The cosmetics and personal care markets had average annual growth rates of 14 per cent in Pakistan and 10 per cent in Vietnam, according to a new Euromonitor report. However, trade problems, high taxes, and cultural and economic differences could create barriers for eager companies. In Pakistan, although consumer disposable income is growing, the most frequent purchases are still essentials, such as bar soap and toothpaste. There is little room for growth for non-essential or luxury items, perhaps because 40 per cent taxes are applicable on all cosmetics and toiletries, Euromonitor said. In Vietnam, high inflation has pushed up the unit price of most cosmetics and toiletries products, impacting on consumer spending. Both countries are blighted by illegal imported products. Vietnamese outdoor markets are the leading retail distribution channel for cosmetics, and attract consumers with cheap versions of leading brands. Sunsilk, P/S shampoo, and Colgate are often counterfeited, according to the report. Illegal goods' importers are also prevalent in Pakistan, as are parallel traders. They make a huge profit of billions of rupees every year, a major concern for local and multinational companies. Although the government is trying to prevent this kind of business, Euromonitor points out that as yet there is no formal trading association for the segment. Despite the problems Pakistan and Vietnam still remain potentially lucrative markets for interested manufacturers, said Diana Dobson, Euromonitor's cosmetics and toiletries senior industry analyst. She told CosmeticsDesign.com that these markets are more dynamic than developed markets, so there are greater opportunities for value gains. She warns that manufacturers will have to deal with cultural differences such as religion, skin colour and disposable income. However the Muslim majority is "reasonably liberal" she said. "Ethnicity is a big [cultural difference], and impacts skin care, colour cosmetics and hair care particularly. It's not just skin and hair colour, but texture and type as well," she said. "The ethnic cosmetics category is not particularly well developed in these markets." Disposable income is an important factor companies must consider when entering these markets. While incomes are rising in both markets, getting the majority of consumers to make the jump from low price to higher quality is still a barrier to growth. "Shopping habits too need to change," Dobson said. "While consumers are incresingly foavouring supermarkets and department stores, outdoor markets and other, older style retail channels continue to be a major feature of these countries, blocking the spread of Western brands particularly and the development of the premium segment too." Companies would therefore be wise to focus on cultural aspects. For example, deodorants have little sales value. Unlike in the West, deodorant is not seen as a hygiene essential, and talcum powder is sometimes used instead. Manufacturers also need to keep prices down. They can do this by using small pack sizes and promoting cheaper packs such as refills. In Pakistan in particular, companies often offer around four different pack sizes to suit all pockets. "Companies could also establish production capabilities in the country or a neighbouring one, where it would reduce their overall manufacturing costs," Dobson advised. "A risker approach, and one multinationals seem loath to do in these markets for fear of underminining their brands, is to use cheaper ingredients." Companies must also invest in advertising and marketing in order to carve out a market share, with room to grow in all sectors. Several successful marketing campaigns have already been undertaken in both countries. In Pakistan, the local Marriana International won shares in the sector of oral hygiene. The company also kept the price of its Medicam toothpaste low, and claimed that it was the best toothpaste in the oral hygiene category. The company backed its product with huge advertisements supported by the Pakistan Dental Council. Proctor & Gamble successfully entered the Vietnamese market with its Pantene Pro-V brand, thanks in part to advertising through the TV show 'Who wants to be a millionaire?' Similarly, Unilever focused on developing its Dove brand. Using aggressive marketing campaigns, the company targeted the wealthy city dwellers eager to follow international hair trends. In Pakistan, all cosmetics and toiletries sectors are in their infancy, so there is room to grow across the board. Consumers still do not have a lot of disposable income, so the most promising area for manufacturers is hygiene essentials - bath, shower products, hair care and oral hygiene products. Vietnam has promising prospects in the skin care, colour cosmetics and fragrances markets, according to Euromonitor International forecasts, reflecting a growing consumer desire for luxury products. "Vietnam has a large youth market, which is more appearance conscious than previous generations and more willing to spend on pricier, value added and premium products," Dobson stated. "Already, the premium segment is growing fast - a 16 per cent compound annual growth rate between 2001 and 2006 in local currency terms."