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Mongolian women drive rise in organic cosmetics

Entrepreneurs seek to expand overseas sales of animal-based oils and creams

Otgontsetseg Ganbaatar, co-founder of organic soap maker Gilgerem, makes a batch of camel bone marrow soap. (Photo by Ochir Khaidui)

ULAANBAATAR -- A group of female entrepreneurs is developing a new use for the tens of millions of yaks, goats and sheep on Mongolia's vast steppes -- a range of organic cosmetics and skin creams, often based on traditional recipes, that is rapidly attracting attention from foreign buyers.

Lhamour, the biggest of several companies launched to exploit the potential of locally made organic cosmetics, raised 100 million tugrik ($53,000) in September from a bond issuance launched to finance new products, and is already exporting to Taiwan, South Korea, Hong Kong, Singapore and Belgium.

The company, established in 2014, makes soaps from yaks' and goats' milk, lip balm, hand creams, nipple creams for breastfeeding mothers, and a soap made from sheep's tails. Its animal-based products are widely available in retail outlets in Ulaanbaatar, but Chief Executive Khulan Davaadorj said significant investment was needed in animal husbandry to allow the industry to grow.

Lhamour, makes horse oil soap among other products. (Photo by Ochir Khaidui)

"We need investment, innovation and technology to utilize this asset [livestock] to create value-added products that can compete internationally," said Khulan, 30, who founded Lhamour after resigning from a job in Mongolia's wind power industry.

Fast-growing Lhamour, which employs 38 full-time workers at a factory and office building in Ulaanbaatar, remains small by the standards of the international cosmetics industry. But the company raised revenues by 83% in 2016 to $220,000, and is targeting a further 105% increase to $450,000 in 2017.

Half of Mongolia's 3 million people are nomadic herders, and their 60 million livestock offer many potential opportunities for the development of organic products. However, sourcing materials remains a significant problem for the nascent cosmetics industry.

Lhamour's sheep's tail oil soap (Photo by Ochir Khaidui)

"It is difficult for us to source quality raw materials on a constant basis as many of our suppliers have never supplied in [this way]," said Khulan. "Mongolian animal husbandry is still very traditional [and] suppliers have a traditional mindset."

Lhamour's success has prompted the emergence of a number of other companies making organic cosmetics, many of which are competing for sales of sheep's tail soap, a version of a traditional product that is thought by Mongolians to be rich in calcium, protein and other vitamins. Mongolian mothers often give sheep's tails to infants, believing that sucking on them will make children strong and sturdy.

Sheep's tail soap, which contains no added chemicals, is also thought to clean without removing moisture from the skin, which is especially useful in cold and windy Mongolia. Lhamour's sales material claims that a product that works on the steppes will provide even greater benefits for women who live in less harsh climates.

Innovation potential

However, other entrepreneurs have expanded the product range, indicating that there is substantial potential for innovation in the industry.

Battsetseg Chagdgaag, co-founder of Gilgerem (Photo by Ochir Khaidui)

Battsetseg Chagdgaag, the 35-year-old co-founder of Gilgerem, another organic soap maker, began selling soaps made from camel bone marrow, sea buckthorn (an oily berry) and sheep's tails in 2016. Battsetseg said she is also about to launch a soap made from camels' milk, having been inspired by Lhamour and Goo, another organic skin care company that started operations at about the same time as Lhamour.

"I am proud of [Lhamour and Goo]; I respect them," she said. "We call them the older sisters, and they are a good example for this industry. They spent their energy and finances to make everyone understand these organic handmade sheep's tail soaps, which paved the way for my business."

Battsetseg, who sells her soaps for $2-$3 each -- half the price of comparable Lhamour products -- keeps overheads low by operating from a two-room basement, employing only part-time workers, and selling her products in local supermarkets to reduce distribution costs.

Her camel bone marrow soap is based on traditional practice among herders in the Gobi Desert, where the product is used as a body lotion and is believed to heal bed sores and skin lesions. Bone marrow oil are also believed to prevent stretch marks during pregnancy because they contain high levels of collagen.

Battsetseg urged the Mongolian government to help promote entrepreneurial companies such as hers by exempting them from the country's 10% value added tax and from income tax, also levied at 10%. She said the government could also help by reducing or eliminating customs duties on some imported ingredients required to make her products.

"Our soaps could have been sold even cheaper and could compete against imported soaps if the government exempts some of the taxes and really supports SMEs," she said, referring to small and medium-sized enterprises.

Moili lip balm uses ghee as the main ingredient. (Photo by Ochir Khaidui)

All the organic cosmetics entrepreneurs said that much more research was needed to develop the industry. Battsetseg, who was a previously a journalist, marketing manager and fashion stylist, said she is "addicted" to researching chemicals and aims to build a laboratory to study raw materials so she can produce more unique products.

Davaa Munkhdorj, a 28-year-old accountant, sells lip balm made using shar tos, or ghee made from yak's milk, under the brand Moili and is looking for factory facilities to expand her range. "Mongolia is full of natural resources, not just dairy products; we have so many herbs that can be a source of organic products, but they are not fully studied," Davaa said.

Commentators say there is no shortage of budding entrepreneurs in Mongolia, suggesting that the initial success of the organic cosmetics industry may draw in more competitors, especially if export sales continue to grow.

"Young and educated Mongolians are increasingly going into startups, and are disinterested in becoming conventional salary men and women [because of low wages] in both private and public sector," said Gerel Orgil, CEO of East Maven, a public relations agency based in Ulaanbaatar which was one of Mongolia's most successful business startups in 2012. Gerel represented Mongolia at the 2017 U.S.-government-backed Global Entrepreneurship Summit in Hyderabad, India, in late November.

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