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Central Asia: Cosmetics, Culture and Politics
By: Gregory Grishchenko
Posted: March 3, 2011, from the March 2011 issue of GCI Magazine.
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The Central Asian beauty market is worth nearly $1 billion, and has shown strong double-digit growth from 2003 to 2008. Growing awareness of beauty products on the market is one of the reasons for the increase. Despite the 2009 nosedive due to the economic crisis, the opportunities for retailers and importers based on rising concern about health do exist for products such as baby care, hair care, oral hygiene, skin care and sun care.
Kazakhstan (pop. 15.4 million), the wealthiest Central Asian state with the largest share of Slavic population (more than 34%), was influenced by its mighty neighbor, Russia, to the growing spending pattern on personal care during independence years. With total sales of $660 million in 2008, the country’s beauty market demonstrated healthy growth of 8.4% in a five-year period. The following slowdown was caused by economic crisis attributed to shifting consumer preferences, mainly cutting down on premium products. Premium cosmetics, especially premium hair care and premium fragrances, started to plunge in 2008, which positively impacted mass fragrances and mass hair care growth rates.
According to Kapital.kz, Kazakhstan’s business portal, currently 80–90% of the country’s population prefers inexpensive cosmetics, and a significant number of customers switched to less expensive products in several market sectors—extra spending on oral hygiene or personal deodorants, for example, is no longer considered logical.
By 2008, a legally structured retail industry became a key trend in Kazakhstan’s beauty market, replacing the “gray” market, with Western style stores with certified products taking the place of open air bazaars and markets selling mostly counterfeit goods. Furthermore, Western style retail is spreading further into the regional centers like Karaganda, Aktau, Atyrau and other cities where significant number of specialized outlets opened their doors to customers over the last five years. The beauty market there is far from the sophistication of the U.S. or Western Europe, however, it is the strongest player among all Central Asian states, and is comparable to the Russian market.
Multinational companies dominate the Kazakhstan’s market in all cosmetic product categories, with the biggest investments in beauty coming from the top three global players—Oriflame, Procter & Gamble and Avon. According to Euromonitor International, they accounted for more than one-third of total beauty sales value in 2008. The only local producer, Urker Cosmetic, represent only 2% of total beauty sales, so the market remains divided between multinationals.