Europe Offering Eastern Promise
By: Briony Davies, Euromonitor International
Posted: October 3, 2008, from the March 2006 issue of GCI Magazine.
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The most dynamic sectors in Romania are fragrances and skin care with 44% and 31% growth respectively. Fragrances benefited from a boost in both volume and value sales as both male and female consumers realized that deodorant sprays could no longer act as a substitute, and bought into mass fragrances. Facial care accounted for around 83% of total skin care value sales in 2004, and was worth more than most other cosmetics and toiletries sectors. The preoccupation with skin health grew in 2004 as multinationals offered more sophisticated products such as Avon’s Anew Clinical range including antiagers with added collagen.
Slowdown in Slovakia, Poland and Bulgaria
In U.S. dollar terms, growth in 2004 in Slovakia, Poland and Bulgaria was strong but in local currency, their growth was limited. Recession in Poland has led to a standstill in cosmetics and toiletries sales, and consumers increasingly are deferring to lower-priced goods. Supermarkets have become the most popular place for Poles to purchase personal care, due to competitive prices. Direct sellers also are popular, with Avon having a dominant position in the market. Despite the current economic climate, Euromonitor International expects Poland to experience growth between 2004 and 2009, particularly given its recent entry into the EU.
Since 2000, Slovakia saw sound growth in sales of cosmetics and toiletries but remains the poorest of the new EU member states. High unemployment rates, protests regarding food taxes, membership of NATO and an ambitious reform process are expected to leave consumers unable to afford luxury products. This is likely to result in weak industry growth forecasts to 2009.
Bulgaria saw moderate growth in 2004, as cosmetics and toiletries are considered more of a luxury than a necessity. New product launches and brand extensions contributed to growth in the sector. Improved distribution also helped cosmetics and toiletries sales to grow, but also led to lower prices as companies clashed for shelf space.
Euromonitor International expects Eastern Europe to be the world’s fastest-growing region, with growth of almost 50% to 2009. Russia’s size means that it will drive the market. Improving retail networks, including the development of the supermarkets/hypermarkets channel and the deepening penetration of direct sellers, and the geographic expansion of major multinational manufacturers are expected to introduce the region’s consumers to a widening range of products. Parallel to this, increases in the number of employed women are expected to boost purchasing power and stimulate demand for higher value cosmetics and toiletries.