While Intercharm 2008 (23-26 October) attracted fewer visitors than the pervious year, Russians are still optimistic about the future of the industry.
It is no secret that Russian women are passionate about grooming. The region’s colour cosmetics market alone is worth $1.5bn and it is a popular local adage that a Russian woman on a budget would sooner buy lipstick than bread. So it was unsurprising that participants at Intercharm 2008 were buoyant in spite of the less than rosy global economic situation.
Back in 1994, when Intercharm first opened its doors, the show had just 72 exhibitors. Now celebrating its fifteenth year Intercharm 2008 boasted 884 exhibitors covering an area of 19,775 sq m in Moscow’s Crocus Expo Exhibition Centre. And while the footfall of 76,000 visitors was a marked drop from the show’s 2007 high of 98,000, there was no reduction in scale or vision.
Presentations and training workshops included The Ninth Cosmetique News Forum, which was targeted at an international audience and featured topics including Consumer expectation management; Trade stimulation and sales increase; Doing business in Russia, an outsider’s guide to the market; Nail Service Studio, an educational event for the nail industry and the Third All-Russian Convention for Beauty Salons.
Several competitions were held over the course of Intercharm 2008. The Second International Championship on Spa-Massage; the Moscow International Make-Up Championship, which asked contestants to offer variations on the theme of Christmas angels; and the Eighth Championship on Nail Design all invited specialists from across the industry to show off their expertise.
The show also cemented its global status welcoming exhibitors from 28 countries. The international pavilion featured companies from Germany, Spain, Italy, France, Bulgaria, China, Brazil, Taiwan, South Korea and Poland. “This year there are a lot of Chinese products, last year there were many Brazilian ones,” commented exhibitor Maria Lyalina, head of the development department at Russo Chemie. “It’s changing each year but it’s similar each year.”
While the demographic may vary year on year, the $8.6bn Russian market remains consistently attractive to foreign companies. According to Anna Dycheva-Smirnoff, editor in chief of Cosmopress and business development manager of Intercharm organiser Reed Exhibitions, 30% of exhibitors visit the show from abroad to seek distribution in Russia. One such company was Turkish colour cosmetics and personal care manufacturer Farmasi Cosmetics. “The Russian market is important – it’s a huge market,” enthused representative Svetlana Zakotnova. The company was at Intercharm 2008 to find a distributor for the Moscow area, having secured one for northern Russia at last year’s show.
Hotly tipped trends for the future were showcased in the Zoom area, where research and production enterprise Xian Ltd demonstrated its xenon gas-based face, body and scalp care products. Also exhibiting in Zoom was Swiss confectioner Lindt & Sprüngli and the cocoa-based theme continued into Intercharm’s Novelties Gallery with Golden Chocolate’s chocolate wrap with 23 carat gold coating.
Formulaction and Intercharmpack offered a platform for raw materials, packaging and equipment suppliers. “Intercharm is interesting,” commented Denis Duquesnel, area sales manager of machinery group Kalix, at the show to promote its KX601 mid-range tube-filling machine. “It offers us an opportunity to see the completed products as our customers are also exhibiting here.” According to the organisers, the Formulaction and Intercharmpack areas will be afforded even more prominence in 2009.
RUSSIAN REALITY
The Russian C&T market is a lucrative one to crack (it grew by 10.4% in 2007) and Intercharm provided international participants with a valuable insight into what makes Russian consumers tick. A country covering an eighth of the globe and bordering Norway, Kazakhstan and China will inevitably produce citizens with very diverse tastes and who require different effects from their beauty products. Cosmetic Market Today editor Yana Krupenia stressed this issue in Russian consumer of cosmetics: portrait and important characteristics, part of the Doing business in Russia seminar, describing the Russian consumer as “impossible” to define and “as different as the seasons”. The effect that regional and seasonal differences in climate have on consumer habits should not be underestimated. “Where it is warm in spring and summer they like fresh citrus smells and in Siberia they prefer warm, amber and musky fragrances,” Anna Makarevich, chief manager niche perfumery department, Soling Niche Brands told SPC. “In summer our best sellers are floral and citrus and in September, bright fragrances.” Moreover fashions tend to filter down from cosmopolitan Moscow and St Petersburg to more remote regions. Therefore cosmetic trends in one area of Russia may not be the same as in another.
As a general rule, however, Russian C&T consumers are educated, demanding and choosy and prevailing tastes lean towards products with an expensive or branded image. “In Russia there are many millionaires,” said Kazimierz Leszczewicz from Polish packaging specialist HeinzGlas Dzialdowo. “Russian women look for very luxurious products.”
Natural and organic products, ubiquitous at recent trade fairs, were thin on the ground at Intercharm. “Russian consumers make no distinction between natural and organic and cosmetics that contain natural ingredients,” said Dycheva-Smirnoff. “For an average Russian consumer, any cream that contains camomile is already natural.” And according to Dycheva-Smirnoff, the blame for this confusion lies with companies who are willing to use consumer misinformation for their own gain. “Marketing from companies has exploited this for too long, many do not distinguish between organic and natural.”
This attitude does seem to be changing however. Ukranian joint-stock company Naturpharm, which was exhibiting at the show in order to find Russian distributors and retailers for Italian brand Natura House – certified as being of natural origin by CRNH – reported healthy interest in Natura House’s skin care and baby care products. Meanwhile Sudarikov Vladimir, business development director of Russian distribution chain Gradient announced that the company is to distribute organic products from US manufacturer Freeman next year.
Tipped as a rising star at the 2007 show, home grown-brand Natural Siberica, which blends organic Siberian ingredients with Ecocert certified organic extracts, is setting its sights on becoming Russia’s answer to L’Occitane. But brand manager Ekaterina Ashitkova conceded that Natural Siberica’s success has not necessarily been due to Russian consumers being more informed about natural and organic products: “We [Russians] don’t have a lot of organic cosmetics. It’s hard to sell them because of the expiry date – there is just a small window of time in which the product can be used. Customers buy first because of the nice packaging and then because they like it.”
Like Natural Siberica, Russian Ayurvedic specialist Aasha was exhibiting at Intercharm to raise the profile of niche cosmetics amongst Russian consumers. “Everyone is interested,” general manager Dimitri Kovalev told SPC. “Not just Russians from an Indian background, all Russians. We have two main customer groups, firstly people who are interested in oriental cosmetics and secondly, people who are interested in natural health.”
EVEN DISTRIBUTION
Despite this optimism, Russian manufacturers are at something of a disadvantage when it comes to selling to domestic consumers. According to Dycheva-Smirnoff, 60% of C&T products sold in Russia are imports and 40% local with most local products sold being in the skin care, baby care, hair care and oral care sectors.
In the experience of Natalia Nikitina, general director of distributor and pharmacy chain Arbor Mundi, Russian women are drawn towards foreign brands. “If it’s care brands they like Swiss and French, and for make-up the best are French ones,” she commented. “So it is very difficult for a Russian brand to establish itself and they need to create something unique.”
Karin Jacques, vice president of St Petersburg and Moscow-based store chain Rive Gauche, agreed. “There is a clientele who would be interested in Russian cosmetics, but it is not big. I think as far as cosmetics are concerned ‘made in Russia’ has not yet been achieved. But it may change if Russian brands achieve credibility with the Russian people.”
It is unsurprising then that a significant chunk of Intercharm’s domestic presence was made up of distributors. And when it comes to local C&T brands of the future, Russian consumers are likely to start hearing more from these companies. “Distribution is a very competitive business and every distributor dreams of being a manufacturer and owning a brand, as all distributors know that one day a manufacturer can open up a plant here and get rid of you,” explained Nikitina. Indeed, some savvy distributors have already made the move into manufacturing. Mass-market perfume distributor Uni Top produces its own fragrance brand, X-Bond, while Gradient has collaborated with Vivienne Sabó to produce a colour cosmetics range, with both companies promoting their own brand products at the show.
PHARMACY FOCUS
The show was also host to the first Farma & Beauty conference, a meeting between cosmetic companies and major regional pharmacy chains. Talks featured in the programme included The main tendencies of pharmacy chains market development: yesterday, today, tomorrow and Which cosmetics can truly be called therapeutic?
For brands pharmacies can provide a very lucrative break, increasing visibility and sales. In Russia sales of C&T products through pharmacies increased by 17% last year and are predicted to reach $700m by 2009. According to Dycheva-Smirnoff: “Every second person who goes to a pharmacy will leave with a product and 63% of consumers trust cosmetic claims from pharmacies more than from a department store.” But the benefit is mutual. Pharmacies welcome C&T brands as the state does not currently allow mark-ups on medicine. “On cosmetic products they can add any mark-up they want,” adds Dycheva-Smirnoff. “Pharmacies can make serious money on cosmetics.”
Taking advantage of pharmacy retail’s popularity, both Intercharm Professional 2009 (23-25 April) and Intercharm 2009 will extend the Farma & Beauty concept into a specialised exhibition. Together with the show’s other new additions, a section on nutricosmetics to reflect the increasing volume of foodstuffs used to supplement beauty products and areas dedicated to both spa and niche products, Intercharm 2009 promises to be another attractive prospect for participants. It seems that for both domestic and international players recession-proof Russia really is the market to break.