Asian active ingredient market faced with counterfeit challenge

08-Oct-2012 - Last updated on 08-Oct-2012 at 15:15 GMT

Fake cosmetics are still common in Asia-Pacific and are a threat to the regions active ingredients market according to a market researcher.

According to Frost & Sullivan, countries in Asia-Pacific need to halt the rise of fake cosmetics and ingredients by tightening regulations, in order to avoid stunting market growth.

It says that the biggest challenge faced by the active ingredient suppliers in Asia-Pacific is the smuggling and counterfeiting of ingredients, which are also significantly held back by competition from low-priced Chinese products.

The market analyst states that as these illegal products evade import duty and sales tax, their suppliers can afford to price them competitively and still gain huge margins, placing enormous pressure on legitimate suppliers.

“Countries need to design strict regulations and enforce adherence to eliminate the threat from counterfeit and smuggled personal care products. Further, suppliers could also establish local manufacturing facilities to mitigate the effects of this challenge,” it says in a statement.

Ongoing problem

Cosmetics, medicines and other goods that can seriously damage the health of consumers continue to be faked in large quantities.

Changes in the routes of fraud, an increased range of products being copied, and the use of the internet in selling counterfeit goods, make customs job even more challenging.

It is something that has been monitored closely by the European Commission for many years and cosmetic giants such as L'Oreal, Beiersdorf and Johnson & Johnson have all targeted the counterfeit craze by launching anti-counterfeit drives in the Middle East and China in recent times.

Work together

"Strategic relationships between manufacturers will also help synergise their strengths and overcome individual weaknesses," adds senior research analyst Dr.Nandhini Rajagopal.

"While vertical integration of industries can result in higher margins, horizontal integrations are expected to expand the product line."

Such alliances have been useful to the majors operating in this segment, and could be replicated by other participants.

New analysis from Frost & Sullivan finds that the active ingredients market in Asia earned revenues of US$116.6 million in 2011 and estimates this to reach US$176.4 million in 2017.

The rising demand for natural products is said to boost this, but the industry must remain wary of the counterfeit issue at hand.