Shoe retailer Econika and clothing chain 2MOOD are entering the perfume and cosmetics market

After large Western manufacturers of perfumes and cosmetics refused to invest in the Russian market, local companies began to create their own lines en masse. Thus, to work in this segment, the shoe retailer Econika and the clothing chain 2MOOD registered a joint company, Glow Beauty. Over the past year and a half, almost 150 new cosmetic brands have already been created in the country. However, the dominant position in the market is still retained by global brands, since they have localized production in Russia for a long time.

As Kommersant discovered in the Unified State Register of Legal Entities, on October 17, the owners of the Econika shoe chain (130 stores throughout the Russian Federation; revenue for 2022, according to SPARK, is 10.45 billion rubles) and the clothing brand 2MOOD (15 points of sale; revenue last year – 1 billion rubles) created Glow Beauty LLC to produce perfumes and cosmetics. In the new company, 25% was received by the Econika structure – Esperance, 10% – by the main co-owner of the shoe chain, Alexander Iliopulo, the remaining share was distributed among the co-owners of 2MOOD: 30% – by Sergei Borisov and 17.5% each – by Ekaterina Gayur and Christina Khoronzhuk.

2MOOD told Kommersant that the new company was created for possible future projects. Econika did not answer the questions.

The situation in the perfumery and cosmetics segment in the first year of the new crisis was slightly better than in clothing retail. According to Infoline, in 2022 in Russia, the turnover of the perfume and cosmetics market decreased by 4–5%, to 800 billion rubles, and the clothing market – by 10.3%, to 2.6 trillion rubles.

The decline in turnover in the perfumery and cosmetics segment was affected by the refusal of such international brands as L’Oreal, LVMH, Estee Lauder and Lush from investments in the Russian market and from direct sales after the start of Russian military operations in Ukraine in February 2022. And Procter & Gamble and Colgate-Palmolive reported reductions in product offerings.

After the decision of global brands, local companies began to announce the creation of their own lines. Among these are non-core players, as in the case of Econika and 2MOOD. Over the past year and a half, about 100–150 new Russian brands of household chemicals, skin care and decorative cosmetics have appeared, estimates Naturalistyka CEO Yuri Goryakov.

Non-core companies often organize production of products through contract manufacturing or place orders abroad, explains Petr Bobrovsky, executive director of the Association of Manufacturers of Perfumery, Cosmetics, Household Chemicals and Hygiene Products. According to Mr. Goryakov, to launch a line of basic cosmetics, such as shower gels and shampoos, contract manufacturing will require a minimum of about 3 million rubles. and another six months for product development, the composition of which will determine the final amount of investment.

Now contract manufacturing is at full capacity, as retail chains have begun to increase the production of cosmetics under their own brands, says Pyotr Bobrovsky. The head of the Ministry of Industry and Trade, Denis Manturov, in turn, announced on October 23 the need to provide preferences to Russian manufacturers of perfumes and cosmetics to help them fill the niches vacated after the departure of foreign brands.

However, according to Yuri Goryakov, the dominant position in Russian retail chains is still occupied by global brands that do not want to lose the local market. Most of them have localized production in Russia. In such a situation, the expert adds, it is almost impossible for local players to get on the shelves of specialized retail. Now Russian manufacturers of perfumes and cosmetics sell their products mainly through marketplaces, but this channel, according to Mr. Goryakov, is still significantly inferior in sales volume to offline stores.

Alina Savitskaya