Cosmetics prices soar as supply crisis grows
Sales of beauty products globally are expected to top the 2019 level of $538bn this year
● European perfume and cosmetics makers face shortages of paper, glass and some key oils and alcohols, as Russia’s invasion of Ukraine adds further disruptions to the supply chains for beauty products, driving prices higher amid demand.
Like the food industry, the $500bn (about R7.3trillion) global cosmetics sector is grappling with fallout from the war because producers use alcohol derived from grains and organic beets to make perfumes, and sunflower-seed oils to make cosmetics — all from Ukraine.
At the same time, the energy crisis sparked by the war has pushed glass and paper prices through the roof, while China’s Covid lockdowns have thwarted companies’ ability to obtain packaging components for $100-a-bottle scents and $30 lipsticks.
“We’re in crisis management mode when it comes to these subjects of sourcing,” said Emmanuel Guichard, secretary-general of French cosmetics association Febea.
Consultancy firm Bain & Co calculates higher prices for packaging, energy and raw materials have driven up production costs in the cosmetics industry on average by 25%-30%, though it says demand remains strong.
Italian fragrance manufacturer ICR expects sales this year to surpass pre-Covid levels, but the maker of Bulgari and Salvatore Ferragamo perfumes is wrestling with a yearly 30% spike in the cost of alcohol and a 10% rise in the cost of glass and paper, said vice-president Ambra Martone.
Sales of beauty products globally are expected to top the 2019 level of $538bn this year, up from $518bn in 2021 and $458bn in 2020, a McKinsey report showed.
While larger companies with higher profit margins have more financial firepower and flexibility to cope, the challenge is particularly acute for small and medium-sized companies in Europe.
“We face scarcity and price increases every step of the way: from essences and alcohol to glass and paper — even for spray dispenser pumps and Surlyn plastic used for caps,” said Marco Vidal, MD of Venetian fragrance maker Mavive.
Sales of fragrances have been rising steadily over the past three years, and were up 15% in 2021 in the US, with perfumes priced at more than $175 a bottle more than doubling in unit sales, according to data from NPD Group.
European cosmetic makers are competing with other industries for packaging materials as demand rises due in part to the pandemic, which boosted e-commerce. Glass makers, on their part, have struggled to cope with demand for vaccine vials after scaling down production in the early stages of the pandemic.
Now gas prices are worsening problems for both industries, forcing paper mills in Italy to temporarily halt production to renegotiate selling prices. —