Intercharm 2008

Now into its 15th year Intercharm, the largest C&T exhibition in Eastern Europe, is getting bigger year by year.

And the number of exhibitors using the show as a springboard to enter the Russian market is growing in turn.

The impressive Crocus Expo exhibition centre on the outskirts of Moscow was again the setting for this year’s Intercharm, an event that is high on the agenda of those interested in the burgeoning C&T market in Eastern Europe, and in particular Russia.

This market is one that many exhibitors at Intercharm are looking to crack, such is the potential of this emerging industry. As recently as 2002 there were only single outlet beauty stores in the country, now L’Etoile for example has 500 doors in Russia, predominantly in Moscow and St Petersburg. It is a sign of how times have changed, according to Anna Dycheva-Smirnoff, editor in chief of Cosmopress and a regular ECM contributor. “The C&T market in Russia was worth $US8.6bn last year and has been growing at a rate of 10% YoY for the past three years. We think that by the end of this year the market will have swelled to $US9.3bn and we are predicting that by 2013 this will have risen further to between $US15-18bn.”

Pretty impressive figures for an industry that could best be described as fledgling only a few years ago. More exhibitors and visitors than ever are flocking to Moscow every October to try and get Russian distribution, confident that if they do it will open the door to a whole host of possibilities.

Making inroads

Many exhibitors were keen to get their foot in the door of the Russian market, as Roman Godek, president of Chantal hair care products, explained.

"We are a Polish company and there has always been tension between the two countries which makes it a bit difficult now we are trying to enter the Russian market. We were distributed in Moscow about ten years ago but we got cheated by our Russian distributors unfortunately and lost a lot of money. Because of this we pulled out of the country immediately. “But the way things have gone we absolutely need to get back into Russian retail channels as we cannot afford not to be. That is testament to how powerful this industry has become.”

These sentiments are echoed by Jevgenij Gafurov, commercial director of Lithuanian company Eilorita, which specialises in supplying nail polishes and equipment to the retail and professional channels. Gafurov says the brand is already sold in some Moscow retail independents but that he was using the show to make inroads with distributors from some of the major retail chains. He said: “We have been to this show for the past three years and I think it’s one of the best shows to go to. To be a success in the Russian market means big business for any company. Russia is a country with 141 million people in it and several of the big cities have over one million people in each. Coming from a country like Lithuania where the capital city has only 600,000 people, we are well aware of the impact such a large number of people can have when it comes to their spending power.”

Securing distribution

This was a fact not lost on the Russian distributors present at the show, many of whom realised they would be the first point of call for those attending to find distribution. Sudarikov Vladimir, business development director of Gradient, one of Russia’s largest distribution chains told ECM that they had had a lot of interest so far. “We have had enquiries from smaller companies that are trying to break into the market – most of the larger companies are already here. Intercharm really is a show for niche brands and we have seen a real interest from niche areas such as organic cosmetics and natural skin care. Russian consumers are turning back to mass market products in their droves because of the credit crunch so this is the direction that many manufacturers are also moving towards. Previously there have been no shops catering for this market – there were either ones selling premium products or those selling very cheap ones.”

Vladimir also suggested that there is a lack of education within the country when it comes to C&T purchasing.

“Consumers in the big cities like Moscow are well educated in what is available, but those in the country and in the smaller towns are not privy to the big advertising campaigns and marketing materials that go hand in hand with the world of beauty.

“In this way nothing much has changed for them since soviet times. The rest of Russia has been flooded with choice and variation in C&T but the rest remain ignorant to what is available, through no fault of their own.”

These were thoughts echoed by Andrey Nerushay, general director of fellow Russian distributor Unitop. The company distributes French, English and Italian fragrance and cosmetics brands throughout Russia.

“C&T is very important to some Russian people and goes practically unnoticed by others,” he said. “It is a strange parallel and is very dependant on where you live and which socio-economic bracket you fall into as to whether you will get to hear about new launches and developments in the industry. That is why Intercharm is so good because it brings all the major Russian distributors, manufacturers and retailers together under one roof. Together with the non-domestic exhibitors that makes for a really good show.”

Nerushay feels that Russian consumers aren’t loyal to home grown brands, rather they prefer French and Italian brands such as Dior, Givenchy, Gucci and Collistar. “Most Russians buy French fragrances,” he says “because of France’s worldwide heritage with perfume and they simply do not feel they have the choice or quality of products in their own country. And the same goes for the cosmetics they buy. It has a lot to do with communism where cosmetics and fragrances were not encouraged or invested in, therefore we have a lot of catching up to do.

“I don’t think the credit crunch is restricting Russian’s spending on beauty items. The ones that do spend the money, particularly young women, spend it regularly and wouldn’t go without their mascara or blusher. The choice is very clear cut for them, they have standards and they will stick to them. They would rather go without other things instead, such is the importance of looking good to them.”

Back to nature

While Russia is not particularly strong on the scent or lipstick front, one area it is making progress in is that of natural body care. The country utilises its indigenous ingredients such as honey and goat’s milk for their softening and cleansing properties and Intercharm was filled with Russian exhibitors showcasing their natural wares.

One such company was Natura Siberica, a natural body and hair care brands that uses organic ingredients in every single one of its 50 products. The brand is already sold in its native Russia, Khazakstan, Latvia and the Ukraine but was using the show as a platform to break into Europe, particularly the UK and France.

“We launched in January 2007,” said Elena Palul, brand manager for Natura Siberica, “so it’s still very much a time of expansion and growth for us. We recognised that the Russian appetite for natural products was increasing when L’Occitane en Provence started flying off the shelves a couple of years ago after it was introduced. We thought we could offer something better and cheaper. We are sold largely through Russian pharmacies, which is a key retail chain in this country.

“We are using the show to look for more distribution overseas, so we are the opposite to lots of people here. While they are looking to break into our market, we are looking to break out of it!”

Johanna Dilling, sales manager from Weckerle Cosmetics, was manning her stand in the German pavilion – other country pavilions present were Spain, France, Poland, Turkey and Brazil – when ECM gauged her thoughts on the show. Dilling said that she felt being grouped together as a country worked well as visitors knew exactly where to go.

“That said, most of the visitors have been Russian speakers so that has caused some problems. It is still largely a show for Russians despite being billed as one for the whole of the Eastern European market. And I also think that while we have had good footfall at our stand, it is more useful at this show to get out and about and talk to people at the Russian stands. So next year, if we came back, we wouldn’t take a booth.”

But while this was one viewpoint, in the next hall Farmasi, a Turkish Cosmetics company which exports its colourful products to 116 countries worldwide, was doing a lively trade in visitor makeovers. Explained Elcin Gokhan, export manager for the group: “For us, the best way to showcase the quality of our products is to provide makeovers where we get our professional artists to apply our make-up so visitors can see its stunning effects. This is certainly paying dividends for us at this show as Russians are very keen on their bright colours and we offer over 2,000 lines for them to choose from in a variety of colours.

“We are here to find a distributor in the south of Russia as we already have one in the north. And we are hopeful because many of the distributors here are supplying mass market channels and that is exactly the market that our price point is suitable for. With the recent credit crunch this channel has stepped up a gear and we have seen our sales increase as a result. Consumers are realising that in order to afford make-up these days they must plump for reasonably-priced brands. But obviously they still want quality and this is what Farmasi’s products can offer them. So, as far as we are concerned, the future is bright.”

This would seem to hold true not just for Farmasi but for the entire Eastern European market if Intercharm’s footfall and popularity are anything to go by. It seems this not-so-fledgling emerging market continues to go from strength to strength.

Russia - not for turning

Anna Dycheva-Smirnoff is the editor in chief of Cosmopress, a newsletter which covers all aspects of the Russian fragrance and cosmetics industry.
Speaking to the press at Intercharm, Dycheva-Smirnoff said that the Russian C&T market, while so far remaining largely untouched by the credit crunch, would go through a purification process, which she said would be beneficial for the industry in the long run.
“It will weed out some of the brands that can’t stand up to scrutiny and leave only quality brands that are efficacious. Russian consumers are not fools – they study chemistry to a high level in school and know all about ingredients and formulations so there is no pulling the wool over their eyes when it comes to products.
“Russians are one of the leading buyers of luxury cosmetics goods in the world and they will not be deterred by the credit crunch. We have a very cash-based society and rather than rely on credit cards and loans, we use cash to fund our purchases. This means that if people have the money they will spend it and if they don’t they will not. But nothing seems to have stopped them spending so far and I don’t anticipate a drop in the market of more than 5% in the next two years.”

Improvements for 2009

Dycheva-Smirnoff says that there a number of improvements planned for 2009’s Intercharm, the plans for which are already well underway. These include:
l Introducing a Pharma section to the show to represent the fact that this channel is growing by 30% per year
l Complementing this with Pharma and Beauty – a networking event for pharmacy professionals
l Growing the raw ingredients/packaging section next year and also the Zoom section
l Introducing a new section for Bio products encompassing anything that is specifically natural and organic
l Launching a brand new spa section for next year’s show including an interactive salon area to showcase new spa products