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Opportunity Malaysia. US Mission to Malaysia.



 

Malaysia has the second highest per capita income in the region, 4.5% growth, and is a stable country in the otherwise volatile southeast Asia. The cosmetics market is strong and continues to grow. And Malaysia continues to be a U.S. product friendly market.

COSMETICS AND TOILETRIES
Malaysia

SUMMARY

Buoyed by strong economic growth in 2003, the Malaysian cosmetics and toiletries market recorded sales of approximately US$800 million.  Sales were sustained by increased urbanization, a rise in the number of women working, and aggressive marketing and promotional activities of the retailers.  The numerous new product launches also signified that the market still has room for growth. 

Imported cosmetics and toiletries are well received and are perceived to be of high quality.  An increase in purchasing power resulted in more women seeking higher quality products and branded cosmetics.  Competition is stiff in the local market, especially among the companies from the U.S. and France. Advertising and promotion play an important role in cosmetic and toiletries products.

Market Overview

The local cosmetics and toiletries market is valued at approximately RM3 billion or about US$800 million, with a growth rate of 13% annually. It is estimated that there are more than 60,000 types of cosmetic products in the local market.  Imported products from Thailand, the United States, France, Singapore and Japan dominate the market in Malaysia.

The local cosmetics and toiletries industry generally involves mixing and formulation processes, using imported ingredients.  Many of these companies are contract manufacturers, mainly for products such as shampoo and conditioners, other hair care products, perfumes, and cosmetics.  The Federation of Malaysian Manufacturers – Malaysian Cosmetics and Toiletries Industry Group (FMM-MCTIG) reported that there are now about 50 small and medium sized local companies producing cosmetics.

Market Trends

Cosmetic products in Malaysia can be divided into the following categories:

a.        color cosmetics

b.       skincare

c.        perfumes and fragrances

d.       toiletries

e.        hair care

The market can be divided int  

a.        Mass market

Low to medium range price cosmetics and toiletries are sold at mass market in supermarkets, pharmacies and through direct selling agents such as Avon, Amway, Cosway, Maybelline, Neutrogena, L’Oreal and Mode Circle.

b.
      Prestige brands

Exclusive brands such as Estee Lauder, Clinique, Chanel, Christian Dior and Shiseido are usually sold at major departmental stores.

c.        Others

Outlets (especially franchise chains) such as Body Shop, Red Earth, Origins, 5S, Sasa, and Roche operate individually in shopping complexes. These individual outlets usually specialize in natural based products while beauty centers such as Leonard Drake, Dermatologica, Thalgo Cosmetics, Clara International, PT Mustika Ratu, and Bella Skin Care offer niche and specialized products to the middle and higher income groups. 

Sun care, skin care, and color cosmetics segments are still relatively undeveloped when compared those in developed countries.  However, the skincare market is quickly growing, with suppliers trying to cater to the needs of increasingly demanding customer base, which include both men and women.  Clarins recently introduced its men’s range of skincare products and its beauty salon.

The latest concept of retailing cosmetic and skin care products in Malaysia is KENS apothecary.  Inspired by Barneys Apothecary at Barneys Madison Avenue, E6 Apothecary in Boston and Space NK apothecary in London, KENS apothecary seeks to bring clean brightness to the world along with unique and exciting products for connoisseurs beauty.  KENS apothecary houses some of the finest fragrances, skincare, and cosmetics only previously available in New York, Paris, Milan, and Hong Kong.  Hip and happening cult brands such as Aesop, T.LeClerc, and Diptyque stand side by side with Annick Goutal and Peter Thomas Roth.

Although mass brands still continue to dominate color cosmetics and skin care, sales of premium products are supported by the improving economy, especially as consumer spending increases.  Premium brands of color cosmetics and skin care will soon overtake mass brands, just as premium fragrances have started gaining an edge over mass fragrances.  It is projected that the sale of premium brands of color cosmetics and skin care will overtake mass brands by 2006.

The same applies to the hair care products market.  Popular brands such as Sunsilk, Rejoice, Pantene, Organics, Vidal Sassoon and Head & Shoulders fill the supermarket shelves.  From normal hair shampoo, shampoo for the colored hair, dandruff-control, and niche market, to the salon-looking hair market, the current strategy is to offer a full range of shampoos to fit different consumer needs and lifestyles, as well as to cater to different purchasing power.

In 2002 and 2003, more lifestyle products were launched.  As the economy grew stronger and purchasing power increased, consumers were more willing to indulge themselves.  Hence, competitiveness in the beauty business is increasing and niche products are highly sought after.  Aromatherapy products and spa-related products and services have been widely introduced. Many beauty and cosmetic companies have started to include these ranges of new products and services to their clients.  For instance, Esthetics International Group Bhd. owns and operates Leonard Drake professional skincare outlets, which provides beauty and wellness treatments and services.  It also exclusively distributes Dermalogica range of skincare products in Malaysia and other ASEAN countries.  In addition, the company distributes Eve Taylor (London) Ltd for aromatherapy products and represents Nemecton GmbH, Weyergans High Care AG and Ros’ Esthetican Electomedicina for beauty equipment. 

Statistical Data

Cosmetic and Toiletries
(U.S Million)

 

2002

2003

2004(e)

Total Market Size

352.47

369.86

419.22

Total Local Production *

159.96

210.50

273.36

Total Exports

86.83

147.18

191.33

Total Imports

279.34

306.54

337.19

Total Imports from the U.S

44.40

32.84

34.48

Exchange Rate

3.8

3.8

3.8

* Note: the latest local production available is year 2000.  Estimated data is use for the purpose of this report.
Source:  Department of Statistics Malaysia

Import Market share of cosmetics in 2002 & 2003 (top exporting countries)

  2002   2003  
Country US$ mil % US$ mil %
Thailand 37.31 13.35 51.88 17.46
United States 44.40 15.90 32.37 10.89
France 25.46 6.57 31.29 10.53
Singapore 26.94 9.65 29.60 9.96
Japan 19.21 6.88 19.21 6.46

The U.S. was the highest exporter of cosmetics to Malaysia in 2002 with a market share of 15.9 %.  However, in 2003 its market share dropped to 10.89%, a 33.8% decrease.  On the other hand, Thailand’s exports of cosmetics to Malaysia increased by 30.8% in 2003, to 51.88%.

Malaysia exports her cosmetic products such as beauty creams and skincare products to Singapore, Hong Kong, Thailand, Japan, and Australia.

COMPETITION

Despite unfavorable currency exchange, some European brands (e.g. L’Oreal, Chanel, and Christian Dior) products are successful due to their commercial responsiveness.  Consumers associate the brand with fashion, expertise in cosmetology and dermatology research, and innovative breakthroughs. 

*Top Companies by market share in 2003 (% value)

  • Colgate-Palmolive (M) Sdn. Bhd.            9.2
  • Unilever (M) Holdings Sdn. Bhd.             8.4
  • L’Oreal (Malaysia) Sdn. Bhd.                 5.7
  • Unza                                                   5.6
  • Procter & Gamble                                 5.5
  • Johnson & Johnson                               4.8
  • Avon Cosmetics (M) Sdn. Bhd.               4.5
  • Estee Lauder                                         4.1
  • Gillette (M) Sdn. Bhd.                             3.5
  • Amway                                                  3.4
  • Kao (Malaysia)                                       2.8
  • Shiseido Co Ltd.                                     2.7

* Euromonitor

END USERS

Approximately six million, out of an estimated population of 24.53 million as of 2002, will fuel demand for cosmetics and dermatological products.  When this segment of the population matures, demand should grow stronger because age-related skin problems such as fine lines, wrinkles, dull skin and brown spots start to surface

Women in Malaysia tend to characterize their skin type by its external appearance: according to matte or shiny, the skin texture, the size of the pores, and its thickness and sensitivity.

SALES PROSPECTS

Best Prospects

The following sub-sectors are ranked according to their highest retail value:

No. 1:  Skincare, especially for anti-aging and skin whitening

No. 2: Bath and shower

No. 3: Color cosmetics (includes foundation, rouge, face powder, blusher, highlighters, face bronzers and 2-way cake products)

No. 4: Fragrances

MARKET ACCESS

Regulatory Regime

The Control of Drugs and Cosmetic Regulations 1984 Act stipulated that all cosmetics in Malaysia:

  • Be Registered with the Drug Control Authority
  • Manufacturers, importers and wholesalers must be licensed

All cosmetic products must be registered with the Drug Control Authority, National Pharmaceutical Control Bureau of the Ministry of Health, effective January 1, 2004.  Due to the large number of cosmetic products in the local market, the products are divided into two categories for the registration exercise.  Category 1 products are those that have the potential of being absorbed through the skin or mucous membranes.  These products include those meant for application around the eyes (except eyebrow products), lip products, oral cavity products, and sun tanning products containing topical dyes or tan accelerators that are applied over a large area of the body.  Applications for registration of Category 1 began in January, 2002. 

All other cosmetic products are placed under Category 2.  These include hair dyes not containing phenylendiamine, toluenediamine, their salt and derivatives, and sun tanning products not containing topical dyes or tan accelerators (hair dyes containing phenylendiamine, toluenediamine and their derivatives, and tooth whiteners, have already been subjected to registration  during the 1990s).  Applications for registration of Category 2 cosmetics began in January 1, 2003. 

Manufacturers must disclose all the composition/ingredients of any cosmetics before they can be registered.  The products must be manufactured, packed, and stored under sanitized conditions as stipulated under the good manufacturing practice (GMP) requirements.  Products must be labeled according to the following information:

  • the name of the product and its function
  • instructions on how to use the product
  • a list of all the ingredients in the product
  • the country of manufacture
  • name and address of the company responsible for the product
  • the content – quantity in metric units of measurement
  • the batch number
  • the registration number
  • warnings or cautions, where necessary for safe use of the product
  • statement that declares the presence of bovine/porcine parts

Registration of cosmetics can be conducted on-line.  All the necessary information and guidelines are available on the National Pharmaceutical Control Bureau’s website: www.bpfk.gov.my

In regard to “cosmaceuticals”, the terminology has not yet been applied by the Drug Control Authority (DCA).  In general, the DCA uses three basic criteria to determine whether the product is classified as a cosmetic.  The criteria includes site of application, purpose, and composition or ingredient.  If the cosmetic product has medicinal claims, it needs to be referred to the Drug Control Authority to ascertain its classification.  For example, a beauty cream that claims its ability to treat acne is classified as an OTC product.

Currently, there is no duty for cosmetic products, except for the 20% to 30% import duty on talcum powders, face powders and hair preparations.  However, as stipulated in the regulations, as of January 1, 2004 all importers, manufacturers, and, wholesalers need to be licensed with the Drug Control Authority before they are allowed to manufacture, import, or sell the products.

Distribution Channels

Department stores are the leading channel for premium lifestyle products such as fragrances, color cosmetics, and skincare.  Branded cosmetic and toiletries such as Estee Lauder, Christian Dior, Chanel, and Bobby Brown are sold at their respective counters in departmental stores.  However, some of the finest fragrance and cosmetic brands, such as Laura Mercier, Annick Goutal, T.LeClerc, Peter Thomas Roth, Aesop, and, Philip B are only sold at Kens apothecary outlets.  In addition, Crème De La Mer ranges are only sold at Metrojaya Departmental Store and Isetan.  Other reputable brands such as Sothy’s and Thalgo are distributed by dealers. The products are only sold at their beauty centers and beauty salons, as they offer not only cosmetics, but also slimming, and the latest trend in spa products.

Other brands that cater for the mass market such as Neutrogena, L’Oreal, and Maybelline are sold at pharmacies, supermarkets, and other personal care stores.  Direct selling companies such as Avon, Amway, Cosway and the latest addition Tupperware are selling their products via direct-selling.  Direct selling stockists claim that their products are 30% cheaper than those sold in pharmacy or retail outlets.  Direct sellers lead in sales in the rural and suburban areas where the strength of their distribution network comes into play.

Advertising and promotion is crucial for cosmetics and toiletries products, in order to create an awareness of new products and build brand loyalty among consumers.  Advertisements in TV and the print media such as newspaper and magazines, especially women’s magazines, are very common.  Samples of toiletries products are distributed to individual households and products in sachet form are attached to magazines.  Free gifts are given during promotion periods and are advertised in the local major newspapers and on the web.

According to the industry, the market is saturated with many different types of products, and in the long run, established brands that emphasize quality and service will have the edge.

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