russian perfumery & cosmetics market 2014 (download .pdf)

2014-2015Analytical overview of Russian perfumery &

cosme tics industry

2 Market Review: Russia: safe and prosperous as ever | 4 Face Care: Eye to Eye

6 Hair Care: Hair Share | 8 Skin Care: Getting Down to Body Care

10 Premium: Obsession of luxury | 12 Organic: Green Valley

16 InterCHARM Event: Saint Petersburg – expand business | 19 Make-up: Face will Tell

22 Male Grooming: Stronger Sex Evolution | 24 Bath care: Bubble and Body Talk

26 Perfumery: Smelling the Scent | 30 Oral Care: Armed to the Teeth

34 Sun Care: Burnt by the Sun

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Winston Churchill said, “Russia is a riddle wrapped in a mystery inside an enigma.” This becomes clear when thinking about Russian perfumery and cosme tics market.

Russia is mostly an urban coun-try. Between 15-25% of the coun-try’s 142 million population belong to the middle class or middle class periphery. It is expected to grow 16% between now and 2020. According to the census results, 74% of Rus-sians live in urban areas. Everyone knows Moscow and St. Petersburg, but there are ten other Russian cit-ies with populations over one mil-lion that offer plenty of opportuni-ties to reach stable middle class customers.

More than 5 million companies operating on the market, Russian retail industry demonstrates fantas-tic growth (appr. 20% in 2013).

It is worth remembering that al-most all multinationals from the “Fortune 500 Global” are present in the Russian market and are ac-tively developing their business in Russia. No single multinational company pulled out of Russia since the so-called “sanctions” were in-troduced.

Secondly, the Russian currency (Ruble or RUR) is strengthening against both USD and Euro, and the trend is expected to continue.

Thirdly, consumption levels in Russia are not decreasing as sug-gested by various media. Russia’s major retailers (Magnit, X5 Retail Group, etc.) have just reported the promising results for the 1Q of 2014 according to which the retail sales growth equals to 25%. It clearly

demonstrates consumer confidence and purchasing power.

Fourthly, Russia and China have been cultivating closer economic relations. Such trend has become even more obvious since the visit of Vladimir Putin to China, during which both supreme leaders announced a new period in the Russian-Chinese bilateral relations. Russia has se-cured more than 40 business con-tracts with China. Top is the USD 400 billion gas contract, there are also deals in finance, investment, aircraft, and automobiles. By the 2015 the trade turnover between two countries is expected to reach USD 100 billion, as to 2020, accord-ing to the plans, the trade turnover is going to reach USD 200 billion.

Estimated at USD 15 billion (EUR 11,1 billion) in 2013, the cosme tics and personal care market in Russia ranks 5th in Europe, after France, Germany, the UK and Italy, with an-nual growth 11%. The market is expected to continue growing, as well as the evolution of consuming habits. The Russian cosme tics and personal care market is gradually recovering from the 2008-2009 re-cession. The Russian beauty mar-ket grew to an estimated USD 13.9 billion (EUR 10.75 billion) in 2012, compared to 13.5 billions (EUR 10.43 billion) in 2011 and is fore-casted to reach USD 15.6 billion (EUR 12.06 billion) in 2015. The country’s new economic wealth is associated with increasing con-sumer expectations. The main seg-ments of the market are perfumed pro ducts (23%), skin care pro ducts (22.6%), hair care (19.2%) and make-up (15.4%).

In parallel to the development of the market, the distribution was highly restructured in Russia. Open markets, with their amounts of goods of questionable origin, which had become emblematic of the post-communist era now account for only a fraction of the overall distribution of perfumes and cosme tics (7.2%).

Russia is the largest internet marketing audience Europe (over 53 million). Mobile phone penetra-tion is among the highest in the world. Beyond using digital media to advertise and promote pro ducts, firms use it to overcome the poor in-frastructure. The specialized deliv-ery and pick-up services mentioned above incorporate mobile tracking of orders and text messaging alerts to notify customers when and where pick-ups are available.

Reports indicate the Russian media market grew by 13% and is now worth USD 20.5 billion, while the global media market increased by only 4.6%. Furthermore by 2015 Russia will be the fifth-largest TV ad-vertising market in the world, behind only the U.S., Japan, China, and Bra-zil. This same report indicates that growth rates for offline advertising in Russia are double worldwide rates.

Similarly, direct sales (internet ex-cluded) carried on declining. On the contrary, health and beauty retail chains and grocery retail channels saw continuous consolidation, with the largest retail players increasing their market presence. The number of beauty retail outlets increased by +24.2% (compared to the previous year).

The city of Moscow is the leader in specialized retail with some 800

RUSSIA: SAFE ANDPROSPEROUS AS EVER

MARKET 3


point of sales and their number is expected to continue growing in the nearest future. This is accom-panied, however, by a significant concentration of retailers. In the selective distribution, the three ma-jor retail networks (L’Etoile, Ile de Beauté and Rive Gauche) are domi-nating the market, in particular in Moscow and Saint Petersburg, and are extending their network nation-ally.

Besides national retail chains some 25 regional specialized re-tailers operate in the market. The biggest are Seven days (Voronezh), Novex (Siberia), Podruzhka (Mos-cow), Alpari (Tatarstan). In parallel, the “Drogerie” format has been de-veloping actively. In October 2012, the number of “drogeries” increased by +25% (compared to the previous year). Among the biggest market players are Magnit Kosmetik, Po-druzhka, Ol!Good, Yuzhny Dvor, etc. This retail format is expected to be one of the most dynamic over the next years.

As their familiarity with cosmetic pro ducts is increasing, Russian con-sumers are becoming increasingly sophisticated in their pro duct choic-es and tend to spend money more rationally. The marketing strategies of specialized retail chains, based on discounts, have also simulated changes in consumption patterns. This trend, which is forecasted to continue, is prompting retailers and manufacturers to explore new ways to communicate with their tar-gets. To date, manufacturers are continuing to exploit natural claims that continue to be highly attractive for consumers.

Nevertheless the cultural attitude towards cosme tics, the curiosity for novelties and the openness to new techniques and pro ducts still make Russia a market where investments and efforts are well rewarded in terms of steady growth and posi-tioning. At present, the Russian perfumery and cosme tics market is welcomed, safe and prosperous as ever. Or even more.

Market Players: Manufacturers By now, most international leaders have manufacturing sites in Russia. TOP-10 manufacturers:

1. L’Oreal 2. Avon 3. Kalina 4. Nevskaya Kosmetika 5. Arnest 6. Faberlic 7. Mezoplast 8. Svoboda 9. Unikosmetik 10. Vesna

Sales Channels

Average increase in the number of Russian retail chain stores is more than 20% annually

Specialized retail chains, incl. drogery Direct sales Drugstores Open markets Other, incl. supermarkets, internet etc.

Cosmetics Import

Import value (2011): USD 3370,3 mln

Main importers are France, Germany and Poland

Together these countries deliver one-third of the cosmetics

import to Russia

4 FACE CARE


Recently, the face care segment has been evolving much more dynamically versus body or hand care segment. Russian women are concerned about their skin, complexion and pigmentation. They are becoming more aware in choosing skincare pro ducts and keep an eye on all cosmetic innovations and seek state-of-the art techniques. Technology development triggers a growing interest towards skincare pro ducts and as a consequence, the volume of this market segment goes up.

Colour cosme tics, the environ-ment and problem skin are all fac-tors that contribute towards the need for proper facial skin care. To-day, thanks to a wide range of pro-ducts for different age groups and skin types, combined with afford-able prices, everyone can find a set of facial skin care pro ducts to suit them. Facial skin care pro ducts en-able women to keep their skin look-ing radiant and young – and impor-tantly to look attractive as the years progress. The majority of marketing studies held in Russia confirm that sales of skin care pro ducts within the domestic market are growing year after year, and experts believe

that this trend will survive in 2013.But consumer behavior has

changed. It seems that today, shop-pers are more sensitive when it comes to buying skin care pro ducts and are reluctant to waste money on a pro duct they are not convinced by. Instead, it is evident that Rus-sian consumers now pay more at-tention to formula, ingredients and quality, and are looking for pro ducts that suit their age and personal skin problems...

Women’s desire to use pro ducts with a high content of natural in-gredients is another feature of the modern body care market as a whole and facial care in particular. At the forefront are cosmetic pro-ducts based on natural and herbal ingredients and therapeutic skin care allowing to mobilize our biologi-cal resources so as to restore youth and beauty. High interest of Russian women in buying face care pro ducts results from their desire to be better and brighter than others, their strive to delight and amaze and always look fresh and young, while their European mates give preference to personal easement and comfort.

The upper mass segment has demonstrated a suc-

cessful development. Last year was another fruitful period for the development of inexpensive mass pro ducts for skin care in Russia. Russian consumers have become more rational in shopping and chose things more carefully, focus-ing on price and quality ratio.

At the same time, more and more Russians address the premium cosme tics. Consumers are now prepared to pay more for body care pro ducts with proven effectiveness. In 2013, the premium segment was the fastest growing, supported by the expansion of network retailers selling premium brands.

According to Synovate Comcon survey, over one half (55%) of Rus-sian population use skin care pro-ducts, mainly women – 86% of them use skin care pro ducts; among men – 19% (one in five). Women aged 25-44 make the backbone of target audience (most active us-ers of facials). Day cream use 51%; night cream – 37% , hygienic lip-stick – 31%; gel and facial wash – 31% and makeup remover (lotion, toner, etc.) – 27%.

Among TOP-5 skin care brands are: Avon with 23%, Nivea with 22%, Chistaya Linia with 21%, Cherny

EYE TO EYE

FACE CARE 5


Zhemchug with 18% and Oriflame with 14%.

Unilever remains a leader in the market of skin care pro ducts with a market share of 12%, abating L’Oréal one percentage point only. Attractive prices, extensive portfolio of brands focused on different con-sumer segments alongside with ag-gressive promotion through federal channels allowed corporations to strengthen their leadership position in this segment.

Lately, the cosmetic market has become more “green” in ge-neral: many global players (Unile-ver, L’Oréal, Yves Rocher, Oriflame, etc.) roll out new lines awarded with bio certificates, including middle-price market. Moreover, some retail chains persistently produce natural pro ducts under their own trade-marks. In the medium term, this trend will consolidate because the sales of house brands in the grow-ing market will bring extra profits to companies. Many new brands from France, Italy, Germany, UK and USA have launched various eco-labeling, and market players are now expan-ding this range.

Many Russians scrutinize the content of various blogs and fo-rums dedicated to beauty and personal care, focusing at pro duct ingredients. They are attracted by cosmetic brands free from sulfates or parabens. However, sometimes

just single natural component is enough to guarantee the pro duct demand, despite its chemical for-mula.

Russian brands have strength-ened their footholds in face care category, largely thanks to low price and massive distribution over sale channels. The popularity of specia-lized shops offering organic cosme-tics has expanded; however online shops remain the main pipeline for these pro ducts.

Russian retail landscape shows further growth on the back of chain stores and significant increase in the number of pharmacies in citi-es, while the share of direct sales is dropping. However, we should not expect any substantial weak-ening, since this market segment has already developed its own au-dience.

Specia lized shops still dominate among the distribution channels of skin care; however pharmacies dem-onstrate the most dynamic sales of cosme tics despite the fact that the average mark-up rate in pharmacies is often higher compared to other distribution channels.

For example, in 2013, pharmacy retailer “A5” launched cosme tics corners in its outlets – L’Occitane, Nuxe, VICHY and others (15 com-panies altogether). Pharmacies al-locate substantial space for such corners – from 10% to 30%. Brands in their turn are investing in design and promotion, train and motivate consultants and support local mar-keting campaigns. Around 350 SKU of pro ducts are offered in cosme tics areas – five times more than in a regular pharmacy.

Cosmeceuticals belong to higher-margin categories, rather than me-dicinal pro ducts whose prices are government regulated, so pharma-cies are actively expanding this seg-ment. Now the share of cosme tics in “A5” circulation account for 13% of the chain proceeds. Thanks to the launch of individual corners by the end of 2014, this figure will reach 15%.

Other pharmacy retailers are de-veloping special sale formats for cosmetic pro ducts. For example, Moscow pharmacies of “Rigla” chain have the studios of “active cosme tics” where customer can get expert advice and buy pro ducts of VICHY, Biodrma, Lierac, La Roche-Posay and other popular brands. Saint Petersburg retailer “Pervaya Pomosh” offers cosme tics in its pharmacy corners.

A steady upturn is expected in the face care market mainly thanks to a stronger presence of premium cosme tics in the regions and organ-ic brands online. Russian consum-ers will keep on seeking the best value for money ratio. Moisturizing and anti-age pro ducts will enjoy the highest demand, whereby thanks to new technologies you can both delay the first wrinkles, and signifi-cantly reduce already available.

Face Care consumption by age, 2013 год,%

Age Groups Share

10 - 19 years 9

20 - 24 years 11

25 - 34 years 20

35 - 44 years 16

45 - 54 years 18

55 and older 25

Source: Synovate Comcon, RTG-I

Face Care consumption, 2013 год,%Categories Share

Day Cream 51

Night Cream 37

Gel, Cleansing Foam 31

Hydiene Lipstick 31

Make-up Remover 27


Тор-5 Brands, 2013,%Brands Share

Avon 23

Nivea 22

Chistaya Linia 21

Cherny Zhemchug 18

Oriflame 14


6 HAIR CARE


According to Euro-monitor International, in 2013, the market of hair care (excluding beauty salon treatment) reached EUR 1.6 billion to become a most impor-tant segment of the total cosme tics and perfumery market.

Customary shampoos remain the main engine in the hair care market generating 41% of all hair care sales in value terms thanks to their versatility and persistent need for personal hygiene.

In 2013, shampoos and conditioners pre-served the positive trend. Hair care pro ducts for men are developing much faster. For example, in 2013, this market showed an upturn of 6% in value terms with account to infla-tion. More rapid development is dic-tated by the developed consumption culture of male pro ducts separately, and still prevailing interest in such pro ducts.

Salon hair care pro ducts remain the most promising market seg-ment. Distributed in the retail, they are winning more and more fans, es-pecially among women. The urge for pro fes sio nal cosme tics is attributed to the consumer’s desire to use more efficient pro ducts perceived as premium.

According to experts, more ex-pensive pro fes sio nal hair care pro-ducts are gaining popularity as well. People buy them both in salons and cosmetic chains, as well in expert shops for hairdressers. This distri-bution channel is progressing – its corners can be found in many shop-ping malls. At the same time, many Russian consumers are price-sensi-

tive; they are reluctant to migrate to hair care pro ducts of premium class and opt for the cheapest pro ducts.

Multinational corporations lead the hair care market. The aggregate share of Schwarzkopf & Henkel and L’Oréal Russia in 2013 approximat-ed to 40%. Schwarzkopf & Henkel and L’Oréal Russia benefit from a very broad portfolio of brands in var-ious categories including salon hair care and hair dye.

Russia is the main hair dye mar-ket in the world. As Garnier experts witness, 60% of women in Russia use these pro ducts. Compare: the number of French women dissatis-fied with their natural hair is twice less. Blond of all shades is most popular tint among Russian fair sex.

And finally, 48% of Russian women dye their hair themselves at home.

Synovate Comcon 2014 data says, top-demand hair care pro-ducts are shampoos – 93% of Rus-sians use them; balms – 40% and hair masks – 20%.

According to RosIndex survey, the proportion of shampoo/balm users remained virtually unchanged in 2013. However, the share of hair masks users increased by 13%. The most popular brands of shampoos

Hair Care Consumption,%Categories 2011 2012 2013

Shampoo 93,2 93,4 93,1

Balm 38,9 40,0 40,0

Mask 16,4 17,8 20,2


HAIR SHARE

Shampoo and Balm Consumption, 2103,%

Brands2013

Know Use

Head & Shoulders 45,6 18,6

Schauma 44,6 14,3

Chistaya Linia 36,5 13,2

Nivea 40,5 11,5

Timotei 42,7 10,7

Pantene Pro-V 35,4 9,8

Avon 38,5 9,6

Shamtu 38,5 9,5

Fructis 36,7 9,2


HAIR CARE 7


and conditioners for hair in 2013 were Head & Shoulders – 18%, Schauma – 14%, “Chistaya Linia” – 13%, Nivea – 11%, Timotei – 11% and Pantene Pro-V – 10%.

The proportion of women using hair dye in 2013 increased by 7%; the majority of them (70%) dye their hair at home, but in recent years we saw a growing number of women electing to visit beauty salons – 29%. In 2013, the share of women preferring to use permanent hair dyes steepened. Natural dyes (Hen-na and Basma) are gradually fad-ing. 77% of Russian women opt for resistant dyes, shading pro ducts (mousse, shampoo, shower gel and conditioner) – 10%, highlighting – 8%, natural dyes – 5%.

In terms of consumption, the most popular hair dye brands are Palette – 25%, Estel – 16%, L’Oréal – 14%, Garnier – 11%, Lon-da – 11% and Schwarzkopf – 8%. In 2013, the proportion of women preferring to dye their hair signifi-cantly increased: 35-44 years (5%), 55-64 years (4%) and older than 55 years (8%). In 2013, the share of dye users significantly increased among women with below average financial standing (by 5% versus 2012).

The Russian market is enough mature and saturated and is rep-resented by two largest subcatego-ries: washing pro ducts and dyes. In the future it will develop mainly thanks to innovations and high competition among existing play-ers. Additional development impe-tus will be provided through such categories as medicated sham-poos, preventing aids for hair loss and premium hair care.

According to market experts, hair conditioners, styling and beauty sa-lon cosme tics are also progress-ing – all these categories have grown above average indicators in terms of hair pro ducts in general.

As far as the current market trends are concerned, we see an actively developing pro fes sio nal segment and mass-market that po-

sitions itself as pro fes sio nal but of-fering affordable prices.

However, the share of these seg-ments in general category of hair care is still quite small, but there is a sound potential for development. Moreover, the companies are ex-panding their pro duct range to offer more niche concepts: tint balms or dandruff conditioners. Those com-panies that previously produced shampoos only, now involve in con-ditioners or masks. On top of that, we see more complex concepts for home hair dying – texture mousses and homemade highlighting.

Russian hair care market is demonstrating growing demand for specialized and niche pro ducts, mainly. For example, therapeutic shampoos designed to solve spe-cific tasks in hair care are the fast-est growing category.

As in virtually all other catego-ries, manufacturers offer more diverse portfolio of hair care pro-ducts; therefore consumers should thoroughly analyze information shown on label so as to make the right choice. Repositioning of many cosmetic lines towards “salon” or “pro fes sio nal” treatment is among the most notable trends in the hair care market. Many well-known manufacturers are launching new brands or restart old ones position-ing their pro ducts as a “match” to salon treatment backed by promi-nent hair stylists. Consumers wait-ing for more advanced integrated solutions and advanced technolo-gies are willing to pay more for an innovative pro duct with new for-mulas recommended by pro fes sio-nals. This trend is beneficial both for customers and manufacturers, because “pro fes sio nal” pro ducts are definitely more expensive than their regular counterparts.

Pro duct positioning in the natu-ral niche remains a clear tendency in the hair care market. Therefore, an attractive design alongside with natural ingredients will be a key to success. Consumers perceive hair dye with oil as a more gentle

and natural pro duct. Added oils are seen among other hair care pro-ducts as well.

Russian hair care market ex-pects a further growth in competi-tion and a variety of new pro ducts, as well as new players.

Hair Care consumption by age,%Age Groups 2011 2012 2013

16–19 years 27,1 25,7 25,8

20–24 years 29,5 30,2 28,6

25–34 years 38,6 37,1 38,9

35–44 years 50,3 50,3 52,8

45–54 years 57,1 58,1 59,5

55–64 years 56,6 56,9 59,0

65 and over 39,5 46,1 49,7


Hair Colorants consumption by channels,%Place of usage 2011 2012 2013

Home 74,1 71,9 69,9

Beauty Salon 24,0 26,9 28,9


Hair Colorants consumption,%Categories 2012 2013

Permanent colors 74,1 76,6

Colorants 9,9 10,2

Highlight prepara-tions

7,9 8,4

Sun-lighteners 6,9 5,2

Natural hair colors 5,5 5,1


Hair Colorants consumption, 2013,%

Brands2013

Know Use

Palette 59,4 24,8

Estel 47,4 15,7

L'Oreal 49,3 13,7

Garnier 32,8 10,9

Londa 46,1 10,7

Wellaton 42,9 8,3

Schwarzkopf 36,7 7,8


8 SKIN CARE


Currently, the body care market is sufficiently saturated and is deve-loping rather in quality terms on the back on new pro ducts and expan-sion of customary care programs. According to Euromonitor data, as per 2013 bottom line, premium body care segment developed twice rapidly versus mass segment reach-ing 6%.

Premium brands tend to win more and more new consumers thanks to extensive marketing support on the part of glossy magazines and the Internet providing comprehensive coverage of luxury skin care bene-fits. Russian women have become more educated in terms of healthy skin and seek the most innovative and progressive brands to maintain their healthy appearance.

Anti-age segment was progres-sing at the same pace as the over-all skin care segment reaching a 4% increase in value terms. Anti-aging properties enjoyed a higher de-mand in various types of skin care pro ducts. At the same time, body care with rejuvenating effect is not as popular since many consumers discredit the allegations of manu-facturers.

Producers of moisturizers and anti-aged cosme tics bet on innova-tive components bringing extra ef-fects such as deep and long-lasting hydration and quick lifting. Never-theless the consumers are unwilling to trust advertising messages all the way. Many Russians have used the Internet in search of advice provided by their mates.

In the forecast period (2013 – 2018), this segment will follow the premium expansion trend; however the consumers’ sensitivity to price will remain a major factor to leash this trend, because Russians will

continue to seek the best value for money ratio. Since, generally, skin care is not a pro duct of urgent de-mand, Russians often prefer to wait for the best offer of their favorite pro ducts or buy discounted goods at a preferred price in the luxury seg-ment. However the premium seg-ment is expected to remain the most dynamic. It will be affected neither by exchange rate fluctuations, nor by cheaper pro ducts in the mass segment.

According to 2013 “RosIndex” survey of Synovate Comcon, the pro-portion of body care users equals to 56% of the population aged 10 years or older with women making the largest portion of 84% and men of 16%.

2013 saw a significant upturn of the share of body care users among women aged 25-34 (20%) and the age group of 45 – 64 years. 83% of Russians preferred hand cream; 36% – foot care cream (tal-cum powder, deodorant or cream); 30% – cream, lotion, body lotion; 28% – intimate care aids (gel, soap); 19% – exfoliating cream (scrub) and 16% – sunscreen.

In 2013 the share of body care users including cream, intimate care, scrubs, sunscreens and anti-cellulite increased.

Today, multinational companies including L’Oréal, Beiersdorf (Nivea) and Unilever (Dove) are in the van-guard of body care segment.

The most popular brands of body care are “Barkhatnye Ruchki” with 27%, Avon with 20% “Chistaya Linia” with 16%, Nivea with 15% and Oriflame with 13%.

In terms of Russian consumers’ preferences to body care pro ducts, several major trends should be highlighted:

1) More frequent choice of “niche” pro ducts;

2) Interest towards innovations in pro duct lines (new flavors, prop-erties and consistency);

3) Consumers’ urge for premium pro ducts;

4) Attention to scientific develop-ments and innovations.

Consumer choice is becoming more practical based on accumulat-ed information; therefore such driv-ers as innovative pro ducts, scienti fic research, proven efficiency coupled with natural ingredients and formu-lae are extremely important.

The majority of Russian consum-ers, especially in big cities live in a very tense mode so they opt for handy and quick-acting body care pro ducts. Hence, quickly absorbed and light textured express and SOS-

GETTING DOWNTO BODY CARE

Body care consumption by age,%Age Groups 2012 2013

16 - 19 years 5,1 5,0

20 - 24 years 12,6 11,5

25 - 34 years 17,1 20,5

35 - 44 years 18,7 17,1

45 - 54 years 18,5 19,4

55 - 64 years 11,9 16,5

65 and older 16,1 10,1

Source: Synovate Comcon, R-TGI

SKIN CARE 9


aids enjoy the highest demand on the market in this country.

Recently, consumer interest in sa-lon body care pro ducts has expand-ed in Russia. Obviously, the quantity of information that a complete skin care is only possible thanks to pro-fes sio nal pro ducts has turned into “quality”, largely because pro fes-sio nal cosme tics cannot be sold without relevant training and the ex-pert level of beauty salon business has elevated as well. Today, neither beauty shops, nor private beauti-cians would offer mass-market cosme tics (which was quite com-mon everywhere a few years ago). Salon cosme tics market is no longer a “niche”; rather, it has become a full-fledged market phenomenon.

On the one hand, in Russia, we see a substantial pool of strong foreign players, and on the other, national manufacturers of salon cosme tics are gaining strength and compete successfully with international com-panies. Currently, the below Rus-sian companies are involved in sa-lon cosme tics pro duction: “Academy of Scientific Beauty”, “Charm Cleo Cosmetic”, “Alpica”, “Pro fes sio nal Beauty”, “Alina Zanskar”, “C-Ultra”, “Nanosintez”, “Tiana”, “Myrra-Prof”, “Kosmoteros”. “KORA Lab” and “Geltek-Medica” have their own lines of salon cosme tics. Meanwhile the bar for entry into this market is quite high. The pro duction cost of pro fes sio nal cosme tics is ten times higher, and the payback period is much longer. According to mar-ket players’ estimates, a company

needs at least three – five years to get a foothold on the salon cosme-tics market (while relevant period in the field of customary pro ducts in-tended for retail takes a year at the most).

Creation of domestic pro fes sio-nal body care lines by Russian dis-tributors of European and Ameri-can brands is seen as a trend that was born recently and boosted in 2013. To date, Russian cosme-tics definitely can compete with its overseas counterparts. The compa-nies’ range involves body correction

pro ducts, cosme tics for hardware techniques for face/body (LPG, ion-, phonophoresis, galvanizing, ultrasound, myostimulation, micro current and radiofrequency thera-py). Russian requirements to raw material quality used for cosme-tics manufacture are rather severe. Moreover, the prices for Russian pro ducts are much lower, whereby the formulae of Russian creams are very rich.

The so called “green theme” has been pronounced in the Russian market for several years already, especially thanks to the “flavor” of national traditions. In this respect, handmade natural cosmetic pro-ducts have become very popular. Worth noting that if some time ago these pro ducts had a rather low price, today, they are positioned in the middle-market segment.

Following from the above, Rus-sian body care market has enough niches and areas to generate new players or brands, and consumers of this country are waiting them with excitement.

TOP-10 brands, 2013,%Brands Know Use

Barkhatnye Ruchki 47,8 27,1

Avon 50,2 20,2

Chistaya Linia 45,1 16,3

Nivea 41,8 14,9

Oriflame 41,4 12,7

Cherny Zhemchug 44,3 12,0

Dove 36,8 12,0

100 Receptov Krasoty 34,5 9,3

Camay 33,8 7,6

Recepty Babushki Agafie 33,6 7,4


Body care consumption.%Categories 2012 2013

Hand Cream 83,8 83,4

Foot Care 37,3 36,5

Cream, milk, lotion 28,3 29,7

Women Hydiene Gel and Cream 26,3 28,4

Scrub 16,5 18,7

Body Sun Cream 14,5 15,9

Body Night Repair Cream 10,6 11,7


10 PREMIUM


Russians are keen on novelties and companies offering premium beauty and personal care, prefer to test their pro ducts and advertis-ing campaigns in Russia. Premium cosme tics and perfumery brand owners take steps to attract new buyers, especially young people. Through the acquisition of afford-able luxury pro ducts middle-class and young consumers feel an at-tachment to the world of luxury.

Rational approach to shopping coupled with increased focus at pro duct functionality is seen as a main feature of the post-crisis de-mand worldwide. In this respect, the behavior of Russian consumers is becoming more rational as well. When choosing premium cosme-tics, the Russians are driven both by the prestige factor and desire to buy a useful pro duct with natural in-gredients capable to treat a specific skin problem. This is the reason of high demand for targeted and spe-cial-purpose pro ducts and close at-tention to brand new pro ducts. The brands say that consumers are in-terested in fresh items even more often than in pre-crisis times.

Despite of slower growth of cer-tain macroeconomic indicators in late 2013, the Russians’ revenues are characterized by a positive be-havior justifying the expenses for premium goods, cosme tics and per-fumery inclusive.

According to Euromonitor Inter-national, in 2013, the market of premium cosme tics and perfumery upturned by 5% in value terms al-lowing for inflation. Currently, the demand for premium cosme tics is growing steadily in Moscow and St. Petersburg because these cit-

ies have a solidly saturated market of luxury goods. As a result, we evi-dence an urge for brands that are new in the Russian market, mainly premium brands. All key luxury brands are already represented in Russia, while the consumption pat-tern of premium goods is just be-ginning to emerge in this country. People in Saint Petersburg are now willing to spend pretty big money for outfits, accessories, premium cosme tics and perfumery. The turn-over of premium pro ducts in this segment is growing 2% faster than the market as a whole.

The expansion of beauty special-ist retailers into Russian regions as well as the ongoing rise in the num-ber of new launches throughout the country led to year-on-year growth of current value sales. Moreover, consumers are highly conscious of their appearance, which spurs the demand for super premium beauty and personal care.

2013 saw a shift in the direc-tion of pro duct range policy towards a larger share of more expensive cosme tics and smaller share of mass pro ducts.

Concurrently, retailers are at-tempting to master the “boutique” format enabling to sell an extra pro-duct line separating it from the oth-er chain stores. A good example is Rive Gauche, which opened a store of exclusive perfume brand Rivoli Perfumery in St. Petersburg in late 2013. This boutique offers such brands such as Nasomatto, Sospi-ro, Xerjoff, By Kilian as well as com-plete collection of Les Collection Ex-clusives from Guerlain in Baccarat crystal bottles. The boutique was designed by Lilian Driessen, Dutch

architect, the spouse of eccentric perfumer Alessandro Gualtieri (Na-somatto), and owner of her own per-fume brand MariaLux. Having put flavors in the same league as pieces of art, she invented an interior con-cept in the style of “Cabinet of Curi-osities” going back to Catherine the 2nd times.

In addition, in late 2013 Rive Gauche chain continued the re-branding of its stores under Douglas Rivoli. The right to use the brand un-der license from Rustiset Holdings Limited (which administered Rive Gauche at the time of transaction) had remained till late 2013. To date, the company has already renamed 26 stores, and according to the company website, only six stores are now operating under Douglas Rivoli brand.

Dmitry Kostygin, the compamy co-owner says that ordinary Rive Gauche will not take all remaining platforms of Douglas Rivoli. Some of them will be rebranded into Rive Gauche Exclusive. In addition to the stores name, it will distinct from its older “sister” by a larger share of premium cosmetic and perfumery brands in the pro duct matrix and in-terior design. The number of doors under new brand has not been an-nounced yet.

On top of the desire to preserve premium segment that was occu-pied by Douglas Rivoli, the company had to satisfy the needs of shoping malls so as to retain commercial platforms. “Shopping malls have various footholds in the market: some of them need standard Rive Gauche, while the others seek Rive Gauche Exclusive”, – adds Dmitry Kostygin.

OBSESSION OF LUXURY

PREMIUM 11


The company’s policies are well verified in strategic terms since the structure of traditional pro duct range of cosme tics and perfumery chains is becoming more unified with the only difference in brands represented; as a result, the com-petitive edge has become more price sensitive. Moreover, we see an intensified competition among per-fumery and cosme tics chains and online shops offering lower prices and a much wider range of pro ducts.

High level of competition encour-age retailes to play with special price offers for premium cosme tics and perfumery. Marketing strategies of perfumery and cosme tics chains largely based on the discount com-ponent have triggered changes in the consumer model. “Gift for a purchase” is a common practice amongst many premium brands. First, this is an opportunity to dem-onstrate how high the customers’ devotion to this or that brand is valued and encourage their next choice. Secondly, this is an option for a buyer awarded with a gift to try something new – and certainly the best from the premium brand port-folio. For example, Clinique brand tries to offer the most appropriate pro ducts for skin care or make-up mixing well with each other. For ex-ample, a beauty kit may include a

facial scrub, c l e a n s i n g soap, moistur-izer, mascara and lipstick. Such kit will be handy on a trip with one or two extra items.

Special price offers can be arranged both at the initiative of producers themselves or rapidly grow-ing cosme tics networks. The migration from mass segment

to premium segment is still on the way, says experts.

While analytics predicts more ra-tional consumption in Russia brands witnesses Russian women never to save on their beauty, and this is a peculiar feature of Russian con-sumption market of color cosme-tics. Russian consumers are buying more and more premium brands to make their skin both beautiful and healthy, and their priorities are not tan accelerators but rather pro ducts with strong protection effect says in L’Oréal. MAC Cosme tics asserts, that year after year, they see the lux-ury segment growing – 9 out of 10 Russian women use make up; on the average, they begin to use makeup 5 years earlier as compared to their mates in Europe or other countries. This is because makeup plays a far more important role for Russian women as compared to many Euro-pean countries. Over 80% of the fare sex use makeup every day.

Advertising сampaigns and pub-lications in mass media, growing numbers of barber shops, cornners in shopping malls have stimulated male consuption. More and more Russian men using male grooming. Most likely, this is the outcome of wellness advocacy in mass media, which is not limited to women only. The so-called middle class – gener-

ation of young men and women with sound income affording to care for themselves – is expanding. Today, of course, women remain the main buyers of male cosme tics (60%), but the share of men as shoppers is steadily growing. For example, the share of male grooming sales Cla-rins in Russia is almost two times higher as compared to Europe, i.e. 9.8% versus 4.5%.

Shaving pro ducts, aftershaves and basic skin care pro ducts lead the demand, but at the same time I see a strong interest towards ex-press cosmetic pro ducts including rollers to treat under eye bags or acne spot gel. One of the must-have of the year is a pro ducts for beard and moustaches.

Manufacturers continue to invest in marketing and developing of rep-resentation in leading distribution channels in response to escalating demand for premium cosme tics and perfumery in Russia.

Premium brand Clarins set a goal to enter into top-five luxe make-up selling brands in Russia. Just in three years, sales of make-up have grown more than three times. Le Long Mascara launched in Sep-tember 2013, immediately entered the top five best-selling pro ducts in this category. The company invested 20% of its budget in the advertis-ing campaign to create the brand awareness. As per 2013 outcomes, Clarins Russian has outrun France and now the brand is behind the United Kingdom only in terms of make-up sales.

Russian cosme tics market is pro-gressing at 12% per year being the fastest growing market in Europe. For this reason it is so attractive for investors and manufacturers of premium cosme tics. A lot of luxury shops, new perfumery chains and boutiques have emerged in the mar-ket with a record number of beauty-brands that offer a large number of new pro ducts every month. Women are becoming more obsessed with luxury pro ducts; thereby they have become more exacting and aware.

12 ORGANIC


Organic or “natural” cosmetic pro ducts are contemplated as an independent and very lucrative seg-ment of cosme tics and cosmetology market. According to Transparency Market Research survey, the global demand for these pro ducts in 2012-2013, totaled to USD 7.6 billion, while as per 2018 bottom line, sales may boost to USD 13.2 billion.

The upsweep behavior is affected by such factors as higher purchas-ing power of consumers around the world, expansion of distribu-tion channels for such pro ducts and zooming of pro duct lines on the back of new ingredient sources. Eu-rope and Asia are among the largest consumers of organic cosme tics.

Consumers appreciate the ben-efits of such pro ducts (i.e. low aller-genicity, almost complete absence of potentially harmful elements and high promise-result ratio) and im-plant them in their lifestyle along-side with fitness and healthy nutri-tion.

According to various estimates in Russia, the share of organic cosme tics accounts for about 1%; however its potential is definitely higher, i.e. 3%, without any doubt that the market will steadily move towards this indicator. This trend is supported both by consu mers’

growing concerns about their health and the environment as well as the latest developments in the Russian market.

Firstly, given that a few years ago the industry was represented by Internetional brands only, today, “green” Russian-branded cosme-tics certified by European stan-dards or alleging that their formula has relevant “organic” labeling are appearing in the market. These are well-known trademarks such as Na-tura Siberica, Organic Shop, Green Mama and some young brands – Greencaress, Joli, Orga nic People...

Secondly, new retail distribution channels promote the development of natural cosme tics segment. As we know, some time ago, the bulk of such pro ducts was distributed via the Internet, a small number of pharmacies and the flagship store of Russian organic market – Bio-market. Certainly, such weak re-tail infrastructure was no good for “green” cosme tics sales. But today the situation is changing rapidly.

Cosmotheca is one of the most fashionable and creative chains, which actually has become a cult. Its stores offer the most innovative pro ducts for beauty, skin, face and hair care. For example: Japonesque 150 Degree makeup brushes de-

signed to make the application of light natu-ral cosme tics makeup easy and comfor-table. Tooth-brushes with natural bristles Acca Kappa, M a l i n + G o e t z with SPF pro-tection, mira-cle soap COR, which restores the skin secre-

tory ability, especially in the T-zone. Beautician, hairdresser and mani-cure expert will be at your service at Cosmotheca corners, in particular, you can enjoy absolutely safe ZOYA nail polish.

Organic Shop is a cosmetic chain established by a major Rus-sian manufacturer of certified natu-ral and organic cosme tics – Pervoye Reshesnie. (Natura Siberica). Actu-ally, Organic Shop is the only place, where are presented all natural brands of this company, including eponymous cosme tics.

The most of Russian-made or-ganic pro ducts are attested by Ital-ian independent certification com-pany ICEA. Pro ducts originating in Switzerland or other countries boast their Ecocert mark (French indepen-dent agency). It has become known that in the near future, Organic Shop pro ducts will be awarded with Ger-man certificates for natural cosme-tics – BDIH. Other brands (Eco Hysteria, Organic Shop, Planeta Or-ganica, etc.) are not awarded with such certificates, but the manufac-turers’ packages always read that their pro ducts are free from harm-ful ingredients prohibited by natural pro ducts standards. The company shop offers brand-made soap and bath salts – you may wash your hands right there in a sink next to which the samples of creams, balms, etc. are lined up. Near cash register you will find Natura Siberica makeup stand. If the queue is too long you can have an apple or drink herbal tea – these are complimen-tary from Organic Shop.

Apart from in-house pro ducts, the company sells other organic and natural brands including Ava-lon Organics, Aubrey Organics, Dr. Hauschka, EcoKids Friendly, Lavera, Sanoflore, Weleda and others.

Morisania boutique of natural and bio-goods has been operating in

GREEN VALLEY

ORGANIC 13


Moscow historical downtown for al-most two years. The project is aimed at a safe alternative to virtually all things needed in everyday life. Two floors of the boutique offer cosmet-ics awarded with international eco-logical certificates.

Today, the store range covers or-ganic cosme tics brands for bath and shower, body care, personal care, a male line and various acces-sories (natural sponges, brushes and towels), pro ducts for children (handmade toys, hypoallergenic cosme tics), household eco-goods (cleaners, detergents, etc.).

Organic cosmetic pro ducts are represented by such famous brands as Dr. Hauschka, Alpha Nova, Au-brey Organics, Logona, Born to Bio, Pangea Organics and many others.

In the area of children’s cosme-tics you can find Alphanova Bebe, Weleda baby, Wiona and Helan.

Bath & Fun Island is a special place in the shop, where the pro-cess of bath taking is a real specta-cle. This include the most incredible and all-natural pro ducts for bath, re-laxation and pleasure: bath oils Ca-lendula Nativ and Ecoworld, made in the form of confectionery, Atlantic salt Les Fleurs de Bach with heal-ing essences of flowers, Moroccan black soap Kae, cream bath Green Energy Organics and much more.

This is a perfectly organized and arranged store; cosme tics and fe-male hygiene pro ducts are offered

on the ground floor, household and children’s goods – on the first. Gen-tlemen will find a special dedicated corner with natural deodorants, shampoos and shaving pro ducts.

Morisania has a substantial ben-efit, i.e. detailed labels with the de-scriptions of each item; moreover, qualified consultants will update you about any pro duct and help to choose the best one.

Organic FAN – a cozy “all-in-one” shop has settled in Moscow sub-urb – not only sells bio cosme tics and household but even has a cof-fee bar. Friendly hostesses will serve tea, delicious pastries made from bio-flour and other bio-ingredients, tell about their pro ducts and share the secrets of self-care. Moreover, this store hosts Saturday customer events featuring master-classes for seeds germination, tasting of “most natural” Tuscan pro ducts, “cus-tomer days” of PHYT’s cosme tics line, which offers a wide range in the store. Here you can find French crystal deodorants OSMA; Aubrey Organics, Weleda, Logona and some other cosmetic brands are present-ed selectively. A separate place is devoted to household eco-aids: DM Sodasan and Klar, Canadian Eco-max and French Etamine Du Lys.

Lemongrass store has been op-erating in Moscow downtown for two years. The store specializes in spa-

cosme tics and aromatherapy offer-ing a wide spectrum of Thai hand-made cosme tics – essential, basic and massage oils. Although there are not ecologically certified cosme-tics here, all pro ducts are manufac-tured of herbal ingredients without sulfates, parabens, colorants or preservatives. On top of oils, Le-mon grass House offers pro ducts for face, body, hair, bath and shower, natural repellents, cosme tics for moms and babies, and even vari-ous pro ducts for pets (shampoos, paw care, glossy fur, etc.) as well as herbal teas.

In 2014, a showroom of L’Origine Naturelle was opened in Moscow downtown to offer small family brands, producing delicious natural foods and cosme tics.

The key brand, which L’Origine Naturelle has brought to Russia, is Famille Mary – a family of beekeep-ers from France, which has created its own organic cosme tics Abellie based on royal jelly and top qual-

14 ORGANIC


ity honey with most incredible addi-tives, including truffle, brandy or ... 24-carat gold.

Krasnopolyanskoe Mylo is the family brand comprehensively dis-played in the Showroom: soap of all possible fashions, creams, sham-poos, hair balms and even dish-washing liquid manufactured by a small family in Krasnaya Polyana, near Sochi.

MamaBio – a small shop of or-ganic baby goods offers a broad range of cosme tics both for women and children.

BioStoria supermarket has been operating in Moscow since 2013 offering almost everything that you can imagine including farmer and bio-pro ducts, natural and organic cosme tics a well as household chemicals. The main message for BioStoria is to provide a complete assortment for Russia including in-house bakery that makes bread from organic flour and, finally, bio-meat.

Cosme tics portfolio includes French brands Coslys and Cattier, German brand Lavera, as well as Russian BotanicaLife. The company plans to launch organic and decora-tive cosme tics.

Near Taganka district, which is a part of Moscow historical center, operates Biozka – a showroom and shop offering an exclusive and complete range of selective organic cosme tics, including French brands Cattier, Florame, Santa Verde and ZAO.

On Novy Arbat Avenue, near the Kremlin, Kokos store offers natural pro ducts. Kokos presents natural cosme tics, nice handmade accesso-ries including Nonicare, 100% Pure, Organic Surge, Organic Essense,

Organic Ocean, Nature’s, Pangea Organics, Lemongrass House, Mos-queta’s, Russian brand specializing on Crimean herbs – Botanic Garden and some eco-friendly female hy-giene pro ducts.

Eco-world in Strogino, near Cro-cus Expo International Exhibition Centre, is a small corner-shop with a huge pro duct range: natural cosme-tics from Natura Siberica to Dr. Hauschka, eco-friendly household for all occasions, a variety of toys, eco-napkins, and eco-nutrition. You can also find a handful of non-tradi-tional pro ducts here, including Indi-an Ayurvedic things: toothpaste with pepper, Chyawanprash and rose water, “pure mud” from the Dead Sea of Israel. It is worth to drop here for household cleaning pro ducts and cosme tics: in addition to those mentioned, Eco World offers Born to Bio, Little Siberica, Dr. Hauschka, Weleda, Organic Shop and rare in Russia – Danish Urtekram, French Coslys and German budget brand Nonique.

Following the enomorous interest to bio pro ducts InterCHARM exhibi-tion launches this autmn new pro-ject Green Valley – one of the most expected premieres of the Russian perfumery and cosme tics market.

Full breadth of organic pro ducts’, natural cosme tics’, environmentally friendly cleaning pro ducts, cosme-tics for home care, food supple-ments and nutraceuticals will be shown during 4 days of exhibition. Moreover, certification authorities and specialized media will exclu-sively represent their activities and principles.

Following ecological trend, Inter-CHARM organizers created ECO-HOME during the last year’s exhibi-tion. That was a section dedicated to eco-friendly pro ducts for home care. This platform aroused great interest among the visitors, includ-ing retailers and media represen-tatives. In 2013, natural cosme-tics pro ducts manufacturers were firstly awarded by the new BIO.RUS Award, organized by the Perfumery

and Cosme tics Association of Rus-sia (PCAR), with support of Inter-CHARM.

InterCHARM continues following this direction. Jury of BIO.RUS Award will determine the best organic pro-ducts and natural cosme tics manu-facturers this year, and diversity of eco-friendly cosme tics will be exhib-ited in one of the four halls called Green Valley.

InterCHARM visitors will familiar-ize with natural cosme tics brands represented by local distributors, as follows: Florame, Santaverde, Eco-doo, Cattier, Acorelle, ZAO, Bocoton, Zeitoun, World of Medical Cosme-tics, Natural Cosme tics, and many others.

Demonstrate the cosme tics in-spired by nature from:

- Germany (Dr. Hauschka, Lavera)- Poland (AVA)- Belgium (Pranarom, Ecover)- Denmark (BAMBO, ABENA)- Czech Republic (UNION)- Italy (NATURE’S, CELL-PLUS,

BIOKAP)- UK (NATRACARE)- Israel (DR.DABOUR)- India (KHADI, Biomui)- Indonesia (BY – cosme tics), etc.Unique part of this section is a

group of certification authorities, where industry pro fes sio nals will note the main principles and stan-dards of the CAs in natural cosme-tics. ECOCERT (France), the first in-dependent CA to develop standards for natural and organic cosme tics, and BDIH (Germany) will exclusively take part into InterCHARM’s Green Valley.

Traditionally, years of Inter-CHARM’s experience guarantees contacts of exhibitors with their tar-get audience – cosme tics distribu-tors, retail chains and stores repre-sentatives, pharmacies – all market players interested in natural cosme-tics. Effectiveness of participation in the exhibition annually proved by its results – up to 80% of contacts throughout the Russian perfumery and cosmetic industry concluded here at InterCHARM.

16 INTERCHARM EVENT


Saint Petersburg remains the second largest platform after Moscow on the Russian market of cosme tics and perfumery. No wonder that this city is called the “second capital of Russia” being the second centre of cosme-tics industries following Moscow. Advantageous geographical position, well-developed transport and retail infrastructure, relatively high income level and sound consumer culture make Saint Petersburg a lucrative venture for perfumery and cosmetic brands.

For example, South Korean leader of cosme tics sales “THE-FACESHOP”, a subsidiary of famous electronics manufacturer LG, is en-tering Russian market through Saint Petersburg. The company intends to join the top three leaders of Rus-sian natural cosme tics market with a turnover of USD 1.4 billion per. The network launch is scheduled

for July. The first store is opened in a major trade center of Saint Peters-burg. By 2017, the company hopes to expand its network to at least 10 stores.

According to 2013 data, sales volume of cosme tics and perfum-ery in the Northern-Western Fed-eral District amounted to about USD 1 billion, which is 10% higher com-pared to the same period in 2012.

In 2013, the number of perfum-ery and cosme tics chains in the re-tail market of the Northern-Western District with Saint Petersburg as the capital topped 50 (in 2011 there

were just over 30 such chains). 29 of them are federal retailers. All in all, there are approximately 1,110 stores of perfumery and cosme tics chains with 45% concentrated in St. Petersburg and Leningrad re-gion. The drogerie format enjoying a high demand on the market – is progressing in Saint Petersburg with the number of outlets reaching 188. Throughout the year, the number of chain stores selling cosme tics and perfumery has increased by 21% with account of closed outlets.

The highest sales of perfumes and cosmetic pro ducts in the North-ern-Western Federal District in 2013 still accounted for Saint Petersburg, i.e. around 63%; however its share is declining amid the rising portion of Leningrad, Kaliningrad and Arkhan-gelsk regions. Gradually, retailers are mastering regions remote from the Northern Capital thanks to two drivers: high level of competition in Saint Petersburg and sound demand in the aforementioned areas.

Positive dynamics of average wage growth contributed to a steady upturn in the volume of retail trade turnover; according to preliminary data, the increase approximated to almost 11%. In terms of average cash income per capita, this region holds the fourth place in Russia.

Saint Petersburg residents can afford to spend more for clothes, accessories, premium cosme tics and perfumery. The turnover of premium pro ducts in this segment is growing 2% faster than the mar-ket. The growth in consumption of luxury goods in Saint Petersburg is attributed to the fact that compared to Moscow, prices there are slightly lower. Moreover, unlike Muscovites who prefer classical luxury, Peters-

SAINT PETERSBURG –EXPAND BUSINESS

INTERCHARM EVENT 17


burg residents are more susceptible to new premium pro ducts and inter-ested in niche cosmetic brands at the same time prepared to pay the sums comparable to luxury good pricing.

The volume of target audience of premium pro ducts in Saint Peters-burg is lower versus Moscow, but this market is admitted the second in terms of attractiveness. However, when entering the market of St. Pe-tersburg, it should be noted that the demand growth can be agile, but due to limited capacity of the market as regards potential buyers, it would be a hard job to arrive at maximum saturation. An example of “DLT” (Saint Petersburg peer of Moscow Departement Store or “TSUM”) clearly mirrors this thesis. The city market is appealing for players who are already represented in “DLT”, but their sales and pro duct range will be lower than in Moscow.

All leaders of perfumery and cosme tics retail chains have their shares in the market of Northern-

Western Federal District, i.e. L’Etoile, Ile de Beauté and Rive Gauche. Be-sides, there operate mono-brand networks such as Fresh Line, LUSH, L’Occitane, Stenders, The Body Shop and others.

According to Russian Business Consulting (RBC) survey, chain retail accounts for approx. 70-75% of the cost of retail sales of perfumery and cosme tics in the North West Federal District, being the highest figure in the Russian Federation. This large proportion of network is ensured by “Ulybka Radugi” drogerie chain and specialized perfumery and cosme-tics chain Rive Gauche – their com-bined share total to around 50% fol-lowed by L’Etoile with approx. 10% and Ile de Beauté with approx. 7%. A significant share belongs to “Mag-net Cosmetic” drogerie, which has more than tripled the number of its stores.

“Ulybka Radugi” is the leader in terms of stores number operating in the district, i.e. 263 outlets (92 of which are located in St. Petersburg).

Today this chain operates in 68 cit-ies of the Northern-Western Fed-eral District and 14 regions of the Central Federal District and evolves under franchising policy. According to Alexei Baulin, the chain Director General, in 2014, “Ulybka Radugi” growth rate will remain stable: “The priority for us is the home region – Petersburg and Leningrad region. Moreover, we intend to master some new areas of the North West Federal District and gradually build up our foothold in the Central Federal Dis-trict”.

The closest competitor of “Ulyb-ka Radugi”, i.e. “Spectr” chain of stores (a member of AS Watson Group) is represented by 52 outlets (in 2012 – 55 outlets) in St. Peters-burg. The company plans to develop its network including regional ex-pansion. For example, last year, the company entered the Southern Fed-eral District with four stores in Vol-gograd.

On top of “Ulybka Radugi” and “Spectr” some Moscow companies

18 INTERCHARM EVENT


operate in drogerie format including “Scarlett” and “Yuzhny Dvor” with 14 and 24 outlets respectively.

Another major market player is the drogerie of Arkhangelsk and Arkhangelsk region – “CHiK”, of-fering four brand formats: “CHiK”, “CHiK Beauty” “CHiK Cash” and “Narodny Magazin” with 84 outlets altogether. Trading chain is also rep-resented in Murmansk and Yaroslavl regions. Chain stores “CHiK” is po-sitioned in the medium price rank; “CHiK Cash” is targeted at both re-tail and wholesales while “Narodny Magazin” operates in low price seg-ment.

In Vologda region, two networks operate: “Cherny Kot” (Cherepovets) with 67 shops and “Desyatochka” drogerie (Vologda) with 27 shops.

In the past few years, sales of perfumery, cosmetic and salon ser-vices market in the Northern-Wes-tern were characterized by strong growth. According to various esti-mates, Saint Petersburg has 2-2.5 thousand beauty and hairdressing salons. As per “Petrostat” data their total turnover in 1H 2013 totaled to almost USD 23 million.

According to Roman Grinchenko of “Investkafe”, 2013 turnover of beauty salons in St. Petersburg amounted to approx. USD 660 mil-lion. “The average check is at USD 14, while the largest share of rev-enue comes from our women, as they spend much more on their beauty than men”, – says Grinchen-ko. Owners of beauty salons agree: women can afford to spend much more on self-care, including all-day visits to beauty salons and ordering a complete set of services.

INTERCHARM pro fes sio nal Saint Petersburg, the first exhibition of pro fes sio nal cosme tics and equip-ment for beauty salons organized by Reed Exhibitions on June 05-07, 2014, in “LenExpo” has become a milestone for salon services market of St. Petersburg. This new project was primarily created to present novelties of salon industry in the Northern-Western Federal District

both for suppliers and experts di-rectly. The exhibition attracted over 120 Russian and foreign companies that have presented new pro ducts for body care, treatments and medi-cals for health and beauty, beauty equipment and supplies. During three days, INTERCHARM pro fes-sio nal has been visited by 4,660 beauty industry pro fes sio nals – beauticians, owners and managers of beauty salons and aesthetic clin-ics, doctors, masters of nail service, hairdressers and stylists, massage therapists, specialists in procure-ment and sales. The majority of experts came from all areas of the Northern-Wes tern Federal District, Moscow, Tver, Yaroslavl, Smolensk, Voronezh and other areas of the Central District as well as the Volga region.

The below companies and brands were among the new exhibitors in the first St. Petersburg trade show that have never participated in Mos-cow INTERCHARM or participated there long ago:

• pharmaceuticals for health and beauty from Biocodex (France);

• Skeyndor – pioneers of genetic makeup using encapsulated nano-liposomes of stem cells of plant ori-gin (Spain);

• peptide bioregulators and cos-metic pro ducts with peptides created by Scientific and Pro duction Centre of Revitalization and Health in con-cert with the Institute of Bioregula-tion and Gerontology for Active Aging;

• “Deleks-Acne” – Russian-made skin care aids for home care and in medical facilities;

• Beauty salon equipment, ap-paratus for body correction B-Flexy and sunroom Sunflower;

• Natural Cosme tics from Thai-land – Nina Buda;

• Foot care Uriel (Israel);• Molecular makeup from “Olga

Romasko” and other pro ducts.Exploring new market and meet-

ing new people, both clients and visitors, are willing to establish new contacts gained opportunities for further business growth.

MAKE-UP 19


No secret that make-up is the most important thing for Russian women. Certainly, in other countries, women make up too, but in a different way. Let’s compare Russian and European make-up minimum. For a Parisienne, for example, it means a tint cream and concealer, and for a Muscovite – lip gloss and mascara. These two pro-ducts are bestsellers in this country followed by shadows and face powder. Tonal pro ducts remain behind, although in recent years they won a higher demand.

According to various estimates, pastel shades of gloss, lipstick and nail polish sell better in Russia, while in France, Italy and Spain, deep and saturated colors are more popular. In other words, when a for-eign woman decides to rouge her lips, she will firs of all try to make them flashing and enticing.

There are several general trends in women’s preferences across the world. Firstly, the lipstick shades. Russian women are very sensitive to this feature and become obsessed thinking whether certain colors fit them well.

The second difference is readi-ness to use bold or bright makeup. Experts highlight differences both in the choice of eyeliner colors (pen-cils, liquid eyeliners, etc.) and use of false eyelashes. Normally, Russian girls and women prefer black, brown or gray shades to emphasize their eye shape in a covert manner, while eyelashes remain a niche category in Russia. Such widgets are used only for special occasions just sev-eral times a year.

In general, domestic decora-tive cosme tics market is huge and potentially lucrative for cosmetic brands. Russians preferences may vary very quickly making it difficult to predict future trends in the make-up sector. Thus, we can argue that

Russian market is dynamic and vari-able.

An average Russian woman spends around 20 EUR for make-up with lip cosmetic pro ducts in the vanguard – 38% of total spending. Typical trend of recent years is the growth of premium pro ducts seg-ment, which proves to be the most

promising in terms of future devel-opment. In value terms, the share of premium color cosme tics increased by 7% totaling to 13% of aggregate sales in 2013. Luxury pro ducts segment grew faster versus mass segment. Dior, Chanel, Yves Saint Laurent and some other brands are among the leaders of color cosme-tics sales.

Premiumization trend is seen as the most prominent in the market of color cosme tics. Sometime ago, the “demonstrational consumption” was a kind of premiumization driv-er, but today people need high and guaranteed quality. Nevertheless, the evident “rational consumption” of a part of population in the crises aftermath forces some women to buy pro ducts in more democratic price category provided they satisfy their quality needs.

Eye make-up segment has shown an upturn reaching EUR 390 mil-lion in 2013. This category of color cosme tics holds the second place after lips care with a 33 percent

FACE WILL TELL

20 MAKE-UP


market share. Higher sales in this category were stipulated by the in-creasing demand for innovative pro-ducts.

Multifunctional pro ducts such as creams with moisturizing, sun-screen and anti-aging effects, deco-rative face care “3 in 1” (base, tint-ing cream and powder), lipstick or lip gloss to moisturize lips, etc. are winning popularity.

Distribution of color cosme tics is developing on the back of expand-ing drogerie chains. Retailers seek to reach more customers by virtue of loyalty programs including discount cards, various promos and expand-ed online stores so as to facilitate consumers’ choice and price com-parison as well as to find the best deals.

Year by year, consumers become more scrupulous about their health and wellbeing, and this trend inten-

sified in the last five years. As a re-sult, mineral make-up attracts loyal customers as they perceive it as more natural and beneficial for the skin versus regular make-up. Nev-ertheless, mineral pro ducts remain a niche in Russia. At the same time, the pro ducts positioned as natural are much more popular and avail-able in Russia mass market along-side with the premium segment.

As per 2013 bottom line, the pro-duction volume of color cosme tics in Russia has zoomed by 18%.

By late 2012, the volume of color cosme tics import to Russian market increased by 2% in volume terms, while in value terms it remained vir-tually unchanged.

France, Poland and United States were the leaders in the field of color cosme tics import; their share ac-counted for over one half of total make-up import.

Eye care cosme tics retained its first place in terms of popularity with 14.6% of imported cosme tics or USD 128 million. 21.8% were imported from Italy, 18.2% from France and 13.5% from Poland. Around 11.7% accounted for German pro ducts.

Lip make-up follows with 10.1% (USD 88.2 million). France (30.2%), Poland (15.8%), Germany (12.9%) and Italy (12.1%) led this category.

Nail care import in 2013 equaled to 6.2% or USD 54.7 million with United States (18.5%), France (18.0%) and Turkey (17.0%) in the lead.

Therefore, the market has be-come mature with all implied conse-quences including intensifying com-petition, high degree of penetration in most segments, reallocation of distribution channels, etc.

According to Synovate Comcon, in 2013, mascara used 80% of Rus-

MAKE-UP 21


sian women, lipstick – 76.1%, nail polish – 67.1%, eye shadows – 53.9%, eyeliner – 50.8%, lip gloss – 46.5%, tint cream – 44.7%, compact powder – 40.6%, blush – 36.7%, lip liner – 31.6%, pencil eyebrow – 30.6% , masking pencils – 14.8% and loose powder – 11.9%.

Lips and eyes make-up enjoyed the highest demand (over 80% of women). Face and nail care are more popular amongst Moscow resi dents.

Women aged 20-44 form the main target group accounting for 51% of cosme tics users.

Fundamental factors in select-ing makeup include high quality, hypoallergenic properties and per-sistence throughout the day. These factors remarkably rose within 2011-2013. Moreover, in this pe-riod, customers have become more concentrated at pro duct annota-tions and information shown on package.

As for sales places, more than half of consumers (54.5%) bought color cosme tics in specialized stores, 31.3% – in super/hypermar-kets, 23.8% – from independent distributors and 11.2% visited small shops.

Recently, a new tendency was revealed in Russia, i.e. make-up demand is being generated thanks both to national and global trends. Currently, Russian women go shop-ping consciously focusing at specific pro ducts that available brands can offer to them.

Cosmetics for eyelash growth or Lycra flexibility formula have re-cently appeared in “Eye Make-up” category.

“Lip make-up” category proves to be is the most competitive today since a lipstick that can be applied several times a day is very important for Russian women. According to es-timates, approx. 89% of Russian fair sex use lipstick every day. Pro ducts manufactured in non-customary form should be noted among the in-novations, such as lacquer lipstick, resistant lip gloss or pro ducts incor-

porating several cross-categorical properties.

“Face” is seen as the most chal-lenging segment in terms of mass market consumers’ perception, be-cause in their understanding, only expensive face cosme tics can have

high quality. Hence, they will rather buy a pricey luxury pro duct than a handful of things from mass seg-ment. This means that as before, manufacturers have to amaze peo-ple with innovative designs to win customers.

TOP-10 Brands Make-up consumption, 2013,%Brands Russia (Cities 1 mln+) (Cities 500-1 mln) (Cities 100-500 thousand)

Avon 30 28 32 32

Oriflame 21 18 23 22

L’Oreal 19 22 19 16

Max Factor 17 19 16 15

Maybelline 15 15 16 15

Bourjois 12 14 12 9

Yves Rocher 12 13 11 10

Faberlic 11 9 12 11

Mary Kay 10 10 12 9

Lumene 9 11 10 7


Make-up consumption, 2013,%Categories Russia Moscow

Eye 86 86

Lip 86 83

Face 66 70

Nail 61 63

Others 1 2


Make-up consumption by age, 2013,%Age Groups Share

16 - 19 years 5,6

20 - 24 years 12,0

25 - 34 years 21,3

35 - 44 years 17,4

45 - 54 years 19,2

55 - 64 years 15,6

65 and over 8,9


22 MALE GROOMING


Analyst says, the demand for male grooming cosme tics is triggered by the increasing number of men employed in the service sector, strong competition in working area and the demands of new generation seeking new standards of male beauty. Russian men annually increase the consumption of skin and hair care pro ducts alongside with perfumery. On the average, Russian men spend around USD 115 per month for toiletries. Worth noting, that even American women spend less than 50% of this amount.

According to Synovate Comcon survey, in 2013, shaving pro ducts used 73.5% of men, toilet water – 66.3%, deodorants – 57.3% and hand creams – 9.8%.

TOP-5 skincare brands: Nivea was used by 17.9% of men, “Chistaya Linia” – 11%, Avon – 8.3%, Ori-flame – 7,7%, and Clearasil – 6, 2%.

TOP-5 perfumery brands: Adi-das –14,3%, Avon – 11,9%, Hugo Boss – 11,3%, Gillette – 10,9% and Oriflame – 7,3%.

TOP-5 aftershave brands: Gil-lette – 35,9%, Nivea – 31,5%, Arko – 23%, Old Spice – 9,6%, and Arko Men – 8,5%.

Men prefer to buy cosme tics and perfumery in specialized stores (52%), in super- and hypermarkets (38%); the share of buyers from indi-vidual distributors is small – just 6%.

According to Euromonitor ana-lysts, men in small towns or villages care less about cosme tics as com-pared to big cities. Nevertheless, deodorants, shampoos, shower gels or other cosme tics have become a “must” for the majority of men. Manu facturers started to develop special series for men aiming to boost such pro ducts. At the same time, competition among manufac-turers is intensifying because it is

becoming harder and harder to win new customers.

Premium bath and shower pro-ducts designed for men demon-strate the highest growth rates in value terms. However, premium pro ducts attract a limited number of people living mainly in big cities such as Moscow or Saint Peters-burg. Premium cosme tics for men account for just 5% of the total male cosme tics market in Russia.

Male hair care in the mass seg-ment is another promising niche that is worth noting.

Cosme tics for men showed an in-crease of 6%. Deodorants, despite one percent upturn in quantita-tive terms, did not change in value terms – they are stable enough to hold their high rates being an es-sential for men.

L’Oréal Russia remains the ab-solute leader in the field of male cosme tics; it owns such brands as

STRONGER SEX EVOLUTION

MALE GROOMING 23


TOP-5 After Shave Brands, 2013,%Brands Share

Gillette 35,9

Nivea 31,5

Arko 23,0

Old Spice 9,6

Arko Men 8,5


Male grooming consumption, 2013,%Categories Share

Shave pro ducts 73,5

Perfumery 66,3

Deodorants 57,3

Hand Cream 9,8

Foot Care 4,4

Face tonic/ lotion 3,6

Day Cream 3,2

Face Cleaning Gel and Foam

2,9

Moisturazing Cream 2,5

Exfoliants 2,1

Sun Care 2,0

Hydiene Lipstick 1,8


TOP-5 Shave Brands, 2013,%Brands Share

Nivea 17,9

Chistaya Linia 11,0

Avon 8,3

Oriflame 7,7

Clearasil 6,2


TOP-5 Perfumery Brands, 2013,%Brands Share

Adidas 14,3

Avon 11,9

Hugo Boss 11,3

Gillette 10,9

Oriflame 7,3


Place of purchase, 2013,%Distribution channels Share

Specialized store 52,7

Supermarket 38,7

Direct Male 6,0

Internet 1,3


Vichy Dercos, Vichy Homme, Bio-therm Homme and Lancôme Men. Vichy Homme accounts for the larg-est share – 22% of male cosme tics market.

According to the Kline & Compa-ny, by 2016, male toiletries segment only will reach USD 3.2 billion.

The above figures demonstrate that men seek to look well-groomed so as to achieve their career goals. Decade by decade, they invest in cosme tics and perfumery to create the image of a successful business men regardless of country, political regime or climate.

Russian men pay more attention both to customary and specialized pro ducts for skin and hair care. To date, virtually all cosmetic brands offer lines for men. Moreover, manu-facturers of mass pro ducts pay particular attention to anti-aging aspects including aids to recover freshness in the morning, de-puf-fing eye, anti-age creams, etc. Men wishing to say goodbye to gray hair have a range of brands offering both dyers and toners. Experts believe that these pro duct categories are very promising.

As before, Russian men opt for simple and universal hair care pro-ducts. Shampoos for hair and body “two-in-one” have become wide-spread lately. A man would need just one bottle to refresh his body and hair. As before, the stronger sex is neglecting conditioners or extra care pro ducts – they simply do not see them necessary. Russian men

are rational and conservative in their choice: having tried a pro duct once, they would become an addict.

Analysts from research Canadean have reported on changes taking place in cosmetic market, in par-ticular in the field of male cosme tics among BRIC countries, i.e. Brazil, Russia, India and China. The in-creased demand for male cosme tics and body care pro ducts is attributed to the stronger sex desire to look good both at work and in day-to-day environment. As to Russian men’s preferences, the rate of makeup use is much lower making 12% of the market only. This reflects existing social and traditional concepts of the strong half of the mankind. Be-sides, the majority of Russian men perceive cosme tics as a purely “fe-male” pro duct.

The most efficient and handy cos-metic pro ducts (for example, very popular wet wipes), as well as those matching durability and long service requirements are considered best-selling men’s care pro ducts.

Experts highlight consumer awareness of pro ducts on sale in-cluding their focus on formulae and commitment to “natural position-ing”. Moreover, despite steadily growing income, consumers remain very responsive to sales or promo-tions in search of best bargain.

The target audience for male care is expected to grow because more and more Russian men will buy and regularly use cosme tics and person-al hygiene pro ducts.

24 BATH CARE


The market of bath and shower pro-ducts proves to be the most promising since shower gel and soap belong to living essentials. And whatever economic situation, people will take shower and wash their hands one way or another. Moreover, year after year, Russians concentrate on premium and organic pro ducts as well as cosme-tics positioned as natural. Consumers have become much more aware of the impact on health and well-being inherent in various ingredients used in bath or shower pro ducts, and manufacturers try to respond quickly so as to meet the demand for pro-ducts with natural ingredients and organic cosme tics.

In general, Russians’ preferen-ces are virtually the same as their American or European mates: they also prefer natural and moistu ri-zing pro ducts with pleasant flavor and texture. The main difference is that, at the moment, Russian con-sumers are not strongly focused on gender division of bath and shower pro ducts. In Russia, the share of specialized cosme tics for men is small, although this segment is steadily growing. Manufacturers amaze customers with new pro-ducts, scents and textures. Shower gel, bath foam, soap, scrub and even jelly and smoothie have found their place on home bathroom shelves.

Liquid soap is seen as the fast-est growing category stimulated by two drivers. First, more and more people are migrating to liquid soap since it is easier to use and because liquid soap available on stock is virtually replacing traditional bar soap. Secondly, manufactures have some opportunities for diversifica-tion allowing to charge higher prices and stimulate higher sales of liquid soap.

Bar soap sales depend on the success of liquid soap sales. Many manufactures seek to preserve and win new customers by making pre-mium class soap or positioning it as a hand-made pro duct.

Pro ducts with natural or organ-ic components demonstrate the high est growth rate. For example, “Pervoye Resheniye” under Natura Sibe rica brand has reported a dou-ble-digit upturn. Thus, the producers realized that pro ducts based on na-tural ingredients or extracts will sell better versus other lines or brands.

Exfoliating body scrubs have a limited presence – mostly within the premium category. They are poorly presented in the mid-price segment; however a variety of aromatherapy pro ducts with chocolate, strawberry or mango flavors are popular there.

A very small share of Russian consumers uses body talc because people would rather buy baby pow-der, which can be found in virtually every store.

Bath and shower premium pro-ducts, as well as premium segment on the whole, are gaining demand especially in large cities, where pre-mium cosme tics chains are rela-tively well developed and residents have enough money to spend on premium brands. L’Occitane with a market share of 37% is the leader in premium segment of bath and shower pro ducts.

Similar to other pro duct catego-ries, consumers of bath and shower aids are becoming more educated and better versed in a broad range of pro ducts offered by manufactur-ers and can now afford expensive things, so such properties as a nat-ural and moisturizing ingredients as well as scents count more. Thereby, high price mirrors higher quality and additional properties of a pro duct.

According to “RosIndex” survey regularly conducted by Synovate Comcon, in 2013, 57% of Russians used bath or shower pro ducts. Most popular are shower gels (55% of us-

BUBBLE AND BODY TALK

BATH CARE 25


ers), second place belongs to bub-ble bath (18% of users) and 15% of Russians prefer bath salts. The con-sumer share expands in cold sea-son (especially in winter). The aver-age monthly consumer uses shower gel 15 times, bath foam – 5 times and bath salts – 4 times.

Residents of Moscow and South/North Caucasus Federal District are intensive shower gel users (61% and 63% respectively). Bubble baths are popular among residents in the Far Eastern Federal District (25%). The share of bath salt is significantly higher among residents of Moscow and Far Eastern Federal District.

The most popular bath and shower brands include Palmolive – 22%, Avon – 19% and Nivea – 19%. TOP-6 brands cover Dove, Timotei and Camay. Women use bath and shower pro ducts more persistent-ly. Meanwhile, 37% of men prefer shower gels, 23% – bath foams and 22% – bath salts. Among women, this ratio is 63, 77 and 78 percent respectively. An interesting trend in recent years is a higher consump-tion of bubble bath and salts among Russian men suggesting that today

men and women tend to transform regular bath or shower procedure into a ritual seeking to cherish their bodies with nice texture or flavor.

When making the consumer pro-file in terms of bath and shower, Synovate Comcon experts found that women using bath or shower pro ducts are more sociable. They like social events and strain after or-ganizational activities. They tend to be optimistic, cheerful and welcome changes. Users of foams and bath salts are also somehow careless and addicted to spontaneous ac-tions. Therefore, manufacturers and suppliers of these pro ducts should use not only bright and glamorous package, but also game patterns of marketing communications, blogo-sphere and tailor-made promotions to awake the audience interest.

According to Step by Step GC, every sixth customer prefers to pur-chase pro ducts through individual consultants. Direct sales players have evident strong footholds in this segment, e.g. Avon, Oriflame, as well as Russian company Fa-berlic. In general, Russian bath and shower mass market is dominated

by major multinational companies such as Unilever, Beiersdorf, Palmo-live and P & G. “Pervoye Resheniye”, “Magrav”, “Neva Cosme tics”, “Flo-resan”, “Mylovarov” and “Lauren Cosmetic” belong to confident Rus-sian producers in this segment.

Cosmetic and perfumery market in general and bath and shower segment in particular demonstrate sustainable updates of offers in line with developing culture of cosmetic pro ducts use and growing income of people. Today, consumers tend to focus at unique properties of the goods and manufacturer’s skills in specific pro duct properties; there is a need for new formats. Companies try to meet consumer requirements by launching new pro ducts in the market.

Manufacturers in mass market segment have adopted the popu-lar concepts of aromatherapy, spa and wellness reflected in pro duct names, dressing and advertising. Obsession of exclusivity, natural-ness and uniqueness of ingredients give a push to the segments of solid soaps, shower gels and bath pro-ducts.

TOP-10 brands, 2013,%Brands Share

Palmolive 22

Nivea 19

Avon 19

Dove 16

Timotei 15

Camay 13

Fa 12

Oriflame 11

Adidas 9

Chistaya Linia 9


Consumption of Bath Care in Russian Federal Districts, 2013,%Categories Russia Moscow Nord West FD Central FD Privolzhsky FD Southern FD Uralsky FD Siberian FD Far Eastern FD

Shower Gel 56 61 52 52 55 63 56 48 55

Bath Foam 18 19 17 19 19 17 17 16 25

Bath Salt 15 16 14 16 15 13 14 13 20


Consumption of Bath Care by Age, 2013,%Population Russia Shower Gel Bath Foam Bath Salt

Men 46 37 23 22

Women 55 63 77 78


Portrait of women using Bath CareWomen 16-75 Shower Gel Bath Foam Bath Salt

Extroverts 31 36 41 42

Partners 35 38 40 40

Adventurous 28 29 33 33

Stable 24 27 28 28

Innovators 31 36 41 43


26 PERFUMERY


Back in 2012, Euromonitor ex-perts reported a continuous trend in the fragrance market, i.e. consum-ers’ migrating from mass fragrance trademarks to established premium brands. Regional expansion of spe-cialized chains is one of the main reasons. L’Etoile, Rive Gauche and Ile de Beaute, with their stores both in big cities and across regions, be-came accessible to a broader circle of consumers.

According to the Discovery Re-search Group, in 2013, the volume of Russian perfumery market to-taled to USD 1.12 billion. The main distribution channel of perfumery and cosme tics in 2013 accounted for specialized chains alongside with aggressively expanding online sales. The influence of direct sales channel on the market has faded away due to the outflow of consul-tants attracted by higher wages as well intensified regional develop-ment of federal retailers.

Experts believe that in nearest yeas, fragrance market will show an aggregate annual growth rate of 3%. Stable economic growth will support the increase of personal income and, consequently, expens-es. Wider penetration of modern chains coupled with online sales will widen the perfumery range available to consumers across this country.

As far as geographic market con-centration is concerned, we see a downward trend in the total share of federal cities in perfumery and cosme tics sales by reason of ag-gressive expansion of federal chains into regions and the development of local operators. In the medium term, the share of Moscow and Saint Pe-tersburg will go down against the backdrop of higher share of big re-

gional cities, which are actively de-veloping pro fes sio nal perfumery and cosme tics networks.

Three overseas players, i.e. L’Oréal, LVMH and Proc ter & Gam-ble lead the sales in volume terms; in value terms, Estée Lauder Com-panies, Coty, Puig Beauty & Fashion Group, Shiseido, Chanel are in the vanguard. Popular domestic pro-ducers include “Novaya Zarya” and “Faberlik”.

According to Synovate Comcon 2013 survey, 37% of Russian girls and women aged over 16 years use perfume; their share in Moscow is 20% higher totaling to almost half of the city residents (45%); the fig-ure in Saint Petersburg is slightly lower than the average (34%). Eau de toilette is a more affordable pro duct and thus has significantly more users – 57% in Russia in gen-eral. The demand for toilet water is higher in Volga/Volga-Vyatka region with their modest incomes – 62% of users.

To get a new perfume or eau de toilette, the majority of shop-pers traditionally visit specialized stores (20%), or super/hypermar-kets (14%); this channel is becom-ing increasingly popular, and for the past eight years, the proportion of perfumery buyers has more than doubled. Department stores sell 7% of perfumery. The same share ac-counts for individual distributors/consultants. Shopping at kiosks or in the market has sharply declined in recent years fading away virtually (1%).

The community of perfume buy-ers has two target groups character-ized by the use of more expensive perfume: girls up to 24 years, uni-versity students or those receiving

SMELLINGTHE SCENT

PERFUMERY 27


special secondary education, sin-gle. Another group covers mature women aged 45 to 54 years, includ-ing a high proportion of managers of various levels and qualified pro fes-sio nals with higher education and above average income per family member, they have enough money for large household appliances, real estate or other expensive things.

Eau de toilette is more popular among women aged 25–44 years with a larger number of married or cohabiting women. Among the us-ers of toilet water, the proportion of employees without higher edu-cation and technical staff is higher, although there are managers and skilled experts with higher educa-tion. In any case, perfume enjoys higher demand among those having a job.

As far as the consumer behavior is concerned, toilet water addicts are more discreet as compared to perfume fans: they always plan their actions; they like to be organized and follow a certain order. Women in both groups monitor fashion trends and prioritize their appear-ance; however the share of fashion-focused users is slightly lower in toilet water user segment. But both seek leadership and career growth. Those preferring perfume don’t care about price when shop-ping; brand and quality are the most important drivers, they would choose imported pro-ducts and rarely plan shop-ping.

“Aroma obsession” is an essential feature of Rus-sian consumers. Where else in the world women would smell mascara, eye shadow, or cream, focus-ing on “appetizing” scent just to choose a pro duct? And conversely, disregard an efficient aid because it is non-odorous? How about spending half of monthly wage for an exclusive flavor? By the way, according to per-fume brands representatives,

tastes in this country often conflict with global preferences, and suc-cessful international launches often face fiasco in Russia. For example, romantic scent Parisienne (Yves Saint Laurent), which stop the show in Europe was unable to drive out such long-standing hits of this brand as “In Love Again” and “Baby Doll” from the hearts of Russian women. The same happened to Kenzo: none of this brand hits could come close to L’Eau par Kenzo success. The ex-citement is being masterfully sup-ported by fragrance varieties of this perfume.

Russian women have their priori-ties with regard to Dior as well. No-where in the world Miss Dior or Dior Homme Sport enjoy such furor, how-ever Hypnotic Poison line adored by French and Italian women is ne-glected here.

Clinique never fails to amaze the success of Clinique Happy for Men. Eclat d’Arpège, Lanvin; Amor Amor, Cacharel (nobody even expected this success), Nina and Nina Ricci h a v e

been and remain the sales engine in Russia. Nostalgic flavors stand apart: Climat and Magie Noire, Lancôme; Estée and White Linen, Estée Lauder; Diorissimo and Poi-son and Dior. Many of them are tak-en out of pro duction being available for Russia only.

About five years ago, Russian consumers passionately rushed to niche fragrances, Jo Malone, first and foremost, whose sales in 2012 rocketed by 40% (a cosmetic brand generating a gain of 5%, is con-sidered victorious). Many Russian fashionistas are crazy about Kilian Hennessy and Geza Schönau, cre-ators of Kilian and Escentric Mol-ecules brands. The last ranked sev-enth in Ile de Beaute chain standing in a row with such megastars as Dior, Chanel or Guerlain. Some stores don’t even offer testers of these fragrances since they fly away in seconds.

“A few years ago Russians scruti-nized what was happening in other

countries

28 PERFUMERY


but now they are building their unique tastes different from Eu-ropean counterparts, – says Alex-ander Soldatov, – head of LVMH Perfumes & Cosme tics, Russia. – Innovations and new flavors enjoy high demand; however Russian connoisseurs remember classics as well. This is doubtless given the success of Dior (J’Adore fragrance), Guerlain (La Petite Robe Noir fra-grance) and Givenchy (Ange ou De-mon le Secret fragrance). For many years, these brands have been in the vanguard of this category. Es-sentially, this is worldwide trend. Fragrance connoisseurs follow the trends, but respect classics at the same time. Male fragrances are gaining stronger demand in Russia, and a series of enticing launches is pending. As to Russian men, their tastes are just being developed. The main difference between Rus-sian men from all the rest is their determination and openness to in-novation. Russian is building his image and seeks ele gance. I meet more and more men preferring niche pro ducts from high class brands (it’s not just about per-fumery). That is why all our sport launches such as Kenzo Homme Sport and Dior Homme Sport meet their target audience confirming that Russian men are active, slim,

athletic and willing to be more ele gant.

Female tastes are evolving and becom-

ing more subtle; light and fresh

flavors are among fa-v o r i t e s . R u s s i a n ladies pay close at-t e n t i o n to latest l a u n c h e s in search of trendy flavors for

their col-lections. At the

same time, as I have said, authen-tic classics are evaluated high. The everlasting success of Guerlain rep-resenting a palette of deep flavors demonstrates that Russian women thirst for such pro ducts. They try to be suc-cessful, attractive and preserve their individuality”.

Russian per-fumery market is booming in terms of players and brands saturation. In this re-

gard, the below trends should be highlighted.

Consumers are becoming more scrupulous and particular about quality.

Female perfumery remains the main segment in the market ac-counting for a larger portion of sales, while about one third belongs to male perfumery.

Today consumers seek male pre-mium brands; their potential is im-pressive.

Mainstream consumers are get-ting closer to more expensive, pre-mium brands thanks to numerous promo campaigns in pro fes sio nal retail chains.

New segments have emerged in the market recently, i.e. fragrances for children and teenagers promot-ed by pop stars, new pro duct forms and formats (e.g. hair perfume and perfumed soap).

30 ORAL CARE


Currently, the range of oral care is extremely broad covering toothpastes, rinses, balms, toothbrushes, flosses, fresheners and many other items, but toothpastes undoubtedly make the volume of the market. Today, consumers seek pro fes sio nal pro-ducts, and this is the main trend in oral care market. Now people can afford to pay more for high quality pro ducts to get excellent results.

Moreover, plain toothpaste is not enough for consumers, since they need high quality and effective pro-duct; so, in recent years, premium and super premium segments re-sponded with strong sales.

This factor alongside with a vari-ety of others (e.g. population size) makes the Russian toothpaste mar-ket promising and attractive for manufacturers. Indeed, it is grow-ing steadily and it did not shrink even in crisis, one of the few, by the way. Annual average growth rate of Russian mar-ket totals to 9% (cf.: in the UK – 4%).

It should be noted that oral care segment has an enormous potential. As

we know, this market is one of the most competitive since low primary cost of toothpaste allows manufac-turers to gain good profit from the end-pro duct.

According to Synovate Comcon, in 2013, 95% of Russian families used toothpaste, with Colgate (51%), Blend-a-Med (38%) and Aquafresh (14%) in the lead.

The headliner of 2013, in terms of volume of course, is toothpaste (63%), followed by toothbrushes (23%) and mouthwashes (10%) with a large gap. The growth rate of den-tal floss category slowed slightly but remains at a very high level (+11%). Reduced growth rate is attributed to more sophisticated systems and in-

novations in toothbrushes as well as increased popularity of mouthwash, which are seen as a certain alterna-tive to dental floss. Toothpaste for comprehensive oral hygiene (40%) enjoys the top demand; the second place holds whitening toothpaste (13%) and the third – paste for base oral care (10%). Toothpastes for sen-sitive enamel and gum care are be-coming more and more popular with +4% and +5% in 2013 respectively; the segment of baby toothpaste and hygiene pro ducts is actively devel-oping as well with a surge of 33% in 2013.

The share of toothpaste users is gradually zooming. An average fami-ly buys about 3 packs of toothpaste for 3 months. Over one half (64%) of people using toothpaste brush their teeth two times a day. The purchase

share in super- and hypermarkets as well as via the Internet is es-

calating. On the other side, markets, supermarkets and ki-osks are gradually losing their ground.

Today, approx. 20-25% of the total volume of toothpaste sales account for pharmacies. However, there are brands selling via either pharmacies or retailers only. Therefore, we cannot pinpoint a uni-versal leader for these pro-ducts, but the main players, foreign and Russian inclu-sive, are evident. These, of course, include Colgate, Proc ter & Gam ble (Blend-a-Med, Blendax), Glaxo-SmithKline (Sensodyne,

Parodontax and Aquafresh), Dr. Theiss Naturwaren GmbH

(Lacalut), Betafarma (Presi-

ARMEDTO THE TEETH

ORAL CARE 31


dent) and Rembrandt accounting for about 55% of the total toothpaste market and 95% of the pharmacy sector. Among Russian producers, experts highlight “Neva Cosme tics”, “Svoboda”, “Splat – Cosme tics”, “Torn”, “Vesna” and “Avanta”.

In 2013, the market of oral care grew by 8%. Toothpastes hold the lion’s share of oral care segment; however Russians are focusing more at oral care pro ducts. First and foremost, the substantial upturn of dental floss and mouthwash sales is attributed to Russians’ care for health lifestyle and desire to have flashing smile as well as approach-ing to European consumption mod-el, where such pro ducts are quite popular. The markets of dental floss and mouthwash have grown by 15% and 13% respectively.

In analyzing fundamental trends, we must highlight the increasing fragmentation of this segment. The most noticeable positioning is seen in the field of gender and age differ-ences. Steadily growing child popu-lation in Russia and substantial in-terest towards baby pro ducts had an inevitable impact on the toothpaste market. Oral care for children of all ages are becoming more and more popular including special pro ducts for infants, schoolchildren and teenagers and dictating a growing demand for smaller packaging for-mat, for example, 50 ml, and Mickey Mouse drawings.

The so called “premiumization” is among fundamental trends as well: Russians increasingly opt for pro fes-sio nally positioned pro ducts as they are now prepared to pay more for high quality. For example, “Splat – Cosme tics” and “Diarsi” GC are no-tably increasing their market share producing specialized and relatively expensive pro ducts under Splat and R.O.C.S brands.

But often, oral care novelties can be distinguished just by a new fla-vor or position in the market. Any new pro duct launch always entails significant development and promo-tion costs. Despite the majority of

new pro ducts are entering the mar-ket thanks to overseas companies’ efforts, domestic companies are aggressive on the toothpaste mar-ket as well. For example, “Splat – Cosme tics” Co. has presented den-tifrice foam and develops pro duct lines aimed at specific problems and offering peculiar flavors and for-mats.

Despite the broad range of tooth-pastes, most Russians prefer pro-ducts for comprehensive oral care, which account for 40% of the total market; whitening toothpaste en-joys a high demand as well.

Last year saw a price surge for oral care pro ducts because the pur-chasing power is intensifying since customers are becoming more educated in terms of oral care and can pay more for tailor-made or in-novative pro ducts. On top of that, consumers are becoming more “skilled” willing to benefit from state-of-the-art technologies so as to reduce the number of their visit to dentists.

This segment is moving towards pro fes sio nal home dental care thanks to a plenty of teeth care equipment designed for ultrasonic whitening and polishing. Moreover, in recent years, the market wel-comed irrigators, i.e. devices en-

abling teeth cleaning by means of water or air jet without toothpaste or brushes, which is ideal for pe-ople with sensitive teeth or gums or suffering from other oral problems. However, meanwhile this sector is developing in big cities only and its share is modest.

Mousses and indelible multipur-pose balms have joined the range of customary pro ducts – pastes, rinses and refreshing sprays along-side with so-called oral deodorants, which are gaining demand.

Baby hygiene pro ducts gave a push for current oral care market. Innovative and absolutely safe pro-ducts, even if swallowed, can be recommended right after an infant has first teeth. Today, parents nour-ish a habit for their children to brush teeth right from the cradle.

Homeopathic pro ducts form an-other direction of high demand and popularity. For example, “Doctor H” for the first time implemented an original formula of homeopathic ingredients of essential oils and herbal extracts (dandelion, comfrey, arnica, parsley, cilicia, etc.).

And a few words about tooth-brush market. According to Step by Step GC, in 2013, trade volume in Russian wholesale toothbrush mar-ket soared by over 10 times. Cur-

32 ORAL CARE


rently, a lot of companies operate in this field, but it is controlled by two multinationals, i.e. P&G and Col-gate-Palmolive. Direct import of ma-jor retail players in the retail trade network is becoming a notable fea-ture of Russian toothbrush market. Step by Step GC experts highlight the below trends:

• Market growth;• Higher market saturation;• Declined share of electric

toothbrushes – from 2% to 0.99%;• Intensified competition in the

segment of conventional tooth-brushes;

• Higher average price of electric toothbrushes and

• Broader consumption of elec-tric toothbrushes for children.

Step by Step GC experts predict that market volume will reach its maximum by 2020 provided that current growth rate persists.

Most experts agree that oral care pro ducts have huge market projec-tions. Their assessments account for changed attitude towards oral hygiene – this is no longer a “hy-giene measure” but rather a stan-dard treatment procedure.

So today consumers concentrate on dental pro ducts offered in phar-macies. On the one hand, when suf-fering a problem people visit phar-macy in search for a remedy, and on the other, they dream about tooth ache prevention given the high cost of medical and dental procedures and emotional aversion (despite state-of-the-art anesthesiology and technologies). Manufacturers of innovative oral care aids take this factor into account and actively pro-mote them in pharmacies and ad-

vanced clinics.

The message of today’s manufacture is not

to sell toothpaste but rather help people to be healthy, handsome and successful; concentrate on the most popular toothpastes; never frighten the consumer; seek unsat-isfied needs and respond to cus-tomers’ covert desires. Moreover, today, consumer’s satisfaction with toothpaste is not more than illusion, while winning a competitor is only possible by producing appealing innovative pro ducts because only such goods can agitate high-fed consumers in this sector.

34 SUN CARE


Sunscreens belong to the fastest growing categories of cosmetic market backed up by the consumers’ desire to nourish their body and intensive media coverage concerning the impact of ultraviolet radiation on skin aging.

Euromonitor International ex-perts have revealed a number of trends in the sunscreen market.

Although the sun care market showed a steady growth of 6% in 2013, self-tanning pro ducts re-mained the fastest growing sub-cat-egory in 2013. Thanks to developed distribution system and availability of pro ducts in various retail outlets across the country, more women can enjoy sun care not only in vaca-tion. On top of that, some Russians believe that self-tanners are much more comfortable and affordable than solarium.

Mass pro ducts dominate the market with over 80% of total sales value in 2013. Premium brands con-

tinue to expand their market share. L’Oréal Russia dominates both in the mass and premium segments having a portfolio of established brands such as Vichy and La Roche-Posay.

The most popular level of SPF in Russia is 15-30, as local residents still use sunscreeners irregularly. Most regions of Russia have a mo-dest number of sunshine days, holi-days are short and not all consum-ers can afford a travel to southern countries for rest and revitalizing. As a result, every sunny day is extreme-ly important for anyone intending to sunbathe, swim or tan. Some con-sumers believe that sunscreeners with high protection level prevent tanning. However, given that con-sumers are now more skilled, manu-facturers are launching pro ducts that cover the entire range of SPF, start-ing from SPF 2 for consumers seek-ing quick tan, to SPF 50 + for those with sensitive skin and for children. Alongside with pro ducts with vari-ous SPF levels, manufacturers offer pro ducts with extra features, such as BB-cream (e.g., Garnier Ambre Solaire BB), or pro ducts designed for specific body parts such as the legs, décolleté, etc.

BURNT BY THE SUN

SUN CARE 35


According to Synovate Comcon 2013 survey, 9% of Russian popula-tion use sun care. As to protection level preference (SPF-factor), 29% buy SPF 30, 24% – SPF 20, 17% – SPF 15 and 12% – SPF 50.

TOP-5 brands: Garnier Ambre So-laire prefer 21% of Russians, Nivea sun – 20%, “Moye Solnyshko” – 14%, L’Oréal Solar Expertise – 9% and Johnson’s Sun Care – 7%.

In terms of sales channels pref-erences, the situation is as follows: 31% of Russians buy sun-protection cosme tics in specialized stores, 20% in super/hypermarkets, 14% – from individual consultants/distrib-utors and 13% in pharmacies.

The sun care segment is ex-pected to show a 3% CAGR upturn in value terms over the forecast period (2012-2017). The market has a strong growth potential. Its development will be stimulated by several factors including promising macroeconomic environment with higher consumer incomes, deeper penetration of retail business in the regions, higher awareness of local residents of sun harm and acceler-ated evolution of tourism in warm and sunny regions, both abroad and in Russia.

Experts predict that self-tanners will attain the most dynamic growth of 4% CAGR in value terms for the forecast period and may account for 18% of sales of sun cosme tics by the end of 2017. This category will definitely benefit from the consum-ers’ desire to have tanned skin even in cold or cloudy weather because self-tanners enable to tan their skin quickly and comfortably without te-dious visits to solariums.

In the future, leading manufac-turers of sunscreen cosme tics will concentrate on innovations and as a result, will develop a range of new pro ducts with sun protection as the

main function and an extra feature. The first property would be useful for people traveling in sunny regions and resort areas, while the second will be handy for consumers living in the southern regions and using sun protectors daily.

The sun care market has zoomed over the past few years, firstly, thanks to well-developed informa-tion resources and improved access to them. Consumers are becoming more informed about the dangers of solar radiation, their possible con-

sequences for the skin, protection aids and other necessary skin care before, during and after sunbath-ing. Moreover, currently consumers know much more about skin photo type and why it is so important. Safe-ty of prolonged sunbathing is one of the main drives when choosing ap-propriate sun care pro ducts. On the other hand, from the consumer’s point of view, attractive and lasting tan remains an important subjective characteristic.

Russian market trends include an increased supply of sunscreen pro-viding an intensive skin care (mois-turizing, softening and anti-aging). According to experts, sunscreeners designed specifically for children’s skin are expected to enjoy higher demand.

Summarizing the above, the sun care cosme tics market is still un-saturated; hence, manufacturers aggressively promote their pro ducts and offer a wide selection of SPF, package formats and additional properties (e.g. anti-aging). Sun-screens with SPF 15-29, 6-14 and 30-50 remain the preferable vari-ety.

Place of Purchase, 2013,%Distribution Channels Share

Specialized Store 31

Supermarket 20

Direct Mail 14

Pharmacy 13


Sun Care consumption, 2013,%SPF Share

5 4

10 5

15 17

20 24

30 29

40 10

50 12

60 3


TOP-5, 2013,%Brands Share

Garnier Ambre Solaire 21

Nivea Sun 20

Moye Solnyshko 14

L’Oreal Solar Expertise 9

Johnson’s Sun Care 7


Cosmetic-Forum, LLC1, build. 2, Banny per., 129110 Moscow, RussiaTel: +7 903 185 83 49E-mail: [email protected] Editor Yana Krupenina

The publisher has taken all reasonable steps to ensure the accuracy of information in this magazine. Nevertheless, no responsibility is accepted for any errors which may occur. The newsletter, including all articles and illustrations are copyright. Unauthorized usage of published material is prohibited and will be subject to legal action.

russian perfumery & cosmetics market 2014 (download .pdf)

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