2Market review: On the top | 3Professional: Beauty

Transcription

2013–2014
Analytical overview of Russian perfumery &
cosmetics industry
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2 Market review: On the top | 3 Professional: Beauty Salon Gallantry
8 Male grooming: Strong Attraction | 10 Face care: Professional Toolkit
14 Ingredients: Raw Stuff is Mine! | 16 Contract manufacturing: Pitfalls of Outsourcing
19 Packaging: Pack the market | 22 Brands: Natural Success Story
26 Retail: Healthy Future for Drogerie | 29 Perfumery chains: Fragrance of Success
2 MARKET REVIEW
ON THE TOP
Russian retail market of perfumery
and cosmetics belongs to Europe TOP10 ones showing strong growth.
Perfumery and cosmetics market is
among the most successful retail segments on a whole. In 2012, the growth
rate has slowed, but the market volume continued to climb. According to
the survey “Russian Perfumery and
Cosmetics Retail in 2011-2012 and
2013 Forecast” by RBC research, in
2012, the nominal growth rate of retail sales of cosmetics, perfumes and
related products (in USD) amounted
to just over 10%. In terms of geographical market concentration we can
highlight a downward trend in the aggregate share of Moscow and Saint Petersburg in the sales of perfumery and
cosmetics due to aggressive expansion
of federal chains in the region and the
development of local operators.
Given that in 2010 the total share
of sales of the two largest cities in Russia exceeded 30%, in 2012, according
to preliminary estimates, it was about
25 %. In the medium term, the share
of Moscow and Saint Petersburg will
get lower, with increased share of Volgograd, Samara, Voronezh, Krasnodar
and other cities that are actively mastering professional perfumery and
cosmetics chains.
According to market research “Russian Market of Cosmetics and Perfumery in 2009-2011 and 2012-2015
Forecast” performed by “Amico”, 41%
of perfumery/cosmetics retail sales
accounted for Central Federal District.
2011 sales totaled to USD 30.1 mln
in retail prices. North-West Federal
District holds the seconds place with
a 29.2% share followed by North-Caucasian Federal District with 7.1%.
Total sales of perfumery and cosmetics are steadily increasing year by
year. By the end of 2011, sales rallied
by 3.75 times. In 2012, the market
continued to grow. The growth rate
in 1Q of 2012 was reported at 13%,
which figure is not indicative, however.
In 2011, Moscow and Saint Petersburg hold the lead among regions in
terms of perfumery and cosmetics retail with 36.8% of revenue and 28.6%
respectively.
According to DISCOVERY Research
Group survey, 1H of 2012 saw an upturn in the perfumery and cosmetics
market of approx. 16% compared to
the same period in 2011, so the market volume totaled to USD 5.69 bln.
Around 18% of perfumery and cosmetics market account for perfumes.
Experts estimate that in 1H of 2012,
the volume of Russian market of perfumery totaled to USD 1.024 bln; the
volume of perfumery market climbed
by 5% in 1H of 2012, as compared to
the same period of 2011.
Direct sales remained the main distribution channel for perfumery and
cosmetics in 1H of 2012 supported
by extensive online sales. Three foreign companies: L’Oreal, LVMH, and
Procter & Gamble are among the leaders in terms of sales. The top ten sales
leaders in terms of value traditionally include foreign companies: Estee
Lauder Companies, COTY, Puig Beauty
& Fashion Group, Shiseido, Chanel,
Avon, Oriflame and Mary Kay. “Novaya
Zarya” and “Faberlic” are national
producers enjoying high demand.
According to experts, by 2015, the
volume of imported cosmetic products in physical terms will increase by
10% not only thanks to persisting demand for foreign-made cosmetics, but
also the reduced customs duties on
the imported products following Russia’s accession to the WTO. In fact,
cosmetic market in Russia is one of
the fastest growing in the world with
10% annual growth rates in indexes.
The Russian market of perfumery
and cosmetics demonstrates a high
level of competition amongst its major players. The market is dominated
by several importing companies,
which have divided the global famous
brands.
To date, the volume of color cosmetics and skin care is imported from
Poland – 48.95%, France – 9.49%,
Germany – 7.29% as well as from
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Lithuania and China. Noteworthy, that
France and Germany hold the second
and third places respectively suggesting a relatively small spread of prices
for products from these countries. Premium segment cosmetics primarily include products from France, Germany,
Japan, Belgium and Switzerland.
Russian “Kalina” with a turnover of
USD 400 mln and “Nevskaya Kosmetika” with over USD 150 mln deserve
special attention. They are in the TOP100 largest companies - manufacturers of perfumery and cosmetics in the
world. “Arnest” and “Faberlic” have a
tangible foothold as well. According to
experts, in 2012, the import of cosmetic products increased by 4.3% in
volume terms and by 5.5% in value
terms, whereby export hovered almost
at the same level. By 2015, cosmetics
imports in Russia will go by 9.9% in
volume terms.
It is obvious that thanks to Russia’s accession to WTO, foreign companies have received a big bonus in
terms of lower custom duties pushing
up the volume of cosmetics import by
several times. But even without this
driver, the market demonstrates an
intensified competition thanks to new
production facilities that foreign companies, formerly engaged in import to
Russia, are developing in this country.
As for export, the Russian cosmetics are primarily exported to Ukraine
(62.61%), in Kyrgyzstan (22%) and in
Latvia (5.57%).
According to INFOLine & Retailer
Russia TOP-100 ranking forecast, the
growth of Russian cosmetics market
is due to higher living standards of the
population. The consumption level of
cosmetics in Russia will eventually
reach out relevant pitch in European
countries. Experts predict that as a result, the level of costs for cosmetics in
2014 in Russia will approach to USD
100 per capita/year. It is also expected that in 2012, the market will reach
USD 13.5 bln, whereby the potential
capacity of the cosmetics market in
Russia is USD 18 bln.
PROFESSIONAL 3
BEAUTY SALON
GALLANTRY
In 2011, the professional cosmetics
market hit the figure of USD 1.6 billion;
another gain of 6-7% is expected in the
middle-run on the back of expanding
network of beauty salons. Thus, the
share of professional segment in the
volume of perfumery and cosmetic
products equals to ca. 15%. Today, the
segment of beauty salons proves to
be saturated and highly competitive.
More and more players are emerging
in the market; however not of all them
can survive competition by an obvious
reason that the professional sector is
too complex for direct investments.
UNEASY MARKET
Moscow market of beauty salon
services is immense, being amongst
the largest consumer trade areas.
As of November 2012, over 4,600
hairdressers and beauty salons with
the total staff of 40 thousand operated in Moscow. According to the
statistics, since 2000, the number
of beauty salons and barber shops
in the Russian capital has zoomed
by 4 times. Over 2012, the volume
of hairdressing services rendered to
the public in Moscow topped three
billion Rubles in terms of value. As
per experts estimates, in 2010, the
population of Moscow spent a record amount of 67 billion Rubles for
various services in beauty salons.
Thanks to sustainable restoration
of revenues in 2011, is expected an
upsurge of approx. 9%.
The market growth is primarily associated with people’s incomes getting back to pre-crisis level. In contrast
to the crisis of 2009, as per 2011
bottom-line, the average per capita
income of Moscowites started to recover, reaching 50.2 thousand Rubles
per month. Against the background
of 10-13% inflation per year and the
preserved level of average prices, the
services of beauty salons are becoming more and more affordable. For
example, in 2010, the total number
of visitors to Moscow beauty salons
equaled to 3.9 million Moscowites,
whose expenses pump the salons’
revenue. The next years the number
of customers will go up as well.
Optimization of “average cheque”
is becoming a key progress driver. When new beauty salons are
opened, the pricing policy tends to
base on “economy”, “middle class”
or “premium” concept. When an
existing salon is migrating from
one price category to another, its
customers suffer much. But if the
market is originally subdivided into
six price categories, we can surprisingly find a relatively free and therefore promising price niches, one of
which should be used as a ground
for the beauty salon concept.
On the one hand, a large number
of overseas high rollers operate in
this country, and on the other, national producers of salon cosmetics
are growing in strength and successfully compete with their foreign counterparts. Moreover, the consumer
has become more interested in salon
products. Obviously, the quantity of
information that a full-fledged skin
care is possibly by virtue of professional products only has transformed
into quality. Since the professional
cosmetics cannot be sold without
adequate training for its application,
the professional level of salon business experts has elevated. Today,
you will not see mass-market cosmetics at a beauty salon or private cosmetologist (as it used to be just a few
years ago). The beauty market is no
longer a “niche”; instead, it speaks at
the top of its voice.
Currently, such Russian companies as «Academy of Scientific Beauty», “Charm Cleo Cosmetics” research
and manufacturing laboratory, “Alpika”, “Salon Cosmetics”, “Alina Zanskar”, “C-Ultra”, “Nanosintez”, “Teana”, “Mirra-Prof” and “Kosmoteros”
are engaged in salon cosmetics production; “KORA Laboratory” Holding
and “Geltech-Medica” produce some
lines of such products. Meanwhile,
the bar for entry into this market
remains quite high. The production
cost of professional cosmetics is ten
times higher, and the payback period
is much longer as compared to regu-
4 PROFESSIONAL
lar products. According to market
players, a new brand would need at
least three - five years to enter the salon market (for conventional cosmetics intended for retail this period is
one year at the most).
Russian-made cosmetics lines
can hit the happy medium by satisfying the most uncompromising demands of cosmetologists. Of course,
not everything is smooth and optimistic for domestic players in the
Russian salon market.
In terms of body and face care
products, the professional cosmetics market has gained a new push
for development. We see more and
more brands. The demand for natural professional cosmetics is escalating creating a robust background
for the companies offering innovative solutions to create products
with highly efficient ingredients and
new care programs.
Andrei Mayatsky, Director of “Salon Cosmetics+”, Ltd. (“Premium”
and “His Story Tobacco” brands)
comments on the evolution of consumer preferences: “The number
of new clients has surged recently;
they are very sensitive towards the
choice of cosmetics. These shoppers are keen to look perfect and always be in sound shape. They read a
lot about wellness, beauty, methods
to remain young and therefore they
choose professional cosmetics with
guaranteed effectiveness. The growing number of visitors and customers of our online store and website
pages dedicated to theoretical and
practical issues of face and body
care are a convincing proof of that.
“The market professionals, i.e.,
cosmetologists, now have two emerging trends, primarily stipulated by the
end users’ needs. Firstly, I would
like to highlight the increased sales
of professional photoprotection products after major cosmetic procedures. Not surprising: the segment of
chemical peeling is also progressing,
and one pulls the other. Secondly,
the enhanced focus of stronger sex
at skin-care programs. Fortunately,
modern men are well aware of the
need to look good not only for conquering the opposite sex, but for doing business as well”.
Today it is getting harder and harder to impress consumers with anything. Accordingly, the manufacturers and distributors of professional
brands have to work much harder to
develop in this market. Even an energetic presentation of a particular
effect and its supporting statistics
are no longer working, as they used
to earlier. Historically, the price has
been among the key drivers for decision making, but high efficiency and
non-invasive nature of professional
cosmetics are becoming persisting
choice factors.
The market players’ product range
policy is changing to a certain extent.
Indeed, many brands have concentrated on the rejuvenation, renovation and expansion of existing product lines, rather than creating new
ones. Firstly, such approach implies
much lower risk (it is easier to promote and sell a new product in the
existing line, which everyone knows
and loves, rather than spend money to promote an utterly new thing).
Secondly, the “rejuvenation” of the
line (adding new ingredients or new
dressing) requires lower costs as
compared to the research and development of a novelty. On top of that,
it is very difficult to “reinvent the
wheel” and create something really
new, without any counterpart in the
competitive brands, to sell and promote easily and successfully.
Moreover, the above situation with
saturated demand has a significant
impact on changing assortment policy
of the market players. More than ever,
all participants of the professional
cosmetics market are struggling for
their production cost trying to minimize it. Each brand makes its choice
- to the detriment or without detriment
for the brand quality and appearance.
However, we must not allow brand depreciation even when we have to work
aggressively with the production cost.
Goodwill is a long-term and very complex asset in terms of its creation and
especially restoration.
Nevertheless, the market players
always have options to target their
promo actions or other sale tools at
more lucrative products. Manufacturers are becoming convinced that
it is more feasible to sell less profitable products than to sell more
products with lower profitability with
other things being equal, including
the bottom line profit. As far as other
accents or
matrixes
are
concerned, as a
rule, they rest
in the plane of
response to current
consumer preferences.
Commenting the product range
policies, the analysts of Fenix Consult Group assert that beauty salons generally prefer to work with
well-known or promoted brands of
professional cosmetics because in
most cases the consumers become
“addicted” to the favorite brand
and when they call to the salon for
the first time they ask, which professional cosmetics are on offer in
the salon. Therefore, the collaboration with popular cosmetics brands
does not require extra investments
in brand building. The product lines
of such brands are optimized and
usually serve a full range of multifunctional products. Thanks to hefty
sales and high turnover of the products, the suppliers are prepared to
offer low prices.
PROFESSIONAL 5
According to Fenix Consult Group,
the below trends can be highlighted in
the market of professional cosmetics:
•Progressive market mastering by
producers from South-East Asia
and higher interest towards Russian
market on the part of European
companies thanks to reduced import duties;
TRENDS
ing their trade, retail products can
become a robust profit source. On top
of that, offering home care products
alongside with professional treatment
is the most competent approach to
business: professional expert advice
and correct selection of adequate
home cosmetics boost the treatment
effect as well as customer loyalty.
“Increased accessibility is becom-
In retrospective terms we see the migration from active promotion of sunburn (1960-70s) and understanding
the restrictions on sun exposure (8090s) to comprehension of ultraviolet
dangers and fashion for pale skin”.
As we know, the fashion for naturalness in all areas of life (food, clothing
made from natural fabrics and cosmetics) in Europe has a rather long
•Strong growth of professional cosmetics for men;
•Professional cosmetics are becoming more accessible (expansion of
home care series);
•Development of beauty salon
chains;
•Escalated sales of professional
cosmetics via Internet.
In terms of key market trends, the
experts report that the professional
cosmetics have recently become
more accessible to customers. Sales
of home care products are springing
up in salons. If a salon has skilled professionals and administrators know-
ing one of the most obvious trends in
the segment of professional cosmetics, - continues A. Mayatsky. - This
term implies the expansion of professional products line for the clients, rather than the representatives
of beauty industry. Therefore, the
manufacturers have two options for
evolution. The first – to upgrade their
home series with novelties and the
second - to supplement the general
price-list with products from professional lines (permitted for use without special training).
Sun care treatment is becoming a
prominent trend in professional care.
history. Today, this fashion is rapidly
occupying the market of professional
cosmetics. Many brands follow global
trends and launch their lines of ecological cosmetics. Overseas manufacturers have pioneered the production
of organic series. For example, Italian
spa brand [comfort zone] released
the Sacred Nature line awarded with
the certificate of French Ecocert, imposing the most severe global requirements to such lines.
As to professional products for face
and body as a whole, anti-age and anti-cellulite treatment undoubtedly enjoys the highest demand. In particular,
6 PROFESSIONAL
various pilling systems, instant lifting
products with Botox-like effect are
very popular. All large and well-known
salon brands are focused on the development of these products.
In the field of professional spa
cosmetics we see a pronounced orientation towards products with “comprehensible effects”. Naturally, the
problem of over-weight holds the first
place. People seeking remedial programs are becoming frequent visitors
of salons; hence the salons-consumers are basically buying supplies for
such treatment. Fortunately, the professional cosmetics have one more
wonderful segment, i.e. gift demand
or shopping of salon products for
home care or salon treatment certificates as gifts. Of course, aggressive
corrective products are giving way
to less intrusive methods. The customers have become more demanding for everything: package, scent,
name, claimed effect, and, above all,
compliance with their insight of gift
looks. Therefore, the manufacturers
should always remember specially
arranged gift baskets, gift boxes, etc.
DISTRIBUTION SPECIFICS
Recently, the distribution of professional cosmetics has been rather
even and the established sales system in Russia has not changed practically. The cosmetologist remains
an important link for professional
cosmetics, whereby most companies
continue their endless struggle for
this group loyalty.
According to Fenix Consult Group,
many chains engaged in professional cosmetics sales distribute their
products via their own online stores
enabling to expand the network audience considerably. This distribution
channel is seen as the most promising tool. However, experts note that
despite high concentration of brands
on the Internet, this channel remains
unexplored in Russia. Online stores
are relevant only in megacities with
Moscow as an undisputed leader.
“Today, you can buy a broader
range of professional cosmetics via
public distribution channels, in par-
ticular, in boutiques or pharmacies.
Sales channels of professional cosmetics are expanding, - comments A.
Mayatsky, – thanks to the customers
attention to professional cosmetics.
On the shelves we see professional
creams, masks or serums intended
for mid-treatment care. You would not
see professional peeling there, because such services must not be done
at home so as not to hurt yourself.
This is the priority of professionals.
Regional markets are evidently
growing but not as dynamically, as
we would like, due to such reasons
as reduced solvency of population.
Wages, despite of inflation processes, have remained on the same level
- this is no secret. Regional footholds
are strategically important for premium cosmetics brands; therefore we
give a high priority to then, providing
support where possible.
Of course, the most important
thing is cooperation with beauty salons, health centers, private beauty
salons and regional distributors market professionals. But I would like
to render a special courtesy to professional stores, which are the “closest friends” of the final shoppers
and introduce professional brands to
them staying within permitted limits.
It’s worth a lot”.
The emergence of professional
cosmetics in mass distribution channels can also be attributed to current
trends. This is an attempt to respond
to the above situation characterized
by an apathetic demand and saturated market. When it comes to the
question whether to engage alternative distribution channels, on the one
pan of scale rests the obvious possibility to boost demand by virtue of
sales channels development. But on
the opposite scale pan - less rosy
perspective based on the fact that
salons often prefer brands, which are
offered in salons exclusively. It looks
like a piece of professional brand
halo – “to be sold and to be used by
beauty professionals only”. In case
of stagnating salon demand, the first
pan of scales outweighs for many
those involved in this process. In the
short and medium term, this is a very
clear choice. However, the long-term
profitability of such decision raises
questions. Regional markets, save
a few large centers such as Kazan
and Yekaterinburg, are smaller in essence (in terms of capacity). But at
the same time, they are less saturated and more receptive to novelties. Of course, the price factor is
extremely important for regions, but
other drivers are more significant as
compared to Moscow. For example,
regional consumers are very responsive to such factors as media exposure of a particular brand. Moreover,
they are evidently more enthusiastic
to investigate such available materials as press bookmarks. Regional
markets are becoming more and
more motivated for mastering.
It is expected that the coming year
will be more dynamic for professional
cosmetics and will host not only new
products or brands, but services for
beauty salons as well.
In any event, the market of salon services will persistently grow at
3-5%. The portfolio of salon services
will change. Their further expertise
will be a key trend in the near future,
that will deepen the split between
beauty salons/centers and public
utilities with aesthetic orientation.
Spa-technologies, despite promotion
efforts, will remain unclaimed in the
coming year. Spa and wellness sectors will demonstrate a steady but
moderate upturn. Emerging price
segments will trigger demand for
affordable cosmetic devices made
in China or Korea. The demand has
energized the Chinese suppliers; the
pioneering Chinese companies are
already operating in Russia. Large
enterprises set up by the premises
owners will generate demand for expensive equipment, lasers and technological systems from Europe. Machine cosmetology will demonstrate
the highest growth rates of 15-20%.
Summarizing, we can presume
that 2012 will become a go-ahead
year in the social and competitive areas of salon business and stabilization of consumer environment.
NEWS 7
Cosmetic Market
Today
Beauty industry
from within
8 MALE GROOMING
STRONG ATTRACTION
Diligent care of personal appearance would not suppress the machismo in any way, rather the opposite.
When a man wants to prove himself,
he deserves a bonus. Wants to look
younger? Why not? Business success
coupled with attractive look is equally important for both sexes. A great
many of beauty salons for men render both hairdressing and cosmetics
services, and they are equally popular as the salons for women.
Today men tend to treat their appearance more and more meticulously. The market responds to this trend by
intensive production of new skin care
lines for men and opening of professional beauty salons for stronger sex.
Today in salons we see politicians,
theater or movie stars and celebrat-
ed athletes. Men, whose way of life
is not associated with public activities, but who seek to look attractive,
become frequent guests there as
well. Basically, these are successful
businessmen and top managers, but
sometimes the representatives of
middle class would drop in there too.
Men aged 25 or older with above
average income become the customers of beauty salons. Such people
would not save on their appearance,
given that services in such salons are
more expensive.
Businessmen devote the main part
of their life to the struggle for their
business, handling stress, balancing
air travels, smoking, alcohol and unbalanced diet. One day, a gentleman
would look in the mirror and see a
tired, old person with bags under his
eyes, gray hair and overall mussy appearance that would not strengthen
his social status in the eyes of business partners, top managers and, of
course, women.
By the way, the fair sex plays a significant role in deepening men’s interest in beauty salons: independent,
wealthy and self-sufficient women
are anxious to be close to a handsome, well-groomed, slim, trim and
smartly dressed partner. Men feel
that they just have to look good so
as to match women’s concept of an
ideal modern man.
A man going to beauty salon primarily motivated by healthy, prosperous and respectable appearance. A
gentleman goes to the salon to con-
MALE GROOMING 9
centrate and collect himself before
an important business meeting or
to relax after a hard work, therefore,
he needs comfort, pleasure of treatment and ultimate efficiency.
Until recently in Moscow, there
were five professional beauty salons
for men. The life has proved that the
concept of male beauty salon was not
quite tenacious, and as a result most
of beauty salons for men ceased to
be purely male.
Meanwhile, in Chelyabinsk (the
Urals), the salons focused exclusively
on the stronger sex are appearing
one after another. According to the
surveys of beauty salon consultants,
separated areas for men and women
are usually typical of the East only.
For example, customers from Kazakhstan normally follow this tradition, because men and women dislike
to cross paths, say in a hairdressing
room. It is not that women and men
have different status in the society or
stick to religious prohibitions. Rather,
their service areas are separated by
gender in view of social and ethical
standards.
“A man visiting a beauty salon
wants to relax and escape from
hustle, bustle, and women, above
all, - believes the manager of “Barbers & hairdressers” - the first male
salon in Chelyabinsk. We take into
account all preferences of our customers. These include relevant environment, music and scents. We
render special requirement to our
staff’s appearance as well, however
their professional expertise is most
important”.
Even the interior of the beauty salons is filled with masculine charisma. For example the halls of “Lord”
salon positioned as a “territory for
men”, look like studies with fireplaces, leather chairs and bookshelves.
Customers can browse magazines
for men or business press, while the
expert is doing pedicure, or request a
favorite drink. There are no common
halls there; instead, each client is
served in a private room.
Services provided in specialized
beauty salons for men are exclusively
on “male menu”. Haircuts and styling, hair tinting, cosmetic procedures
helping to resolve problem male skin,
manicure and pedicure – this is a
must hygienic procedure for the modern man, as experts say.
Women who are strictly prohibited
from entering such “gender salons”
will certainly envy the SPA-complex.
Men can enjoy a massage, paraffin
therapy, masks or cleansing. Here you
can purchase cosmetics for men for
home care or get an expert advice.
Chelyabinsk beauticians recommend the stronger sex to put aside
their stereotypes and think about
their appearance. And this is not a
whim. It is easier for a well-groomed
man to win the interlocutor, to instill
confidence to the partner or employer or to charm a woman. Your appearance is your business card.
Modern men are divided into
two groups: those who use pre- for
and aftershave cosmetics only, or
in fact, do not care for their skin,
and business class – those seeking
to feel more confident. Given that
previously the beauticians worked
with universal cosmetics, currently
every brand would produce a separate line dedicated to men. After all,
male skin is definitely different from
the female one. In green years, the
stronger sex goes to the beautician
for anti-inflammatory care and later for anti-aging.
Men love to get all services in one
basket and usually have minimum
time. So they like when new beauty
salons can offer all services for them.
To date, services rendered in male
beauty salons are considered as VIP
treatment. Still, not every citizen
of Chelyabinsk is concerned about
the beauty of his nails, and let’s not
write-off the prices that are above average. However, the salons’ demand
for clients is satisfied.
“CEOs of various companies, well-todo men and their children visit us. Very
few students can afford that, - admits
one manager of male salon. - More affordable prices for personal care can
be found in universal common salons,
which welcome men as well”.
So, what is the range of services
for men offered by beauty salons?
The most popular procedures on
demand include traditional haircut,
manicure and pedicure. Thereby, hair
dye with natural aids, light coloring,
tinting, scalp massage, hair straightening, and special anti-loss programs
are becoming more and more popular.
Psychologists assert that both men
and women are afraid of aging. They
are concerned about wrinkles, sagging skin and blurred facial contour.
They want to bring back their former
appearance by virtue of face care set
of services. As far as the cosmetologist treatment is concerned, the male
salon offers the full range of services:
cleansing, cosmetic facial massage,
plastic massage, anti-stress therapy,
lifting, peeling, mask, as well as overall treatment named “business care”
designated, for example, to prepare
the client for a business meeting or
for important negotiations.
Moreover, beauty salons offer special programs. i.e. “anti-stress” or
“deep relaxation” (the client is sleeping during treatment for 40 minutes.),
SPA-treatment, aromatherapy, soothing vibro-capsules with warm steam
and massage including therapeutic,
relaxing or Thai.
Removal of undesirable body hair
is becoming a very popular service
both for women and for men involving
athletes, bodybuilders, actors and
just men who consider excess body
hair unaesthetic.
Men dislike wasting time and money. But minutes or hours spent for a
particular service, can be pleasant:
usually, treatment rooms have monitors broadcasting sports or entertainment programs; any salon offer
magazines for men.
As soon as the gentleman realizes
that it is pleasant, useful and necessary to visit a salon from time to time,
his urge for such pastime begins to
grow day by day. Taking care of his
face and body takes an appropriate place in his calendar and a visit
to the hairdresser, cosmetologist or
manicure expert becomes a point of
his agenda.
10 FACE CARE
PROFESSIONAL
TOOLKIT
Professional face care cosmetics
are characterized by a rather high demand both among regular visitors of
beauty salons and customers of re-
tail chains thanks to high efficiency
of these products. Professional lines
are being updated with home care
products to support the effect of salon treatment.
Russian players in the professional cosmetics market deserve talking
about, since their product portfolio
includes a lot of innovation. For example, Saint Petersburg “Arcadia”
cosmetics laboratory has released
“AzeLine” correction cream to the
Russian market based on 20% azelaic
acid. This product is a powerful antiacne agent to be used when advised
by a cosmetologist only. The cream
contains membrane lipids, white
willow extract and beta-glucan. Al in
all, these ingredients have a strong
effect on the basic components of
acne pathogenesis chain. Thanks to
membrane lipids, the skin protective
barrier restores; beta-glucan has a
positive impact on skin immunity and
white willow extract promises regenerative effect and tightens pores. The
cream has a light texture that is easily absorbed without a trace rendering a matt effect to the face skin.
“Geltek-Medica”, a Russian manufacturer of professional cosmetics has
presented a gel with muscle relaxation effect. This is a smooth muscle
relaxing agent intended to reduce the
depth of wrinkles. The formula contains synthetic argireline polypeptide,
elastin, aloe vera and hyaluronic acid.
Argireline helps to relax expression
lines; muscle innervation is blocked
by competitive inhibition of proteins
involved in nerve impulse. This gel
can be used for iontophoresis, elec-
FACE CARE 11
troporation and as an aid for professional and home care.
New Line brand of “Kora” is offered in over five hundred Moscow
beauty parlors. Home care products
can be bought in pharmacies “Rigla”,
“36.6”, “A5” and “03”.
The products of New Line contain
low-molecular biological substances – peptides, hydrolyzed proteins of
wheat, almond and other plants as
well as vitamins complexes. These
active ingredients penetrate into the
deeper layers of skin. Russian shoppers are fond of cream-serum for
intensive skin moisturizing and gelcream with shea butter against puffiness and wrinkles. Serum-cream for
intensive moisturizing of dehydrated
skin provides both instant moisturizing effect of the surface layers of epidermis, and the long lasting and sustainable moisture of deeper layers.
This product improves skin turgor,
reduces the depth of wrinkles, visibly smoothing the skin texture; eliminates the effect of peeling. Restores
and strengthens the lipid barrier, increases the energy potential of skin
cells, provides detoxification; renders
a radiant look to the skin and gives
a fresh and comfortable feeling even
to the driest skin. Maximum stable
results are achieved when product is
applied regularly within 1 month.
Intensive moisturizing serumcream for dehydrated skin is a part
of series with hydrating sea-weed extracts. The deepest moisturizing effect is achieved when product is applied regularly within 4 weeks of the
course of intensive daily treatments
under complete program.
Gel-cream with shea butter
against puffiness and wrinkles with
a light texture without perfume additives designed for delicate and sensitive skin around the eyes. Regenerates, soothes, refreshes, nourishes
the skin with moisture for a long time
fighting dark circles and swelling
eyelids; tightens the skin, smoothes
fine wrinkles. Shea oil, hydrolyzate of
wheat proteins and vitamin E in combination create a highly diversified
aid to restore natural skin functions,
stimulating collagen synthesis, activating antioxidant defense mechanisms, preventing premature aging
of the skin and loss of its elasticity.
The product has an intense moisturizing and protective properties. Phyto-complex soothes, moisturizes and
softens the skin improving its color.
Caffeine with its toning and draining
effect helps to reduce the traces of
puffiness around the eyes. This product is an excellent base for make-up.
In 2004, a young scientist from
Orenburg Ramil Rakhmatullin, the
developer of Russian anti-aging cosmetics, Hyamatrix, created a special
elastic plate with hyaluronic acid to
treat the tympanic membrane and restore hearing for patients after injury.
After a while one employee from Rakhmatullin’s staff got a heavy burn.
Ramil decided to use his plate to
cure the burn and succeeded. From
this moment he started to perfect his
magical discovery.
The experiments have resulted in
nano-molecules of hyaluronic acid.
Everything happened like in the movies: Ramil left the lab without turningoff one device. At night, it overheated
and independently synthesized nano
hyaluronic molecules over which Rakhmatullin has worked for several
years. These nano-structured active
molecules and polypeptides have
become the main ingredients of
Hyamatrix series. The discovery was
very important because nano-molecules of hyaluronic acid are so small
that they can easily penetrate into
the deeper layers of skin and are not
destroyed there by the enzymes of
human body. Hyamatrix cosmetics
formula is similar to the substance
that fills the space between the skin
cells. Thanks to this property, the
products are well absorbed by the
skin supporting quick regeneration.
Unlike other cosmetic products,
Hyamatrix® not only removes the
signs of aging, but actually stops the
aging process – the biological age of
skin cells is reduced by several years.
Thanks to low molecular weight,
peptides can easily penetrate via the
upper epidermal layer of the skin, as
a signaling molecule, or sort of “information media” and are recognized by
receptors located on cell membranes
resulting in intracellular mediator
- cyclic adenosinemonophosphate,
which triggers the processes of selfregulation of cells and synthesis of
extracellular components of skin:
hyaluronic acid, collagen and elastin.
Revitalization processes, i.e. skin
rejuvenation eliminating harmful external factors: stress, UV radiation
and urban smog, are initiated.
The most important effect is the
ability to restore the level of metabolism and cell division up to the level
of skin cells of a young body. This
aspect is the basic ground to get a
pronounced cosmetic effect.
Hyamatrix® cosmetics series for
home skin care are recommended
as a follow-up of bio revitalization
treatment so as to fix and maintain
the maximum lasting effect, after the
use of Hyamatrix® professional series, and to prevent skin aging.
Clinical studies have shown that
the effect would last
for
several
months
and
is
n o t
12 FACE CARE
subjected to “cancellation syndrome”
(i.e., when the original symptoms
come back or intensify upon treatment discontinuation).
It should be noted that this segment regularly brings innovations,
first and foremost those that were
born in the laboratories in Europe or
U.S. Chris Farrell is a German brand
of orthomolecular and biochemical
cosmetics based on the physiological
concept. This trademark has been on
sale in Europe for 40 years and this
year came to Russia.
The purpose of orthomolecular
medicine is to maintain and restore
health by changing the concentration of minerals and vitamins in the
body. Chris Farrell decided to apply
this principle in the cosmetics. “Biomimetic” means the application of
active ingredients whose structure is
close to the components of human
cells. As a result, Chris Farrell cosmetics promise to correct both aesthetic and dermatological skin problems (as a preventive or supportive
therapy for dermatitis, eczema, psoriasis, acne, etc.). At the same time,
the formula is free from mineral oils
or artificial coloring; these cosmetics
are not tested on animals.
Chris Farrell line features about
200 cosmetic aids designed to treat
dry, oily, aged or sensitive skin as
well as hyperpigmentation, acne, rosacea and photo-aging. 8 lines have
been developed so far for home care,
namely, regular, universal, mineral,
anti-aging, sun protective, etc. This
trademark is presented in beauty salons and wellness centers, but soon
will appear in professional outlets.
Anti-aging booster Formule Merveilleuse from Académie Visage is
another interesting launch in the
parlor cosmetics segment. This is
a new development whose formula
has 57 active ingredients aimed at
intensive skin nourishing and antiaging. Formule Merveilleuse covers
11 vitamins and 7 minerals (calcium,
magnesium, sodium, etc.), 5 oligoelements (copper, iron, manganese,
zinc, and silicon), a large number of
amino acids, extracts of stem cells
and other useful components. They
stimulate the synthesis of collagen in
deep skin layers and promise to render an anti-aging effect and strengthen the skin. The manufacturer claims
that after a few weeks of Formule
Merveilleuse treatment, the skin becomes soft and moisturized, regaining youthful glow; the overall skin
condition improves and the makeup
lasts longer.
In addition to parlor treatment and
in order to preserve the rejuvenation
effect, the experts often recommend
home care lines, consisting of a large
number of serums and creams, which
can be applied independently following the beautician’s consultation.
For example, facial rejuvenation
Ossential Growth Factor Serum or ZO
Skin Health protects skin cells from
free radicals and normalizes repair
processes in DNA. Moreover, this serum helps to eliminate wrinkles and
renders a young and healthy look to
the face. The patented complex of
peptides supports native collagen
synthesis thus recovering the skin
elasticity. Retinol and amino acids
trigger the synthesis of framework
proteins in the dermis. The serum
has a gel texture.
Face rejuvenating serum with
deep effect - In Depth Revitalizer Fillast. This concentrated serum for day
and night care is an innovative face
care aid with revitalizing and rejuvenating effects. This product stimulates the synthesis of hyaluronic acid
in the skin, smoothing and softening
wrinkles and providing a powerful lifting effect. It complements injection
of anti-aging treatments, extends
the effect of hyaluronic acid in the
programs of bio-revitalization and
contouring plasty; can reduce the frequency of injections.
Hyaluronic Day & Night Cream from
Klapp is a gentle face cream designed
on the basis of hyaluronic acid with
the primary function of deep and longlasting hydration. This aid promises
to improve regeneration of skin cells,
rejuvenate and unwrinkle the skin.
The formula has jojoba oil and grape
seeds, hydrolyzed wheat protein, hyal-
uronic acid, which provides the inflow
of moisture necessary for the skin.
Ingredient hyaluronic acid allows
to sustain dryness and small wrinkles. The cream also copes well with
the negative impact of bad weather
conditions, easily absorbs and leaves
no film. However this light cream is
not good for cold weather and can be
used just as a make-up base.
Ceramidin Liquid Dr. Jart+ nourishing Emulsion with high ceramide
content is a moisturizing emulsion.
It strengthens the epidermal barrier
of the skin and ensures its sustained
recovery. This aid eliminates dryness
or tightness feeling and softens skin;
helps to restore the natural moisture
level. The product reduces wrinkles,
redness, peeling and skin sensitivity
when the same is caused by insufficient ceramides. Extracts of licorice,
purslane horticultural and leaves of
aloe vera interacting with ceramides
rapidly restore the skin damaged by
frequent peeling, negative environmental impact or stress.
This hypoallergic aid is recommended for skin exposed to frequent peeling, sunburn and adverse environmental effects; for dry or sensitive skin as
peeling follow-up; for irritated or flaking
skin areas; for insufficiently moistened
skin after moisturizing treatment.
To sum up, the salon cosmetics is
gaining strong footholds in the cosmetics market year after year.
The extensive marketing for professional cosmetics deserves special
attention. According to some experts,
such products cannot be retailed and
are intended for the demanding and
savvy consumers seeking high efficiency on top of multi-function, immediate effect, high content of active
additives and user-friendliness.
Therefore, the promotion of such
products requires a staff with an extensive expertise in biochemistry,
medicine and cosmetics, because
the marketing of a product originates in free training workshops,
which should “scientifically” and
competently convince the consumers of the benefits of this or that professional brand.
CHAINS 13
XX
X
X INTERNATIONAL
INTE
ER NATIONAL PERFUMERY
PERFUM
MER
RY
AND COS
COSMETICS
EXHIBITION
SME
ETIC
CS EXHI
IBITION
PRESENTS
P
PRE
SENTS SPECIAL
L AREA
AREA
BEAUTIFUL IDEAS TO BEAUTIFUL BUSINESS
PACKAGING ● INGREDIENTS
CONTRACT MANUFACTURING
NOVEMBER 27– 30, 2 013
CROCUS EXPO, MOSCOW, RUSSIA
●
The ideal platform to enter Russian growing market,
discover new opportunities, find partners and clients and enlarge business scope at special
business area of InterCHARM – the largest in Russia, CIS and Eastern Europe
showcase of the most innovative products and services.
●
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involved in the development of perfumery and cosmetics.
●
Growing sector of contract manufacturing
and industry rapid development triggered creation of the sector.
Contact us right now and be sure you book the best place!
T. +7 495 662-71-01, +7 495 937-68-61 ext. 143
F. +7 495 937-68-62
E-mail: [email protected],
[email protected]
www.intercharm.ru
Organizer:
Support:
Perfumery
and Cosmetics
Association
of Russia
14 INGREDIENTS
RAW STUFF
IS MINE!
Raw materials play a global role
in the cosmetics industry. Cosmetic
product formulae cover aroma compounds, silicones, herbal extracts,
oils, vitamins, surface-active agents
(surfactants), emulsifiers and a lot
more. This country produces something from this non-exhaustive list,
but only in small quantities, including aroma compounds, surfactants,
emulsifiers, and herbal extracts. The
share of imported ingredients in the
production process of most Russian
companies equals to 80-90%.
The underlying development factors include the increased sales of
cosmetics and perfumery as well
as retail trade turnovers that drive
consumption. Moreover, major foreign players are becoming more
and more motivated with respect
to the Russian consumer market,
thus boosting its economic appeal.
Global suppliers of cosmetics ingredients are increasingly shifting their
focus from the saturated markets of
the USA, China, Germany and UK to
the emerging economies, including
Russia, where consumer demand
for cosmetics is rallying. Over the
past few years, pinpoint ventures
opened by major foreign companies
in Russia to produce ingredients
(e.g., Symrise) have become a notable trend.
The main domestic
challenge in Russia
is a strong import-dependence associated
with the dominance
of imported products,
including the market of
initial raw materials to
produce cosmetic ingredients. Most additives and ingredients offered by national
companies are made from overseas raw stuff. The Russian market
is far from being saturated and has a
significant capacity for growth.
“On the average, around 15-20 ingredients are essential to produce one
cosmetics products, – explains Alexei
Nechaev, president of Faberlic. – Imported ingredients are predominant
in our formulae. For example, 19 ingredients are imported, and one, say,
peppermint extract, is Russian”.
According to “Mezoplast” contract
manufacturer, depending on the
cream formula complexity, there may
be 10-25 ingredients; in shampoos –
10–20 ingredients. The share of Russian raw materials in the cosmetics
produced by the factory would not
exceed 10%. These can be herbal extracts, vitamins and water.
There are several reasons why
Russian cosmetics companies are
so heavily reliant on import. The
first reason has a historical trace.
Cosmetics production was never
a priority back in the Soviet times,
and therefore no major source of
raw materials had been created.
Just several major factories and the
Research Institute for natural and
synthetic fragrances were engaged
in formula development. Surfactants were produced by Dzerzhinsk
factory “Kaprolaktan” and aroma
compounds – by Riga “Selak” enterprise; herbal extracts were supplied
by National Institute of Medicinal
Herbs. The volume of imports was
never disclosed officially; it is estimated to vary USD 60-70 per year.
Russian companies have inherited
Soviet assets but they have failed to
master the production technology for
raw materials, so to date, little has
changed. Requirements for modern
cosmetic raw materials are extensive:
they must be of high quality, innovative and safe. Any technology expert
would agree with this, because HQ
raw materials are a precondition for
the product eventual properties that
the consumers expect to get.
Moreover, some raw materials
cannot be manufactured in Russia by
definition. For example, the famous
carnauba wax is manufactured from
tropical plants; therefore, it must be
imported. On top of carnauba wax,
we have palm and coconut oil and
dozens of other items.
“Can national manufacturers compete with their foreign counterparts
in terms of quality? Hardly, – says
Svetlana Kuzmina, chief technology
officer in “Floresan” cosmetics company. – We have not managed to develop a domestic raw market for our
cosmetics over thirty years, and today it is simply unavailable. Currently,
all manufacturers employ the same
raw materials produced mainly in
South-East Asia, China or India. And
let’s not pretend that we have our
own raw material base: it is common
for everybody involved, and matches
the price niche where a specific company operates. I would not say that
this is bad. It is impossible to develop
an industry from a scratch in the current economic environment. We need
huge investments. Who will tackle
this challenge? Another important
issue is quality/price ratio. The cosmetic products will neither be better
nor cheaper if we have our own raw
material resource. As for the cosmet-
INGREDIENTS 15
ics industry, it has been developing
on leftovers in this country”.
“We import about 70% of raw materials and components, – admits
Helen Sagal, Director General of
“Arnest”. – Regretfully, Russia has
neither production facilities for aroma compounds and polymers, nor
qualitative tin for cans and valves, as
well as necessary aluminum stock. It
turns out that in Russia we can only
buy alcohol, propane, butane and energy sources. Therefore, we cannot
go along without binding to the rising
Dollar or Euro. However, the positive
factor is that the climbing currency
exchange rates may encourage multinational companies to place new
orders in Nevinnomyssk factory for
contract manufacturing. After all,
even a 30 percent evasion from currency risk in the current situation can
be a major stepping stone”.
“Russia really lacks raw materials
for our production, but this drawback cannot hold back our progress, because we have a chance to
buy the stuff, – says Eugeny Demin,
Director General of “Splat-Cosmetics”. – Moreover, all market players
are on equal footing. We buy 99% of
the raw materials abroad and other
manufacturers, as far as I know,
have practically the same share.
Trivial chemical components, such
as sorbitol or glycerol are imported
from South-East Asia. Oddly to say,
we have to order tubes abroad. The
Russian chemical industry has been
utterly killed in terms of production
of cosmetics raw materials.
The developing procedure for new
products in our company includes audits of global components and knowhow for our category. In addition 99%
of our suppliers are foreign high rollers such as Dow Chemicals, BASF
and others, and they regularly bring
such information to us whereby R &
D experts pick out major trends. Suppose, they say: there is a tendency to
replace chemical blowing agents by
natural ingredients extracted from
the soap tree; we recommend to
change this for that – for example,
to remove triclosan, because it kills
the microflora or cancel sodium lauryl sulfate or something else. On
the ground of these trends, we approve manufacturing templates that
every new product must satisfy. We
prepare terms of reference for technologists; they develop products and
make arbitration samples. Arbitration samples are tested in-house in
terms of organoleptic properties,
that is, to check, whether they are
nice to taste, because they can be
very useful, but, say, very bitter. Then
samples are trialed clinically. We get
the result and check that it is at least
not worse than the previous version
of product; ideally it should better
with some small margin that is not
a statistical error. If so, the prod-
uct will be approved as a new one.
Thereafter we certify it, include in the
procurement budget and production
plan, develop a new dressing design
and so on. This is a routine. Do we
have a scientific creativity? Certainly,
yes. Just look: we have a family of 20
products, all of which are made in accordance with 20 specific formulae,
which is a rare case apropos. And
where one product works thanks to
herbal ingredients such as “Active”
toothpaste designed to fight paradontosis, the other, for example “Extreme White”, has a very advanced,
purely chemical formula without any
natural ingredients, and we openly
declare it, because it is intended for
other purposes. Moreover, we have
substances that exist in a single copy
globally, manufactured by a French
company under our order for deliveries of 50 kilos per month“.
Objectively speaking, imported raw
materials or technologies are quite
alright in terms of overall economic
environment. By virtue of these products, contract manufacturers and
independent producers of cosmetics
have managed to master new products and to boost quality. Eventually,
thanks to overseas raw materials and
technologies, the domestic products
and consumer goods can now compete with their overseas counterparts, that is, with pure import.
In general, the Russian market
of cosmetic ingredients is seen as
sustainably developing and promising. It is dependent on the development level of the beauty industry on
the whole. The intensive growth of
market will trigger an expansion of
cosmetic ingredients market, which
is expected to return to pre-crisis surplus figures in 2013.
In the long term, we expect to see
new players who will employ streamline technologies and equipment innovations. The battle for customer
relationship will take place in the
“price-quality” segment.
The Russian market will stay attractive for foreigners both in terms
of expanding sales of ready-made ingredients and incorporation of manufacturing enterprises across this
country on the back of investment
attractiveness of the Russian market.
All in all, the outlook for Russian
market of cosmetic ingredients will
be generally supported by global
trends. Firstly, synthetic-free production with preference to natural
agents; secondly, the growing demand for high efficient components
and, consequently, an increased
demand for innovative and healthy
ingredients. The third pan-global
trend is the intense development of
Research & Development segment
so as to support implementation of
state-of-the art technologies.
16 CONTRACT MANUFACTURING
PITFALLS
OF OUTSOURCING
In recent years, the contract
manufacturing has been the underlying
trend of global cosmetics industry. It is
developing in Russia well too.
In the last couple of years, thanks
to robust and impressive growth of
the consumer demand in Russia, the
foreign customers turn to Russian
producers with increasing frequency.
And the latter reciprocate. To date,
according to experts, the share of
contractual manufacturing in the perfumery and cosmetic industry in this
country reaches 50%. At the same
time, despite the world-wide decline
in the consumer demand, the quest
for such products in Russia has not
fallen; rather, it is moving up again.
As a result, the overseas players tend
to expand their orders promoting the
share of contract manufacturing in
Russia, which may reach 65-70% in
the structure of certain sectors in the
next one or two years. Worth noting
that foreign companies get a much
more profitable chance to set up their
business in this country, since they
can eliminate burdensome logistics
and customs hurdles from the production chain. Moreover, today, Russia and CIS countries are amongst
the fastest growing consumer markets in Europe.
As per INFOLine estimates, in
2011, the volume of retail private
label (PL) sales in Russia (including
cosmetics) was app EUR175 mln
with annual growth rate of about
50%. The market hike was supported by higher prices in the consumer
market rather than progressing interest towards PLs. According to INFOLine, the share of private label in the
global trade may reach 30% by 2020.
It is commonly known, that Russian factories have to invest to enter
this market. A contract manufacturer
must have a strong laboratory and
technological assets. But today, over
two dozen Russian companies invest
in the production such funds that
match the requirements of a dynamic cosmetics market. Half of them are
positioned as contract manufacturers. Such companies as “Mezoplast”,
“Red Line”, “Arnest”, “Twins Tak”,
“KorolevFarm”, “Firma VITA”, “Himros”, “Maxan” and “Katrina” and
have upgraded their production lines.
As regards to investments in the
modernization of production, currently, cosmetic companies find some
opportunities to push up the demand
for their products and intend to expand the scope of their business. A
good example is “Splat-Cosmetics”,
a national producer, which managed
to penetrate supersaturated market
of toothpaste. Some time ago, the
company increased its production
volume; to that end it had to buy a
new factory. One of the largest food
producers “Wimm-Bill-Dann” sold its
first factory producing mineral water
“Valdai Springs” in Novgorod region
to “Splat-Cosmetics”. In 2013, on the
site of “Valdai Springs” located in Okulovskaya area a factory will be built.
It will produce oral care products
with investment reaching over USD
10 million. This is a fairly big deal.
But as for any investment, of course,
relevant pay off period has been
computed. In case the factory is purchased, the company can load its
capacity by 30-40% with its current
sales volume; alongside, the company can develop projects for contract
manufacturing. This will be an extra
income enabling to level the costs.
This is the way the company treats
any investment.
Another example of successful
investment in the production. Not
long ago, Saint Petersburg company
“Yunikosmetik” bought a plot of land
and production facilities in Kolpino
(S-Petersburg region) for USD 20
million to step up the production of
professional hair cosmetics under
CONTRACT MANUFACTURING 17
Estel brand from 6 to 15 million units
of products per month. The existing
buildings and facilities are perfect for
the production of cosmetic products.
On the purchased site, the company
intends to launch a new production
of aerosols and brightening powder
and to expand warehouse facilities.
The storage for final products was
launched in early 2011; the warehouse for raw materials and production line – in late 2011. The industrial
complex is scheduled for full commissioning in 2013.
Many market experts believe
that Russian market of professional
hair cosmetics is one of the most
dynamic. Today in Russia, 40 million tubes of professional cosmetics
are sold annually or around EUR 25
mln per year. By 2020, the market
size will increase two to three times
to reach 100 million tubes per year.
The management of “Yunikosmetik”
estimates that the company holds a
30-40% share in the Russian market.
The company’s turnover is growing
by 35% year by year. The market of
Ukraine, Kazakhstan and Belarus,
where the company now operates,
are in their infancy. To enter the market of Central Europe (Germany, Poland, the Czech Republic, Slovakia
and other countries) the company
will register a subsidiary in Berlin,
which will be its representative office,
by the year end.
Estel is one from the handful
of successful developing Russian
brands engaged in professional hair
dye production. The company keeps
its eye on the market, has developed
a distribution network and takes correct marketing decisions. The midprice segment, where the company
operates, is progressing. This company has no competitors among Russian players.
Vertex is another promising market participant from Saint Petersburg manufacturing medicines and
cosmetics under the brand “Vertex”,
affiliated with the drugstore chain
“First Aid.” Currently, Vertex produces
assortment of 50 items of medicines
and cosmetics. “Alerana” is the best
known line of hair care and “Asepta”
is famous for oral care products.
Currently, the company is building
a factory investing EUR 25-30 million.
It will be completed by 2014 with the
objective to boost the production volume by 100%. As per business plan,
by 2015, the turnover of Vertex will
reach EUR 15 mln.
Arnest is well-known Russian contract manufacture and producer ot its
own brands like hair styling “Prelest”.
“Some time ago, we passed the technical audit on the part of our customers, namely, Schwarzkopf, L’Oreal,
Schwarzkopf & Henkel, “Kalina” Concern and some others, - says Helen
Sagal, Director General of Arnest. –
The result of the first visit of Schwarzkopf representatives was highly
critical. It took us 25 million Dollars
and a year to satisfy all their requirements. We had to build a separate
production unit to manufacture Fa
deodorant under their request”.
She comments: “Currently, the
manufactures are cautious to launch
novelties in the market. In order to
create a sound foothold in the market, you need a big budget. Normally,
two or three years are essential to roll
out a brand; moreover, you will need a
reliable investor. Given our relatively
modest yield, it is too risky to launch
new strong brands independently.
Compared to multinational companies, which import all their products
to Russia, our competitiveness has
even risen. It could be higher if not
for problems with raw materials in
Russia: we import about 70% of raw
materials and components. Therefore, we cannot go along without taking in account to fluctuation of Euro &
Dollar exchange rates”.
As already noted, the contract
manufacturing market is growing rapidly. Michael Bortz, Director General
of Saint Petersburg cosmetic company “Firma VITA” highlighted a large
number of new ambitious producers
that have emerged in recent years.
Typically, these are small companies
unknown to the consumer. Their primary task is to survive, so they would
grab any orders for contract manu-
facturing, which tactics matches the
customers’ desire to rent production
facilities and get a quality product at
a very low price, at the razor edge
of production cost. And this is really
possible, when we are talking about
quality in terms of microbiological purity, physical and chemical properties
or compliance with effective standards and requirements. However,
the efficiency of cosmetic products is
a different category. In building partnerships, skilled market players explain to the customer that efficiency
requires innovative formulae of active ingredients triggering higher cost
of the products. In this regard, many
contractors are trying to come to a
consensus with partners.
According to market players, the
contract manufacturing sector has
become more articulated in terms of
companies specializing in the production of a particular product group, for
example, contract manufacturers of
color cosmetics, oral care or household have emerged. Such specialization enables the companies to be
more competitive in their segments.
“Of course, the customers choose
various priorities. There are clients
ordering turn-key production or those
electing separate options and supporting cosmetics production with
their own raw materials. Previously,
Russian cosmetic companies as a
rule ordered the full package of turnkey services (developing formulae/
recipes and manufacturing of product
lines and packaging), and multinational companies preferred to puzzle
contractors with individual production operations (they had always their
own formulas). But now the situation
has changed. “Today, just 3% of customers order turn-key services, - said
Maxim Pirogov, director of wet wipes
production company “Efti Cosmetics”,
- while 90% prefer to adhere to corporate identity and have ready-made design layouts. Accordingly, they receive
the complete production cycle, except
for dressing design. And around 7% of
customers provide some of their own
raw materials for specific manufacturing processes”.
18 CONTRACT MANUFACTURING
Today, the below trends are seen in
the market of contract manufacturers.
1.The market of contract manufacturers is growing by 30% in some
segments (wet wipes, cotton products and personal care).
2.Private labels are trying to push out
various brands from the shelves.
3.The factors posing competitive advantages in the contract market,
e.g. quality and innovation.
4.Private labels are attacking all
price segments. For example,
if sometime ago a chain would
launch a PL project in the low price
segment only, now we see such
projects in the middle and premium segments as well.
“The demand for contract manufacturing services is growing sustainably, - asserts Uliana Stepkina, Sale
and Promotion Director for “Maxan”,
wet wipes producer, - supported by
the developing culture of wet wipes
and people getting used to this convenient product.
“Aside from traditional bottle filling, we decorate glass bottles (powder and water based paints), make
pad printing on bottles, and before
long plan to master and implement
printing with hot foil stamping. Moreover, by the year end, a workshop for
aerosol products (liquid perfumed deodorants, air fresheners, etc.) will be
commissioned, - adds Sergey Minakov, Deputy General Director of “Perfume Style”. Our proposal is somewhat special because we deliver to
our customers a range of services for
the production of perfumes (painting
and decorating of bottles, bottling
and manufacturing of deodorants) to
reduce the ever-increasing costs of
our partners arising when semi-products are moved from one contract
manufacturer to another, from one
service provider to other”.
Olga Snegireva, Deputy Director
General of “Himros”, comments:
“We are keen to be engaged in contract manufacturing. Our customers
come to us with exclusive requests
and we have offers always. Contract
orders are expanding. We are happy
with contract manufacturing orders,
as partners cooperate with us on a
prepaid basis; moreover, we don’t
have to think about marketing and
sales. Those customers, who already work with us, would stay with
us, as we create the most comfortable working environment and guarantee quality.
Our company employs many chemists, who used to work with the Institute of Applied Chemistry; therefore
we simply cannot produce low-quality products. And it is quite evident
that a good product simply cannot
be cheap. Hence, we try to make a
product with optimal “price – quality”
ratio. Manufacturers in the middle
price segment, of course, cannot
sell quality products at extremely low
prices. Generally, we concentrate on
the middle class”.
Essentially, the Russian market of
beauty products contract manufacturing has reached its pre-crisis level
of orders; manufacturers and brands
are increasingly interested in it.
PACKAGING 19
PACK THE MARKET
According to Euromonitor International, traditional assortment of
cosmetic packaging is demonstrating sustainable consumption indexes
across the Russian market, while
some segments even report positive
dynamics. In particular, the volume
of consumed glass bottles and jars
has increased on the back of premium segment upturn. The overall situation proves to be satisfactory, and in
some cases it is improving in terms of
quality and quantity. Today, the share
of imported package totals to 80% of
the Russian cosmetics market.
KEY TRENDS
According to preliminary estimates developed by Anastasia Goncharova, Senior Analyst of Euromonitor International, the recent trends
in the Russian cosmetics and perfumery market are as follows.
“Over 2012, the Russian cosmetics and perfumery increased by 6.5%
in value terms. Overall, the market
shows a steady positive trend and
is climbing both in monetary and in
natural terms.
As far as consumer trends are
concerned, first of all, the Russian
consumers have become extremely
rational and cautious in shopping in
the aftermath of crisis. They strive
to spend as little money as possible, often sparing no time or effort
to find the knock-down price. By all
means, this trend attributes to the
dynamic progress of retail network.
Moreover, we see a deeper loyalty to
inexpensive, locally-made products.
However, no less important are
sustainably high growth rates in the
premium segment: a small category
of high-income consumers tend to
spend more for their beauty prod-
ucts. Luxury segment sales will grow
by 10% in 2012 to reach over 13%
of total sales in monetary terms. We
expect a stable market growth in the
future”.
A brief summary of key product
categories and outlook for their use
are outlined below.
1.Experts predict an increase in face
care sales, which in their turn will
trigger a higher consumption of
package.
2.Segment of children cosmetics
demonstrates a growing popularity of licensed products as a major
design trend. In other words, major manufacturers are using images of popular book characters as
well as children’s favorite movies
and cartoon heroes when developing new products.
3.Sun care feels comfortable. The
crisis has not affected its sales,
contemplating an increase in the
consumption.
20 PACKAGING
BEST FIGURES
We will not entrench upon the
truth to say that 2012 was a celebrating year for the vacuum dispenser. And not only thanks to the novelties in the product range of package
manufacturers, but the growing number of cosmetics brands with vacuum
dispensers as the leaders. You may
easily find a confirmation of this in
the Russian market.
Russian manufacturer Faberlic has
rolled out two vacuum dispensers for
BB cream (for normal or oily/combination skin) in the Premium line.
Euromonitor International reports
that the growing consumption of all
types of pumps, including vacuum
dispensers will continue in line with
the compound average growth rate
(CAGR) by 5% in the period from
2011 to 2016.
But nail polish segment has become a sheer
beneficiary
recently
b o t h
across
the world and here in Russia. Euromonitor International surveys held
as per 2011 bottom-line have shown
that globally, the category of nail polish has proved to be the most successful in terms of positive dynamics, whereby the growth in Russia is
projected as much as 11%.
This is equally true for quantitative
figures in this segment as well as for
innovative packaging for cosmetics
products. Speaking more precisely,
we see new models of brushes: wide,
flat, sometimes with rounded contour
making nail polishing process more
user-friendly to motivate the shoppers and product sales.
Euromonitor International believes
that Russian market is developing in
the fairway of global trends. For example, in value terms, this segment
has significantly increased over the
period from 2010 to 2011. The steepest climb is seen in the mass-market
nail polish category: from USD 126
million to 146 million; according to
the forecasts, this mid-price category
will preserve this momentum in the
coming years with a perspective to
reach 220.9 million Dollars in 2016.
Avon with 17,1% share followed
by Oriflame with 12,4%, Sally
Hansen with 9,3%, «Smart
Enamel» (Frenchi) with
8,3% and Rimmel (Coty)
with 7.4% hold the lead in
the Russian market of nail
polish.
OUR NEAREST
HORIZONS
Women
remain
the
backbone cosmetics consumers in
Russia. Reportedly, men have not
become active shoppers of these
products yet. However the experts
conceive this very fact as a sound
background for progress; in other
words, this segment has enough
room to grow.
Cosmetics for children remain in
high demand with particular attention to another category, i.e. cosmetics for babies, whose reserves are far
from depleted. Experts believe that it
has a potential for future growth expecting to see a 7% rise in the near
future. This will trigger an increased
use of all types of primary plastic
packages. Plastic jars or tubes are
typically used for creams or lotions;
whereby wet wipes (a small category
as of today) are packed in flexible
plastic bags, and just in few cases in plastic containers.
Angela Kuzmicheva, head of cosmetics package department in “Unipack Center”, a major Russian supplier of premium European package
from the celebrated manufacturers,
highlights the underlying trends and
prospects of Russian package market:
- A savvy producer keeps on investing in new equipment and new
technologies; so from time to time
we receive various novelties from
our partners and track appealing
proposals in this field in Europe and
Asia. More and more shoppers now
prefer vacuum dispensers as well as
streamlined – bag-like gadgets.
Decorating is another feature
that renders a flashing look to the
PACKAGING 21
cosmetics packaging. In particular,
the stained glass in transparent or
opaque color is very popular alongside with biodegradable package
(bottles or tubes) and recycling materials, which we present to our customers as well. We deem important
to choose a reliable manufacturer.
We supply packaging of European
producers including those manufactured at their factories in Europe or
Asia. We supply European or Asianmade products for midprice-range
and luxury category; it is important
to deliver standard but at the same
time unhacked packaging with a variety of sizes in the same style and,
by all means, decent quality. Not less
important is to observe manufacturing time schedules.
“Seven years ago, we were open to
cooperation for many companies, but
not all of them sustained the careful selection. As a rule, we arrange
visits to our established partners or
would-be customers so as to comprehend their working style, their control facilities for product quality and
equipment potential to realize their
business strengths. We get a lot of
samples from various manufacturers and perform market surveys to
decide, which products will be on demand in the Russian market. To date,
we have some dedicated partners
bound with us by agreements for official distributon within our market,
namely, M & H Plastics (UK), Eurovetrocap (Italy), DieterBakicEnterprises
(Germany), Novo-pak (Poland), Stackplast Ltd (Israel) and many others.
“Our status of official distributor allows us to offer products from
these manufacturers at special prices, to be the first to know about new
products and obtain a large number
of testers for our customers.
“The urge for European original
package is escalating every year.
Here are just the most recent examples. Our regular customer, “Salonnaya Kosmetika”, a leader of Russian manufacturers of professional
cosmetics, always stakes on the
high quality of European packaging.
This time, vacuum dispenser from
Promens was chosen as a novelty
in the broad-range PREMIUM series
for home care of face and body.
This is a bag-like (400 ml) with actuator to block excess squeezing of
product. Bottles for massage oil gel
have handy flip-top caps, which can
be easily opened or closed with one
hand (DiterBakicEnterprises, 500
ml). And the line highlight, a peculiar
modification of tube-bottle (DiterBakicEnterprises, 200 ml) to fill-in
aroma milk, is made of special soft
packing material enabling to squeeze
out the contents to the last drop!
“New lines for face, i.e. creams,
gels are packed in vacuum dispensers (DiterBakicEnterprises, 30 ml)
whose design and original dressing
are attractive. These are two-color
actuators and bottles with a special
lacquer finish selected in a color
range and rendering a soft-touch effect making this package fascinating.
Generally speaking, Russia is a
huge country with various needs.
2011 DEBUTS
Last year, a number of Latvian
companies emerged at the Russian
market, namely Gammaplast, a producer of primary plastic package
and Balt Warrant Co., serving a wide
range of paper carrier bags.
The emergence of “Ural Pollena”
plastic package manufacture has
become an important event for the
connoisseurs of cosmetic market.
A year ago, this company launched
its own production in the Urals. This
Polish brand has been operating in
Russia for a year only, but at home, it
has been famous for 50 years, since
earlier it was a packaging unit of the
well known cosmetics concern whose
products, by the way, were familiar
to consumers back in Soviet times.
And now it has developed into an independent manufacturer of polymer
package operating within Russia.
RPC Group - a major manufacturer
of plastic package – has presented
their products at InterCHARM 2012
International Exhibition for the second time and sees its presence at
the Russian market as a big chance.
“There are many
cosmetics firms in this
country seeking innovative and high
quality products - dispensers, jars,
etc. And there is always something
new, but virtually, there no such
manufacturers in Russia. We are
showered with requests from Russian
companies to supply our products,
and it means that high-quality and user-friendly package enjoys a high demand here. Big players, such as Natura Siberica with which we have been
team-working for several years, are
among our customers. InterCHARM
show has demonstrated a drive towards our products; our stand was attracting a lot of professional visitors.
We have participated in Inter
CHARM trade fair for the second time
and I hope that we will come again
next year. We need to develop the
market, to negotiate with customers,
including those representing small or
medium-size Russian businesses. It
is important for us to articulate our
participation in this show. We are a
well-known manufacturer, but participation in InterCHARM is not only
a matter of prestige. We have dedicated customers in Russia and we
would be happy to win new ones. This
exhibition is a robust forum for small
or medium-size customers.
By comparison, the volume of sales should
be higher than last
year, as the quality
of contacts has
improved“.
22 BRANDS
NATURAL SUCCESS
STORY
Can a Russian cosmetic brand attracts European customers? Read
two stories of successful businessmen who are brave enough to conquer the world!
Andrey Trubnikov, has developed
the largest Russian brand of organic
cosmetics Natura Siberica. To develop sales in Europe, he decided to
“marry” the beauty shop and sauna.
Andrei Trubnikov having modest marketing budgets found a way
to gain a foothold in the market.
In 2009, his company became the
first Russian manufacturer seriously
engaged in
organic
cos-
metics under Natura Siberica brand.
Today, it accounts for 20% of sales.
According to Trubnikov, in 2011,
his group of companies’
turnover
reached EUR
100 mln, or
30% more
versus
previous
year. Be
t h a t
as it
may,
“Pervoye
Reshenie”
ranks among the top five
Russian
manufacturers, including Concern
“Kalina”,
“Nevskaya
Kosmetika” (projected revenue in 2011
– EUR 160 mln.),
“Faberlic” and “Svoboda” (2010 revenue – EUR 77.5 mln
and EUR 67.5 mln
respectively).
In 1998, Trubnikov, a graduate
BRANDS 23
of the Faculty of Economics of Moscow State Institute for International
Relations (“MGIMO”) cooperated
with his Syrian partner to buy a gel
formula for dish-wash from Moscow
Research Institute “HOUSEHOLD
CHEMISTRY”. After investing another five thousand Dollars, Trubnikov
and the partner from Syria have
purchased the blowing equipment
for plastic bottles. 30 square meter
industrial space was rented from
“Flavosintez” chemical factory. After
in low price segment were faceless:
“Russkoye Polye”, “Polyushko” or
“Chistaya Liniya”, - comments Trubnikov. - I decided to develop a product with a legend that would speak
out that a specific person with a
name and a face was responsible
for the product quality rather than a
phantom Moscow suburban factory.
“Babushka Agafia”, a mythic sorceress allegedly collecting medicinal
Siberian herbs used for shampoos,
has become such person”.
CEO of “Stephanie”, one of the largest cosmetics distributors, who became the first businessman to handle “Babuchka Agafia” sales. The
trial run of 10 thousand bottles went
like hot cakes in three days.
In 2004, body care, creams, conditioners and hair masks were added to
“Pervoye Reshenie” shampoo, making a product range under the brand
of “Babuska Agafia’s Recepies”. Trubnikov decided to save some money
and bought Russian-made equip-
a couple of years, “Fratti NV” rented
a workshop to produce “Russkoye
Polye” shampoo on top of “Volshebnitza”, which became a hit in the
Russian market.
In 2002, Andrey Trubnikov sold
his stake in “Fratti NV” to incorporate a new company named “Pervoye Reshenie”. It took him one year
to roll out the first product. Back to
that time, the names of shampoos
The businessman has put six
herbal extracts in the product formula. The main advantage of “Babushka Agafia” was its price – just
6 Rubles per a 250 ml bottle. The
competing brands offered 10 or 12
Rubles. But Trubnikov had to sacrifice the margin: he worked with a
10% margin, whereby the market average was 40-50%. Then Trubnikov
went to his friend Dmitry Seleznev,
ment for USD 20 thousand to produce creams, but eventually lost 30
thousand Dollars. Distributors began
to return creams claiming that they
were spoilt. “Later it became clear
that because of wrong equipment
configuration, some cream stuck in
pipe bends to host pathogens, - explains Trubnikov. - We had to spend
another 60 thousand Dollars for Italian machinery”.
24 BRANDS
Soon, the representatives of
“Auchan” approached Trubnikov. It
was the first federal retail chain to
cooperate with this producer from
Moscow region, taking up 5-10%
of “Pervoye Reshenie” turnover at
once. Currently, the pool of “Pervoye
Reshenie” partners covers 70 thousand points of sales. Alongside with
“Auchan” and “Magnet” chain, the
company cooperates with “Okay”
and “Lenta” chains.
Thereby, the company has just 15
sales managers – a half of the staff in
the development department. The retail price of “Babushka Agafia’s Recepies” shampoo (1-2 Dollars per bottle)
is comparable to the competing products price, namely “Russkoye Pole”,
“Ballet” or “100 Recipes for Beauty”.
According to Synovate Comcon
Research company, in 3Q 2011,
face care cosmetics “Babushka Agafia’s Recepies” (without direct sales
market) was in the Russian Top-Five
ranking, and shampoos - in the TopTwenty: 9% and 6% of respondents
respectively used this brand. However, in 2007, Andrei Trubnikov started
to diversify his product portfolio. He
was concerned that the company
was dependent on one brand and
low profitability at 10.5%. Trubnikov
did not finance the promotion of new
brands, counting on the turnover in
commercial networks, affordable
price and the original positioning.
He has developed, for example, cosmetic lines especially for boys (“Antoshka”), for sauna fans (“Herbs and
Teas for Bath”) and athletes (VitaMilk Sport).
The company’s portfolio has
zoomed to 25 brands and around
1 thousand SKUs. However, the hit
was only one – “Natura Siberica”.
The brand name came to Andrei
Trubnikov in a dream in 2008 after
his trip to Paris. Trubnikov noted a
fashionable European trend - organic cosmetics and decided to create
his own organic “miracle”, however,
in the “lower+” price segment. Natura Siberica hair care aids cost 4.57 Dollars; creams - 7-13 Dollars and
color cosmetics - 13-20 Dollars.
Trubnikov has failed to break
through into specialized perfumery
and cosmetics chains such as Rive
Gauche, Ile de Beauté or L’Etoile”
because cheap cosmetics could not
fit into their strategy. Sales that were
launched in mature distribution
channels (grocery retail) brought a
modest success: only 30 thousand
units per month, which was much
worse as compared to “Babushka
Agafia.” Natura Siberica was on demand in small profiled stores thanks
to the low price again.
Trubnikov asserts that the share
of synthetic substances in his prod-
ucts does not exceed 5%, and this
is acceptable. In 2009, Natura Siberica was awarded with Organic
Products Certificate of ICEA Italian
Institute. The products of other Russian producers have no international certification. Natura Siberica received golden medal on InterCHARM
in 2012.
In order to promote the brand,
Trubnikov has opened his own branded retail chains. The first Organic
Shop was opened in Moscow in November 2010. The Organic Shop offers approx. two thousand products
of organic cosmetics. Five brands
BRANDS 25
(Natura Siberica, Baikal Herbals,
Organic Shop, Organic Garden and
Handson) belong to Trubnikov and
60 – to other companies. 30% of
sales account for Natura Siberica,
and 20% for other products under
“Pervoye Reshenie” brand name.
According to Andrei Trubnikov,
the investments in the first store
totaled 200 thousand Euros, which
have been paid off within one year.
Today, six Organic Shops of 60 - 180
sq. m are operating in Moscow and
one in Saint Petersburg. In March,
Trubnikov opened a 60 sq. m Natura
Siberica shop on Nevsky Avenue in
Saint Petersburg, which is always
flocked by tourists. 130 products will
be offered there under the Natura
Siberica name including cosmetics,
gift sets, shampoos and handmade
soap. The next one will be opened
soon in the centre of Moscow.
At the year-end, Natura Siberica
store will appear in Tallinn with a
sauna so that the customers could
try the cosmetics before shopping.
“I would not dare to open saunas in
Russia, because our people associate them with quite different sort of
entertainment”, - adds Trubnikov.
If the Estonian experience goes
well, Trubnikov hopes to set up new
stores in the high ends of London,
Paris and Rome.
In March, the businessman would
get the second certificate for organic
products - Cosmos. Partly, Trubnikov
buys the raw materials for Natura Siberica in Germany and France and
partly in Siberia. According to Trubnikov, Siberia is associated with an
environment-friendly region with
rich nature, but Europeans may
have other associations - deep forests and extreme cold. Owners of
small foreign shops aimed at the
Russian-speaking audience began
to order “Pervoye Reshenie” products in 2004. Currently, these are
exported to the Baltic States, Turkey,
Spain, France, USA and UK. However, the share of exports in “Pervoye
Reshenie” turnover totals to mere
3%; it is unlikely to grow up in the
near future.
Oleg Nasobin, Russian-born manager with European business training is a good example of creating
successful family business. Moreover, this businessman has become
a model to follow since he managed
to create a company with the worldwide reputation from the scratch of
just USD 50 thousand to start up.
In France, Nasobin has launched
the production of creams and facial
masks. Green Mama – is one of the
first brand created on the back of
maturing drive for organic and natural essence in the cosmetic industry.
The idea was so new and revolutionary that he decided to offer cosmetics with the extracts of herbs, which
he remembered from his childhood,
to the Russian consumers. It was decided to make a cream with plantain
instead of jojoba. Nasobin invented
the packaging design with leaves
of plantain and elderberry. A little
green manikin, drawn by Nasobin’s
four-year son depicting his mom in
a green dress, has become the company’s logo. Formula and production were ordered at a Prague factory standing idle without orders and
package – at a German firm with a
promise of after-sale payment.
The first lot – a truck half-loaded
with 50,000 plastic tubes of face
masks, creams and gels - Nasobin
expected to sell within 3 - 4 months.
But the product was sold off in two
weeks: the shoppers welcomed
cosmetics with national motifs with
great enthusiasm. A queue emerged
for the second lot immediately. Eighteen months later, Green Mama
used to sell up to 15 trucks of products per month.
Production and sales of natural
creams and masks are uneasy in
a way. For example, such products
have a relatively short shelf life. But
the natural concept as such ensures
quite stable demand across overseas markets, including Japan, the
Netherlands, Italy, the USA, Israel,
and two dozen other countries. Currently, the company manufactures
herbal extracts independently, but
purchases some raw materials outside Russia: for example, the best
sage can be found in the UK.
Then there was a move to France.
Le Plantain factory was commissioned in the summer of 1998. Following the August crisis, the turnover fell five times, the company
had to cut the prices 2.5 times and
managed to survive on the back of
foreign markets.
Today, Green Mama operates
two tandem factories in France and
Russia. In Russia, Green Mama produces mainly shampoos and facials,
while more high-tech products, i.e.,
creams or lotion milk, are still made
in France.
The company has never tried to
win a specific market share. Green
Mama would not produce a new
product just because a similar stuff
has appeared under a competitor’s
brand name. The range of Green
Mama started to soar only when the
company has created a full-fledged
base for further development - a factory on the Cote d’Azur, and opened
a research center. Recently, “Formula of Provence” collection was
enriched by products certified by
Ecocert and are on sale as organic.
Hence, Green Mama and Natura
Siberica are among the first companies mastering the market segments, which are new for Russian
manufacturers, so that to go beyond
European markets, inter alia.
26 RETAIL
HEALTHY FUTURE
FOR DROGERIE
Retail perfumery and cosmetic
chains have managed to restore
their stand in the market and to exceed the pre-crisis sales. 2011 turnover totaled USD 13.3 bln or almost
16% more versus 2010. In 2011, the
share of this distribution channel including drogerie was 33.5%. Thereby,
the share of specialty retail excluding drogerie dropped from 24.8%
in 2010 to 23.2% in 2011. But the
share of drogerie, which grew at priority rate rose to 10.83%.
In 2011, L’Etoile (27.3%), Rive
Gauche (26,4%), Ile de Beaute
(14,9%) and Yves Rocher (11.5%)
were amongst the largest perfumery
and cosmetics chains. The share of
these four companies accounted for
80.1% of total sales of perfumery
and cosmetics in 2011.
Direct sales are slightly dropping:
in 2011 their share equaled to 21.9%
against 25.1% in 2010. Despite this,
the sales volume rose by ca. USD
100 mln to reach USD 2.96 bln with
the growth of direct sales at 3.5%.
The share of street markets and
kiosks continued to decrease reaching 7.2% in 2011.
The share of pharmacy cosmetic
brands was 5.3% in 2011. The volume of pharmaceutical cosmetics
was USD 700 mln or 207 million
packs. In 2010, on the back of recovering consumer demand for cosmetic
products, the share of such products
in drug stores started to grow again.
However, the upturn in sales of pharmaceutical cosmetics segment was
supported by cosmeceuticals segment (+16.2% in Rubles), while the
selective cosmetics continued to
decline, but not as fast - only 4.1%);
on the contrary, the mass market
showed a growth of 1.7 %.
According to DSM Group, the sales
of premium cosmetics in pharmacies
are still 100% backed by imported
products; import share in pharmaceutical cosmetics segment accounts for 62% and in “mass-market”
segment - 38%.
Drogerie has been developing in
Russia since 2005; to date, Russia
has about 40 sales chains operating
in this format.
This format is increasingly developing in Russian regions, but so far
many networks have come to the federal level (“All! Good”, “Ruble Boom”,
“Ulybka Radugi” and “Yuzhny Dvor”).
This list can be supplemented with
“Ruble Boom,” “Sangi Style”, “Podruzhka”, “7 Days”, “Noveks” and “Magnit Cosmetic” – that is probably exhaustive list of chains with more than
100 stores. The shops of “All! Good,”
“Podruzhka”, “Ulybka Radugi” and
“Spectr” serve the mid-price segment,
“Yuzhny Dvor”, “Sangi Style” and “Ruble Boom” - the low-price segment.
In 2011, drogerie chains were developing sustainably in the Russian
market. The share of drogerie in the
total turnover of perfumery and cosmetics market in Russia grew from
8.1% in 2010 to 10.4%. In the future,
drogerie network will continue to
climb, reaching 9-9.5% as per 2011
bottom line. In 2011, the turnover of
drogerie chain topped USD 1.4 billion, with the share of perfumery and
cosmetics products with turnovers at
77-80%.
in the Siberian Federal District are
scheduled for opening; to date, the
company has no plans to expand
new regions. The assortment and
marketing policy of the company is
the same for all regions covered by
its chain. The pricing policy varies
depending on the region. The chain
offers a discount scheme under the
loyalty program.
ALL! GOOD
Number of stores: 139 – in Moscow and
Moscow region, Yekaterinburg, Kazan,
Ufa and Novosibirsk.
Shop floor space: 80–250 square
meters.
NOVEKS
Number of stores: 125 – all located in
the Siberian Federal District.
Shop floor space: 180 – 110 square
meters.
The product range of each store
of “Noveks” chain offers 30 thousand names of goods: cosmetics
(37%), perfumery (3.3%), household
chemicals (9.7%), and household
goods. By the end of 2011, 22 stores
Currently, there are two formats of
stores: a section in the trading floor
of 40 - 170 square meters; a section
of building or a stand-alone building
with commercial space of 100 to 300
square meters.
“All! Good” network is positioned
in the mid-price segment of drogerie.
The amount of “average cheque”
in stores 300-350 Rubles; in regions - by 15-20% lower. The chain
RETAIL 27
MAGNIT-COSMETIC
Number of stores: 692.
Shop floor space: 230 square meters.
customers is dominated by women
(90%).
The company is concentrated on
the development of various segments
and its own exclusive brands. “All!
Good” network has been developing
its Private Label since 2005. The network promotes the following PLs accounting for 30% of sales: Lili White
in tissue and cotton-hygiene products;
Fresh Zone - household chemicals
and household products; “SPA-Salts”bath salts; “JIVE” - footwear care products; Silk Line - cosmetic accessories
and ACULA - oral cavity care.
PODRUZHKA
Number of stores: 111 – Moscow and
Moscow region.
meters.
The product range of each “Podruzhka” store offers 10.5 thousand
items of different goods: cosmetics
(44.7%), artificial jewelry and accessories (16.8%). The goods of midprice segment account for 60% of the
range. The share of PL equals to 6%
(including color cosmetics, facial and
oral care products).
The chain was the first player positioned as “for women-only” outlets. The
target audience covers women aged
25-50, including working women and
housekeepers. “Podruzhka” operates
in the mid-price segment of drogerie.
Price positioning - “soft discounter”
available to all segments of the population. In 2013, the company plans to
open 23 stores.
“Magnit-Cosmetic” became a market leader just upon emergence in
2011. The product range of “Magnit
Cosmetic” offers over 3.5 thousand
items: toiletries, household chemicals, cosmetics and perfumery.
In 2012, “Magnit” company boosted its net profit as per IFRS by 92%
(in USD) - up to USD 803.87 million
versus USD 418.68 million in 2011.
In Rubles, this increase totaled to
103.15%. Over 2012, the company
opened 1,575 stores (1,040 “corner
shops”, 36 hypermarkets, 17 stores
“Magnit Family” and 482 “MagnitCosmetic”) and increased its shop
floor spaces by 30%. As of 31 December 2012, the total number of stores
was 6,884 (6,046 “corner shops”,
126 hypermarkets, 20 stores “Magnit
Family” and 692 “Magnit-Cosmetic”).
The company’s revenue in Dollar
terms totaled to 26%. The gross margin has increased from 24.33% in
2011 to 26.52% in 2012. The gross
28 RETAIL
profit increased by 45.71% reaching
USD 3,827.05 million.
In 2012, Sergey Galitsky the owner
of “Magnit” launched a new project
to create a perfumery and cosmetics
network that will operate in the premium price segment. The first shop
of Rouge chain opened in Krasnodar;
one more opening is pending in the
same region.
ULYBKA RADUGI
ent, 100,000 customers have such
discount cards. Each month, the company releases an advertising catalog
featuring the best bargain prices of
“Ulybka Radugi”.
In 2012 the chain opened 64 new
stores instead of the planned 30,
overrunning the target by 2.5 times.
Through 2013, the company intends
to develop at the same pace but does
not plan to enter new regions. In 2013,
Number of stores: over 250 in 75 cities
in the North-Western and Central Federal
Districts.
meters.
The product range covers a variety
of 8,000 products from toilet paper
and soap, to dietary supplements and
sports products with PL share of 10%.
The company offers a discount chain
cards under the loyalty
discount program.
Regular customers are eligible
to discount cards
allowing to buy
all goods with a
3% discount at
any store. At presMORE ON COSMETICSRUSSIA.LIVEJOURNAL.COM
the company intends to strengthen its
stand in the North-West Federal District and to expand its presence in
Moscow and Moscow Region.
CHAINS 29
FRAGRANCE
OF SUCCESS
L’ETOILE
Number of stores: 754 in over 210
Russian cities
Revenues in 2011: USD 724.5 million –
20% more versus 2010 (alongside with
Bon Joli chain)
Shop floor area: 200-750 square meters
Market share: 27.3%
L’Etoile perfumery and cosmetics chain is the leader in the Russian
market.
L’Etoile opened its first store in
Moscow in September 1997. In December 1998, the first regional outlet
was set up. In 2011, L’Etoile entered
the Ukrainian market through acquisition of local cosmetics and perfumery distributors, namely “Egzagon”
Ltd., K&K International and two local
chains – Brocard and Bonjour.
All in all, the chain stores offer
over 10,000 names of perfumery
and cosmetics products and more
than 150 luxury brands, including Christian Dior, Guerlain, Chanel, Givenchy, Sisley, Kenzo, Estee
Lauder, Clarins and many others.
The company operates as the exclusive distributor of Lulu Castagnetee,
LOEWE and Banana Republic.
In 2006, the company launched
a number beauty salons as an extra
source of revenue. Today, 16 such salons are operating with sophisticated
foreign equipment; they use products
of global leading skin care brands
(Guerlain and Thalgo Valmont), and
offer a comprehensive range of cosmetic services, including treatment
in L’Etoile manicure salon in Moscow.
In 2007 the company opened an
online store letu.ru with the key target to win the youngster audience.
Since June 2011, the network
has launched a collection of make-
up and accessories of its own trade
mark L’Etoile. Currently, the product
range accumulates 800 SKU (makeup, accessories for makeup, manicure/pedicure and imitation jewelry).
The chain’s principal mainstream
is to enhance the number of outlets
by virtue of regional development
and expansion.
In 2012, the chain started to reshape its marketing policies: the
share of mass-market products began to escalate by virtue of private
label inter alia. Today, the share of
mass-market and middle/luxury accounts for 30% and 70% respectively. The company seeks to expand its
audience by attracting young shoppers with modest income.
For the benefit of network customers, the company offers a permanent
system discount cards, which are issued for a purchase. You can get a
30 CHAINS
10 %
card
when
y o u
b u y
something for
EUR 10 or
higher and 25% –
EUR 625. Moreover, you may also
buy gift certificates denominated as
EUR 8 – 250. L’Etoile arranges promo actions, contests and advisory
services rendered by guest experts,
beauticians and makeup designers.
The company publishes the magazine featuring the latest news and
tips for skin and hair care.
BON JOLI
Number of stores: 10 (Kazan, Naberezh
nye Chelny, Orenburg, Samara, Tolyatti,
Ulyanovsk and Ufa)
Bon Joli is a Russian chain of perfumery and cosmetics stores. As an
independent shopping chain, this
brand was launched in 2008. It was
incorporated in 1994, in Kazan, under name Tacos and originally was involved in distribution and wholesale
supply of perfumery and cosmetics.
In June 2011, Alcor and Co., managing the largest Russian retail chain
of perfumery and cosmetics L’Etoile,
announced purchase of Bon Joli.
In
2 010 ,
Bon
Joli
chain had over 40
stores in 16 Russian cities, Moscow
inclusive. At the time of L’Etoile’s
takeover, Bon Joli had already 25
stores in the Volga Region and in the
Urals. Now it has only 10 stores in
the regions.
Since October 1, 2011, Bon Joli
has been operating a new payment
system and discounts scheme matching L’Etoile standards, and offers the
exchange of Bon Joli loyalty cards for
L’Etoile discount instruments. In Bon
Joli outlets, you can issue a gift card
of any value with unlimited validity.
Moreover, the network customers
can enjoy “beauty cabins” offering
the full range of cosmetics services.
As at late 2012, of 5 cabins that were
operating in 2011, just two remained
in Kazan.
RIVE GAUCHE
Number of stores: 190 in 64 Russian
cities, including Moscow and St.
Petersburg
Revenue in 2011: USD 700 million
Market share: 26.4%
Rive Gauche is the number two
retailer in the market of perfumery
and cosmetics presenting about
30,000 SKU of 250 brands. The ratio
of luxury/mass market is 60% / 40%
respectively. The company also produces the private label – Eva Mosaic.
In late 2010, Rive Gauche acquired
a competitor – Douglas Rivoli. According to market experts, Rive Gauche
network, which is developing in the
democratic segment only, has entered the premium segment to cement its stand. As of today, most of
the shops are closed or re-branded.
Rive Gauche places its stake on
the affordable prices and democratic
product range. The chain offers a user-friendly format and product range
with competent and verified balance
between the selective brands and
mass market products. This very balance facilitates the Company’s prosperity in all regions. In 2012, the number of its stores increased by 19%.
Currently, the company is concentrating on customers with average or
above average income and seeks to
become a leader in the middle-price
segment.
In 2010, the company opened its
first “Express” image studio in Moscow. To date, 10 such studios are
successfully operating within the
Project in Moscow, Saint Petersburg
and in the regions. There you can
make a haircut, coloring or enjoy
treatment, offered by L’Oréal Professionnel, draw eyebrows, crop fringe,
refresh hair ends or make quick hair
styling with products of LeeStafford
English brand.
On top of hairdressing services,
Rive Gauche Image studios serves a
wide range of professional cosmetics
for hair care. Holders of Rive Gauche
Gold Cards are liable to a 25% discount for image studio services.
Another project of the Company
is the “Rive Gauche Pro
fes
sio
nal
Makeup School” opened in Saint
CHAINS 31
Petersburg with a variety of training programs for visage and makeup designers – both for such clients
and those seeking professional engagement in this field. Thereby, the
company’s employees get discounts
for training.
A fresh-bar in bright and intricate
design is opened in “Rive Gauche
Beauty House” in Saint Petersburg
offering business lunches, breakfasts and a la carte meals. “Rive
Gauche Beauty Institute” arranges
hosting days of luxury brands.
In 2012, the company launched
“Good News from Rive Gauche”
magazine featuring novelties, tips
for skin and hair care and fashion
advice; since September, monthly
catalog “Choice of Rive Gauche” has
been in circulation.
Rive Gauche arrangers promoactions “Days of Beauty” to render
make-up designer services for women, professional advice for choosing
cosmetics from the latest collections
and to award gifts in case of shopping
for a certain amount. Under the company’s loyalty program the customers
can get 5% or 25% discount cards.
ILE DE BEAUTE
Number of stores: 140 across Russia,
including Moscow and Saint Petersburg
Turnover in 2011: USD 395 million, i.e.
18% higher versus 2010
Market share: 14.9%
Ile de Beaute is the third major
perfumery and cosmetics chain in
Russia.
Currently, it operates 140 stores
across Russia, including on-lineshop, delivering products across
this country.
Chain stores offer 240 brands and
over 30,000 names of perfumery, color cosmetics and body care products.
The main drivers of Ile de Beaute
development policies are as follows:
•Push up the number of outlets,
•Provide wide product range,
•Deliver high-quality services (stake
on sales consultants) and
•Promote private label, ancillary services and customer loyalty programs.
The network management intends
to escalate the retail chain, in particular, through expansion to regions
and neighboring countries. However, from August 2011 to November 2012, this chain opened just 12
stores, i.e. much less as compared to
the competitors’ figures.
In late 2007, Ile de Beaute network initiated a project to develop the
private label by launching its own line
of body care cosmetics in the middleprice segment. Today, the overall
product range is represented under
the company’s private label.
Two years ago, United Europe Holding – the owner of chain, knuckled
down to promote Sephora brand in
Russia. However, as of late 2012,
there were no Sephora stores in Russia, whereby United Europe is developing the brand in shop-in-shop format.
Ile de Beaute ranks the first in
terms of service quality in Moscow
perfumery and cosmetic chains. It
offers ancillary services, individual
treatment, gifts for shopping, monthly special offers, beneficial discount
schemes and user-friendly gift cards.
The company publishes a quarterly
glossy magazine with 250,000 copies print-run, which is distributed
among customers.
For the sake of better positioning and differentiation, the company
opens “beauty cabins” in its stores.
Cosmetologists diagnose the type and
problems of skin, help to find appropriate products and develop individual beauty programs. Besides, clients
may diagnose the condition of hair or
try unique hair care premium brands
in the cabins (MARLIES MÖLLER, Leonor Greyl, Rene Furterer, etc.). All
treatment is free in beauty cabins
(provided you have bought products
for a certain amount in relevant store).
Moreover, you can try the products. In
2012, 45 “beauty cabins” operated in
29 Russian cities.
Until recently, Ile de Beaute chain
had offered nail-bar services, however
they were closed by the end of 2012.
Ile de Beaute arranges its products on the store shelves under zoning pattern: the trading hall is divided
into two parts – products of luxury
and mass market segment, each of
which is then subdivided into sectors
of perfumery, color cosmetics and
skin care products. The ratio of massmarket/luxury products is 17% / 83%
respectively. Recently, the share of
mass market has increased; hence,
the company intends to expand its
audience thanks to consumers with
average income.
ARBOR MUNDI
Number of stores: 15 (4 in Moscow and
11 in Moscow Region)
Shop floor area: 200 square meters
Arbor Mundi cosmetics and perfumery chain in Moscow and Moscow region is not seen as a strong
competitor for the high-rollers of
perfumery and cosmetics retail and
does not have a major market share:
prior to the crisis, the company’s
turnover with even higher number of
stores would not top USD 100 million. However, unlike the big players, this company relies on niche
brands, in particular, Lubin, Aqua
di Genova and Different Company.
ARBOR MUNDI specializes in luxury
perfumery and cosmetics, and currently offers the following brands:
Chanel, Christian Dior, Lancome,
Guerlain, Givenchy, Shiseido, Yves
Saint Laurent, Kenzo, Biotherm, Gucci, Helena Rubinstein, Nina Ricci,
Dolce & Gabbana, Cartier, Jean Paul
Gaultier, Hugo Boss, Escada, Moschino and Cerruti.
The chain offers the discount
cards scheme and a buying service.
You will be entitled to 10% discount
card in case of shopping totaling
to EUR 10 and 25% for EUR 625.
Moreover, the company offers gift
certificates denominated as EUR
12.5 – 250. Arbor Mundi regularly arranges various promos in its
stores, awards prizes, holds raffles
and congratulates its customers
with public holidays.
32 SUN CARE
XX INTERNATIONAL PERFUMERY
AND COSMETICS EXHIBITION
TOGETHER
NOVEMBER
27–30, 2013
CROCUS EXPO
MOSCOW, RUSSIA
* BY NUMBER OF EXHIBITORS
The ideal platform for cosmetic companies to enter Russian growing market,
discover new opportunities, find distributors and enlarge business scope.
With over 3500 brands represented this is the largest in Russia, CIS and Eastern
Europe showcase of the most innovative products and services, opportunity to observe
the whole market at one glance and a meeting point for all industry professionals.
SHOW VIDEO
www.intercharm.ru
ORGANIZER: REED-SK LLC
Теl./fax: (+7 495) 662-7101, 937-6861/62.
e-mail: [email protected]

2Market review: On the top | 3Professional: Beauty

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