The road to success is paved with green

  • 2010-09-15
  • By Anna Kravcova

RIGA - Once in a blue moon a Latvian business gets the green light to make a big splash on foreign markets. Funny as it sounds, but a ‘green’ project has managed to succeed in today’s green economy. It took only four years for Madara Cosmetics to establish itself as a premium brand and became a potent player in the global cosmetics arena. The company debuted in 2006 with its completely new concept for the Latvian market - an eco-conscious organic beauty culture - and has proved that Latvian home-spun creativity is a good target for investment.

Commenting on the early beginning of their activities, the founder of Madara Cosmetics, Lotte Tisenkopfa-Iltnere, says that it happened relatively smoothly. “When Madara placed its products on the shelves, consumer reaction was extremely, and quite unexpectedly, positive. The demand for eco-friendly cosmetics appeared to be very high. It seemed that Latvians were craving for this for a long time.”

“It was a time of economic depression and strong inflation, and everyone was expecting that we would not succeed with our business. However, very surprisingly we have managed to achieve quite satisfactory results. The turnover was at double-digit [growth] levels every year. We have survived the worst of the crisis, and we believe in [our] future growth,” she says.

Tisenkopfa-Iltnere says that the idea to create a home brand of organic beauty products came quite naturally. “There was an empty niche in the market. It was very easy to notice that Latvia lacked the products which had already become a habit for the rest of Europe. People did not know what an eco-cosmetic was. There was some talk about eco-food, but no word was spoken about beauty products. As a result, we were the first to use this opportunity.”

In contrast to classically known brands, an eco-conscious beautycraft puts the emphasis on its harmlessness to human health. It is common for beauty products to contain synthetic ingredients, for instance synthetic perfumes, and the preservative parabens. Parabens have good antimicrobial properties, however, they are linked to an increasing incidence of breast cancer.

Tisenkopfa-Iltnere points out that European legislation concerning the usage of parabens in beauty products is still in its infancy. “The maximum concentration of parabens in one cosmetic product is regulated by the European Cosmetic Directive. Nevertheless, people are not limiting themselves to one beauty product a day. Everyone is using shampoo, soap, tooth paste, deodorant, creme, etc. Summing all these up, in the end we have an excessive amount of chemicals,” she says.
Instead of synthetic chemicals, Madara uses a small concentration of natural alcohol and organic acids to preserve its cosmetics and toiletries. “Of course, parabens are harsher; these natural ingredients are not harmful for health, and are the safest means of preserving a product,” asserts Tisenkopfa-Iltnere. Other ingredients in Madara products include herbs, organic plant extracts and oils, as well as biotechnologically active ingredients. The usual expiration date of paraben-free toiletries is about 24-30 months after its production. In the course of this time period product characteristics are stable and do not lose their qualities.

In building up the business, Madara strongly accentuates the potential of the plants harvested in Latvia. Tisenkopfa-Iltnere asserts that due to the cold Latvian climate plants and herbs are especially rich with active substances and extracts, and more effective and powerful than those gathered in warmer countries.

Starting with only four beauty products in 2006, at the moment Madara can congratulate itself with forty kinds of toiletries, three specialized shops and 50 selling venues in Latvia. “The volume of sales in Latvia could be called very good, while exports in Europe are increasing even faster,” comments Tisenkopfa-Iltnere.

Madara entered the foreign market in its second year of existence. It currently sells in twenty-five countries in the EU, Asia and the U.S. The products sell well in countries where consumer demand for natural products is high, for example Switzerland, Germany and Denmark. In Switzerland there are 70 sales venues.

At the same time, Tisenkopfa-Iltnere acknowledges that expanding abroad was not an easy task: “One of the difficulties of entering the foreign market was that we had to compete with larger companies, which were established a long time ago and are very well promoted. We had to reach their level and acquire the necessary skills and knowledge in a relatively short period of time. It is difficult to judge our results since we are present on the foreign market for a relatively short period of time. However, feedback from the shops which sell our products, and consumers, have been really positive. The start is very successful.”

The Latvian National Bureau of Statistics shows that exports from Latvia are gradually improving. In June 2010, exports totaled 518 millions euro, 100 million euros more than for the same period last year. However, compared with 2008 numbers of 511 million euros, export numbers remain flat.

Laura Krastina, the chief communication officer at Aldaris Corporation, asserts that it is extremely important for Latvian companies to expand abroad. “We agree with those experts who believe that exports could improve the Latvian economy,” she notes. The most difficult thing to do in entering the foreign markets, from Aldaris’ perspective, is to earn brand recognition along with the dominant international players. “It is easier to conquer the foreign markets for those companies which have found a good international partner. For example, Aldaris is a member of the world famous Carlsberg group. Madara was also successful in this, building a business partnership with the German chain of shops, Douglas,” she points out.

“To be competitive on the foreign markets, a company has to offer some obvious advantages compared to local manufacturers. One of the most substantial benefits characteristic to Madara is certainly the niche of natural beautycraft, which becomes more and more popular in today’s world,” continues Krastina.

Madara has developed its advertising campaign in a quite extraordinary way. “We do not put our advertising into fashion magazines or on TV. Instead, we are promoting our products by means of public opinion, a so-called ‘mouth-to-mouth’ advertising, which is difficult to influence. We also have our own page on Facebook and Twitter,” says Tisenkopfa-Iltnere.
Alina Rence, an advertising expert at PR Studio, believes that interpersonal advertising coming from our friends sometimes happens to be even more effective than traditional means of promotion. “Although the modern consumer is still prone to be influenced by advertising tricks, he feels less serious about the information presented by mass media. If the offer to use one or another product comes from a person who has already tried it himself, it stops being simply a beautiful story, told on the other side of the world, but is a real and reliable example. The quality of the product is also very important. It is possible to promote beauty products and toiletries by means of verbal advertising. However, it is preferable to combine it with some traditional methods,” she says.

Public relations specialist at A.W. Olsen&Partners, Olga Kazaka, also confirms that “mouth-to-mouth” advertising is a very powerful instrument in cosmetics sales. Nevertheless, she believes that it was not the primary reason for Madara’s success, saying that “More likely it is the quality of the products, as well as good marketing communication and public relations, where the role of media is underestimated. 

The fact that it seems that Madara can deal without proactive communication only proves the delicacy of this communication. The other interesting fact is that although Madara implements direct sales, organizing in-home presentations, it does not fall into the ‘black list.’”

Despite the evident heating up of Madara’s business, some people are still able to see weak points. Gints Kellers, the owner of Zalais Veikalins, which sells Madara beautycraft and other eco-friendly products, comments that the niche of organic products is still quite unpopular among Latvian consumers. “Madara cosmetics are well-known by our clients. However, at the moment people buy them less often, since the prices are rather high, and one simply cannot afford them, especially taking in account that there are foreign eco-cosmetics that cost two or three times less.”

Expressing her opinion on prices, Tisenkopfa-Iltnere is very positive. “The indicators of consumer [purchasing] capacity show that people are still able to buy expensive beauty products, even in spite of the crisis. Madara’s profits are increasing, and this means that people are interested in our products and can pay the high price. Cosmetics are an exclusive product which does not require much money to enjoy. We believe that our men and women love and value themselves enough to be able to sacrifice their money for their own health and to look good. Qualitative cosmetics are a small luxury which everyone must afford,” she stresses.

Tisenkopfa-Iltnere believes that the going-green strategy could be the future for the global economy. “I think that there is a tendency to turn one’s attention to ecologically friendly products, and interest in this trend is growing. People are becoming more responsible and are starting to think about how one or another product could affect their health, how sustainable [the product] is, and how many natural resources it requires,” says the company’s founder.