Perfume in Russia

In 2006 perfumery sales increased by 10% to reach $908 mln (ExpoMediaGroup Staraya Krepost). The share of women’s fragrances remained the largest within fragrances in 2006 due to the fact that Russian women are well known to use a lot of cosmetics and toiletries, and fragrances are considered essential products by most women. Segment of luxury perfumery develops very rapidly in Russia. It is a result of improved paying capacity of big cities’ population, huge investments in advertising campaigns of luxury goods, and certain confidence in trademark selection.

Demand for premium perfumery in regions grows according to potential consumers’ awareness, and information environment is quite saturated. However interest grows only there, where demand and paying capacity are. That’s why consumers will satisfy demands in regional centers and Moscow.

According to ExpoMediaGroup Staraya Krepost, specialized retail chains hold 24.1% of the Russian perfumery and cosmetics market.

Specialist outlets penetrate into Russian regions. In 2007 the largest specialized retail chain L’Etoile plans its presence in 19 cities and to expand by 140 shops at least. In January 2007 Brocard Group GmbH & KgaA and L’Etoile group of companies unveiled the integration of two retailers, Brocard and L’Etoile in Russia. L’Etoile requires total control over the local Brocard distribution arm. Brocard Group claimed to concentrate on retail development in Ukraine. L’Etoile group of companies will increase the gain by 50% up to 248.9 mln. euros according to the outcomes of financial year 2006 that will end on March 31, 2007, as per the analytical survey by MDM Bank (the organizer of the bond issue for the company of 1.5 bln rubles).

In 2007 300 new stores of Arbat Prestige chain will be opened in Russia (there are 64 at the moment). Moreover 60 stores will be opened in Ukraine and 10 stores in Kazakhstan.
Turnover of the specialist chain accounts for $346 mln in 2006 (that is 44% more than in 2005).

Ile de Beaute (60 stores) focuses on Russian regions. Only 25% of its shops operates in the Moscow market. Besides, 25% of perfumery offered in Ile de Beaute is novelties. For example, celebrity perfumery becomes very popular in Russia nowadays, while Western European market is oversaturated. In Autumn 2006 toilet waters “Oksana Robski” and “Ksenia Sobchak” were launched by United Europe Holding. In January 2007 fans of Dima Bilan, a popular TV-star and a singer, got opportunity to widen their perfumery collections with a fragrance under his name. The new product is sold under slogan "Never let you go" after one of the hits of the singer.

The cult of celebrity is still as strong as ever and 2007 can expect to see more celebrity brands and endorsements, particularly in fragrances, skin care and colour cosmetics. However, this type of marketing does not appeal to every demographic and will never become all pervasive as manufacturers look to specifically target every consumer segment. Celebrity fragrances have not been a major trend, since celebrity brands do not tend to have longevity, and in fragrances particularly, extending shelf life has become vital in an increasingly fickle market.

Several local companies, both manufacturers and distributors, striving to highlight exclusivity of their products, sell them only through brand stores. Novaya Zarya is among them. In March 2007 perfumery enterprise Novaya Zarya - Nouvelle Etoile presented Temps de Femme (Woman’s Time) perfume. The composition of the perfume opens with cherry, bitter almond, pear, strawberry and lemon, in the “heart” of the fragrance there are freesia, lily-of-the-valley, mimosa and violet, the lower notes contain vanilla, musk and praline. The package of the fragrance is designed in red colours, the bottle bears a star symbolizing eternity. The target audience is women over 25. A promotion campaign was conducted under slogan “Temps de Femme – the timeless beauty”. It includes outdoor advertising and media promotion. The new product is sold in Novaya Zarya brand stores at 785 rubles ($30). Another company's novelty is a new fragrance for men, Moving, launched in ultra luxury category. The perfume is described by manufacturer as splendor and nobleness. Scents of grapefruit, rosy berries and black pepper transform into geranium and cedar based on patchouli, amber and wood moss. Though Novaya Zarya brand is well known in Russia and abroad due to its long history and professional acknowledgement, the new product price, 392 rubles ($15.7) for a 100 ml bottle, is far from premium segment Novaya Zarya is the only Russian company developing its own perfumery formulas.

In July 2006 perfumery distributors met serious difficulties provoked by a new legislation regarding products containing alcohol affects industry. On 1 January 2006 the State Committee for economic policy, entrepreneurship and tourism passed a new Federal Law “On State Regulation of Production and Distribution of Ethyl Alcohol, Alcoholic and Alcohol-Containing Products”. Till the end of the 2006 cosmetics and perfumes containing alcohol were referred to as non-food products with alcohol. According to the new law, national cosmetics manufacturers using metallic aerosol packaging were excisable in full. New excise taxes for products with more than 80% alcohol content more than doubled costs for some perfume producers. All participants of the alcohol market had to register all the information regarding movement of the products into the Integrated State Automated Information System (ISAIS). This measure dissuaded many distributors from selling products containing alcohol. Consequently the industry was paralyzed for a few months due to an inoperative System. Moreover, some companies out of 3.500 failed to pay for the System and license.

As a result in October 2006 wholesales of perfume products contain alcohol stopped, preventing appearance of famous and new brands as well in the market. Global companies, such as Procter & Gamble, Unilever, Henkel met serious problems in Russian market and their sales rapidly decreased. Chanel stopped its export in Russia. Less than 10% wholesale operators (310 companies) obtained the license by November 1. How do you usually obtain new bottle of perfume?

 

-I buy fragrances myself 38%

-My lover presents me with perfumery 34%

-My friends know what I like and present me with my favorite brand 9%

-I receive perfumery as present from people who have vague idea about my preferences

19%

Source: Beautytime.ru

Only in December 2006 the Government passed a law that decreed to draw enterprises of perfumery out of the force of the Integrated State Automated Information System. The market accepted the “perfumery” amendments with relief. However, the industry has already experienced sizable losses. According to Perfumery and Cosmetics Association of Russia, the non-gained profit of the whole market within four months made up about $500 mln.

Changes in legislation provoked consolidation of market players, strengthening of foreign brands. Nevertheless, despite certain obstacles in perfumery retail a new specialist store Vanille was opened in 2006 that to be expanded by 5 in 2007. In contrast to other specialist outlets Vanille offers fragrances launched 3-4 years ago and loved by some consumers.