Not only grouped politically but also culturally, the Nordic countries are synonymous with innate beauty. From the Norwegian fjords and mountains, the flat, low areas of Denmark, Sweden’s archipelagos to the Finnish moraines and lakes, the region has a lot to offer, including an abundance of natural resources. Alexandra Shore explores how these resources are being put to good use
With a vast and varied terrain, the Nordic countries span the three kingdoms of Sweden, Denmark and Norway along with Finland. A chequered history unites the region, otherwise known as Scandinavia and, while economic success may differ from country to country, the region as a whole enjoys reasonable stability.
Despite this present economic commonality, it was not always so. Sweden experienced a severe recession in the 90s and its growth rate dipped once again in the early 00s, from which it has slowly been recovering. Denmark meanwhile has maintained a strong economy over the past few years and its people enjoy a high standard of living. Norway, remaining outside the European Union, celebrates its position as the country with the second highest GDP per-capita in the world.
Finland, historically bound to the Baltic countries since it was subsumed by the Russian Empire, became independent in 1917 thus making the concept of a Nordic community rather than a united Scandinavia a reality. Its turbulent economic collapse in 1991 saw the end of the bartering system with the former Soviet Union, from where some 20% of its trade originated. However, since 1995 the country has made largely positive steps and is now listed as having one of the highest growth rates of the OECD countries and the only one of the four who chose to join the Euro Monetary Union, with the likes of Denmark and Sweden rejecting membership through referendum on 1 January 1999.
It is true to say that, due to their geographical position and high operating costs, the Nordic countries have, up until now, not attracted much interest from major foreign retailers and the
multinationals too have often come second place to home-grown business. However, times are changing and the markets are finding themselves having to make space for investment from abroad.
Facing the facts
In terms of the C&T markets, Denmark proved to be a shining beacon in 2006, growing 8% to total t0.928bn, following on from a 7% rise the previous year, according to Colipa. The country tends to pay a higher price for beauty products but consumers don’t appear to mind. It is true to say that the premium and mass sectors are becoming increasingly less polar. Sweden did not perform as well in growth terms however, putting on 1.6% to total t1.552bn.
Finland put in an even stronger performance in 2006 to total t0.758bn, an increase of 8.8%. This can be attributed to the Finns’ increasing lust to take better care of their appearance, leading to higher spending on C&T products. Enticing consumers by constantly offering innovation is key to the market as the Finns are keen to try out new beauty items. Norway weighed in with t1.022bn, indicating a 14.6% rise on last year’s t0.892bn.
In contrast, Euromonitor figures for 2006 show a less optimistic picture. Denmark’s C&T market pulled off a steady 0.7% rise to t0.750bn, while Sweden increased just 0.6% to t1.188bn. Still Finland’s t0.647bn (+5.9%) proved a success and Norway’s t1.075bn (+3.2%) is nothing to be sniffed at.
Hair care, skin care and colour cosmetics feature in the top three categories of all four countries. Drawing on the strength of these sectors, Swedish companies Oriflame, who reaped a sales total of over t917m in 2006, and Invima, brand owner of IsaDora cosmetics, have proven popular and both draw on their ties with the natural beauty associated with the region.
A successful Finnish brand with a close eye on the skin care and colour cosmetics categories is Lumene (Lumene Group). Launched in its native country in 1970, its first products were skin care, soon opening out to include colour cosmetics. Within three years it was the market leader in Finland and maintains this position today, holding back multinationals such as L’Oréal and Beiersdorf. The Lumene Group comprises of three divisions of which Lumene, the cosmetics division, is by far the biggest. In 2006, group turnover was t140m. Double-digit growth is expected for 2007.
Local resource
Lumene is seen as a strong brand both at home and internationally. Vice president, Pekka Silvennoinen, explained why: “What is really interesting is the Lumene story which is a combination of the power of Nordic nature and scientific beauty. We are probably the only company who can take advantage of native ingredients.” The mineral-rich peatlands and natural spring water of the Arctic circle help to cultivate resources such as the Arctic berries blackcurrant, cloudberry, cranberry and sea buckthorn, linseed and canola oils and willow. “The Nordic region consists of a people bound together with nature,” he added.
With a third of the business focused on Finland and another third in Russia, the rest is concentrated in the US (20%) and other international markets. Lumene has been in Norway for 27 years where market share is an estimated 7-8%. Last year it bought out the distribution centre. Though not yet on the Danish market, it is looking at possible options.
Despite a clear focus on its core Nordic and Baltic markets, the company is very aware of the larger picture. “We’re not aiming to conquer the world but why not take our products to the rest of Europe? We’re interested in the international markets too. To the US consumer products straight from nature are compelling but we still have to carefully pick our market. We’re in the process of quite a few interesting discussions at the moment.” Lumene recently entered Chile with pharmaceutical chain Fasa and in February announced that it had signed a distribution agreement with US retailer Target.
His eye trained on both the Nordic and Baltic markets, Silvennoinen highlighted the differences between the two types of consumer: “If you look at the skin care category and the colour cosmetics category, the Nordic consumer takes a much more holistic view of beauty and so, therefore, chooses more caring products while the Baltic consumer is interested in beauty with a less natural focus.”
Healthy competition
According to Colipa, there are signs that Swedes and Danes are willing to pay more for natural and organic products on a per-capita basis and the rest of the world is playing catch up. But with this voracious global interest in all things natural, are Nordic brands like Lumene in with a fighting chance on an international scale? “I suppose the natural trend could be a threat but ours is a powerful story that seems to be working so far. Consumers who want 100% organic are more of a niche in the market. Lumene doesn’t market itself as purely organic and isn’t thinking of doing this either.”
Lumene’s products are placed in the masstige market, according to Silvennoinen. Its top selling line Vitamin Plus, an anti-wrinkle skin cream which won an independent award in 2002 and is soon to be relaunched as Vitamin C Plus, boosted sales to jump its market share from
4-5% to around 9%. It recently won the The Readers Digest Trusted Brand award and CEW Beauty Award 2007 under the category Facial Skin Care for its Time Freeze Instant Lift Mask which the company proudly displays on its website. “Typically for these awards it is the market leaders who receive nominations so it is nice for our company to get recognition and it’s even more significant when it’s on an international platform.”
Retailing traditions are changing throughout with the growth of the internet and the market opening to further competition. Both Tesco and Carrefour were said to be considering entering the Swedish market in 2006, which would shake up the retail landscape.
Silvennoinen pointed out that enormous gains can be made by paying attention to small details through in-store displays and promotion. In terms of distribution, Swedish department store Ahléns leads the cosmetics and fragrances market which can be attributed to its acquisition of Kicks cosmetics chain in 2002. According to Mintel, in 2005 the store accrued C&T sales of SK960m. Other Swedish beauty stores to register on Mintel’s list of major health and beauty retailers are Parelle Beauty with SK250m and The Body Shop, registering SK220m.
Stockmann is one of the leading retailers in the Finnish market, operating separate Stockmann Beauty stores throughout the country, while Denmark’s leading health and beauty retailer is drug store Matas. The three leading cosmetics mail order operations include Nature’s of Scandinavia, US brand Nu Skin and French brand Yves Rocher.
According to Euromonitor, Denmark’s predicted total for 2007 is t0.756bn, a year on year growth of 0.9%. Sweden is on target for t1.210bn, (+1.8%), Norway set on t1.114bn (+3.6%) and Finland should produce t0.685bn (+5.9%). Already into the second half of the year, the markets are looking positive. Silvennoinen added: “There is a tradition in the Nordic countries that virtually everything is closed in the month of July but this is changing as business becomes increasingly international. We all need to keep our doors open if we want to compete.” Local manufacturers have at least one strong advantage in their favour which is knowing their own market. This finely tuned model definitely has the force of nature behind it.