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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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Kazakhstan’s fragrance sector is the fastest growing and most fragmented, with all key international brands available for sale. This is the only sector where people’s daily earnings and the country’s economic situation directly relate to actual sales numbers. Fragrances, skin care and hair care represent the fastest growing segments (63%, 55% and 51%, respectively) in the five year period preceding 2009, according to Euromonitor market research. However, an estimated 20% of these products enter the country illegally, attracting shoppers with a 30–40% price reductions.

Kazakhstan’s subsidiaries of direct sales giants Oriflame and Avon make up nearly 25% of the overall cosmetics market. The strong performance of direct sales in the country, which increased its share at an expense of other manufacturers, should be credited to women who out of work because of the economic crisis and who tried their hand at direct selling, which positively influenced the growth of this channel. “Despite that everyone was talking about the crisis in 2009, our company was gaining power and increased sales volume more than 24%, “ says Oriflame’s Central Asia and Kazakhstan’s Regional director Katrin Alakbarov. “ This is quite impressive for a company that started with 20 people in 2000 and currently is a market leader.”

Uzbekistan

In 2008, the beauty market in Uzbekistan (pop. 27.6 million) was estimated at $240 million. This is almost three times less than Kazakhstan, the region’s leader in beauty sales, and can be attributed to the much lower GDP (over four times less than Kazakhstan). Uzbekistan, the most populous country in the region, experienced an annual market growth rates of 30% in 2004 but gradually fell to 16% in 2008. Explosive growth of image and brand awareness for the beauty market has driven imports from leading global brands coming into the country through the growing certified retail channels and a shrinking gray market.

Improving life standards are creating strong consumer potential and the desire to look good, while the country’s consumer base has gained some stability with the range of beauty consumers expanded from traditional consumers, middle-aged women and young people, to middle-aged and young men.

Development of the market is also based on rising concern about health, boosting sales of products such as baby care, hair care, oral hygiene, skin care and sun care. Hair care is the largest segment, and accounted for 37% of total sales in 2008.