The Russian cosmetics market surpassed a value of $9bn (€6bn) in 2008, representing a 10.3 per cent increase in value over the previous year.
This growth was driven by a huge increase in consumer activity, combined with a strengthened distribution network as well as a big increase in the number and type of products available.
Lower spending power slows growth
Although the cosmetics market in Russia has undergone a complete turn around in recent years, the upheaval in economic fortunes has meant yet more changes to the industry’s landscape.
According to market researcher RNCOS, the economic downturn has led to lower spending power for Russian consumers, which in turn will lead to a ‘slight slowdown’ in the rate of growth.
As witnessed worldwide, Russian consumers have decided to shun luxury cosmetics and branded products, opting instead for ‘better value’ mass market products.
Changing industry landscape
RNCOS says that the shift towards mass market products will help rescue the industry from negative growth, as it is expected that consumers will diversify from purchasing one luxury product, to multiple mass market purchases.
Alongside Brazil, India and China, Russia is one of the BRIC markets, enjoying phenomenal economic growth that has led to the development of a sophisticated, vibrant cosmetics market.
However, of the BRIC markets Russia has been hardest hit by the economic downturn, with recent data released by the Russian government suggesting that the economy will shrink by 7.5 percent in 2009 and retail sales slide 9.8 per cent in the year up to August 2009.
Robust growth should return in 2010
However, with oil prices and supplies recovering, the country is expected to exit the recession in the fourth quarter of this year, and many analysts believe the recovery will be rapid.
“We expect the industry to recover by the beginning of the second half of 2010, driven by economic recovery, rising consumption levels and positive outlook in consumer purchasing power,” RNCOS said in a statement about the market.
“Despite the slower growth level projected for the next one year, we place Russia as one of the favourable destinations for cosmetic industry investment among the emerging cosmetics markets worldwide, which gives positive outlook for industry in the long term.”