as beauty soaps, face washes, shampoos, conditioners, body andskin lotions, toners, astringents, cold creams and other moisturizing formulations, perfumes, hair

colors, dyes, powders, eye and face packs, to mention just a few. While there is now a

considerable level of manufacturing activity taking place within Africa itself, there is an everassertive and growing segment of consumers who are demanding the best products available in

the world. From this segment Ethiopia is one of the nation who have a bulk.

Enterprising traders are keen to source such goods from all the reputed manufacturers but are

often hamstrung by the volumes of purchases required. Most manufacturers are not interested in

supplying quantities that do not run into several container loads at least. Often it is not viable forbuyers to go in for such large volumes.


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Secondly, there is also the question of sourcing products from different countries and evencontinents. For instance, an African importer may be interested in facial products from Europe,toiletry from the Far East and herbal cosmetics from the USA. But this would place immense

logistics constraints and would involve travelling around the world and opening of letters of

Credit with a host of banks. Often, all these obstacles would prove insurmountable and many

exporters would be put off by the sheer magnitude and complications of the whole exercise.

3.2 What is the Cosmetics, Beauty Product Manufacturing Industry?

This industry comprises companies primarily involved in the manufacture of cosmetic and toilet

preparation products. Key products include cosmetics, perfumes (natural or synthetic),

deodorants, lotions/creams and hair care products. Raw materials are sourced from other

chemical industry segments. The finished product is then sold via various retail outlets including

supermarkets, department stores, specialty cosmetics stores and pharmacies.

A. Industry Products

Hair care products

Deodorizers

Body and bath product

Perfumes and fragrance

Male grooming products

Cosmetics

Other cosmetic beauty preparations

Sun care products

B. Industry Activities Bath salts and talcum powder

Beauty creams, face lotions and hand cream or lotion

Deodorants and depilatory products

Eye shadow, mascara and lipstick

Hair care products

Nail care preparation and nail polish

Perfume

Shaving preparation and after shave lotion

Sunscreen preparation Toilet cream or lotion (except toilet lanolin)


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3.3 Description of the Industry

The essential oils sector is characterized by the extraction of volatile fragrance components from

plants, where the plant oils are extracted through distillation at yields of 0.01-2%. The essential -

oils industry is suited to both the formal large-scale farming operations and small-scale

operations within rural communities in need of economic upliftment. This sector is characterized

by:

High turnover and profit margin

Prices are quoted in US dollars

The product does not perish

It is appealing for farmers who want to diversify and spread their risk

A number of the crops are perennial, lasting on average five years, thus reducing the

labor component each year, while the annual crops, in general, produce high value oils.

The final product is high in value but low in volume and thus can be transported easily

It is produced on the farm at the place of cultivation thus making essential oil production

an attractive option for rural communities. The distribution chain is characterized by long-term relationships between reliable

suppliers and loyal buyers

3.4 Raw Materials

Natural ingredientsflowers, grasses, spices, fruit, wood, roots, resins, balsams, leaves, gums,

and animal secretionsas well as resources like alcohol, petrochemicals, coal, and coal tars are

used in the manufacture of perfumes. Some plants, such as lily of the valley, do not produce oils

naturally. In fact, only about 2,000 of the 250,000 known flowering plant species contain these

essential oils. Therefore, synthetic chemicals must be used to re-create the smells of non-oilysubstances. Synthetics also create original scents not found in nature.

Some perfume ingredients are animal products. For example, castor comes from beavers, musk

from male deer, and ambergris from the sperm whale. Animal substances are often used as

fixatives that enable perfume to evaporate slowly and emit odors longer. Other fixatives include

coal tar, mosses, resins, or synthetic chemicals. Alcohol and sometimes water are used to dilute

ingredients in perfumes. It is the ratio of alcohol to scent that determines whether the perfume is

"eau de toilette" (toilet water) or cologne.

3.5 Quality Control

Because perfumes depend heavily on harvests of plant substances and the availability of animal

products, perfumery can often turn risky. Thousands of flowers are needed to obtain just one

pound of essential oils, and if the season's crop is destroyed by disease or adverse weather,perfumeries could be in jeopardy. In addition, consistency is hard to maintain in natural oils. The

same species of plant raised in several different areas with slightly different growing conditions

may not yield oils with exactly the same scent.


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Problems are also encountered in collecting natural animal oils. Many animals once killed for thevalue of their oils are on the endangered species list and now cannot be hunted. For example,sperm whale products like ambergris have been outlawed since 1977. Also, most animal oils in

general are difficult and expensive to extract. Deer musk must come from deer found in Tibet

and China; civet cats, bred in Ethiopia, are kept for their fatty gland secretions; beavers from

Canada and the former Soviet Union are harvested for their castor.

Synthetic perfumes have allowed perfumers more freedom and stability in their craft, even

though natural ingredients are considered more desirable in the very finest perfumes. The use of

synthetic perfumes and oils eliminates the need to extract oils from animals and removes the risk

of a bad plant harvest, saving much expense and the lives of many animals

IV. Technology and Engineering

A.Technology

4.1. Manufacturing and Process Description

4.1.1. Collection

Before the manufacturing process begins, the initial ingredients must be brought to themanufacturing center. Plant substances are harvested from around the world, often hand-

picked for their fragrance. Animal products are obtained by extracting the fatty substances

d//]/]

444+]]aboratory by perfume chemists.

4.1.2. Extraction

Oils are extracted from plant substances by several methods: steam distillation, solvent

extraction, effleurages, maceration, and expression.

In steam distillation, steam is passed through plant material held in a still, whereby the

essential oil turns to gas. This gas is then passed through tubes, cooled, and liquefied. Oils can

also be extracted by boiling plant substances like flower petals in water instead of steaming

them.

Under solvent extraction, flowers are put into large rotating tanks or drums and benzene or

petroleum ether is poured over the flowers, extracting the essential oils. The flower parts dissolve

in the solvents and leave a waxy material that contains the oil, which is then placed in ethylalcohol. The oil dissolves in the alcohol and rises. Heat is used to evaporate the alcohol, which

once fully burned off, leaves a higher concentration of the perfume oil on the bottom.


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During effleurage, flowers are spread on glass sheets coated with grease. The glass sheets areplaced between wooden frames in tiers. Then the flowers are removed by hand and changed until

the grease has absorbed their fragrance.

Maceration is similar to effleurage except that warmed fats are used to soak up the flower

smell. As in solvent extraction, the grease and fats are dissolved in alcohol to obtain the

essential oils.

Expression is the oldest and least complex method of extraction. By this process, now

used in obtaining citrus oils from the rind, the fruit or plant is manually or mechanically

pressed until all the oil is squeezed out.


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It is the ratio of alcohol to scent that determines perfume, eau de toilette, and cologne.

4.1.3. Blending

G. Once the perfume oils are collected, they are ready to be blended together according to a

formula determined by a master in the field, known as a "nose." It may take as many as 800different ingredients and several years to develop the special formula for a scent.

After the scent has been created, it is mixed with alcohol. The amount of alcohol in a scent canvary greatly. Most full perfumes are made of about 10-20% perfume oils dissolved in alcohol

and a trace of water. Colognes contain approximately 3-5% oil diluted in 80-90% alcohol, with

water making up about 10%. Toilet water has the least amount2% oil in 60-80% alcohol and20% water.

4.1.4. - Aging

Fine perfume is often aged for several months or even years after it is blended. Following this, a"nose" will once again test the perfume to ensure that the correct scent has been achieved. Each

essential oil and perfume has three notes: "Notes de tete," or top notes, "notes de coeur," central

or heart notes, and "notes de fond," base notes. Top notes have tangy or citrus-like smells; centralnotes (aromatic flowers like rose and jasmine) provide body, and base notes (woody fragrances)

provide an enduring fragrance. More "notes," of various smells, may be further blended.

5. Source of Technology

The technology of perfume and cosmetics widely applied by many countries for many years in

the past. The following firm could be a possible supplier of the required machine.


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B.Engineering

The envisaged plant requires the following production equipment. The machinery and equipment

required for the envisaged plant and corresponding cost is depicted in Table

Machinery and Equipment Requirement & Cost

Sr.

No.

Description Qty. Unit cost

[Birr]

Total Cost [Birr]

FC LC TOTAL

1

2

3

4

5

6

7

8

9

Grand Total

V. Manpower and Training Requirement

A. Manpower Requirement

The plant requires both the following administrative and production department.


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VI. FINANCIAL ANALYSIS

The financial analysis of the perfume industry project is based on the data presented in theprevious chapters and the following assumptions:-

Construction period 1 year

Source of finance 30 % equity

70 % loan

Tax holidays 3 years

Bank interest 8.5%

Discount cash flow 8.5%

Accounts receivable 30 days

Raw material local 30 days

Raw Material import 90 days

Finished products 30 days

Cash in hand 5 days

Accounts payable 30 days

Repair and maintenance 5% of machinery cost


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A. TOTAL INITIAL INVESTMENT COST

The total investment cost of the project including working capital is estimated at Birr --------------

million, of which ---------- percent will be required in foreign currency.

The major breakdown of the total initial investment cost is shown in Table

Initial Investment Cost (000 Birr)

Sr.

No.

Cost Items Local

Cost

Foreign

Cost

Total

Cost

1 Land lease value

2 Building and Civil Work

3 Plant Machinery and Equipment

4 Office Furniture and Equipment

5 Vehicle

6 Pre-production Expenditure

7 Working Capital

Total Investment cost


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MAN POWER REQUIREMENT AND LABOR COST (BIRR)

Sr.

No.

Description Req.

No.

Monthly Salary Annual salary

A. Administration

1

2

3

4

5

6

7

8

9

B. Production and Technique

1

2

3

4

5

Sub-Total

Total

Employee Benefits (25% of

salary)

Grande Total


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The Future

Perfumes today are being made and used in different ways than in previous centuries. Perfumes

are being manufactured more and more frequently with synthetic chemicals rather than natural

oils. Less concentrated forms of perfume are also becoming increasingly popular. Combined,

these factors decrease the cost of the scents, encouraging more widespread and frequent, oftendaily, use.

Using perfume to heal, make people feel good, and improve relationships between the sexes are

the new frontiers being explored by the industry. The sense of smell is considered a right brain

activity, which rules emotions, memory, and creativity. Aromatherapysmelling oils andfragrances to cure physical and emotional problemsis being revived to help balance hormonal

and body energy. The theory behind aromatherapy states that using essential oils helps bolster

the immune system when inhaled or applied topically. Smelling sweet smells also affects one'smood and can be used as a form of psychotherapy.

Like aromatherapy, more research is being conducted to synthesize human perfume

that is, thebody scents we produce to attract or repel other humans. Humans, like other mammals, release

pheromones to attract the opposite sex. New perfumes are being created to duplicate the effect of

pheromones and stimulate sexual arousal receptors in the brain. Not only may the perfumes ofthe future help people cover up "bad" smells, they could improve their physical and emotional

well-being as well as their sex lives.

Production Process

Perfume Companies adopted advanced technology and has a complete production process and

strict quality inspection system. The production process includes design development-moldmaking producing quality injection-polishing-plating-QC-packaging-shipping. Every perfume

bottle cap, button or accessory produced by us is strictly inspected in order to provide you the

most satisfied products.


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Production Process

Pre-Production

Design

Mold Making

Production

Producing

Quality Inspection

Polishing

Plating

Quality Inspection

Post Production

Packaging

Service

Shipping


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The Beauty Business

The availability of vast range of products at competitive prices attracts African

buyers to Dubai's booming cosmetics market

Africa presents one of the fastest developing markets in the world and

the demand for cosmetics is growing at a frantic pace. Not only is there ahuge pent-up demand for upmarket products from Europe and NorthAmerica but also for the entire range of beauty and personal care productsfrom major manufacturers around the world.

When it comes to looking their best at all times, Africans are second to none.As such, there is a huge demand for productssuch as beauty soaps, face washes,

shampoos, conditioners, body and skinlotions, toners, astringents, cold creams andother moiturising formulations, perfumes, haircolours, dyes, powders, eye and face packs,

to mention just a few. While there is now a considerable level ofmanufacturing activity taking place within Africa itself, there is an everassertive and growing segment of consumers who are demanding the bestproducts available in the world. Enterprising traders are keen to source such


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goods from all the reputed manufacturers but are often hamstrung by thevolumes of purchases required. Most manufacturers are not interested insupplying quantities that do not run into several container loads at least.Often it is not viable for buyers to go in for such large volumes.

Secondly, there is also the question of sourcing products from different

countries and even continents. For instance, an African importer may beinterested in facial products from Europe, toiletry from the Far East andherbal cosmetics from the USA. But this would place immense logisticsconstraints and would involve travelling around the world and opening ofletters of Credit with a host of banks. Often, all these obstacles would proveinsurmountabe and many exporters would be put off by the sheer magnitudeand complications of the whole exercise.

In such a scenario, Dubai offers African importers the ideal market place."African buyers can source all their requirements from just one location,"says Mohd Al Khatib, Managing Director, Siblin Cosmetics (LLC), a leadingsupplier of salon equipment. "Buyers can select from a vast range ofmerchandise and buy just the quantities they require and then transport thegoods back to their home countries at very competitive freight costs," hesays.

The profit margins in this business are high and plenty of African buyers areflocking to the United Arab Emirates to meet growing requirements forcosmetics and salon equipment in their own countries. "We are in a positionto meet any specifiic requirements African buyers may have and are able tosource all that they need. Even if we do not carry adequate stocks, we are

able to get fresh supplies from our principals at very short notice," saysKamal Khatib, Managing Director of Maram Cosmetics. "We specialise insalon products and are very happy with the interest shown by African buyersin our products," he adds.

Dubai's strength in the cosmetics business is based on low-priced goods andlow import duties. "We have excellent connections and contacts with FarEastern and European suppliers and are able to offer their products toAfrican buyers at very competitive prices due to the fact that we operate onlow profit margins and a very low-cost environment in terms of importrelated tariffs," says Ziad Sabbagh of Al Nasaem Company. "As such, Africanbuyers are very happy to deal with us and we have a large number of repeatorders from them," he says.

Pankaj Menon, General Manager ofAl Hathboor International (agents forAVON) says that his company is very happy with its dealings with Africanbuyers. "We are keen to expand our presence in Africa and are looking
http://www.africa-business.com/profiles/hathboor.htmlhttp://www.africa-business.com/profiles/hathboor.html


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forward to much greater business volumes in the coming months and years,"he says.

"Our participation in the AFRO BUSINESS TRADE FAIR in Ugandaproved to be a turning point of our business with Africa. Thetrade fair provided us an opportunity to establish longterm

business contacts with wholesalers and distributors in the EastAfrican countries of Kenya, Uganda and Tanzania. We weresurprised at the overwhelming interest in our products by theAfrican buyers," says Sanjay Makhija of Gem Plaza, a reputeddealer in cosmetics, toiletries and beauty products. Africanbuyers too are very happy to come to Dubai to buy theirrequirements. "Prices in Africa for these goods are almost

double," says Grace Wanjiku of Kenya, who was recently inDubai to buy cosmetics for her salon in Nairobi. This sentimentvery much embodies the expectations that African buyers have from the UAE

and this trend of sourcing cosmetics and beauty products from the UAE isexpected not only to continue in the years to come buy also grow in scopeand stature.

Business AdviseHOW TO PROMOTE YOUR BUSINESS IN AFRICA

There are a few easy ways for cosmetic dealers and manufacturers to maketheir presence felt in the markets of Africa. For traders of beauty products,perfumes, toiletries and salon equipment, Africa is indeed a very lucrativemarket. Those dealing in products manufactured in the Far East (China,

Korea, Thailand, Malaysia etc) will find a ready market for their products asAfrica is by and large a very price-sensitive market. It is a well known factthat African customers prefer cheaply priced goods from the Far East ratherthan the expensive ones from Europe and America. You can promote yourproducts and/or services in Africa through many mediums:

The first and foremost, and by far the most effective, is to establish directcontacts with your business counterparts in these regions by participating inthe forthcoming 3rd AFRO BUSINESS TRADE FAIR which is being held inKampala, Uganda just before Christmas season. Supported by the UgandaNational Chamber of Commerce and the COMESA Business CommunityCommittee, the AFRO BUSINESS TRADE FAIR has established itself as one ofEast Africa's prime trade events. In the past few years, many internationalcompanies, specially from the Middle East, have used the AFRO BUSINESSTRADE FAIR to improve their presence in the East African markets.Information on participation and stall availibility can be obtained from theOrganisers.


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Download the Kenya Importers Directory and start sending emails to yourbusiness counterparts in Kenya and establish a business relation with them.Kenya is known as the "Gateway to Africa" and is a major importer anddistributor of goods in East Africa. The Kenya Importers Directory is aperfect way to reach the business community of Kenya from the convenienceof your desktop.

The growing use and influence of the Internet can also be harnessed topromote your business in the African markets. By posting your businessproposals on the African Classified Advertisements section, you can expectdirect responses from your business counterparts in African countries.Employing the growing influence of Internet technology to promote yourbusiness in international markets is one of the most simple and effectivepromotional tool for forward-looking enterpreuners. Simply post yourmessage and wait for the results. Simple!

Last, but not least, add your company to the Advertising Section of theAfrica Business Pages. The Advertising Section will carry a full page editorialabout your company as well as two pictures of your company's products. Inaddition to this, your company will also be provided with a direct link in theBusiness Links section. By promoting your company on the Africa BusinessPages you can reap rich dividends. An absolute essential for those targettingthe African market. Browse through some samples before taking a decision.

The rapid industrialisation and modernisation currently sweeping

through many African countries has resulted in an increased demand forcapital goods such as machinery, lubricants, spare parts, ball bearings andother mechanical goods and accessories. The market for automobile spareparts, in particular, has been an attractive sector for UAE-based enterprises,who have emerged as the leading supplier of these goods to many countriesin East, Central and Southern Africa.

The UAE has long been known as a major supplier of automobile spare partsboth within the Gulf region as well as for Iran, CIS, Indian sub-continent and

Africa. After witnessing a depression recently, the automobile and spareparts industry in the country has once gain recovered to its optimum level.However, the increase in demand for quality spare parts has encouragedparallel imports into the country forcing leading automobile distributors andspare part companies to start a full-blooded campaign against illegalimporters who operate from neighbouring countries, particularly across theborder in Oman. As a result of illegal imports into the UAE, the major players
http://importers.africa-business.com/kenya_importers_directory.htmlhttp://importers.africa-business.com/kenya_importers_directory.htmlhttp://www.africa-business.com/classifieds.htmlhttp://www.africa-business.com/profiles.htmlhttp://www.africa-business.com/profiles.htmlhttp://www.africa-business.com/classifieds.htmlhttp://importers.africa-business.com/kenya_importers_directory.htmlhttp://importers.africa-business.com/kenya_importers_directory.html


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in the local market have combined together to curb the inflow of excessivesupply of spare parts through illegal channels.

It has been estimated that almost 30 per cent of the demand for auto spareparts is being fed by parallel imports from neighbouring countries. Thesepirated goods are preferred by buyers as they are offered at heavily

discounted prices. These illegal operators are able to beat the local agentsand distributors as they survive on low profit margins and high volumes.They also do not pass on import tariffs and other additional expenses on to

their customers in order to maintain their low prices.

The rise of a sizable second-hand spare parts market has poseda further threat to UAE-based spare parts dealers. This lucrativemarket has registered a substantial growth in the last five yearsmainly because of the rising demand from East African countriesand CIS. Though not all second-hand spare parts sellers inDubai or Sharjah can provide the full range of used parts for all

car models, but these outlets are capable of providing nearly 90 per cent ofsuch parts. In fact, some of the second-hand spare parts outlets in Sharjahare reportedly selling parts of even 2011 models at less than half the priceof genuine parts. As a result, the business of second-hand spare parts hasdeveloped into a full-fledged multi-million dollar industry involving morethan 100 small and medium-sized enterprises spread throughout thecountry.

Earlier Dubai was considered the main source for second-hand spare partsbut over the last few years the market has shifted to Sharjah, mainly

because of relatively lower overhead expenses. Many second-hand sparepart outlets in Sharjah deal in used used engines which are imported fromJapan and then re-exported to many Asian and African countries. There is ahuge demand for such goods in East African countries of Uganda, Kenya andTanzania as well as other countries like Russia, India, Egypt, Iran and

Pakistan.

Most of the second-hand spare parts aresourced from damaged cars sold by insurancecompanies at throwaway prices and the restcoming from police auctions. Most buyers

prefer to buy these used parts because they are genuine and are often ingood condition. While a major portion of used parts are sold in the UAEmarket itself, almost the entire stock of imported used engines is re-exported. Used engines are in great demand in many African countries whichhave a big market for re-conditioned automobiles.


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It is, therefore, little wonder that an increasing number of Africanbusinessmen are seen purchasing their requirements from one of the manysecond-hand auto spare parts outlets in Dubai and Sharjah. "I come here topurchase used spare parts because the prices in Dubai are one of thecheapest in the world. As a result, I am able to make a neat profit for myselfwhen I sell these goods back home," said Joseph Samara, a spare parts

dealer from Nairobi who was in Dubai recently to buy spare parts worth$20,000 for selling in Kenya. "In addition to auto spare parts I would also bepurchasing low-priced car and truck tyres (made in China) for selling in thelocal market in Nairobi," he said.

Automobile Spare PartsTHE MARKET IN AFRICA

Most of the African buyers are buying substantial quantities of automotivebatteries, tyres, spare parts, ball bearings, water pumps and a host of

electronic goods from Dubai for selling them at a profit in their owncountries. "The African customers price-sensitive - they are looking for lowpriced goods and are not much concerned about the quality aspect," saysAhmed of Popular Tyres Trading, one of the largest stockists of tyres, tubesand batteries in the UAE. "Chinese tyres are in great demand in Africanmarkets as they are cheap and provide excellent value for money," he says.

With price taking the upper hand over quality for many buyers, the marketfor substandard spare parts will always exist. This is a demand that manymanufacturers and dealers are all too keen to satisfy. While some of thecheaper spares are imported through the proper channels, there is also a

significant area of parallel imports of spare parts. Illegalimports from neighbouring countries have been increasing at analarming rate since 1991 when imports grew from Dhs 13million to Dhs 51 million in 1994. A consequence of suchimports is loss of income, loss of business, loss of reputationand credibility and deterioration of the brand image. This notonly deprives the government of much needed income but alsogives the illegal importer an unfair pricing advantage over the authorisedagent.

The used spare parts market in the UAE is as old as that of automobiles. Inthe last ten years, it has become a full-fledged multi-million dirham businessinvolving a large number of small and large enterprises spread all over thecountry. Many such outlets also deal in used engines which they import fromJapan and then re-export to many African and Asian countries, includingRussia, India, Egypt, Iran and Pakistan. Second hand spare parts normallycome from damaged cars sold by insurance companies and the rest frompolice auctions. These agents sell mechanical parts at 25 per cent of the


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price of new genuine parts but the body parts, which are in more demand,are often sold at around half the price of new ones. The rates, however, varyfrom part-to-part subject to the condition of the spare and the availability ofthat part in the market.

Dealers of the genuine spares say that they dont

feel any threat from the used spare parts marketsimply because new genuine parts are purchasedby only those who can afford them and moreparticular about the trouble-free running of their

cars. Some of the spare parts dealers consider used parts as directcompetition to duplicate parts because of the price margin between the twoare close than new genuine parts. People prefer buying used spare parts

because they are genuine and are often in good condition. Every spare partsoutlet may not provide the full range of used parts of all car models buttogether the market is capable of providing nearly 90 per cent of such parts.

The majority of second hand spares end up in the local UAE market, withcustomers coming from nearby GCC states. On the other hand, almost theentire stock of imported used engines is re-exported.

Used engines are in good demand in many African and Asian countries,especially those with big re-conditioned car markets. The diversified range ofused mechanical and body parts of cars and engines has brought thisbusiness parallel to genuine and non-genuine new spare parts businesses asit offers big variety at affordable prices. Dubai has rightly developed areputation as being a buyers market. a glance at the prices of variousproducts confirms that no other place in the Middle East provides such a

variety of goods at such low prices.

The decisive factor is that over the decades, Dubai has developed asubstantial community of retailers, a sophisticated import system andsubstantial warehousing for stock. This has lead to the emergence of akeenly competitive market that ensures that prices in Dubai are as much as10 to 15 per cent lower than in neighbouring markets. Dubai continues to

be number one for buying anything from second hand cars to automobilespare parts and ballbearings, says Pradeep Gupta of Ameeco Marketing, a

leading supplier of ball and roller bearings. Analysts say sales of automobilespare parts and accessories in the Gulf has risen by 20-25 per cent in 1997despite the sharp oil price fall in the year. Several reasons are cited for thisdevelopment.

One of the most extraordinary new trends in theUAE since the 1990s has been the explosion in thenumber of visitors from the republics of the formerSoviet Union lured by the many ways money can be


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made in the Gulf. Enterprising Russians have been travelling to Dubai onspecially-chartered flights to buy as many products as they can carry for re-sale at huge profits at home. An estimated 100,000 tourists from the formerSoviet republics travel to the UAE each year. Each visitor is estimated tospend a minimum of $10,000 in local shops. More than a quarter of thisgoes on automobile spare parts and related products. As the spare parts

trade to Africa gains in stature, there is bound to be new demands fromwithin the African market. The UAE, with its strategic location and its wellestablished distribution network, can reap rich dividends by catering to theincreasing demand for automobile spares, ball bearings and lubricants in thefast developing markets of Africa.

What is the Cosmetics, Beauty Product Manufacturing Industry?

This industry comprises companies primarily involved in the manufacture of cosmetic and toilet

preparation products. Key products include cosmetics, perfumes (natural or synthetic),deodorants, lotions/creams and hair care products. Raw materials are sourced from other

chemical industry segments. The finished product is then sold via various retail outlets including

supermarkets, department stores, specialty cosmetics stores and pharmacies.

Industry Products

Hair care products

Deodorisers

Body and bath product

Perfumes and fragrance

Male grooming products

Cosmetics

Other cosmetic beauty preparations

Sun care products

Industry Activities

Bath salts and talcum powder

Beauty creams, face lotions and hand cream or lotion

Deodorants and depilatory products

Eye shadow, mascara and lipstick

Hair care products

Nail care preparation and nail polish

Perfume

Shaving preparation and after shave lotion

Sunscreen preparation

Toilet cream or lotion (except toilet lanolin)

i

semi- final perfume

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