-Perfume Manufacturing Feasibility Study

September 2011 Addis Ababa, Ethiopia

TABLE OF CONTENTS EXECUTIVE SUMMARY

1. Project Name 2. Project Owners 3. Nationality 4. Project location 5. Project Composition Oromia Production of varieties of cosmetic products in addition to the 1 main Product 5000m
2

Perfume Production Feasibility Study

6. Premises Required 7. Startup Capital 8. Employment Opportunity 9. Benefits of the project For The region/ country

Foreign currency

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 particular consumer 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 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 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.

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 Exchange E. 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

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 roselike 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 reached its 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'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 a huge pent-up demand 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 a huge demand for products such as beauty soaps, face washes, shampoos, conditioners, body and skin 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 ever assertive 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 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 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 B. Hair care products Deodorizers 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)

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-oily substances. 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.

Problems are also encountered in collecting natural animal oils. Many animals once killed for the value 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 the manufacturing center. Plant substances are harvested from around the world, often handpicked 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 ethyl alcohol. 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.

During effleurage, flowers are spread on glass sheets coated with grease. The glass sheets are placed 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.

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 800 different 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 can vary 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 and 20% 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; central notes (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.

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. 1 2 3 4 5 6 7 8 9 Grand Total Description Qty. Unit cost [Birr] FC Total Cost [Birr] LC TOTAL

V. Manpower and Training Requirement A. Manpower Requirement

The plant requires both the following administrative and production department.

VI. FINANCIAL ANALYSIS

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

Construction period Source of finance

1 year 30 % equity 70 % loan

Tax holidays Bank interest Discount cash flow Accounts receivable Raw material local Raw Material import Finished products Cash in hand Accounts payable Repair and maintenance

3 years 8.5% 8.5% 30 days 30 days 90 days 30 days 5 days 30 days 5% of machinery cost

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. 1 2 3 4 5 6 7

Cost Items Land lease value Building and Civil Work Plant Machinery and Equipment Office Furniture and Equipment Vehicle Pre-production Expenditure Working Capital Total Investment cost

Local Cost

Foreign Cost

Total Cost

MAN POWER REQUIREMENT AND LABOR COST (BIRR) Sr. No. 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 Description Req. No. Monthly Salary Annual salary

A. Administration

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, often daily, 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 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. Like aromatherapy, more research is being conducted to synthesize human perfumethat is, the body 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 of the 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-mold making 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.

Production Process Pre-Production

Design Mold Making

Production

Producing Quality Inspection Polishing Plating Quality Inspection

Post Production

Packaging

Service

Shipping

The Beauty Business

The availability of vast range of products at competitive prices attracts African buyers to Dubai's booming cosmetics market

frica 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-up demand 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 a huge demand for products such as beauty soaps, face washes, shampoos, conditioners, body and skin lotions, toners, astringents, cold creams and other moiturising formulations, perfumes, hair colours, 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 ever assertive and growing segment of consumers who are demanding the best products available in the world. 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 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 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 insurmountabe and many exporters would be put off by the sheer magnitude and 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 leading supplier of salon equipment. "Buyers can select from a vast range of merchandise and buy just the quantities they require and then transport the goods back to their home countries at very competitive freight costs," he says. The profit margins in this business are high and plenty of African buyers are flocking to the United Arab Emirates to meet growing requirements for cosmetics and salon equipment in their own countries. "We are in a position to meet any specifiic requirements African buyers may have and are able to source 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," says Kamal Khatib, Managing Director of Maram Cosmetics. "We specialise in salon products and are very happy with the interest shown by African buyers in our products," he adds. Dubai's strength in the cosmetics business is based on low-priced goods and low import duties. "We have excellent connections and contacts with Far Eastern and European suppliers and are able to offer their products to African buyers at very competitive prices due to the fact that we operate on low profit margins and a very low-cost environment in terms of import related tariffs," says Ziad Sabbagh of Al Nasaem Company. "As such, African buyers are very happy to deal with us and we have a large number of repeat orders from them," he says. Pankaj Menon, General Manager of Al Hathboor International (agents for AVON) says that his company is very happy with its dealings with African buyers. "We are keen to expand our presence in Africa and are looking

forward to much greater business volumes in the coming months and years," he says. "Our participation in the AFRO BUSINESS TRADE FAIR in Uganda proved to be a turning point of our business with Africa. The trade fair provided us an opportunity to establish longterm business contacts with wholesalers and distributors in the East African countries of Kenya, Uganda and Tanzania. We were surprised at the overwhelming interest in our products by the African buyers," says Sanjay Makhija of Gem Plaza, a reputed dealer in cosmetics, toiletries and beauty products. African buyers too are very happy to come to Dubai to buy their requirements. "Prices in Africa for these goods are almost double," says Grace Wanjiku of Kenya, who was recently in Dubai to buy cosmetics for her salon in Nairobi. This sentiment very much embodies the expectations that African buyers have from the UAE and this trend of sourcing cosmetics and beauty products from the UAE is expected not only to continue in the years to come buy also grow in scope and stature.

Business Advise
HOW TO PROMOTE YOUR BUSINESS IN AFRICA There are a few easy ways for cosmetic dealers and manufacturers to make their presence felt in the markets of Africa. For traders of beauty products, perfumes, toiletries and salon equipment, Africa is indeed a very lucrative market. Those dealing in products manufactured in the Far East (China, Korea, Thailand, Malaysia etc) will find a ready market for their products as Africa is by and large a very price-sensitive market. It is a well known fact that African customers prefer cheaply priced goods from the Far East rather than the expensive ones from Europe and America. You can promote your products and/or services in Africa through many mediums: The first and foremost, and by far the most effective, is to establish direct contacts with your business counterparts in these regions by participating in the forthcoming 3rd AFRO BUSINESS TRADE FAIR which is being held in Kampala, Uganda just before Christmas season. Supported by the Uganda National Chamber of Commerce and the COMESA Business Community Committee, the AFRO BUSINESS TRADE FAIR has established itself as one of East Africa's prime trade events. In the past few years, many international companies, specially from the Middle East, have used the AFRO BUSINESS TRADE FAIR to improve their presence in the East African markets. Information on participation and stall availibility can be obtained from the Organisers.

Download the Kenya Importers Directory and start sending emails to your business counterparts in Kenya and establish a business relation with them. Kenya is known as the "Gateway to Africa" and is a major importer and distributor of goods in East Africa. The Kenya Importers Directory is a perfect way to reach the business community of Kenya from the convenience of your desktop. The growing use and influence of the Internet can also be harnessed to promote your business in the African markets. By posting your business proposals on the African Classified Advertisements section, you can expect direct responses from your business counterparts in African countries. Employing the growing influence of Internet technology to promote your business in international markets is one of the most simple and effective promotional tool for forward-looking enterpreuners. Simply post your message and wait for the results. Simple! Last, but not least, add your company to the Advertising Section of the Africa Business Pages. The Advertising Section will carry a full page editorial about your company as well as two pictures of your company's products. In addition to this, your company will also be provided with a direct link in the Business Links section. By promoting your company on the Africa Business Pages you can reap rich dividends. An absolute essential for those targetting the African market. Browse through some samples before taking a decision.

he rapid industrialisation and modernisation currently sweeping

through many African countries has resulted in an increased demand for capital goods such as machinery, lubricants, spare parts, ball bearings and other mechanical goods and accessories. The market for automobile spare parts, in particular, has been an attractive sector for UAE-based enterprises, who have emerged as the leading supplier of these goods to many countries in East, Central and Southern Africa. The UAE has long been known as a major supplier of automobile spare parts both within the Gulf region as well as for Iran, CIS, Indian sub-continent and Africa. After witnessing a depression recently, the automobile and spare parts industry in the country has once gain recovered to its optimum level. However, the increase in demand for quality spare parts has encouraged parallel imports into the country forcing leading automobile distributors and spare part companies to start a full-blooded campaign against illegal importers who operate from neighbouring countries, particularly across the border in Oman. As a result of illegal imports into the UAE, the major players

in the local market have combined together to curb the inflow of excessive supply of spare parts through illegal channels. It has been estimated that almost 30 per cent of the demand for auto spare parts is being fed by parallel imports from neighbouring countries. These pirated goods are preferred by buyers as they are offered at heavily discounted prices. These illegal operators are able to beat the local agents and 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 posed a further threat to UAE-based spare parts dealers. This lucrative market has registered a substantial growth in the last five years mainly because of the rising demand from East African countries and CIS. Though not all second-hand spare parts sellers in Dubai 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 of such parts. In fact, some of the second-hand spare parts outlets in Sharjah are reportedly selling parts of even 2011 models at less than half the price of genuine parts. As a result, the business of second-hand spare parts has developed into a full-fledged multi-million dollar industry involving more than 100 small and medium-sized enterprises spread throughout the country. Earlier Dubai was considered the main source for second-hand spare parts but over the last few years the market has shifted to Sharjah, mainly because of relatively lower overhead expenses. Many second-hand spare part outlets in Sharjah deal in used used engines which are imported from Japan and then re-exported to many Asian and African countries. There is a huge demand for such goods in East African countries of Uganda, Kenya and Tanzania as well as other countries like Russia, India, Egypt, Iran and Pakistan. Most of the second-hand spare parts are sourced from damaged cars sold by insurance companies at throwaway prices and the rest coming from police auctions. Most buyers prefer to buy these used parts because they are genuine and are often in good condition. While a major portion of used parts are sold in the UAE market itself, almost the entire stock of imported used engines is reexported. Used engines are in great demand in many African countries which have a big market for re-conditioned automobiles.

It is, therefore, little wonder that an increasing number of African businessmen are seen purchasing their requirements from one of the many second-hand auto spare parts outlets in Dubai and Sharjah. "I come here to purchase used spare parts because the prices in Dubai are one of the cheapest in the world. As a result, I am able to make a neat profit for myself when 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 be purchasing low-priced car and truck tyres (made in China) for selling in the local market in Nairobi," he said.

Automobile Spare Parts

THE MARKET IN AFRICA Most of the African buyers are buying substantial quantities of automotive batteries, tyres, spare parts, ball bearings, water pumps and a host of electronic goods from Dubai for selling them at a profit in their own countries. "The African customers price-sensitive - they are looking for low priced goods and are not much concerned about the quality aspect," says Ahmed of Popular Tyres Trading, one of the largest stockists of tyres, tubes and batteries in the UAE. "Chinese tyres are in great demand in African markets as they are cheap and provide excellent value for money," he says. With price taking the upper hand over quality for many buyers, the market for substandard spare parts will always exist. This is a demand that many manufacturers and dealers are all too keen to satisfy. While some of the cheaper spares are imported through the proper channels, there is also a significant area of parallel imports of spare parts. Illegal imports from neighbouring countries have been increasing at an alarming rate since 1991 when imports grew from Dhs 13 million to Dhs 51 million in 1994. A consequence of such imports is loss of income, loss of business, loss of reputation and credibility and deterioration of the brand image. This not only deprives the government of much needed income but also gives the illegal importer an unfair pricing advantage over the authorised agent. The used spare parts market in the UAE is as old as that of automobiles. In the last ten years, it has become a full-fledged multi-million dirham business involving a large number of small and large enterprises spread all over the country. Many such outlets also deal in used engines which they import from Japan and then re-export to many African and Asian countries, including Russia, India, Egypt, Iran and Pakistan. Second hand spare parts normally come from damaged cars sold by insurance companies and the rest from police auctions. These agents sell mechanical parts at 25 per cent of the

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, vary from part-to-part subject to the condition of the spare and the availability of that part in the market. Dealers of the genuine spares say that they dont feel any threat from the used spare parts market simply because new genuine parts are purchased by only those who can afford them and more particular about the trouble-free running of their cars. Some of the spare parts dealers consider used parts as direct competition to duplicate parts because of the price margin between the two are close than new genuine parts. People prefer buying used spare parts because they are genuine and are often in good condition. Every spare parts outlet may not provide the full range of used parts of all car models but together 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, with customers coming from nearby GCC states. On the other hand, almost the entire 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 of used mechanical and body parts of cars and engines has brought this business parallel to genuine and non-genuine new spare parts businesses as it offers big variety at affordable prices. Dubai has rightly developed a reputation as being a buyers market. a glance at the prices of various products 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 a substantial community of retailers, a sophisticated import system and substantial warehousing for stock. This has lead to the emergence of a keenly competitive market that ensures that prices in Dubai are as much as 10 to 15 per cent lower than in neighbouring markets. Dubai continues to be number one for buying anything from second hand cars to automobile spare parts and ballbearings, says Pradeep Gupta of Ameeco Marketing, a leading supplier of ball and roller bearings. Analysts say sales of automobile spare parts and accessories in the Gulf has risen by 20-25 per cent in 1997 despite the sharp oil price fall in the year. Several reasons are cited for this development. One of the most extraordinary new trends in the UAE since the 1990s has been the explosion in the number of visitors from the republics of the former Soviet Union lured by the many ways money can be

made in the Gulf. Enterprising Russians have been travelling to Dubai on specially-chartered flights to buy as many products as they can carry for resale at huge profits at home. An estimated 100,000 tourists from the former Soviet republics travel to the UAE each year. Each visitor is estimated to spend a minimum of $10,000 in local shops. More than a quarter of this goes on automobile spare parts and related products. As the spare parts trade to Africa gains in stature, there is bound to be new demands from within the African market. The UAE, with its strategic location and its well established distribution network, can reap rich dividends by catering to the increasing demand for automobile spares, ball bearings and lubricants in the fast 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)