Avon Cosmetics Romania boosts sales and profits
general penetration into rural areas has helped to take the Avon
Cosmetics Romania's turnover above the €100m mark, in turn boosting
profits by 50 per cent.
"The Romanian cosmetics market is maturing. Though major global competitors have been present in Romania for some time, the penetration of daily hygiene products in rural areas and of niche products in urban areas has not reached its full potential," said Raluca Kisescu, Avon Cosmetics Romania marketing manager in an interview with Romanian newspaper Ziarul Financiar.
The company reported that for the financial year 2005 its gross income grew to €16m, around 50 per cent higher than the 2004 financial year, while turnover hit €106m, up 18 per cent, making it the biggest player in the country.
Together with the fact that the company's perfume segment reported a 60 per cent increase in sales, executives also pointed out that increased recruitment and training of sales staff had helped to increase sales, particularly in smaller towns and more rural areas. A big advantage in a country with a high rural population.
The success comes off the back of a big increase throughout the central and eastern European markets, where strong economic performances have pushed up consumer spending in most areas.
In Romania the economy has been growing rapidly compared to the rest of Europe, growth that is being accelerated due to increased activity as the country prepares to join the EU next year and also recovers from the devestating floods that hit it last year.
This week the Romanian government reported that GDP in the first quarter of the year grew at 6.9 per cent compared to a Eurozone GDP of 0.6 per cent, and made predictions that GDP would stablilize at around 6 per cent for the year as inflation continued to fall from 8 per cent to 5.5 per cent.
For cosmetic and toiletry players such as Avon, the increased stability in the economy is being translated into a more optimistic and affluent consumers increasingly willing to spend more money on products that were once deemed to be a luxury.
Reflecting the increasing importance of the Eastern European markets, Avon restructured its business infrastructure at the beginning of this year, which now means that the region is managed as a stand-alone business.
At the time, the company said that the move reflected the increasing importance of its business operations in the region, where sales growth has topped 10 per cent in the last few years.
Currently Euromonitor estimates that the Romanian market for cosmetics and toiletries is valued at €250m, with growth expected to be as high as 20 per cent this year.
