Beauty prod­uct mak­ers eye EU mar­kets

Kyiv Post - - Business Focus - BY ANNA HRYSHKOVA SE­[email protected]

Ukrainian beauty prod­uct com­pa­nies are op­ti­mistic about the fu­ture.

On the face of it, there’s not much rea­son for them to be so. Cor­rup­tion still plagues the econ­omy, and Rus­sia’s war on Ukraine con­tin­ued un­abated.

More­over, since 2013, Ukraine’s ex­ports of beauty prod­ucts — makeup, skin care, and hair prod­ucts — have more than halved, while im­ports de­clined by 41 per­cent.

While these fig­ures are trou­bling, many en­trepreneur­s, in­clud­ing Taras Tara­sevych, the gen­eral man­ager at beauty prod­uct pro­ducer Re­mos, be­lieve Ukraine can still be­come a strong player in the global beauty in­dus­try. Re­mos, hav­ing es­tab­lished it­self on the do­mes­tic mar­ket, is now ex­port­ing to Poland, sign­ing its first ex­port con­tract with a Pol­ish firm at the end of 2017.

In ad­di­tion to Re­mos, the Ukrainian beauty mar­ket’s big­gest play­ers in­clude com­pa­nies like Agor, Piel Cos­met­ics, Or­ganic Life, and White Man­darin. One of the big­gest Ukrainian on­line beauty stores, MakeUp.Ua, has at least 120 brands mar­keted as “made in Ukraine.” Most of the com­pa­nies pro­duce skin care and hair prod­ucts, while makeup ac­counts for no more than 20 per­cent of sales.

In 2017, Ukraine ex­ported beauty prod­ucts worth a to­tal of $75.9 mil­lion, and im­ported prod­ucts worth $367.6 mil­lion — al­most five times more. Ukraine im­ports from such internatio­nal brands as Mary Kay, Ori­flame and Avon, which have es­tab­lished a vast net­work of dis­trib­u­tors. One of the largest ex­port­ing com­pa­nies in the Ukrainian beauty in­dus­try is Elfa Group, which has 23 dif­fer­ent brands and ex­ports its prod­ucts to the Baltic states, Rus­sia, Moldova, Kaza­khstan, Ge­or­gia, Be­larus, and Azer­bai­jan.

De­layed plans

Re­mos was launched as a fam­ily busi­ness back in 2005, right af­ter the Or­ange Revo­lu­tion, mak­ing nat­u­ral soap. Tara­sevych’s par­ents, who founded the com­pany, did not have any ex­pe­ri­ence in the beauty in­dus­try, but sim­ply wanted to make a prod­uct of high qual­ity that they them­selves would want to use.

Thir­teen years later, the com­pany now has two brands: YAKA and Claire de Na­ture. Fifty peo­ple work at the Re­mos fac­tory near Kyiv, which pro­duces Hr 13 mil­lion ($500,000) worth of goods per year. All of the prod­ucts are made with nat­u­ral in­gre­di­ents that the com­pany pur­chases mainly from Ger­man and French com­pa­nies.

Find­ing its niche in the soap sec­tor, YAKA quickly be­came a mass-mar­ket brand that is now avail­able in most of Kyiv’s beauty and phar­ma­ceu­ti­cal stores. Re­mos started to ex­pand its prod­uct range in 2010, and now makes around two hun­dred prod­ucts for body care. One prod­uct that Tara­sevych is es­pe­cially proud of is a tar soap — one of the com­pany’s first cre­ations.

Mainly present in Ukraine’s larger cities, Re­mos is now look­ing for ways to ex­pand into the Ukrainian re­gional mar­kets, as well as ex­port­ing to more EU coun­tries.

But Rus­sia’s war on Ukraine in the Don­bas and the gen­eral de­cline in the econ­omy since 2014 have held up the com­pany’s plans.

Ex­ports to Poland

An­other de­lay­ing fac­tor is a short­age of cap­i­tal.

Tara­sevych and the other se­nior man­agers of the com­pany have been in­vest­ing their own money into devel­op­ing the com­pany so as to avoid hav­ing to take bank cred­its, which are pro­hib­i­tively ex­pen­sive in Ukraine.

Fi­nanc­ing is a chal­lenge for all Ukrainian com­pa­nies, but es­pe­cially for those that want to ex­port to the EU, as gain­ing the proper prod­uct cer­ti­fi­ca­tion is very ex­pen­sive for small- and medium-sized com­pa­nies.

“We want to work with a lot of coun­tries,” Tara­sevych said. “But we started to work with Poland be­cause they were the first to of­fer help with prod­uct cer­ti­fi­ca­tion for the EU.”

The chal­lenge of en­ter­ing the Pol­ish mar­ket is even more dif­fi­cult, as the coun­try re­quires cer­ti­fi­ca­tion doc­u­ments of a type that are not is­sued by any agency in Ukraine.

“There are dif­fer­ences be­tween Ukrainian and Euro­pean qual­ity cer­tifi­cates, which means that we have to or­der some (cer­ti­fi­ca­tion) ser­vices else­where to meet EU re­quire­ments,” Tara­sevych said.

But in 2017 Re­mos signed its first internatio­nal con­tract and now de­liv­ers its YAKA prod­ucts to Poland. Af­ter two months of co­op­er­a­tion, Re­mos has al­ready in­creased its ex­ports to Poland by 200 per­cent, Tara­sevych said, though he didn’t give any ab­so­lute fig­ures.

In­spired by the suc­cess in Poland, this year Re­mos plans to pen­e­trate other EU mar­kets such as those of Slo­vakia, Croa­tia, and the Czech Repub­lic.

Tara­sevych said co­op­er­a­tion with Pol­ish busi­ness­peo­ple is easy be­cause of their "open­ness and trans­parency." He stressed that Re­mos works as a trans­par­ent com­pany, hav­ing ob­tained all of the re­quired of­fi­cial doc­u­ments and fol­low­ing all of the state's stan­dards in pro­duc­tion and em­ploy­ment.

"In Poland all com­pa­nies work like that,” he said. “You can’t say the same about many Ukrainian ones.”

Taras Tara­sevych, a di­rec­tor of Re­mos, talks about early soap ex­am­ples on March 12 in their of­fice in Kyivska oblast. (Kostyan­tyn Ch­er­nichkin)

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