Romanian beauty firms try to conceal market blemishes

Newsroom 13/12/2010 | 12:40

The cosmetics market is not going to win any beauty contests this year as far as profits go. 2010 proved to be an ugly time for manufacturers with the market decreasing for the first time in recent years. Nevertheless, local companies take pride in their renewed consumer popularity and what they call more than skin deep profits, announcing plans that should scrub off the effects of the crisis.

Simona Bazavan


The cosmetics market has declined on specific segments in the past year compared to 2010, but continues to count itself among those fortunate enough not to have experienced the full blown effect of the economic crisis, Ioana Borza, marketing manager at Farmec Cluj-Napoca, one of the main local cosmetics manufacturers, tells BR.

Estimated at around EUR 550 million, the market is expected to drop in 2010 for the first time after years of constant growth. According to Raluca Raschip, consumer tracking director at GfK Romania, the personal care segment was hit the hardest, falling by ten percent in the first nine months of the year due to the fewer shopping trips made and less money spent by consumers.  “The numbers show that the local market is about ten times below those in countries like Poland or the Czech Republic. This also means that there is still room for growth in future years, but only after the current economic context picks up,” Rucsandra Hurezeanu, Ivatherm’s founder and GM, tells BR.

In the battle with their bigger international counterparts, local manufacturers have become more vocal, choosing to invest more coherently in promoting their brands. New products were launched in 2010 and as elsewhere in the FMCG sector, promotions lent a helping hand to boost sales, albeit affecting profitability.

So far the efforts are paying off, manufacturers say. “From our data, local products are growing against international ones, especially in the skin care segment. By local, I mean Romanian brands and not various no-name products made in Romania,” Andreea Cremenescu, brand manager at Elmiplant, tells BR. The tighter purse strings brought about by the recession have made cautious consumers pay more attention to the price-quality ratio, and this has also worked in favor of local brands.

For Farmec Cluj-Napoca the recipe for success was investing in marketing and brand promotion and extending its distribution network while keeping a balance between modern and traditional retail. This year the company limited large-scale investment projects and threw more money into marketing with a budget of over EUR 1 million for communication and brand promoting, according to Borza. The Gerovital H3 Evolution and Gerovital Plant Tratament product lines were among the brands which benefited from the funds this year. The promotion of the latter also included an online campaign targeting bloggers.

For 2010 Farmec Cluj-Napoca announced a RON 72 million (approximately EUR 17 million) turnover for the first three quarters of 2010, a 9 percent growth against the same period of 2009, according to company representatives. About 10 percent of the company’s turnover is generated from exports, with Gerovital and Aslavital being Farmec’s most popular brands among foreign consumers. Farmec Cluj-Napoca exports to over 30 countries, but Japan, Lebanon and the United Arab Emirates are its top three external markets, says Borza.

“For the past two years we have mainly concentrated on growing on the local market but in the future we intend to focus intensively on developing new partnerships outside Romania,” concludes the marketing manager. International expansion is also on the cards for another local manufacturer Ivatherm, who will target neighboring markets in 2011, says Hurezeanu. Ivatherm was established five years ago and is Romania’s first and only derma cosmetics manufacturer. Until 2010 the market for derma cosmetics had proved very dynamic, with growth rates of as much as 40 percent in 2008.

This year, however, the market will follow the general trend and will most likely drop by about 10 percent, estimates Hurezeanu. Consumer behavior is also changing. “While previously consumers knew they would find safe and efficient products at a fair price in pharmacies, now they are starting to look for promotions here also,” says the GM, explaining that the company has had to adjust by shifting to more consumer-friendly communication and sacrificing profitability to market share. Nevertheless, Romanians are receptive consumers who are getting more and more accustomed to the derma cosmetics concept and the market offers a lot of room for future growth, Hurezeanu adds.

For 2010 Ivatherm expects a EUR 2 million turnover, an increase of approximately 10 percent against the previous year. The bulk of the investment budget for this year went into marketing, research and innovation, with the launch of new products such as the UNA anti-aging product line and Resveratrox Forte Anti-cellulite. Although a Romanian brand, Ivatherm products are manufactured in France and contain thermal water from Baile Herculane, a local spa resort. Distribution is done exclusively through pharmacies, with the company having a distribution network of about 1,000 units.

Elmi Prodfarm is another local cosmetics company betting on growth in 2011 with an 18 percent turnover increase this year, to EUR 5 million. Taken over by Greek Sarantis in 2007 for EUR 6.5 million, the company underwent an extensive rebranding campaign, launching 65 new products in 2009 and ten more this year. “After the takeover by Sarantis, all efforts were targeted towards rebranding the product portfolio (…). In fact, Elmiplant finally got the well-deserved support we had been searching for for a long time,” Cremenescu says. The company is market leader on the anti-cellulite product segment with its Bodyshape and Cellulight brands. As for what 2011 may bring, Cremenescu predicts that overall the cosmetics market will continue its downward trend, at least in the first semester.

simona.bazavan@business-review.ro

 

COMPANY PROFILES


Farmec Cluj-Napoca

Founded Roots go back to 1889, modern history begins in 1967

Estimated 2010 turnover approximately EUR 17 million

 

Elmi Prodfarm (Elmiplant)

Founded  in 1992 by Elena Cremenescu and sold to Sarantis in 2007 for EUR 6.5 million

Estimated 2010 turnover EUR 5 million

 

Ivatherm

Founded  in 2005 by Rucsandra Hurezeanu. It continues to be the only Romanian derma cosmetics manufacturer

Estimated 2010 turnover EUR 2 million

 

Gerocossen

Founded  1990

Q1 2010 turnover EUR 1.3 million

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