CONFIDENTIAL CONFIDENTIAL CONFIDENTIA L · The campaign will run until April 2017. ... Cresp of Firmenich, ... French natural beauty company Aroma-Zone is to launch nail polish that

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It looks like having the latest breakthrough product could take a backseat to cultivating a strong online following and

connecting with the internet’s influencers. Take subscription box company Ipsy, which was founded by

Youtube make-up sensation Michelle Phan. The company has managed to surpass the subscriber numbers of its larger and better-funded rival Birchbox not because its $10–a-month ‘glam bags’ have better products, but because of the strong online audience behind Phan and her use of other beauty influencers to market her business. Phan managed to create a

community based on exchanging beauty tips and expertise, and as some analysts put it, Ipsy is now “selling advice first and make-up second”. The industry’s major players are well aware of this trend and are looking carefully at

building online audiences and at the power of influencers. It is one of the key reasons behind recent acquisitions in the market, including L’Oréal’s purchase of NYX and IT Cosmetics and Estée Lauder Companies’ deals to buy Becca Cosmetics and Too Faced. And all this is set to see a shift in how these players, and indeed their competitors, approach marketing, online, service and ultimately the consumer.

Community selling The buzz 2News roundup

Netwatch 5 Social media monitor

Interview 6 New Prestige Holdings & Investment (NPH&I) president Samir Goshayeshi

Insight 8 North Africa

Show review 11 Intercharm Moscow

Store visit 13Philosophy wellbeing beauty workshop, New Jersey, US

Oonagh PhillipsEditor in [email protected]

www.bwconfidential.com The inside view on the international beauty industry December 1-14, 2016 #140

News headlines daily on www.bwconfidential.com @BWCbeautynews

Meet the BW Confidential

team at:

l MakeUp in São Paulo, December 7-8l PCD, Paris, January 18-19l CosmeTokyo, January 23-25

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News roundup

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At a glance...

Strategy

Equity fund Alliance Consumer Growth has made a minority investment in US-based natural beauty brand Pacifica Beauty. The investment will enable Pacifica Beauty to expand its distribution and product range. Pacifica Beauty was founded in 1997 by husband-and-wife team Billy Taylor and Brook Harvey-Taylor. Its products are stocked at retailers including Ulta, Target and Whole Foods Market.

Korea-based AmorePacific’s cushion products exceeded the 100 million unit sales mark on a cumulative basis globally in the third quarter of 2016, the group announced. Since the release of IOPE Air Cushion in 2008, AmorePacific’s offer has expanded to include cushion products from the group’s 15 brands. Now in its fourth generation, AmorePacific’s cushion has been upgraded with a 3D Sponge. AmorePacific said that its cushion sales surpassed 33 million units in 2015 alone. The group has also just launched a digital campaign called The Truth of Cushion, designed to showcase its history of cushion technologies. The campaign will run until April 2017.

Retail

Dior opened its first standalone store devoted to make-up in New York’s Westfield World Trade Center last month. The 650ft2 (60m2) store, said to be inspired by the backstage glamour of Dior make-up creative and image director Peter Philips, features videos linking Dior beauty and fashion, and is designed to create a backstage-like experience. It stocks make-up and fragrance and features a fragrance wall that displays scents including Miss Dior, J’adore and Sauvage. An in-store lip studio invites consumers to experiment with different textures and products. Six workshop stations offering professional services such as lash and brow styling and face consultations are also available.

Beauty retailer Sephora launched a BeautyBot Christmas gift finder on Facebook Messenger in five countries in Europe this month. Consumers can connect with the Sephora BeautyBot on Facebook Messenger and answer questions about the person they are looking to buy a gift for, including age and style, as well the amount of money they wish to spend. The BeautyBot then suggests a selection of gifts from the Sephora website. The bot gives consumers the option to purchase the gifts online for collection in-store, or advises them on product availability at their nearest location. It is available in France, Italy, Poland, Spain and the Czech Republic. n n n

Stay informed with our daily news headlines on www.bwconfidential.com

n Dior opens make-up standalone store

n Sephora launches BeautyBot gift finder

n Shiseido unveils new fragrance launches for 2017


News roundup

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n n n Online beauty brand and retailer Memebox has opened a pop-up store in San Francisco’s Union Square shopping district in response to consumer demand for a bricks-and-mortar location. Memebox said that it first tested the pop-up idea with two one-day pop-ups hosted at its headquarters, with products selling out each time. The 600ft2 (56m2) store stocks Memebox’s in-house brands such as Bonvivant, Nooni, Pony Effect and I’m Meme, as well as products from brands including Elizavecca, Cosrx and Skinmiso. The theme of the store is ‘choc choc’, Memebox says, which is Korean for the sound moisturized skin makes when you apply product to it. The boutique features a large table where customers can try products and ask questions about Korean skincare. The pop-up opened on November 18 and will run through December 24. While the company says it does not have any immediate plans for permanent locations, it is working with some retailers like Opening Ceremony to expose its own brands to new audiences.

French fragrance brand Diptyque is opening pop-up stores in major cities to showcase its Christmas collection, Une Nuit Chez Diptyque from November. Diptyque’s Christmas pop-up stores are located at the Invisible Dog arts center in Brooklyn, New York (this pop-up opened earlier in 2016), on rue Saint Honoré in Paris and in Covent Garden and in Boxpark in London. The four pop-up stores feature décor inspired by theaters, and will stock items from the brand’s The 34 Collection.

UK-based vending machine company SocialVend has launched Vendmini, a vending machine designed to reward consumers for their social engagement with brands. Vendmini is SocialVend’s first product, and went on the market at the beginning of November. The compact machine displays a message to prompt users to use a brand’s hashtag on social media, such as “take a selfie to get a free gift”. The system, which is integrated with Snapchat, Twitter and Instagram, then matches the post with the user to reward them with a gift, such as a product sample or gift card. Vendmini can be used for in-store sampling, marketing campaigns and promotional giveaways. The machines can be wrapped in graphics, while the software interface can be customized. In addition, a brand can run surveys and data-capture to generate consumer data.

Data

Sales of prestige beauty products in the UK were up 6% in the July to September 2016 period following the country’s referendum to leave the European Union, largely due to increased spend by overseas tourists, according to The NPD Group. This is twice as fast as the 3% growth rate in the market in the January to June period. Following the Brexit referendum, shopping in the UK became less expensive for overseas

tourists due to the drop in the value of the pound, and NPD reported that the largest growth in the market has been in London and online. Online sales (although representing only 9.2% of the total prestige beauty market)

increased by 34.3% compared to the July to September 2015 period, and contributed most (43.7%) to total prestige beauty growth in this period. The second-biggest contributor in the three-month period following the referendum was London, with 37.9% of total growth, increasing sales by 7.3%. London represents 30.1% in value of the total prestige beauty market in the UK. During the period, the market saw a boom in beauty products with a premium n n n



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z News roundupn n n price tag. Super premium skincare sales rose 32% compared to the same period in 2015; prior to the Brexit decision the sector grew by 4%. Niche fragrances reported an increase of 59.5% in sales compared to the same period in 2015, growing twice as fast as compared with the pre-Brexit result (+28% growth in January to June 2016 compared to 2015). However, NPD warns that this uptick in sales is unlikely to be sustained. Sales of prestige

beauty products in the UK were valued at £2.45bn ($3.04bn) in 2015.

People

Packaging specialist AptarGroup has named Stephan Tanda president and ceo. Tanda, who is currently executive managing director of Dutch nutritional and pharmaceutical ingredients player Royal DSM, will join Aptar on February 1 and become a member of the company’s board of directors. He will succeed Stephen Hagge, who is to retire on March 1, 2017 after 36 years with the company.

Flavor and fragrance company Mane has appointed Susan Klop sales manager fine fragrance, based in France. Klop, who has over 20 years experience in fragrance and cosmetics sales, first joined Mane in 2000 before leaving for Firmenich in 2006.

Launches

Shiseido has unveiled a string of new launches for next year. For its newest brand Dolce&Gabbana, the company will introduce eaux de parfum in the Light Blue franchise for men and women in May. Called Eau Intense, the scents’ bottles have been given a new look, and the fragrances have been revisited. The women’s fragrance is by Olivier Cresp of Firmenich, while the men’s version was created by Firmenich’s Alberto Morillas. A key priority for Narciso Rodriguez next year is the For Her franchise, after a strong

focus on Narciso over the past few years. In February the brand will launch For Her Fleur Musc, which was created by Calice Becker and Sonia Constant of Givaudan and comes in a pink bottle. The fragrance retails at €55 (30ml), €83 (50ml) and €112 (100ml). For Alaïa Paris, the company will introduce a new fragrance range called Eau de Parfum

Blanche, intended to be more accessible and to recruit new consumers to the brand. The line comes in the same bottle as the original fragrance (launched in 2015), but is transparent instead of black. The scent is by Marie Salamagne of Firmenich. Issey Miyake is to roll out an EdT of the L’Eau d’Issey Pure fragrance, which launched this

year. In the second half of next year the brand will introduce a major new men’s scent.

French natural beauty company Aroma-Zone is to launch nail polish that customers can make by themselves at home, tapping into the trend for personalizing cosmetics products. The environmentally friendly range consists of a nail polish base and plant-based and mineral pigments that are combined to create the desired shade. Launching in January 2017, the nail polish base is priced at €2.90 for 30ml and pigments and glitters retail at between €1.90 and €2.90. Also in January, Aroma-Zone will launch a range of ready-to-use nail polishes made with plant-based pigments. The range consists of seven shades and a topcoat, priced between €2.90 and €3.50 for a 6ml bottle. n



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BW Confidential reports on what’s being said about beauty on social networks

Social media monitor

Innovations like the multi-tasking moisturizer from Korean brand J.One Jelly Pack, which doubles as an adhesive ‘make-up gripper’, are taking the priming category to another level, according to bloggers. Some say that this pre-make-up skincare step is expected to become more important in the beauty routine due to these types of products.

The rapid emergence and erosion of trends has given rise to some negative backlash in the blogosphere. After contouring and strobing, now the hot trend is non-touring (the opposite to contouring). Bloggers say that the trends are being created by brands and retailers to boost sales, but that too many new trends emerging one after the other could risk confusing consumers.

Kiara Sky’s nail polish powder is liked by bloggers for offering a novel way of applying nail polish, which is also non-messy and simple. Application involves a nail base, to which the powder clings once the finger is dipped into it.

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Iranian distribution and retail company NPH&I president Samir Goshayeshi tells BW Confidential how he sees the evolution of the beauty market in Iran

New horizons

How do you see the beauty market in Iran developing? Figures differ depending on the source, but the selective market is estimated at between $800m and $1bn at retail. Of this figure around 40 to 50% of the fragrance market is non-official; in cosmetics around 20-30% is non-official. The government is trying to stop this non-official market, but Iran is bordered by Iraq, Turkey, Pakistan and Turkmenistan, so it is very difficult to control. Depending on a lot of factors, the market could grow at between 20 and 40% per year. One of the companies in our group, Prestige, distributes selective brands such as those from L’Oréal Luxe, Dior, Clarins, Interparfums and Euroitalia, and we have around 70% of the selective market in Iran.

As Iran opens up do you see the parallel market shrinking?For around the past five years, the Ministry of Health has ordered that each imported beauty product carry a sticker so that consumers can distinguish the product [from those coming from non-official channels]. This measure has reduced the amount of non-official product, as around five years ago some 70-80% of the market was non-official compared to 40-50% today. The parallel market will shrink when the number of selective points of sale increases.

Despite the announcement of the lifting of sanctions, analysts say it is still complicated to do business with Iran given the difficulties of payment and the lack of international banks. How will this evolve?[Credit insurance company] Coface State Guarantees has been in Iran since March following President Rouhani’s visit to Paris—so today any company can work with Coface. The banks are very timid. There is no restriction in terms of European banks’ presence in Iran. European banks are a little afraid, but they will come. From next spring there will be a very big opening up for Iran, as April 2017 is the first month of the Iranian New Year and all regulations and economic planning of the country are applied. We believe that [in 2017] sanctions will be practically over and a lot of local investments will be finalized. How do you see the recent US election result affecting business in Iran?I do not think at all that any US presidential election would affect Iran because [the nuclear deal] has been signed by a group of countries and just one country cannot change everything. On the other hand, French oil group Total has already signed many contracts in Iran and if it did not have a guarantee, it would not enter the market. Finally, some big deals such as Airbus have been already realized, so I do not think there is any way to go backwards, particularly as the Iranian economy has reached a level of auto-sufficiency and economic growth in Iran is less and less dependent on what sanctions are going to be imposed or not.

How many selective points of sale are there in Iran today?We have a chain of selective beauty stores called Safir, which has 34 outlets. The second chain is Roja with 10 stores, then Meisam with around eight or nine stores, which are more masstige. Then there are around 250 independent selective stores, although if you are n n n

New Prestige Holdings & Investment (NPH&I) president Samir Goshayeshi

NPH&IFounded: 1994Headquarters: TehranDivisions: Prestige division (distribution of selective brands): 48% of business.Distribution includes brands such as Yves Saint Laurent, Dior, Clarins, Versace.Safir (perfumery chain): 26% of business; 34 outlets in Iran.Mahtab (pharmacy/dermo-cosmetics distribution): 23% of businessFarin (inflight & duty free): 0.8% of businessPalace (niche perfumery): 2% of businessArman Graphic: 0.2% of business

“

”New Prestige Holdings & Investment president Samir Goshayeshi

There is no restriction in terms of European banks’ presence in Iran. European banks are a little afraid, but they will come. From spring 2017 there will be a very big opening up for Iran



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n n n talking in strict class-A doors, there would only be around 80. With our Safir stores, the idea is to have a strong identity. Our stores’ decor features an

Eiffel Tower, a blue sky and black furniture—people remember this and know the store because of these elements. We also have a niche store called Palace—the market for niche is very strong in Iran.Chalhoub’s Wojooh also entered the market, and has around five or six stores. But the

fact that the name of the chain is Arabic could negatively affect it. Sephora is planning to launch in Iran, but we have heard that it has postponed entry until the end of 2017. Sephora is a very big chain and is the king of beauty retail, but that does not mean that its concept will work everywhere. Sephora plays a lot on in-store events and make-up artists in its boutiques; however, it will not be able to do all these activities in Iran, and make-up artists in-store are forbidden. If it wants to succeed, it will have to change its model.

How do you see the development of distribution in Iran?Our objective for 2020 is to have 240 or 250 Safir stores. As well as our 34 Safir stores we also have a lot of other independent stores, which we will change to the Safir nameplate. This will have a big impact on the market. We don’t know when we will do that exactly, perhaps mid next year. We also want to create our own private-label make-up line. We have three factories in Iran. And in addition, we will manufacture cosmetics under license with some French companies. In addition to transforming stores and the private-label line, we are putting a big focus on digital marketing and CRM. We have 80,000 loyalty-card holders and the objective is for this to reach 400,000 in six months.

How do you see the development of department stores? [French chain] Galeries Lafayette is due to come and [UK retailer] Debenham’s is here. In Iran, 300 malls will open. The biggest will be Iran Mall, due to launch in a few months.

As the market opens up, will your distribution activities reduce? It’s not that distribution will shrink, but our objective long-term is retail. There is a population of 82 million in Iran, but only around 250 [selective beauty] stores, so there is a lot of room to develop retail. Apart from fragrance, the potential of Iran lies more in skincare than make-up; this is because of the pharmacy channel, which is very strong. There are around 20,000 pharmacies in Iran, but around 2,000 that sell foreign brands. We have a dermo-cosmetics division, called Mahtab, which delivers to around 2,000 pharmacies. Dermo-cosmetics brands have made more advances faster than luxury brands in Iran.

Will it take time for foreign brands to set up their own subsidiaries in Iran? That depends. Mass brands should immediately set up their own subsidiaries and start to manufacture one or two references locally. For selective brands is different, and the way of working is to go through distributors, as there are a lot of difficulties in terms of importation, registration and negotiating with retailers. n s There are currently 34 Safir perfumery outlets in Iran

New Prestige Holdings & Investment (NPH&I) president Samir Goshayeshi

“

”New Prestige Holdings & Investment president Samir Goshayeshi

The selective market is estimated at between $800m and $1bn at retail. Of this figure around 40 to 50% of the fragrance market is non-official. The parallel market will shrink when the number of selective points of sale increases



The beauty markets of North Africa are still underdeveloped, lacking in retail infrastructure and have a complex business environment for international brands.

Political instability in the region is impacting several countries, and market maturity varies widely—business conditions are more favorable in Morocco and Tunisia than they are in Egypt and Algeria, for example. While beauty players are keen to recognize the potential of such markets, they also

remain wary of business conditions and the lack of transparency that dominates. In addition, the thriving gray market—which represents at least the same weight as the official market in certain places, according to sources—means that there is little incentive for brands to enter some of these countries officially.Data on the beauty market in North Africa, notably as concerns prestige, is scarce. While

Euromonitor International states that beauty and personal-care sales grew by 10.3% in Algeria, 12.9% in Egypt, 7.4% in Morocco and 10% in Tunisia last year, no data about specific categories was available. It is estimated that fragrance accounts for around 80% of the prestige market, and despite the arrival of Western-style perfumeries, make-up and skincare still struggle to develop in prestige due to a lack of trained beauty advisors, stock issues and little market consistency.

Lack of stabilityIn such a context, industry observers are less than optimistic in the short term, mainly due to the lack of political and economic stability since the Arab Spring that began in 2010. “In Egypt, purchasing power has been eradicated. In Tunisia, it has declined and in Morocco it has declined a little,” observes Interparfums export director Christophe Albert. “I’m not very optimistic about these markets,” he adds. According to Euromonitor’s forecasts, sales growth should

slow to 4.2% in Algeria, 4.4% in Egypt and 6.4% in Tunisia this year, with only Morocco seeing a slight acceleration of sales growth, at 7.5%. But even in Morocco, largely touted as the most stable market in the region, Albert n n n

Political and economic difficulties and the strength of the parallel market make doing business in North Africa tough, despite a strong consumer appetite for cosmetics and fragrance

Challenges aheadNorth Africa

“

”Interparfums export director Christophe Albert

In Egypt, purchasing power has been eradicated. In Tunisia, it has declined and in Morocco it has declined a little. I’m not very optimistic about these markets

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North Africa beauty & personal-care sales* by countryCountry 2015 sales

$m% change 2015/2014

Projected sales 2016 $m

Egypt 1,160 +12.9 1,214Morocco 758.9 +7.4 815.8Algeria 584.0 +10.3 608.7Tunisia 266.2 +10.0 283.3

Source: Euromonitor International *Retail sales price


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North Africa n n n suggests that prestige sales have slowed by between 5 and 7% this year so far. “The market is difficult because the economy is not performing well, the dirham is losing value on a daily basis, so products that do not come from the parallel market are becoming increasingly expensive to import,” he says.Egypt, the largest market in the region, has traditionally been strongly dependent

on tourism. After the uprising that ousted president Hosni Mubarak in 2011, inbound tourism declined significantly. Terrorism fears after ISIS claimed responsibility for downing a Russian passenger plane, killing all 224 people on board, in October last year, and the unexplained crash of EgyptAir flight MS804 in May this year, have left tourism hotspots practically deserted. Tourism accounted for 11.4% of the Egyptian economy in 2015, down from 17% in 2010, according to data from the World Travel and Tourism Council. Given that 10.5% of the population is employed in tourism and related industries, purchasing power has been dealt a serious blow, observers note. “Sales in Egypt have fallen by about 80% this year, in line with the decline in tourism. The local market has been practically eradicated,” says Albert.Tunisia, where the Arab Spring originated, has since elected a democratic government,

and is hailed as the most liberal country in the region, despite a rise in extremism and several terrorist attacks. “Tunisia is the most developed country in North Africa in terms of its mentality,” Albert believes, although it also has the smallest beauty market, in line with having a population of only 11 million. It is perhaps the most mature market in terms of selective beauty too, thanks to the development of strong local retailers and standalone stores from international brands. MAC and L’Occitane both have stores there, for example, although no international perfumery chains are present.Algeria, while probably the most complex market in the region and the least developed

by selective brands, has strong potential from consumers keen to purchase high-end beauty products, according to Pierre-Alexandre Stark, manager of distributor Intertrade & Consulting. “The market is growing, and [the population] is keen to consume, especially French products,” he says. “Strangely, it is the most expensive products that sell the best in value terms. This is specific to Algeria; it is not the case in Morocco or Tunisia.”Yet, despite government initiatives to encourage official imports in recent years, the

difference between “official” and “officious” exchange rates and ongoing corruption mean that in reality, it is still more advantageous for beauty players to supply the parallel market, a problem that also persists to a lesser extent in other markets in the region.

Fragrance preferenceOverall, French brands tend to be more successful than those from other countries in North Africa, although Puig’s Paco Rabanne and Carolina Herrera are reportedly popular among consumers. This is likely due to much of the region’s strong links to France and exposure to French media. American brands are less present, although several brands from Estée Lauder Companies, including in skincare and make-up, are strongly visible in Tunisia thanks to a longstanding partnership with local distributor Prima, which operates the Pretty Woman perfumery chain. Prima is currently looking to expand to Algeria with Pretty Woman and distribution for the Estée Lauder brands, as well as a standalone for MAC, whose Tunis store it operates, sources say.In fragrance, while mass and direct-sales products dominate the market in value terms in

much of the region due to low purchasing power, in Algeria, for example, LVMH is the market leader with a 15% share, according to Euromonitor. This is notably thanks n n n

“

”Intertrade & Consulting manager Pierre-Alexandre Stark

[In Algeria] the market is growing, and [the population] is keen to consume, especially French products. Strangely, it is the most expensive products that sell the best in value terms. This is specific to Algeria; it is not the case in Morocco or Tunisia

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North Africa n n n to the strength of Givenchy and Guerlain in women’s scents. Throughout North Africa, men’s fragrances account for about half of the market, according to Albert, a much higher proportion than in Europe or the US.Make-up sales in the region are growing, meanwhile, although from a low base,

especially in prestige. According to Euromonitor, Algeria’s annual per capita consumption of color cosmetics in 2015 was $2, compared with $3 in Morocco and $5 in Tunisia. Bourjois was the leading brand in Algeria last year, Euromonitor said, while MAC led in Egypt and L’Oréal was the market leader in Morocco due to its diverse portfolio. Tunisia was dominated by local brand Lella, whose parent company Cosmetica International had a 17% share of the market.For skincare, which is underpenetrated, certain players are looking to alternative

channels like pharmacies to grow sales. Intertrade & Consulting, for example, imports pharmacy brands Lierac, Phyto and Esthederm to Algeria for sale in the pharmacy channel, which Stark sees as having potential due to the advice available there. “We offer the Phyto and Lierac brands in pharmacies using selective distribution codes, a marketing model that is specific to Algeria,” he explains. “Only pharmacists have the will and the skills required to offer advice.”

Retail’s rocky roadIn terms of distribution, the market remains complex and dominated by traditional retail. While some international players have made inroads in the region—French chains Marionnaud (one store) and Beauty Success (eight stores) are both present in Morocco while Dubai-based Chalhoub’s Wojooh has nine stores in Egypt and entered Morocco with two stores earlier this year—observers say it is difficult to reach profitability faced with the prevalence and acceptance of parallel products. “There is no trust, the markets are porous, so many products come from the parallel

market, and if you can find a product 30 or 40% cheaper in the souk in Marrakesh or Algiers, it’s always going to be difficult for a chain like Marionnaud or Beauty Success,” says Interparfum’s Albert. “It’s very difficult for a perfumery to be profitable,” he continues. “If you are not near the entrance to a hypermarket or a supermarket, it doesn’t work; it’s the location of the store that counts in these markets.” Galeries Lafayette, the only department store in the region, closed its store in

Marrakesh’s Morocco Mall at the end of March, to be replaced by French discount chain Tati as the mall repositions to target mass-market consumers. Local chains, while attempting to structure the market and increasingly sourcing their stock officially, face the same problems. As well as Pretty Woman, which has seven perfumeries in Tunisia, another player there is Fatales, with 16 points of sale. In Algeria, the Must chain dominates, with around 10 stores, and others are on the verge of opening, sources suggest.But such players come and go, observers say. “You need to identify the right retail

partners, because those that are performing well today may not tomorrow, and you need to follow them closely financially,” advises Albert. While there is no doubt that North African consumers have a strong appetite for

prestige beauty and there is plenty of room for the market to grow, especially in underdeveloped categories like skincare and make-up, the market remains complex and risky. Analysts warn that what is true today may not be the case tomorrow and that without any market stability, growth is hard to come by. n

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The gradual recovery of the Russian market was a key talking point at this year’s Intercharm Moscow trade

show, which took place from October 26-29 at Moscow’s Crocus Expo Center. The view among exhibitors seemed to be that while the market has not yet fully recovered from the devaluation of the ruble, it has turned a corner. “We had some hard times in the past two years as the currency was very unstable, but since the beginning of this year, it seems that the market [has] become more stable, as the currency has stabilized and customers are willing to invest again,” commented Harald Schielb, Geka account manager business unit Germany, Northern & Eastern Europe.According to show organizers, Russia remains the fourth-largest beauty market in

Europe, and the sixth most attractive region for investment. Euromonitor International estimates that total personal-care sales there rose by just 0.8% in 2015 to $8.93bn and forecasts that for this year the market will contract slightly to see sales of $8.73bn, due to lower purchasing power. Euromonitor says that the annual per capita consumption for beauty and personal care in Russia is $62. Many agree that Russians have not abandoned premium cosmetics and perfumes, even

if it means purchasing smaller sizes, buying less often or making sacrifices elsewhere. Indeed, Euromonitor reported that sales of premium products saw growth of 4.2% in Russia last year. “The more the crisis is [present], the more Russian women invest in good cosmetics,” says Geka’s Schielb. Russian distributor of niche brands Supercosmetics ceo Hayk Sargsyan added: “When the crisis began, the lipstick theory took hold: people couldn’t afford a house, or a new car, so they bought cosmetics and perfume—there was a small boom.” Within prestige, the niche segment is performing well, with Arabic perfumes a

growing trend in fragrance. On the retail front, there are a growing number of niche stores popping up in the country, while key retailers such as perfumery chain L’Etoile are devoting more space in their stores to this category. Organic and natural cosmetics are also being embraced by Russians, reflected by the opening of new stores such as Organic Shop, and an increasing number of brands in this area. Also, in distribution, e-commerce sales are on the rise. Russia’s gradual return to growth was mirrored

by Intercharm Moscow’s exhibitor numbers, which rose 41% to 995 (including 242 international companies from 36 countries). Visitor numbers increased 11.3%, to 69,864. The show featured zones such as La Niche n n n

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Intercharm Moscow

BW Confidential reports on what was seen and heard at beauty trade show Intercharm Moscow, which was held from October 26-29

Getting back to growth

Intercharm MoscowTook place: October 26-29, 2016Exhibitors: 995 exhibitors, +41% vs 2015New exhibitors: 404 Visitors: 69,864, +11.3% vs 2015

Russia beauty and personal care sales* 2015 $bnCategory Sales 2015

$bn% change 2015/2014

Projected sales 2016

Premium beauty & personal care

1.49 +4.2 1.46

Mass beauty & personal care

6.08 - 5.94

Total beauty & personal care**

8.93 +0.8 8.73

Source: Euromonitor International *Retail sales price **Sum of listed categories does not add up to total as all categories are not included


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Talking heads: The industry on Russia“The ruble is going up and down—two years ago it was 50 rubles for one euro. Then we had a time when it was 100 or 110, and then it decreased again, and all this in a short period of time. Because of this, lots of customers went to China, but are now coming back as the situation is stabilizing. Nail lacquer is always very strong, as is mascara; lip gloss is decreasing because lipstick is increasing.Due to the crisis, [Russians] are looking for second jobs, and one option is direct

selling. Faberlic, one of the major [direct sellers] here, always increases its turnover when a crisis starts because it hires new consultants.”Geka account manager business unit Germany, Northern & Eastern Europe Harald Schielb

“Part of the population is looking for cheap products, but there are also consumers who are more focused on quality items. In the past few years, times have been tough, but this year the situation has begun to recover. [Russian consumers] love lip products and bases like foundation. Products for the eyes and for the brows are seeing more success. In the past, the Russian market was

[focused on] door-to-door. Now the situation is changing because of the internet and more people are buying through e-commerce. As for retailers, they continue to do sales promotions very often.”B. Kolor sales & marketing Franceso Savoca

“People can’t buy expensive products in our country because they don’t have enough money to buy in the way they did two or three years ago. In the villages and small cities, they can’t afford to buy expensive goods.”Heinz Glas sales department Evgenia Melyakina n

Intercharm Moscow n n n (dedicated to niche perfumery), and Green Valley, (for natural and organic products). New this year was the Retail Connect Summit (which included conferences with speakers from Euromonitor, NYX and Nielsen Russia). One of the show’s key innovations was a perfume distributor concept by Perfumatic, a Russian company that produces and sells vending machines for spray perfumes. The concept is designed to provide single-dose sprays in locations such as clubs and gyms.

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Philosophy wellbeing beauty workshop

l Location: New Jersey, US l Opened: November 23 l Size: 1,096ft2 (102m2)

l Special features: Conversation circle, digital display of consumer-generated content,

virtual reality-led meditation, hand and forearm massages,

product-finding services

Beauty brand philosophy (Coty) opened a new retail concept called the wellbeing beauty workshop last month in New Jersey, US.

The 1,096ft2 (102m2) store stocks the brand’s skincare, fragrances and bath and body collections, as well as men’s products, and aims to encourage consumer interaction with products. At the skincare section for example, which features product videos, how-tos and ingredient specimens, visitors are encouraged to touch, feel and smell the products on display.At the heart of the store is the conversation circle, where consumers can find

product inspiration, connect with the community or talk to an in-store advisor and select complimentary free samples. The store features a range of services including a gift-wrapping area and offers

individual skin assessments. Customers can find skincare and color products best suited to their skin, as well as discover their fragrance match and avail of a hand and forearm massage. Also at the store is a self-discovery station for the brand’s bath and body scents.In terms of digital elements, the boutique boasts a time-lapse video from

producer Dustin Farrell, a digital display of consumer-generated content and virtual reality-guided meditation.Philosophy donates 1% of each purchase amount to the hope & grace fund for

women’s mental health and wellbeing. Philosophy has just one retail outpost, a store located in Arizona. n

Coty-owned philosophy looks to engage the senses with its new retail concept

Philosophy opens wellbeing beauty workshop





Stor

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s At the heart of the store is the conversation circle, where consumers can find product inspiration, connect with the community or talk to an in-store advisor and select complimentary free samples

s The store stocks the brand’s skincare, fragrances and bath and body collections, as well as men’s products, and aims to encourage consumer interaction with products

BW ConfidentialThe inside viewon the internationalbeauty industry

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