A review of the state of the cosmetics market for FY 2022-2023

If the fiscal year July 2022 to June 2023 had to be described in one word – perhaps the most apt for the general public may be the following: Inflation.

^{Image credit: PBS Monthly Review On Price Indices Sep 2023 (Figure 5 - Link)}

With a government declared inflation rate hovering between 23.84% to 37.97% YoY (per PBS Statistics) but this was for the CPI (Consumer Price Index) which tracks a variety of goods that are essentials. This “basket” of goods that the PBS (Pakistan Bureau of Statistics) uses to track inflation has 487 essential goods and the weight of each item category is assigned differently.

So price changes in essential food items cause a bigger effect on CPI as compared to price changes in recreation and culture items.

While we do not have a definitive list of all 487 products included in the basket, we simply want to clarify that the official CPI statistics do not reflect the actual inflation in each market segment.

For the cosmetics market which is comprised of makeup, skincare, hair care and other personal care products. The inflation was significantly higher primarily because large parts of this segment is dominated by imported products (both because most popular brands are international brands and because local companies also sell imported items under their own brand).

The suspension of imports in 2022 combined with rapidly dropping exchange rate of the Pakistani Rupee (PKR) resulted in spikes in prices as companies tried to anticipate what the value of the goods they had in stock should be and what it might cost them to replenish the stock.

There were occasions when the prices for entire brands rose between 50%-80% in a single month as importers and distributors struggled to cope with the spiraling situation.

The situation ameliorated in 2023 once import restrictions eased and prices stabilized but looking at inflation YoY the prices for most imported brands have doubled or are even higher.

Local brands with local manufacturing were mostly able to keep prices in check but many “local” brands that are effectively importing their entire product range also had massive spikes in prices.

For example the prices of Medora Lipsticks increased from around Rs. 220 in the mid 2022 to Rs. 250 in mid 2023 (around ~13% inflation year over year). But even budget friendly brands such as Medora were not immune as their 500 ML shampoo price shot up and almost doubled while they introduced a smaller size 200 ML at the price of their 500 ML shampoo was previously retailing for (around Rs. 300) – a classic example of shrinkflation.

While this is a single example, it serves as a good sample for how some item types have had higher inflation as compared to others even across the same brand and market segment. Whether this is due to rising ingredients or raw materials or due to higher packaging or general inflation or other costs is difficult to say.

With IMF loans necessary to the smooth operation of the Pakistani economy, the inflation we are experiencing looks to be here to stay especially as global oil prices remain at near record highs due to suppressed production in oil making exporting countries.