Following independence in 1989, Poland experienced average growth rates of more than 5% along with massive influxes of foreign capital. Indeed, this country is the favored location within Eastern Europe for outside investors in the cosmetics and personal care product markets. Johnson&Johnson, Unilever, Beiersdorf, L’Oreal and Avon have all established a foothold in the country.
Poland can be considered the birthplace of modern cosmetics. Max Factor was born in the Polish city of Lodz in 1870 and became the father of modern make-up. He opened his first shop in a suburb of Moscow (Poland was part of the Russian Empire then). Years of mixing potions for prominent clients made him an exclusive supplier for the Russian Czars. The current leaders of Polish cosmetics, Pollena-Ewa and Miraculum were founded in the early 1920’s in Lodz and Krakow.
Poland was a major producer of cosmetics and personal care goods for the Soviet Block, and especially for the Soviet Union. A household name for Russian women, the Pollena brand products were associated with higher quality, becoming the symbol of European beauty. Cosmetics from the West were scarce and very expensive at the time, making low cost Polish imports highly desirable.
Today there are about 470 cosmetics manufacturers in Poland with only 13% of them employing over 50 people. Becoming a member of the EU and providing a lower cost labor force will make it a strong competitor to Germany, which has only 200 companies in the field. The attractiveness of the Polish market has brought the attention of foreign capital. This process has divided cosmetics and personal care product makers in Poland into the following categories:
- Factories formerly owned by the Pollena conglomerate and purchased by foreign investors (Beiersdorf, Cussons Group, Unilever). They introduce new products and upgrade the quality of the existing lines, investing in new processing and packaging equipment.
- Formerly state-owned Polish factories that have been privatized and remain independent (Pollena-Ewa, Miraculum).
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Polish private firms established in the 1980’s and 1990’s (Inter-Fragrances, Laboratorium Kosmetyczne Eris, Kolastyna, Soraya, Dax Cosmetics, Dermika, Delia and Ziaja).
- New production facilities built by foreign companies (Johnson&Johnson, L’Oreal, Avon, and Oriflame).
Market highlights
With a population of almost 40 million people, Poland offers an important and promising market for cosmetics. Local production of cosmetics reached $450 million in 2002 and grew by 5% over 2001. Overall, Poland's cosmetics industry sales have achieved $1 billion in 2002; however, there were no significant growth in sales after 2000. Stagnation was caused by the overall bad state of the Polish economy and saturation in some areas of the market.
More than 90% of the Polish cosmetics market is filled by so-called mass market goods at low and medium prices. Imported luxury cosmetics embody only 5-6% of the entire market, and about 60% of these imports represent perfumes, followed by skin care and make-up cosmetics.
In 2002, cosmetics imports to Poland were valued at $306 million, a 3% increase from 2001. Imports made up 65% of the whole cosmetic market in Poland and presently play a prevailing role there. EU countries supplied 82% ($250.9 million) of Polish cosmetics imports. Major exporters to Poland were Germany, France, Great Britain, Italy and Spain. The best import sales have been achieved in beauty and make-up preparations, sun-tan cosmetics, body care and hair care products.
Poland’s cosmetic exports were worth $291 million in 2002, a 9% increase from 2001. About 66.5% ($193.5 million) of these exports went to Central & Eastern European markets (CEE) and 29% ($84.3 million) to European Union markets (EU). The main importers of locally produced cosmetics were Russia (18%), Hungary (14%), Lithuania and Ukraine (11% each), Germany (8%), and Great Britain (6.3%). The largest exporters of cosmetics were Avon, Miraculum, Cussons Group, Kolastyna, Eris, Ziaja, Pollena-Ewa, and L’Oreal.
The indisputable leader in the body care cosmetics sector is Beiersdorf-Lechia (28%), followed by Johnson&Johnson (8%), Unilever and Kolastyna (7% each), Eris (5%), Pollena Ewa (4%), Ziaja (2%) with others constituting the remaining 39%. The facial care cosmetics segment is dominated by Eris (16%), Ziaja (10%), Oceanic (9%), Cussons (8%), LGP/L’Oreal/Vichy (7%), Dax Cosmetics and Kolastyna (5% each), and others share the remaining 40%. The market for deodorants and fragrances is led by Coty, Cussons Group, Gilette, Procter & Gamble, Unilever, and Henkel.
Domestic producers have a strong position in the skin and body care products area and control 60% of this segment. Some cosmetics companies have tried to increase their sales by inventing and promoting new products. They have introduced advanced technologies, have won ISO certificates, recruited the best specialists in microbiology and founded laboratories, which allow them to develop and produce world-class cosmetics. One of the largest in the sector, Pollena-Ewa, introduced flax into hair preparations, a process protected by international patents.
Consumption and distribution
With the average gross monthly salary wage of approximately $600, and the average monthly household income (per capita) about $180, the average Pole spent only $7 monthly on cosmetics. Current consumption of cosmetics is 4-5 times lower in Poland than in the European Union. Polish consumers in recent years have been leaning towards a more luxurious look. Cosmetics specialists say that mid-priced cosmetics sales have dropped almost 50%, suggesting that demand is growing for higher quality products where the price tag is secondary. This is backed up by the continuing requests for more expensive brands, which have maintained sales levels despite the sector downturn. In addition, the lower end of the market has also remained stable - clearly showing that Poles are fully aware of what they are paying for when it comes to quality.
Most of the Western companies and brands (Christian Dior, Guerlain, Yves Saint Laurent, Yves Rocher, L’Oreal, Clarins, Lancome, Paloma Picasso, Guy Laroche, Giorgio Armani, Cacharel, Yardley, Coty, Elizabeth Arden, Pierre Robert, Estee Lauder, Colgate Palmolive, Nivea, Jean Pierre Sand, Vichy Laboratories, Jade, Max Factor, Revlon, Maybelline, Biotherm, Bourjois, Givenchy, Fendi, Nino Cerruti, Paco Rabanne, Margaret Astor, Constance Carroll, Rimmel, and many others) are well known across Poland and have established their own exclusive shops, beauty salons or at least their own stands in the elite cosmetics stores.
Distribution of cosmetics plays a major part in Polish beauty commerce and is becoming more professional and sophisticated. The highest priced cosmetics (Estee Lauder, Christian Dior, Lancome, or Guerlain) are usually sold in brand name retail stores and in the authorized retail chains like Empik (20 shops), Galeria Centrum (over 10 shops), Ina Center (30 shops) or the French Sephora (30 shops). Medium and low-priced cosmetics are sold in supermarkets, drugstores and specialty stores. In recent years direct sales have been gaining momentum for Avon, Amway and Oriflame.
One of the largest local distributors of cosmetics is Polbita, a private company established in 1990 that is engaged in import, distribution and marketing products. Polbita owns about 20% of the cosmetics distribution market and has established its own distribution network Drogeria Natura, represented by 330 retail outlets (60 owned by the company and 270 operating under a franchising system). The other significant cosmetics distributors are Rossmann (75 self-service drugstores in Warsaw alone) and Yves Rocher Poland (over 50 retail outlets). Super-Pharm from Canada is planning to build a network of 400 pharmaceutical-cosmetic supermarkets in Poland. The company invested $1.5 million in its first store in Warsaw’s Galeria Mokotow shopping mall in 2001.
American Companies in Poland
It is much easier for cosmetics manufactured in the European Union or Central Europe to compete in Poland because of trade agreements. According to Poland’s 1992 agreement with the European Union (EU) and the Central European Free Trade Agreement (CEFTA), cosmetics from EU and CEFTA countries are not subject to customs duties. In 2003 the United States exported 10.8 million dollars of cosmetic products to Poland. Despite high customs duties assessed on American cosmetics products and considerably limiting trade, several U.S. cosmetic companies have established excellent positions in the market.
Estee Lauder opened up its first flagship store in November 1993. The exclusive two-level store is located in one of Warsaw’s prominent shopping areas. The store combines retail sales and a very popular beauty salon. The company is expanding its activity by establishing retail stands in specialized luxury stores.
In 1992 an Avon Cosmetics wholly owned subsidiary was established in Poland. Since then, Avon has become the market leader in the sales of cosmetics and related products. Distribution of Avon products is based on direct selling – in 2003 the company’s 240,000 representatives sold over 600 products directly to their customers throughout Poland. With over 25 million customers served in 2002, Poland is now Avon’s second-largest European market after the United Kingdom in terms of annual sales.
In 1997 Avon established its manufacturing plant named Avon Operations Polska in Garwolin (near Warsaw). This state-of-the-art plant is one of the largest, most modern cosmetic plants in Europe, and it is the largest of Avon’s 16 manufacturing plants worldwide. The bulk of its production is exported. As of mid- 2003, its products shipped worldwide to over 50 countries. The plant has gained ISO 9001 certification and operates its own research facility to guarantee world-class quality standards. The number of employees working at Avon Operations Polska has grown from 384 in 1999 to 2,763 in July of 2003. Currently, this manufacturing operation is utilizing all varieties of modern packaging applied to Avon’s brands of eau de toilette, creams, lotions, roll-ons, mascaras, masks and many more products.
Maybelline make-up products entered the Polish market in June of 1997 through the L’Oreal Company. Freeman Cosmetics Corporation of Beverly Hills, CA, with its wide range of personal care cosmetics, is also very popular in Poland. Sally Hansen has a very significant presence in nail care professional salons and in retail shops. The products from Elizabeth Arden, St. Ives Laboratories, Matrix Essential Inc. and Joico are very popular and have been available in Poland for many years.
Back to Capitalism
Among the top few formerly state-owned Polish companies that have been privatized and remain independent, Pollena-Ewa SA stands out as the maker of the most recognizable cosmetic brands during the times of the Soviet Union and Warsaw Pact. The company was founded by two businessmen from Lodz in 1919 and was dedicated almost exclusively to the manufacture of toilet waters. The factory survived through years of World War and Soviet oppression and became a leader in the Polish cosmetics market with a variety of effective products of very high quality.
However, in the late 80’s the Soviet block collapsed along with a vast and very profitable business for Pollena. The company was on the verge of liquidation in 1991 and was saved thanks to the efforts of its new director Krzysztof Pawlak. In 1992, Pollena-Ewa became a corporation with its stock being traded on the Warsaw Stock Exchange, and today is still the number one Polish cosmetic company controlled by domestic capital.
Pollena-Ewa offers a list of about 200 products that include Eva Natura flax line perfumes, Polish herb shampoos, Alabaster hand creams, Riviera summer cosmetics and the skin-care line Acua Star. The company recently has developed two new scents: Claudia for women and Copernicus for men. Pollena-Ewa has also created the unique line of energizing skin care cosmetics made with amber.
Substantial investment has been made in processing, decorating and packaging equipment. The company was certified for quality standards: in 1996 - ISO 9001, in 1999 - ISO 14001.
Krakow-based Miraculum S.A. with annual sales of $30 million –recently acquired by the Polish holding Grupa Kolastyna – is the market leader with an innovational approach in its wide product range. Founded by Dr. Leon Luster in 1924, the company exports about 10% of all production to 15 countries. Among Miraculum’s products are luxury fragrance brand Pani Walewska, skin care lines Mirasol and the Generation X collection for men. Packaging is integral to the brand’s distinctively Polish image – especially in the Pani Walewska line.
Miraculum utilizes the modern automated homogenizers from Kriger (Switzerland), Fryma (Germany) and Vacumix (Italy). Packaging is done on the Vasquali (Italy) automated line with 2400 jars/hour production rate. The company uses reverse osmosis water cleaning. The entire facility was ISO 9001 approved in 2000. A Miraculum research laboratory was opened in 1959, and maintains high industry standards, recently gaining an international cruelty free certificate affirming the company’s policy against cruelty to animals for cosmetic product testing.
The packaging business for cosmetic products in Poland is in the process of being acquired by major multinational producers like Rexam. There are small Polish companies with foreign capital like Jannel and Dafo Plastics, making high quality plastic packaging for cosmetics. Domestic glasswork company Czechi is supplying fine glass products for the industry with licensed technology from Saint Gobain (France) and machinery from Emhart (Sweden). In 2003 the package designed and manufactured by small private Polish company has won the prestigious award in WorldStar packaging contest. This company, Max-Box, was founded in 1992 by Ewa Rudzinska . Max-Box is based in Warsaw and specializing in cosmetic packaging. The award winning package is one-piece, paperboard rectangular box made of 300g/m2 carton with appealing graphics. The box is containing two different kinds of cosmetics in separate compartments(e.g. deodorant and perfume) and can be opened diagonally to transform into a display case.
Poland, one of the largest countries in Europe, joined the European Union on May 1, 2004. The thorough financial reforms required to meet conditions of membership, including a restraint on piracy and corruption, will make the country a better place to do business, especially when inter-regional tariffs disappear.