Bulgarian cosmetics and toiletries market set to grow
cosmetics and toiletries market will grow by nearly 28 per cent by
Following the recent accession of ten countries to the European Union (EU), thoughts have already turned to one of the next wave of new member states set to join the EU in 2007 - Bulgaria.
Taking into consideration both the positive and negative factors influencing the Bulgarian cosmetics and toiletries market, in their recently published report Euromonitor predicted that it will be worth more than Leva345 million (€177 m) in 2008, up by nearly 28 per cent in constant value terms.
Since the 1996-early 1997 economic crisis, Bulgaria has achieved macro-economic stability and has a stable currency, low basic interest rate and substantial foreign-exchange reserves. The country's cosmetics and toiletries market rebounded from the financial problems experienced in the mid-late 1990s to increase by nearly 103 per cent in current and 32 per cent in constant value terms.
Real economic growth significantly accelerated from 2.4 per cent in 1999 to 5.8 per cent in 2000. After the sluggish growth in 2002, the Bulgarian cosmetics and toiletries market grew by a healthy 5.1 per cent in current value terms to be worth Leva270 million (€138.5 m) in 2003. The market's strong performance can be traced back to consumers trading up to higher-quality and added-value products.
The seven per cent current value growth in sales of skin care products during 2003 reflects the greater purchasing power of the population combined with the increased offering of new products targeting new niches like anti-ageing and anti-cellulite body care products. All these factors helped drive skin care sales and positively influenced cosmetics and toiletries sales in general.
Looking forwards, the strengthening economy will result in increasing disposable incomes, but this positive development will be counterbalanced, to some extent, by a shrinking and ageing population, which will hinder greater growth of cosmetics and toiletries sales. Additional factors positively influencing the future performance of the market will be the expansion of the distribution system, development of unsaturated market niches and strengthening of the domestic manufacturers. Growing utility expenses will have a negative impact on sales.
According to the Euromonitor report, during the review period the biggest gains in terms of sales per distribution channel were realised by direct sales, which gained more than 10 percentage points. Avon, for example, has had a subsidiary in Bulgaria for a number of years that now has about 35,000 representatives and claims 70 per cent brand awareness.
Supermarkets/hypermarkets gained five percentage points, while the biggest losers among the distribution channels were outdoor markets and "others", which between them lost almost 15 percentage points. This shift was due to the development of the distribution system in Bulgaria over the last six-eight years. After the government started implementing significant and quick reforms, a number of international companies entered the market, investing significantly in building modern distribution facilities.
Foreign companies have benefited tremendously from exchange rate fluctuations. The weaker US dollar made imports more competitive against local products in terms of pricing in 2003 and helped grow the market share of international companies. The average exchange rate dropped from Leva2.18 in 2001 to Leva1.75 to US$1 in 2003 [Leva 1 = US$0.61 = €0.51 as at 12 May 2004], a change of substantial importance considering the significant number of imports that are based on US dollar prices. Strong price sensitivity among consumers explains the gains or losses in market share following even small fluctuations in prices.