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Russian Market: Mystery Or Land of Fortune?

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Russian Market: Mystery Or Land of Fortune? Analytical overview of Russian perfumery & WWW.INTERCHARM.RU/EN 2016 cosme tics industry RUSSIAN MARKET: MYSTERY OR LAND OF FORTUNE? 2 Market Review: Russian market: mystery or land of fortune? 4 Face Care: Everything to suit your beauty 6 Hair Care: Within a hair of success | 8 Body Care: In a good shape 10 Internet: Captured in the Net | 12 Organic: Green Valley 16 Retail: Sector continued to grow | 19 Make-up: All in colours 22 Male Grooming: Serious Approach | 24 Bath care: On a fresh wave 26 Perfumery: Scent Obsession | 30 Oral Care: Best Performer 34 Sun Care: Moisturizing and Tanning 2 MARKET REVIEW RUSSIAN MARKET: MYSTERY OR LAND OF FORTUNE? 1. Beauty undustry: data, were oral care and deodor- 2014 low-priced segment grew by drivers on the rise ants. The culture of oral hygiene 3.4% and in 2015 in 2.8%. Premium The Russian cosmetic market is dramatically increased in Russia segment of pro fes sio nal cosmet- the second biggest after Asian and and has strong potential for the fu- ics demonstrated stable volume of still growing (in local currency) in- ture as consumers are increasingly sales as well as cosmeceuticals in spite of the slowdown in the econ- concerned about their health, espe- pharmacies – 3%. omy. Being saturated and highly cially their oral health. In addition, Despite of cutting budget ex- competitive it demonstrates for the pro fes sio nal and medicated oral penses for FMSG products by 22%, last two years slight decrease in dy- care products are expected to post Russian consumers of cosmet- namics – by mere 2.3%. In 2014, the most positive performances. ics increased their purchase by the growth rate of the market, ac- Unlike other categories, the perfor- 15-20% in monetary terms, say cording to analysts RBC.research, mance of deodorants was unique analytics from Russian research rose to 13.2%, while market volume due to consumers’ loyalty to formats company Romir. The less affected amounted to 552-555 billion rubles. rather than brands. Due to the grow- were low-priced and premium seg- Market turnover totaled USD 14.6 ing number of promotional activities ments. billion (the rate – 38 rub./Dollar in and price offers, consumers were The segment that demonstrates 2014). According to Amico consult- buying those deodorants that were stable results is colour cosmet- ing company forecast, in 2018 the on special offer at the time of pur- ics. According to Synovate Comcon growth might be 13% compared to chasing. research company, in 2014 Rus- 2014. The main growth came from the sian women spent an average of One of the trends for 2014-2015 key segments of the market – skin RUB1,174 ($16.30) on make-up, is a slight decrease of export and care, hair care, colour cosmet- while at the end of the first quarter considerable rise of contract manu- ics and fragrances. Euromonitor of 2015 this spending amounted facturing in Russia. The main inter- forecast for 2015 is as follow: skin to RUB1,160 ($16.12). This deter- national companies or distributors care – 85.4 bln rubles in current mination to continue buying colour of European cosmetics invest more prices, hair care – 74.3 bln rubles, cosmetics gave companies the con- in outsourcing production of their fragrances 69.3 and colour cosmet- fidence to continue introducing new brands in Russia. ics – 62.4 bln rubles. products to the market in 2015 de- Another trend of the last two years Direct sales companies also re- spite the challenging economic situ- is a sufficient price increase caused ported good results. According to ation. by currency fluctuation. Although statement of Tamara Shokareva, Surprising for many experts pop- many of the international manu- the President The Direct Selling As- ularity of natural cosmetics shows facturers have production facilities sociation (Russia), (DSA), Executive that despite of economy slowdown in Russia the industry depends on Director of Mary Kay (Russia), in the and prices increase organic cos- imported raw materials and pack- first half of 2015 volume of sales metics is one of the categories that aging. Analytics stress that in 2016 grew up by 7.8% thanks to beauty records current growth and will be price increases will not be as dra- care products. the biggest rising in coming years. matic as they were in 2015. More- For the last years the market was over, local production of ingredients 2. Consumers spends more fulfilled with local Russian organic for cosmetics is growing, and Russia on cosmetics certified cosmetics and imported already has its own manufacturers Another trend is a rational con- brands. of extracts and essential oils and sumption. Now Russians are switch- Among the other recent trends on other active and basic ingredients. ing to mass market and to profes sio- the Russian market is the growing The best performing categories nal cosmetics. The study of Magram use of the internet to buy cosmetic in 2014, according to Euromonitor Research company notes that in products. MORE ON WWW.INTERCHARM.RU/EN MARKET REVIEW 3 3. International brands come to Russia swelled New York-based Avon’s la- est business-to-consumer (B2C) Sanctions did not affect the cos- bor pool in Russia by more than 10 ecommerce markets in the world. metic sector in Russia that is highly percent, Starkova said, declining In 2014, it ranked ninth world- attractive for the cosmetics com- to give the exact number. Smaller wide, fourth in Europe and second panies. Swiss, Scandinavian and competitors Oriflame Cosmetics among the BRIC countries in terms American brands of pro fes sio nal SA and Herbalife Ltd. said they also of online retail sales, according to cosmetics have a particular inter- added representatives in the coun- yStats.com’s findings. Despite the est in Russian market. Among the try in 2014, without being specific. economic crisis, Russia is predict- new comers of the last year are ed to see B2C ecommerce sales Neocutis, Elizabeth Arden PRO and 4. The biggest on-line retail grow at double-digit rates and Ioma. market in the world. maintain its global rankings for the European brands are not pull- On-line retail in Russia contin- foreseeable future. According to ing out of Russian market, instead ues to grow at double-digit rates RBC research, in 2014 online re- many are increasing investments despite the overall economic down- tail of cosmetics amounted app. To and keep the profit at the 2014 lev- turn. Russia is one of the larg- $750 mln. el. So, this year Lush Russia plans to build up facilities production nearby Moscow. Henkel’s sales in the second quarter 2015 in the Eastern Europe Sales Channels region was positive. Despite the challenging market environment, a Specialized retail chains, incl. drogery strong organic sales increase of 5.5 Direct sales percent was achieved. Among the main drivers were the businesses in Russia, with the two-digit sales Drugstores growth. Open markets Beiersdorf increased sales in Russian by 20% for the same peri- Other, incl. supermarkets, internet etc. od. While Eastern Europe delivered sales growth of 6.4%, sales in West- ern Europe were down 1.4% on the previous year. Strong growth rates Average increase in the number of Russian retail chain stores is more than 20% annually were achieved in Russia in particu- lar. “We were expecting troubles in Russia but now we work better Cosmetics Import than ever and we are expecting further accelerating growth in the second half of the year,” said Ste- fan F. Heidenreich, CEO of Beiers- Import value (2011): dorf AG. USD 3370,3 mln Avon Products Inc. boosted sales Main importers are France, in Russia, increasing its ranks by Germany and Poland tens of thousands in the second half Together these countries deliver one-third of the cosmetics of last year as the plunging ruble import to Russia prompted more people to seek ad- ditional income selling goods door- to-door. “Our sales have been growing both in volume and value,” Avon country chief Elena Starkova said in an interview in Moscow. “De- cember was magnificent, exceed- ing our forecasts.” The additions MORE ON WWW.INTERCHARM.RU/EN 4 FACE CARE EVERYTHING TO SUIT YOUR BEAUTY 1. Market Size dients and quality, in other words, lar brand in the face care segment Russian women have been known they are looking for pro ducts that fit with 24.3%; Nivea – 21.4%, Cherny to spend a considerably higher their age and skin problems. Zhemchug – 18.4%, Avon – 17.2% share of their income on personal The consumers continue to be and 100 Receptov Krasoty – 15.1%. care pro ducts than women in many price-cautious. The consumers’ Day creams are gaining popular- other countries of Europe. Accord- preferences are shifting towards ity in Russia as many of them now ing to surveys in other countries, in domestic pro ducts. However, even combine several different functions. the crisis, the cosmetics expenses in this case the consumers are not It was one of the most dynamic dropped, but only Russian wom- inclined to save on face care. When subcategories within facial care – en continued to spend the same selecting pro ducts, they pay atten- 53.2% used this products in 4H of amount of money to look beautiful. tion not only to the price but also to 2015. The face has always been an object the brand. Customers are increasingly look- of close attention. The consumers’ preferences are ing for value for money products The growing aging population shifting towards domestic products. which are natural and beneficial for of women and the subsequent de- However, even in this case the con- the skin, provide a range of com- mand for appearance-enhancing sumers are not inclined to save on bined benefits of high priced pre- skin cosmetics and anti-aging pro- face care.
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