Swedish cosmetics producer Oriflame has revealed plans to substantially speed up the pace and level of price increases in Russia in 2015, after being negatively impacted by the devaluation of the ruble.
The ruble has plummented in value over the last year as a result of Western sanctions over Ukraine and falling oil prices. For Oriflame, this has been particularly bad news, as Russia represents around 30% of the company's total sales, while the ruble is the currency with the largest impact on group sales and operating margin. The gross impact of the exchange rates on Oriflames group sales is estimated to be approximately 12% for the full year 2014 and 14% in Q4 2014.
Oriflame, which operates as a direct seller, now plans to increase prices in a bid to ensure an income level for for its consultants and to compensate for the devaluation in currency.
CEO Magnus Brännström said: “With a large part of our sales generated in Russia, we are clearly impacted by the recent additional devaluation of the ruble. We will continue to carry out our strategy and sequentially implement price increases at levels required to enable a healthy business development. Despite the macroeconomic difficulties, I’m pleased to see a continued positive local currency sales trend for the fourth quarter in line with earlier communication. I am confident that the earnings opportunity that Oriflame offers will be increasingly attractive in this environment, offsetting parts of the euro productivity drop.”
