In 2009 the Russian market for skin care was valued at RUB34.40bn (€955.6m), but according to market research provider Mintel, that figure is set to boom in the next couple of years, and should hit RUB47.10bn by 2013.
Although the Russian skin care market has been relatively stagnant in the past couple of years, financial experts believe the economy is well placed for growth on account of the country’s strong oil, gas and mineral reserves, and the fact that prices for these commodities are now increasing rapidly.
According to financial management company Templeton Asset, Russia is now poised to emerge from the global recession with renewed vigor, which means its economic growth could exceed those of the other BRIC markets – India, China and Brazil - in the coming years.
Economic expansion will drive up consumer spend
Backing this theory up, the International Monetary Fund is forecasting that the country’s economy could expand by up to 4.3 per cent this year, although the bush fires that are currently sweeping the country could impact this figure.
Evidence that the cosmetics and personal care market is already firing on all cylinders has been underlined in the recent financial results of some of the biggest global cosmetics and personal care players, with companies such as Beiersdorf, L’Oreal and Oriflame all singling out the market as a primary driving factor behind growth.
Although Russian consumers followed the international trend in shunning luxury cosmetic and personal care products during the global recession, they are expected to return to the luxury cosmetics fold in the next few years, as spending power recovers.
Return to luxury skin care
The predicted switch back to prestige skin care is underlined by the fact that Mintel predicts average consumer spend on skin care products per capita will increase from £4.90 (€5.90) in 2009 to £7.20 by 2013, a hike of 47 per cent.
In terms of local currency sales, this means that the skin care market in Russia should grow in excess of 8 per cent every year until 2013.
Dividing up the category, facial skin care continues to be the most active area, underlined by the fact that Mintel recorded a total of 995 launches in this segment during the period 2005 – 2010.
Growth in this segment is reflected by continued consumer interest in the anti-ageing segment, a pattern that is expected to be replicated in the course of the next few years and one that should see an increasing amount of prestige launches.
The next most active segment was body care, which recorded 452 new launches during the same period, while there were 167 launches for hand and nail care and 121 products targeting the eye care segment.
The three big skin care players
Currently the skin care market continues to be dominated by three major players. Number one is domestic company Kalina, which continues to scoop up almost a quarter of the market, while global giants Beiersdorf and L’Oreal carved out 8.8 per cent and 5.4 per cent shares of the market respectively in 2008.
Other key players in the market include domestic companies Nevskaya Kosmetika, Vesna and Svoboda, while American global player Johnson & Johnson also appears in the top ten.
It is also interesting to note that in 2008 almost 40 per cent of the skin care market was still accounted for by smaller, mainly domestic players – a figure that underlines how the market continues to be relatively fragmented.
This fragmented state of the market, combined with predicted market growth, is likely to lead to further developments in the structure of the market in the coming years, particularly as the bigger players move in to extend their position in the market.