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Market of cosmetic products in Russia and the Russian Far East

The main segments of the market

According to the division adopted internationally, Russian perfumery and cosmetics market is

divided into three parts: personal hygiene, perfumery and cosmetics.

Personal care products include products for bathing and showering, deodorants, hair care

products and oral care.

Perfumes include perfumes and eau de toilette.

Cosmetics is divided into decorative products (from lipstick to nail polish) and skincare products

for face and body. Facial skincare products include moisturizing, treatment, cleaning, and

antiaging solutions. Body care cosmetics consist of traditional creams and lotions, depilatories,

scrubs, shaving, sun protection and anti-cellulite agents, and products for baby skin care.

In addition to the above, the Russian market of cosmetics is divided into three price levels.

Those are mass-market, middle class and luxury segments.

(http://moluch.ru/archive/101/22706)

Mass market cosmetics is not expensive and produced in big volumes. The sales of such

products is always followed by aggressive advertising. The 70% of cost of mass market

cosmetics is spent on advertising. This segment includes such brand as Oriflame, Avon, Nivea,

and others.

Middle market (or premium) is cosmetics of middle class. It contains 30-60% of natural and

biological active ingredients. This class includes Revlon, L’oreal, Магу Кау, Pupa, Borjois and

others.

The luxury cosmetics is produced with usage of high technological processes. The amount of

natural and biological active substances is 70-80%. The manufacturers use ecologically clean

raw materials without synthetic additions. In Russia this segment is represented by Elizabeth

Arden, Ive Saint Laurant, Nina Richy, Chanel, Estee Lauder, Givenchy, Christian Dior and others.

The Russian market of cosmetics is represented by native and foreign manufacturers. It is

noteworthy that only 10 companies share 80% of all the market. The leading positions are

occupied by international companies like L’Oreal, Procter & Gamble, Henkel, Unilever,

Oriflame, Avon, Beiersdorf. The most popular brands are Avon, Oriflame, Ruby Rose, Max

Factor, L´Oreal, Maybelline, Bourjois, Lumene, Faberlic,MaryKay.

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Current situation on the Russian market of cosmetic

According to the information from Profile Magazine (http://www.profile.ru/obsch/item/109573-

krasota-pervoj-neobkhodimosti) in 2015-2016 Russians did not cut spending on perfumes and

cosmetics, but have become more choosy.

According to the results of research made by GfK LLC (http://www.gfk.ru), the market growth

of cosmetics and personal care products in 2015 was 18.9%. In 2016 this trend has accelerated.

The sales of cosmetics increased by 10% for the period from June 2015 to May 2016, while

personal care products (cosmetics plus perfumes) showed an increase of 22,5%.

However, during 10 months of 2016 the volume of cosmetics sales was 470 billion Rub (about 7

billion USD). That is less than in the same period of 2015 by 2%. The buyers became more

informed and rational. They only purchased necessary products.

Thus, Russia is still ranked fourth in the world after Germany, France and the UK. Globally,

Russian market covers approximately 3% of the world market. The experts expect that the

market will grow by 6% in 2016. Obviously, some categories will develop more intensively -

organic cosmetics, men's cosmetics (hair care, beard, male anti-aging line).

According to Discovery Research Group (http://drgroup.ru/) consumers continue to switch

from premium to mass market, since even in a crisis the main criteria when choosing a product

becomes its quality. Before buying consumers learn all the information about the product

through online resources, blogs, and magazines. As a result, consumers in Russia began to know

more about the products and began to understand the significance of the ingredients and their

positive and negative effects. The largest segments are skin and hair care. They account for

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more than a third of the market: 18.6% for the share of the segment of skin care products, and

16.2% - for the Hair.

The company GfK LLC notes the greatest increase in sales in perfumery. In 2015 compared to

2014 the perfumery grew by 37.8% and hair care products by 16.7%, decorative cosmetics by

29.2%, skin care by 26.1 %, body care - 20.7%, personal care (facilities for bathing and

showering, shaving, deodorant, soap) - 17.8%.

The economic recession significantly affected the development of decorative cosmetics market.

Consumers have to make a choice in favor of the most essential products such as ink, tonal

foundation or powder. The analysts of Euromonitor International LLC

(http://www.euromonitor.com/) also noticed the decline in this segment. In 2015 the volume

of decorative cosmetics sales decreased by 480 million rubles and amounted to almost 76

billion rubles. However, it is not a substantial decline given that the retail price increase was

within 14%.

Consumers have become more selective in prices and more selective in their purchases they

focused on basic products and bought less at a time. The leaders here are the companies, which

focus mainly on the mass market L'Oreal, Avon, Oriflame, and Procter & Gamble.

According to experts of Euromonitor International LLC the domestic cosmetics manufacturers

in crisis received an additional impetus to the development. The main competitive advantage is

the ability to offer attractive prices. There are good examples of geographical expansion. For

example Natura Siberica which is actively exporting Russian cosmetics abroad. Currently such

networks as Natura Siberica and Organic Shop are very popular among consumers.

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Regarding international brands those who are at least partially based they production in Russia

has survived and showed a significant increase. For example, Avon is thinking about how to

increase the production it is in Russia and they plan to reconstruct the factory in the Moscow

region. They have not raised the prices for basic products because they have local production.

This seriously helped to save retail prices.

Retail network

Most cosmetic products are still distributed in the traditional way through retail stores.

According to the GfK, a leading place among the network takes a specialized boutique

"L'Etoile", followed by the giants such as "Ashan", "Magnet" and "Lenta".

By the information from consulting agency Coilers International (http://www.colliers.com) the

segment of perfumery and cosmetics in Russia until recently was represented predominantly by

classic stores of cosmetics such as Ile de Beaute, Rive Gauche and L'Etoile. However in recent

years the retail shops called “Drogerie” are in great demand. This is a European non-food

format stores which are located in residential areas within walking distance from the house,

and the range of products is designed for everyday demand - cosmetics, household chemicals,

household products, and nonprescription drugs.

One of such drogerie network in Russia is Magnet Cosmetics. In 2016 this network consisted of

2588 stores. For example L'Etoiler counted 833 stores only. Moreover, if the traditional shops

of cosmetics and perfumery such as the Rive Gauche and L'Etoile, are used to select the top

locations with high traffic (the first line of houses, near the subway, in a large shopping mall),

for "drogerie" format stores location is unprincipled. This format is interesting for retailers for

several reasons: strong demand from buyers, a small investment in the project and comfortable

rent in residential areas.

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Cosmetics market of the Russian Far East

According to Business Internet Edition ZRPRESS.RU (http://www.zrpress.ru) the cosmetics

market in the Russian Far East in the last decade developed very actively. Besides the huge

increase of sales volume the number of brands increased drastically. Major retail networks

came to market changing the structure of consumption.

In 13 years L'Etoile opened 8 specialized outlets in Vladivostok city, 4 in Ussuriysk city and 2 in

Nakhodka city. Another national network Ile de Beauté started with a small shop 12 years ago

and now they operate of 6 stores in Vladivostok and Khabarovsk cities.

In recent years the sales of Japanese cosmetics were actively developing. Local wholesaler and

retailer Nord Cosmetics LLC is the company which imports and trades Japanese cosmetics in

Vladivostok, Khabarovsk and other cities of the Russian Far East under the brand name

Megumi.

Russian currency devaluation and economic recession changed demand of local buyers and

now they consider more and more buying native Russian cosmetics. For example retail network

Chudodey is selling both Russian and imported cosmetics in Primorsky Region. Nowadays the

share of Russian cosmetics increased from 25% to 45% because the price is much more

competitive than those of imported ones.

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There are several biggest importers, wholesale and retail traders, and international brands on

the market of cosmetics in the Russian Far East.

L'Etoile (https://www.letu.ru). It operates 19 retail shop on the territory of the Russian Far East

region.

Yves Rocher (http://www.yves-rocher.ru). It represented by 14 retail shops in the Russian Far

East.

Ile de Beauté (http://iledebeaute.ru). It operates 11 retail shops in the Russian Far East.

Loccitane (http://www.loccitane.ru). Operates 8 retail stores in the Russian Far East.

Nord Cosmetics (http://cosmette.ru). It operates under Megumi brand. Local importer,

wholesaler and retailer of Japanese cosmetics. Operates 12 retail stores in Vladivostok and

Khabarovsk.

Nissei LLC (http://nihonsei.ru). Works under Kaori brand. Local importer, wholesaler and

retailer of Japanese cosmetics. Operates 9 retail stores in Vladivostok, Khabarovsk, Yuzhno-

Sakhalinsk city.

Chudodei LLC (http://chudodey.com). Retail network with full scope of cosmetics products.

Operates 18 shops in Vladivostok and Khabarovsk.

Ahapa LLC (http://ahapa.ru/) . Wholesaler and retail trader of Korean cosmetics in Vladivostok.

Faceshop (http://www.thefaceshop.club/). Wholesaler and retailer of Korean cosmetics in

Vladivostok.

Ayuss LLC (http://au-ss.ru). Wholesaler of cosmetics in Khabarovsk.

Considering the above, it is easy to make conclusion that cosmetics market of European part of

Russia differs from that of the Russian Far East. The share of Japanese and Korean cosmetics in

Russian Far East is much higher than in the European part of Russia.

Prognosis

According to Internet site http://www.ereport.ru the skin care products will occupy more than

30% of cosmetics market. The second place will be occupied by hair care products.

In recent time the consumers began to think whether the cosmetics they use daily is not

harmful for them. For that reason the new segment on cosmetics market appeared. It is natural

cosmetics.

In the 2016 the growth of new cosmetics products was overwhelming especially those which

contained active ingredients - organic substances. There is a growing number of new

ingredients, as well as the companies themselves, who are beginning to engage in the

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production of so called "green" cosmetics. Thus, in the first quarter of 2016 their number

increased by 40%!

Today Russia still lags behind the world leaders: countries - producers of natural cosmetics. Its

share of the national cosmetics market is only about 1%. However, in 2015 the growth rate of

the production of "organic" was a little less than 30%. According to forecasts of GfK LLC

(http://www.gfk.ru) by the end of this year, its share in the overall market will grow up to 4-5%.

Of course, it is still very little, but the beginning, as they say, is necessary. However, this

situation does not speak about the country's isolation in relation to this segment. All the

leading European manufacturers of natural cosmetics. Russians note that these products

attract with lack of allergic reactions, safety for health and the optimal ratio price-quality.

Import of cosmetics in Russia and Russian Far East

The HS code for cosmetic products is 33.

The main subgroups are:

3301 – essential oils,

3302 - odoriferous substances and mixtures,

3303 - perfumes and toilet waters,

3304 - beauty or make-up preparations,

3305 - preparations for use on the hair,

3306 - oral or dental hygiene products,

3307 - shaving and aftershave products, personal deodorants, bath and shower preparations,

depilatories.

The customs duty varies from 5% to 15% of contract amount.

According to the information from the Russian Customs (www.customs.ru) the main statistics

of cosmetics import is the following:

RUSSIA and the Russian Far East import of cosmetics in 2016

'USD thousand

From the World From Thailand %

Russia 2 521 220,04 5 315,76 0,21%

Russian Far East 17 220,32 301,50 1,75%

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Russian import of cosmetics in 2016by main HS subgroups

HS code Product From Thailand,

USD thousand

From the World,

USD thousand

'3301 Essential oils, whether or not terpeneless, incl. concretes and

absolutes; resinoids; extracted oleoresins; concentrates of

essential oils in fats, fixed oils, waxes or the like, obtained by

enfleurage or maceration; terpenic by-products of the

deterpenation of essential oils; aqueous distillates and

aqueous solutions of essential oils

2,16 13 218,12

'3302 Mixtures of odoriferous substances and mixtures, incl. alcoholic

solutions, based on one or more of these substances, of a kind

used as raw materials in industry; other preparations based on

odoriferous substances, of a kind used for the manufacture of

beverages

6,48 443 093,76

'3303 Perfumes and toilet waters (excluding aftershave lotions,

personal deodorants and hair lotions)

1,08 411 846,12

'3304 Beauty or make-up preparations and preparations for the care

of the skin, incl. sunscreen or suntan preparations (excluding

medicaments); manicure or pedicure preparations

2 941,92 882 796,32

'3305 Preparations for use on the hair 385,56 351 865,08

'3306 Preparations for oral or dental hygiene, incl. denture fixative

pastes and powders; yarn used to clean between the teeth

"dental floss", in individual retail packages

1 197,72 152 404,20

'3307 Shaving preparations, incl. pre-shave and aftershave products,

personal deodorants, bath and shower preparations,

depilatories and other perfumery, toilet or cosmetic

preparations, n.e.s.; prepared room deodorisers, whether or not

perfumed or having disinfectant properties

780,84 265 996,44

33 TOTAL 5 315,76 2 521 220,04

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Russian import of cosmetics in 2016

by country

No. Country USD, thousand %

1 France 625 357,80 24,80%

2 Germany 328 206,60 13,02%

3 Italy 206 332,92 8,18%

4 Poland 157 533,12 6,25%

5 United Kingdom 141 123,60 5,60%

6 US 138 168,72 5,48%

7 Ireland 118 883,16 4,72%

8 China 112 905,36 4,48%

9 Switzerland 86 519,88 3,43%

10 Spain 73 026,36 2,90%

11 Romania 67 936,32 2,69%

12 Belgium 66 667,32 2,64%

13 Belarus 41 966,64 1,66%

14 Japan 39 079,80 1,55%

15 Korea 33 540,48 1,33%

16 Turkey 27 435,24 1,09%

17 India 25 445,88 1,01%

18 Sweden 23 104,44 0,92%

19 Israel 21 433,68 0,85%

20 Netherlands 18 050,04 0,72%

21 Czech Republic 16 956,00 0,67%

22 Ukraine 16 427,88 0,65%

23 Slovakia 15 791,76 0,63%

24 Slovenia 14 745,24 0,58%

25 Canada 12 628,44 0,50%

26 Croatia 11 739,60 0,47%

27 Finland 10 325,88 0,41%

28 Bulgaria 8 178,84 0,32%

29 Hungary 6 746,76 0,27%

30 Greece 5 761,80 0,23%

31 Taipei, Chinese 5 538,24 0,22%

32 Thailand 5 315,76 0,21%

33 Latvia 4 113,72 0,16%

34 Austria 4 085,64 0,16%

35 Mexico 3 485,16 0,14%

Others 26 661,96 1,06%

TOTAL 2 521 220,04 100,00%

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Russian Far East import of cosmetics from the world in 2016

by product

HS Code Products Amount, USD

thousand

%

33 Essential oils and resinoids; perfumery, cosmetic or toilet preparations

(TOTAL)

17 220,32 100,00%

3302 Mixtures of odoriferous substances and mixtures, incl. alcoholic solutions,

based on one or more of these substances, of a kind used as raw

materials in industry; other preparations based on odoriferous

substances, of a kind used for the manufacture of beverages

45,70 0,27%

3303 Perfumes and toilet waters (excluding aftershave lotions, personal

deodorants and hair lotions)

379,20 2,20%

3304 Beauty or make-up preparations and preparations for the care of the skin,

incl. sunscreen or suntan preparations (excluding medicaments);

manicure or pedicure preparations

7 607,30 44,18%

330510 Shampoos 2 395,01 13,91%

330610 Dentifrices, incl. those used by dental practitioners 1 439,14 8,36%

330710 Shaving preparations, incl. pre-shave and aftershave products 58,74 0,34%

330720 Personal deodorants and antiperspirants 20,41 0,12%

330730 Perfumed bath salts and other bath and shower preparations 67,32 0,39%

Russian Far East import of cosmetics from THAILAND in 2016

by product

HS Code Products Amount, USD

thousand

%

33 Essential oils and resinoids; perfumery, cosmetic or toilet preparations

(TOTAL)

301,52 100,00%

3304 Beauty or make-up preparations and preparations for the care of the skin,

incl. sunscreen or suntan preparations (excluding medicaments);

manicure or pedicure preparations

151,00 50,08%

330510 Shampoos 27,44 9,10%

330610 Dentifrices, incl. those used by dental practitioners 84,16 27,91%

330720 Personal deodorants and antiperspirants 2,07 0,69%

330730 Perfumed bath salts and other bath and shower preparations 10,04 3,33%

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Import of cosmetics to Russia is regulated by technical requirements listed in

governmental order “Safety requirements to perfume and cosmetic products” No.799 dated

23.09.2011.

The manufacturer of foreign cosmetics needs to obtain State Registration Certificate to export

its product to Russia. To register the manufacturer needs to proof that the cosmetics is safe for

health.

The Importer has to collect documents as follows:

1. Original power of attorney with translation assured by notary and Apostil. By this document

the importer gives all power to its Russian partner to present interests in Russian government

body ROSPOTREBNADZOR.

2. Certificate of Free Trade

3. Seals of manufacturer and the Russian partner

4. Labels on each item

5. Instructions for use

6. Ingredient of each item with an indication of percentage of all components

7. Certificate of Analysis

8. Importer can also have ISO certificate

Russian Far East import of cosmetics in 2016

by country

Country USD, thousand %

Korea 9 010,93 52,33%

China 2 975,05 17,28%

Japan 2 253,78 13,09%

Germany 1 196,59 6,95%

Italy 329,13 1,91%

France 323,88 1,88%

Thailand 301,52 1,75%

US 281,84 1,64%

Belorussia 168,97 0,98%

India 100,58 0,58%

others 278,07 1,61%

TOTAL 17 220,34 100,00%

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Cosmetics trade exhibitions in Russia in 2017

Name Date and Place Description

Nevskiye Berega http://www.nevberega.com/

23-26 Feb 2017 Saint Petersburg

Professional cosmetics Solariums and tanning Beauty Salons Cosmetic equipment Professional products for face and body care Products for nail design and nail care Hairdressing equipment Professional hair care products Decorative cosmetics Accessories

InterExpoShow and InterCosmetics http://www.interbytchim.com/en/

28 Feb – 02 Mar 2017 Moscow

This exhibition event for professionals in the production and sale of household chemicals, personal care products, cosmetics and related products, as well as eco and natural products that want to satisfy customer demand, find new suppliers and consumers to share what's new and learn something new

Esthetic life 2017 http://esthetic-life.com/

1-3 March 2017 Moscow

Aesthetic medicine Cosmetology Dermatology SPA Perfumes and cosmetics Manicure

INDUSTRY OF BEAUTY http://industry_of_beauty.sibexpo.ru/eng/main/vistavki/exhibitions_schedule/industry_of_beauty/about/

22-25 March 2017 Irkutsk city

Beauty salons equipment, implements and accessories, professional products and tools; Services of beauty salons, cosmetic and health centres; Nail and hairdressing services; Decorative and professional cosmetic lines; Solariums, tanning products; Optics, jewelry, bijouterie and accessories; Perfumes, aromatherapy; Training of specialists.

Serebristy Landish (Silver Lily of the Valley) http://www.yarmarka.ru/catalog/12/243/serebristyy_landysh.html

31 March – 3 April 2017 Nizhniy Novgorod city

Perfumes, cosmetics, care products for face and body, cosmetics for children; Professional cosmetics, hardware cosmetology, therapeutic cosmetics; Hygienic goods; Equipment for beauty salons, SPA-centers and clinics of aesthetic

Intercharm http://www.intercharm.ru/professional/

20 – 22 April 2017 Moscow

Professional cosmetics Special Section Green Corner - Natural Cosmetics Cosmetology Hairdressing Manicure Professional cosmetics

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Equipment, furniture and accessories for beauty salons and studios Equipment and preparations for permanent make-up Solariums, tanning Aromatherapy Spa

InterCharm http://www.intercharm.ru/autumn/

25 – 28 October 2017 Moscow

Perfumes and cosmetics Salon and beauty institute, spa Manicure Hairdressing Gallery Zone innovative and niche products Salon fashion accessories Manufacturers and suppliers of packaging for perfumery and cosmetics manufacturers of raw materials and ingredients for cosmetics and perfumes Natural and organic cosmetics National pavilions Products for health and beauty

Conclusion

Despite the economic crisis, the beauty industry in Russia is in a stable condition. Along with

the growth of total expenditures on cosmetic products the quantity of cosmetic goods sold

continues to increase. According to experts the sales of cosmetics products increased by 5% in

the period from 2011 to 2016. And the growth is expected to be around 1% in the next three

years, and this means that the number of units sold in 2019 will be about 211 million units.

In the current economic situation Russian consumers have focused on cheaper brands and

national brands, which are actively supported and promoted successfully in various Internet

reviews. The Internet has become a powerful tool for the collection and analysis of information

on cosmetic products, as well as comparing the prices of various types of cosmetics. The role of

online resources in the sale of cosmetics is still one of the most important. In this regard,

producers should focus on the creation of quality online content that will be of interest to

consumers both in the planning process and in the process of shopping cosmetics. This step will

allow to attract potential buyers to the physical point of sale as well as ensure loyalty to the

brand manufacturer.

Russians purchase health products and cosmetics to improve their overall wellbeing and

appearance. According to eMarketer.com, over 50% of Russian online shoppers had made

online purchases for beauty and personal care in 2016. Yandex.ru, Russia’s leading search

engine, processes well over 2 million queries per month for the term cosmetics and 800,000 for

the term make-up. Both men and women visit traditional Russian spas known as “Banya”

(bringing their own products), spas, and fitness clubs. Both sexes also receive cologne,

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perfume, and other cosmetic gifts for Men’s Day on February 23rd and Women’s Day on March

8th.

I think Thai cosmetic products can be very competitive on the Russian market. Especially those

which are made of natural ingredients. Considering that buyers are looking for natural and not

very expensive cosmetics Thai products can be in high demand. Thailand is very popular among

Russian tourists. All Russians who visited Thailand know that the quality of Thai cosmetic

products is very high. But other Russian buyers who have not visited Thailand need to know

more information about Thai cosmetic products. At the moment there is not so much

information about Thai cosmetics in the Internet. For that reason Thai manufacturers should

give full and detailed information about their cosmetics in Internet, so Russian buyers can

understand all the benefits of it.