Sweet Scent of Success Is Coming to Russia’s Beauty Market

By Gregory Grischenko, Contributing Editor

Just 12 years after the fall of Communism and the USSR, the Russian packaging market for upscale cosmetics and other personal care products is developing at a rapid pace. Thanks to Russian women’s desire for beauty, the Russian market for cosmetics and beauty products is growing by 30% a year and has already become one of the six largest in Europe. The retail trade in cosmetics is developing even more rapidly than the market as a whole and today is expanding by 40% to 50% a year, second only to grocery retail (80% to 100% a year).

The entire Russian market for cosmetics, fragrances and personal care is estimated at $4.7 billion and characterized by stable, gradual growth in the retail area. Currently in Russia, a new specialized cosmetics and perfume store opens every three to four months. The typical store, with at least 1200 sq. ft. in floor space, boasts modern decor and spacious shop windows displaying the newest in cosmetics and perfumes from around the world. This type of store has won over a fifth of the entire cosmetics market. According to market projections by Lilia Moskalenko from Expert.ru, in the next two to three years the share of specialized retail stores will at least double.

Zolotaya Roza (Golden Rose), the first specialized cosmetics store in Russia, was opened in 1989 by Temtrade, a Swiss company. Other stores selling luxury cosmetics became a widespread phenomenon only five or six years later. They were opened by Russian distributors of luxury Western cosmetics brands such as Lancôme, Chanel, Christian Dior and Nina Ricci. Distributors like Arbat Prestige, Lux Holding (the Rivoli chain), Alkor (the L’Etoile chain), and Temtrade (owners of the L’Escale chain which includes Golden Rose) were forced to go into retail simply because at that time, there were no outlets that matched the quality of their products. Cosmetics were sold in department stores, in open-air markets, in metro station kiosks, and even in regular grocery stores.

The rise in the number of specialized stores can be explained by consumers’ demand for not simply high-quality products, but a better shopping experience as well, where customers can be advised by skilled sales and make-up personnel.

In the last two to three years, Russian cosmetic retail has expanded by almost five times, with turnover at the grandest stores tripling every year. The uncontested leader in terms of the number of chain stores in Russia is L’Etoile, which also runs about a hundred smaller retail outlets, while Arbat Prestige dominates Moscow with 13 stores. Several chains from outside Moscow have also grown, such as Ile de Beute. Today, almost 300 specialized cosmetics stores are doing business across Russia. This recent explosive growth belongs mostly to the capital cities of Moscow and St. Petersburg.The number of luxury brands offered in Russia’s provinces is limited, but potential demand is extremely high, as every Russian town has its local share of affluent and therefore potential customers.

In the late 1990’s, the dramatic growth of cosmetics use, more than 20% a year, including high-priced exclusive brands, attracted the attention of big names such as the French company LVMH, the largest producer of luxury brands including Christian Dior, Givenchy, and Kenzo. In an interview with Expert.ru, Fred Lang­hammer, Estee Lauder Com­pany’s president and chief executive, said, “I haven’t seen eyes as hungry and excited as those of Russian women looking at cosmetics in any other country in a long time.”

Russia is still far behind Western Europe in its number of specialized stores and the cosmetic retail market is far from being saturated. Having been neglected in the Soviet era, this market has grown up significantly and shows no signs of slowing down.

Russian companies have already started to prepare for the coming competition from foreign chains by boosting domestic store images with paintings and sculptures, making them look more glamorous with expensive interior designs.
French Set Fragrance Trends Early

Historically, Russian perfumes were created and later influenced by the French, who settled in the country in the late 1700s. At that time the empress Catherine the Great was infatuated by French culture and encouraged a number of skilled French craftsmen to move to and start a new life in Russia. One of the French “Russians”, Henry Brokar, founded the first domestic perfume factory in 1864 and soon became an exclusive supplier for the royal family. After the Socialist Revolution in 1917, when all businesses were nationalized, the Brokar Factory was renamed Novaya Zarya (New Dawn) and its most famous brand, The Empress’ Favorite Bouquet, became the best selling Soviet-era perfume, Krasnaya Moskva (Red Moscow). The fragrance that was developed in 1913 to celebrate 300 years of Romanov’s Czar Dynasty is still very popular in Russia.

Upscale Packaging Is Spotlighted at Trade Show

Luxpack-2003 was held for the second time, June 16-21, as a show within a show at Rosupak’03, the main packaging event in Russia. Organized by the Russian media holding MVK (International Exhibition Company) at Sokolniki Culture & Exhibition Center in Moscow, MVK staged Luxpack-2003 in a separate dedicated hall that housed 27 exhibitors from Russia, Spain, Turkey, Poland and Bulgaria. This show was introduced as a vehicle to promote domestic super high quality, elite package designs for cosmetics, jewelry and liquor. Only eight exhibitors were dedicated to luxury cosmetics packaging, the rest of the companies (especially from Russia) displayed high-end liquor and candy gift boxes.

FACA, based in Barcelona, occupied one of the largest booths at the Luxpack. The company is a leading manufacturer and designer of plastic packaging for cosmetics products. Bricol, a holding company with 14 businesses in the Czech Republic, Slovakia, Germany, Austria, France, Hungary, Poland and Latvia, supplies decorated glass bottles and jars with unique design solutions. There was also a number of small private design studios from Moscow dedicated to luxury packaging design based on traditional Russian themes.

According to show organizers, the 2004 exhibition may run as a separate event or as part of a major cosmetics show. The 2004 edition of Rosupak will be held Sept. 21-24.

More information: website www.rosupak.ru.