The care turned out to be cosmetic – Newspaper Kommersant No. 57 (7502) dated 04/04/2023

The French L’Oreal, which announced a year ago that it would stop direct sales in the Russian Federation, was able to earn more than 60 billion rubles on the Russian market in 2022, almost the same as before the outbreak of hostilities in Ukraine. The localized production of a part of the products sold by independent retailers, the preservation of imports, as well as rising prices made it possible to retain income. Competitors of L’Oreal also continue deliveries to the Russian Federation. But, experts emphasize, it was not possible to keep the full range of cosmetics and perfumes.

L’Oreal (brands Lancome, Giorgio Armani, Yves Saint Laurent, Biotherm, Garnier, Maybelline and others) was the first among the cosmetic brands represented in the Russian Federation to report on the financial results of the Russian business for 2022. During this period, the revenue of JSC L’Oreal, as follows from the data of SPARK-Interfax, amounted to 60.2 billion rubles, which is 6.5% less year-on-year, but 7% more than in 2020 . Net profit reached RUB 10.62 billion, up 45% year-on-year and twice as high as in 2020. L’Oreal could not be reached for comment.

A Kommersant source close to the company says that the relative stability of revenue was ensured by the sale of L’Oreal products manufactured in Russia by other chains.

As indicated on website L’Oreal, about 54% of skin care products, hair products and hair dyes sold in the Russian Federation, the company produces in Vorsino, Kaluga region. According to Kommersant, L’Oreal supplies up to 45% of these products to large perfume chains – Letual, Ile de Beaute and Golden Apple. These networks did not provide comments. The remaining volume is accounted for by large FMCG retailers and third-party distributors working with non-chain retail and marketplaces.

The manufacturer stopped direct sales through its own retail a year ago due to the outbreak of hostilities in Ukraine.

After that, the Ministry of Industry and Trade included the brand’s products in the list of goods allowed for import into the Russian Federation for parallel imports, but excluded them from the list in July. A Kommersant source familiar with the situation says that this was done in exchange for an agreement to maintain production, even if the company wants to sell it or transfer it to top management in the future.

Also, L’Oreal, Kommersant’s sources say, has retained imports, which account for about 30% of the brand’s total sales in Russia. Basically, these are goods of the middle price segment, which did not fall under EU sanctions, emphasizes one of Kommersant’s interlocutors.

The general rise in prices for cosmetics and perfumes also helped to keep L’Oreal’s revenue. According to Mikhail Burmistrov, General Director of Infoline-Analytics, in 2022, these products have risen in price by an average of 30%, and high-end products by 45-50%.

Three more major Western brands – LVMH (Christian Dior, Givenchy, Guerlain), Estee Lauder (Clinique, Bobbi Brown, MAC and others) and Lush – also declared a year ago about the termination of direct sales in Russia. LVMH does not publish data on revenue in the Russian Federation. The Russian divisions of Estee Lauder and Lush have not yet disclosed financial results for 2022. A year earlier, Estee Lauder’s revenue reached 16.43 billion rubles, and net profit – 1.36 billion rubles. Lush in 2020–2021 had revenue of RUB 1.2–1.5 billion.

According to a Kommersant interlocutor among retailers, some of Estee Lauder’s products are now being imported to Russia through third countries. But, according to Mikhail Burmistrov, in general, in the segment of cosmetics and perfumery, “only partially succeeded in compensating for the dropped assortment due to parallel imports.”

Estee Lauder, in particular, was forced to stop deliveries of products manufactured in the United States, as this country introduced a complete ban on the import of perfumes and cosmetics into the Russian Federation, says another Kommersant interlocutor on the market. The EU has imposed an embargo only on products worth more than €300 per unit.

According to a Kommersant source, products of the middle price segment produced at European facilities continue to arrive.

If there are problems with logistics and payments in the European market, retailers replace the missing assortment with deliveries from Turkey and Asia, adds Alexey Vanchugov, managing partner of Vanchugov & Partners.

In general, according to Mikhail Burmistrov, the turnover of the Russian market of cosmetics, perfumery and care products in 2022 amounted to 810 billion rubles, having decreased by 3.6% year-on-year. Moreover, according to the expert, the main decline was observed in the first half of the year.

Khalil Aminov, Alina Savitskaya