Situated to the west of central Europe, Slovenia’s C&T industry is gaining momentum. And, after gaining independence from Yugoslavia in 1991 the country is gradually getting to grips with what it takes to become a recognised market.
Often referred to as the ‘Revolving Door of Europe’ Slovenia borders European Austria, Croatia, Hungary and Italy. Due to its location and accessibility to its wealthy European neighbours, Slovenia is frequently used as a passageway for European export and import trade but is itself often disregarded as an ex-Yugoslavian country of little significance. However, as it struggles to break free of its former ties after declaring independence from Yugoslavia in 1991, the country is starting to forge a path of its own.
Part of the new EU
Slovenia, due to its size and comparatively small C&T industry, can often be viewed as the poor relation of western EU countries in terms of innovation and product development. However, according to European industry trade body Colipa, it is producing results within the new EU collective. Recent newcomers to the EU are Bulgaria, Cyprus, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Romania, Slovakia and Slovenia. Grouped together with these countries, Slovenia is standing out from the crowd – posting the highest levels of spending per capita on cosmetic, toiletry and perfumery products, second only to the Czech Republic. And given that Slovenia is comparatively small in geographical size (covering 20,273 km2) this is no mean feat.
According to Helena Gombac, secretary general of the KPC, the Association of Cosmetics and Detergents Producers of Slovenia, the country’s drive to succeed is paying off: “The Slovenian market has shown steady growth over the past few years and product category volumes are changing and showing good growth rates. Looking at the different product categories it is anti-ageing, natural, sun protection and baby care products that are showing the highest levels of growth.” Market share for fragrances is also growing, which is thought to reflect a wider availability of products and a shift in consumer habits. Indeed Slovenian consumers, says Gombac, are growing increasingly savvy when it comes to purchasing. “Consumers are becoming more and more aware in terms of the differences of quality and the composition of the products. Price is now not the only purchasing decision factor, but is combined with the need for known and trusted brand names and the awareness and desire for certain niche categories such as natural cosmetics – although this market is still very small”.
High flyers
Like many smaller European countries it is the large multinational brands, which sell in popular retail stores suc as Tus, Spar and E Leclerc, that are the most sought after by Slovenian consumers. According to Katia Lysionak, research analyst for Euromonitor, the global behemoths are leaders in most product categories: “The top four companies in 2008 were L’Oréal Slovenia, Beiersdorf, Procter & Gamble and Henkel Slovenia. In value terms, all together they accounted for 40% of the total Slovenian C&T market. Indeed all but P&G held leading segment positions with L’Oréal Slovenia ranking number one in colour cosmetics, Beiersdorf in skin care and baby care and Henkel Slovenia in hair care.”
However, that is not to discredit the domestic players on the market. In EU terms these companies are not deemed large, categorised as small and medium enterprises (SMEs) with many at micro-size and many of them smaller niche companies with only four local manufacturers of noticeable size, according to Gombac.
Two of the largest C&T manufacturing companies on the Slovenian market are Ilirija and Kozmetika Afrodita, which are undeniably popular but still fall somewhat short of the success of their global competitors. According to Gombac the most important product categories for the local companies are face and body care, oral care, hair dyes, sun care and specialist treatment products such as those for anti-cellulite. Likewise professional hair and body care are also important categories. However, the growing trend for natural and organic cosmetics that is currently sweeping Europe is yet to have an impact on Slovenia. “Local manufacturers do not yet supply wide ranges or quantities of natural products,” says Gombac. “The natural and organics market is not yet big however in the past five years is has been visibly expanding. There are more brands available, more information available to the public and the media attention and advertising of this sector is raising awareness and generating demand.” Indeed, as manufacturers start to grasp the power of the media when it comes to advertising, it would give a much needed injection to a cosmetics industry that has great prospects.
Jana Tercelj from successful domestic company Ilirija feels the Slovenian C&T market has more to offer: “The Slovenian market has matured over the past five years, but I think it has the ability in the future to challenge other Central European countries in terms of sales. Slovenian consumers are only fairly moderately educated when it comes to cosmetics purchasing and this is something we must look at. Ilirija is a company with a good heritage, founded in 1908, which distributes products on the mass market.” As well as creating its own lines, Ilirija also distributes other multinational brands. Says Tercelj: “Subrina is our main brand along with our our Green Line range. We also distribute Revlon and Biokill, which are not our brands, but sell well for us. We generate most of our sales through distribution channels such as Tus, Spar and Mercator but our plan for the next five years is to strengthen the professional segment by entering new markets”.
Private label is also a growing market, with the number of basic private label products launched over the past few years growing. These are mainly sold in non-specialised retail chains and created by local manufacturers. Gombac sees growth in this area, with the products getting exposure from their initial launch through the widespread retail network they launch into and the reverberations of the economic crisis pushing these often cheaper products into the spotlight.
Global intuition
Due to its favourable geographical position within the EU, placing a future focus on entering new markets would seem something of a given for Slovenian cosmetics companies and Lysionak thinks this is something that could give the two main Slovenian C&T companies a competitive edge. “Due to the dominance of the multinational brands, import trade is crucial to Slovenia, while the export business is less important. That said, if both Kozmetika Afrodita and Ilirija want to grow their strategies outside of Slovenia’s small boundaries they would be wise to include strong international activities that will allow volume increase as well as higher profits. But again, domestic companies’ ability to invest in marketing is small compared to foreign multinationals.” Gombac adds: “Slovenian export sales reached approximately t200m in 2008 and have been mostly geared towards neighbouring countries such as Austria, Hungary, Italy and other central and Eastern European countries and also ex-Yugloslavian countries such as Croatia, Bosnia and Herzegovina. Slovenian cosmetics are also distributed in Germany and Spain and in certain product categories, products are being exported to more far flung places.”
Best of a bad situation
As with most western countries, the Slovenian C&T industry is suffering at the hands of the global downturn. Although not seeing a huge effect over the past year, it has now trickled down and is hitting sales figures across the sector. According to Lysionak: “The recession, which is a consequence of the financial crisis in 2008, will cause a slowdown in the value growth of C&T. Some positive growth trends of recent years will turn negative in the forecast period in 2009-2013. A good example is colour cosmetics, which is expected to record a negative growth rate since colour cosmetics are not enjoying the same popularity as in other ex-Yugoslavian countries for example.”
Understandably the Slovenian C&T market is dominated by multinational companies who have deep pockets to spend on marketing and advertising and low priced mass market products that appeal to the consumer. The country is at present falling short in its exportation trade opportunities and relies heavily on imported goods from foreign, well known brands. However, as Slovenian consumers gain more knowledge regarding their C&T products the underdog could fight back, with local brands creating more competition for the behemoths. Gombac says: “Some local brands have existed for decades here – consumers trust them and are traditionally attached to them. These brands are constantly improving themselves and following the trends set by the larger multinational brands such as P&G and L’Oréal.”
While the multinational companies have a firm hold on the Slovenian C&T market, the feeling is that Slovenian consumers would prefer to buy domestic where possible. With local brands upping their game of late and spearheading innovation the population may get a chance to exercise their loyalty more in the future than they now realise.
Kozmetika Afrodita factfile
Began as a direct sales company, moved to retail stores in the late 1980s
Employs 120 staff
Market share in Slovenian C&T market is 6%
Retails worldwide including ex-Yugoslavian countries, Russia and Germany