“Many key international and local players confirm this trend and add that consumers haven’t cut their budget but just became more rational in purchases,” explain the organisers of InterCHARM, the largest perfumery and cosmetics exhibition in Russia, CIS, Central and Eastern Europe. Avon sales in Russia, for instance, increased by 25% in monetary terms and 13% in volume in Q1 2016. Henkel also recently increased its sales in Russia, after a decrease in 2015. Lush also said the demand is recovering: its revenue increased by 12% in Q1 2016, sales have slightly increased in volume terms too.
Consumer goods market increased by 11.3% to RUB 7.79 trillion (USD 119.8 billion) during 12 month-period from April 2015 to April 2016, GfK reported. Personal care products account for approximately 6.6% of this market, or about RUB 514 billion (USD 7.9 billion).
Price increases are not the only propeller of the rise of cosmetics sales. Consumers have become 6.1% more likely to buy personal care products. At the same time, the average spend per one purchase has not changed, says representatives of the market research firm.
Fragrances and makeup drive grow
In 2015, sales of cosmetics and personal care products grew faster than other consumer goods (+18.9%). In 2014, these sales increased by 4.3% - slower than food and household products. This record-breaking sales were driven by perfumes and make-up products (+38% and +29% respectively). Body care also recorded impressive growth in 2015. According to Euromonitor, the segment grew by +19.3% compared to the previous year.
As far as the hair care category is concerned, one of the key growth trends is the popularity of hair loss treatments and salon products that rose by 2.6% and 7.4% respectively. During the crisis, companies did not reduce the production of shampoos, a relatively stable consumable commodity. In 2015 the volume of local manufacturing reached 386 million units, which is 2.4% more than in 2014.
Even the smallest segments of the market performed well: bath care increased by 4% (Euromonitor) and soaps grew by 11% (Russian Government Statistics).
Rise of foreign investments
In parallel, the rise of foreign investments in Russia also illustrates the recovery of the economy. According to Ernst & Young, Russia ranked first in the world in 2015 regarding foreign direct investment projects, with the highest number since 2010.
Germany is the leading foreign investor in Russia. According to the Central Bank of Russia, Germany’s direct investments have increased four-fold in 2015, from USD 350 million to USD 1.42 billion. Other top foreign investors are: USA, France, Italy and China.
During the first half of this year 25 international brands opened stores in Russia, almost twice more than the same period in 2015, global estate company Knight Frank reported. Moreover, no brands have left the market, and at least, 10 more operators are expected till the end of 2016. Among the newcomers are Holika Holika from South Korea, Urban Decay from the USA and Kiko Milano.
The new drivers of the Russian cosmetics market growth will be discussed during the Retail Connect Summit organised during the InterCHARM trade show, which will take place in Moscow on 26-29 October 2016. On the radar of discussions are trends in perfumery, natural and organic products, Russian legislation, retail and e-commerce.
