Perfume and cosmetics companies. Independent development

The research conducted by SBS Consulting is devoted to the development strategy for the perfume and cosmetics industry (PCP) in Russia until 2030. The report analyses the current state of the industry, the main problems and development prospects. Particular attention is paid to global experience, strategic goals and objectives, as well as mechanisms for implementing the strategy.

Current state and problems of Russian PCP development

Key findings:

• Socio-economic role: Critical strategic role of the industry in the country's economy with multiplicative effect.
• Systemic problems: Despite developed production of certain categories, there are problems, such as the shortage of Russian scientific and technological personnel and materials.
• Changing market conditions: Influence of global trends, decline in household incomes, emergence of new players.

Key indicators:

• Market growth: Since 2015, the Russian perfume and cosmetics market has been growing at 5% annually, reaching RUB 623 bln by 2019.
• Consumption pattern: Skin care, hair care and perfumery products predominate.
• Decrease in 2020: Caused by self-isolation measures and mandatory wearing of masks, which influenced the decrease in cosmetics and perfumes purchases.

Analysing the global experience of PCP development

Findings:

• Different development models: The leading countries develop localised production and own brands.
• State support: Active development is possible with comprehensive state support and successful cooperation between the state and business.

Goal, objectives and mechanisms of the Strategy implementation

Goal:

• Increased competitiveness: The goal of the strategy is to increase the competitiveness of domestic products in the domestic and overseas markets.

Tasks:

• Increased competitiveness: At all stages of value creation.
• Mechanisms: Include financial and regulatory mechanisms, R&D support, import substitution, export development.

Performance targets:

• Production growth: Increase of 1.8-3.6 times by 2030 compared to 2017 levels.
• Export growth: From $724 mln in 2017 to $1,365-3,088 mln by 2030.

Market structure and key players

Companies and their market share:

• 450 companies: Mainly SMEs, Russian producers' market share is up to 30%.
• Main product categories: Bath and shower products, oral hygiene products, hair products, skin care products.
• Localised players: Development of contract manufacturing and localisation of international brands.

Export potential and main destinations

Export dynamics:

• Export growth: From $459 mln in 2015 to $899 mln in 2020.
• Main destinations: Belarus, Kazakhstan, Azerbaijan, Ukraine, Uzbekistan, Georgia, the Netherlands.

Export problems:

• Low brand awareness: Insufficient awareness of Russian brands abroad.
• Regulatory barriers: Imperfect legislative regulation of alcohol-containing products and labelling.

Key challenges and constraints

By stages of value creation:

• Raw material development and production: Shortage of scientific and technological personnel, low commercialisation of innovations.
• Production of packaging and final products: Low availability of local Russian ingredients and state-of-the-art equipment.
• Sales and promotion: Diversity of distribution channels, but low brand awareness. Additional challenges.
• Scientific and technological gap: Low commercialisation of innovations.
• Import substitution: Lack of Russian production of cosmetic ingredients and packaging.

Opportunities and growth vectors

Export-oriented development:

• Export growth: Development of export potential by improving the quality of products and their promotion in overseas markets.
• State support: Active support of export-oriented enterprises through subsidies, tax incentives and promotion at international exhibitions.

Development in the domestic market:

• Increased production: Increase in production of high quality products for the domestic market.
• Increasing awareness: Improved branding and marketing strategies to increase awareness of domestic products.

Conclusion

The research emphasises the importance of a comprehensive approach to the development of the perfume and cosmetics industry in Russia. The main objectives include increasing competitiveness, development of science and technology base, import substitution and export support. Achievement of these goals requires coordinated actions of the state and business, as well as the active use of state support mechanisms.