A Romanian spends EUR4 on cosmetics and care products a month, which puts the Romanian market among Europe’s laggards, ZF has calculated based on market research company Euromonitor’s data.
“The local market is underdeveloped if we compare it with the West, but we also need to understand that this is its level now. The market cannot take in any more now because Romanian consumers do not have more money to spend,” says Dana Tudorache, the Romanian in charge of The Body Shop since its entry on the market in 1999.
The executive has been working in the industry for about two decades, having previously held a position with Sarantis Romania.
“The purchasing appetite is there but Romanian consumers have no money to spend. First the purchasing power needs to improve and then the cosmetics market will develop.”
Romania is Europe’s laggard in terms of average cosmetics and care products spending, as well as in terms of average wage and purchasing power. The average net wage in Romania stands at EUR380, seven or eight times lower than in France or Germany for instance. Cosmetics and care products prices are similar, though.
According to Euromonitor data, the market has gone up slightly in each of the last few years, despite the crisis, and the upward trend will continue. The market will reach 4.56 billion lei (about EUR1 billion) by 2017, Euromonitor estimates. The annual growth rate in the last two years has been about 1%.
“If we factor inflation in, we see this growth turns into decline,” says Dana Tudorache, adding that the market in Romania is heavily polarized. The upper and the lower segment are the most developed, while the middle segment suffered.
“The market followed the demographic segmentation by income,” she added.
Companies in the cosmetics industry have said over the last few years that Romanian consumers continued to buy but either chose cheaper products and special offers and promotions or luxury products.
Underdevelopment and segmentation of the local market are a growth driver for some, though. Hans Dewaele, the executive who runs the local operations of Procter&Gamble, has previously said that the growth for the P&G business will come precisely from Romania catching up with Western consumption levels. There is no product category P&G operates on that comes close to countries like Germany in terms of consumption. He said back then consumption in Germany would not grow any more, but consumption in Romania would. A significant growth of the market needs a significant rise in the purchasing power, though.
A Romanian spends EUR2.3 on toothpaste a year, half of what a Pole or Czech spends and more than three times less than a German, according to Euromonitor data. A 100 ml Colgate Advanced White toothpaste tube costs RON9.48 lei (EUR2.2) on coradrive.ro website, which means a Romanian buys only one tube of toothpaste a year.
Moreover, Romanian consumers buy about 11 million toothbrushes a year, which means they replace their toothbrush almost once every two years. Most Germans, on the other hand, replace their toothbrushes once every three months.
Market data, however, show sizeable differences between spending habits of people in urban areas and those in rural areas. Not every home in rural areas has an indoor bathroom, and moreover, many do not even have running water. People living in such conditions use less toothpaste, soap and shampoo than people living in cities.
Another underdeveloped market in Romania is the market of men’s products, but Avon’s general manager has recently said such products saw surprising growth in the first eight months of 2014.
The segment had accounted for very little of the market for many years, but has recently started to grow. The men’s care product market stands at RON340 million, according to Euromonitor data. A Romanian man spends about EUR8 to EUR9 on such products per year, ten times less than a Romanian woman, according to ZF estimates based on market data. (EUR1=RON4.4067)
(English version by Loredana Fratila-Cristescu)