Cosmetics business not about size and fame, but being smarter and greener

KLAIPEDA - Lithuanian cosmetics makers could hardly stand up to the international behemoths of the beauty industry if they didn’t realize one simple thing: only exclusivity of the product, combined with eco-awareness and custom-made manufacture, can keep them in the market.

“Lithuanian cosmetics producers cannot jostle on par with the global brands. However,  exceptionality in offering ecological and often hand-made products lets us get along,” says Linas Cereska, director of BIOK Laboratorija (Laboratory), the largest Lithuanian cosmetics maker. Some dozen national enterprises are engaged into producing local cosmetics, but BIOK Laboratorija stands out for its turnover, capacity and market share. It also stanks out for its ability to resist the crisis and ramifications.

The company reported 11.6 million litas (3.3 million euros) in revenue in 2008, followed by 13 million litas in 2009, 14.6 million litas in 2010 and 17 million litas last year. The producer plans to net 19.5 million litas this year.
“Our sales and revenue have been growing in double-digit numbers in recent years, 16 percent last year alone, and this is very rewarding. However, for this year, we are planning slower growth, 6-7 percent. With modernization of our production facilities and larger inroads into export markets that we focused on last year, we predict export sales to rise as much as three times, and notch up an extra 2.5 million litas this year, compared to 2011,” BIOK Laboratorija marketing manager Jurgita Gusakoviene said to The Baltic Times.

She says that the turnover growth has been determined by three major factors: introduction of new products, increase of output capacity and export expansion. “Last year we succeeded in implementing projects that we had been preparing for several years. Our most successful leap has been into oral care market, as Lithuanian customers were eager to try Lithuanian toothpastes made by us. In fact, to satisfy the high demand, we had to hurriedly ramp up toothpaste production line capacity,” the manager noted.

Acknowledgments for innovations

Lithuania’s Ministry of Economy, acknowledging a partnership of science and business in creating BIOK’s ecologic toothpaste Ecodenta, awarded BIOK Laboratorija with a prize for innovation, while Lithuania’s Confederation of Industrialists marked the product with a gold medal.

The entrepreneur takes pride in the acknowledgements, saying, “We have discovered a niche in the segment of toothpaste and we have filled it, cooperating with innovation-oriented scientists.” He says it has taken over two years to create Ecodenta: “We have profoundly researched the local toothpaste market in order to create the BIOK product, one that is of very high quality, made of ecological, natural ingredients and satisfying the needs of Lithuanian customers.”
A BIOK survey, conducted to better understand Lithuanians’ preferences for toothpaste, showed that “the ideal toothpaste” for compatriots is one approved by odontologists, ecologic, natural and locally made.

Cereska says that the toothpaste market research also revealed that many customers are unhappy about the effectiveness of foreign toothpastes they use.
“We are receiving very good feedback from our customers, and when even specialists from Lithuania’s Health Science University evaluate the product highly, I believe we succeeded in the task,” the director says.

Bid to be among best five

Cereska says the company aims to create a series of four new toothpastes this year. “In terms of sales, we have set a task for the toothpaste to become one of the most sought-after of these kinds of products in Lithuania,” the BIOK Laboratorija director says.

“When creating toothpaste, we have also considered its export possibilities. It is just a matter of time when the toothpaste will end up on foreigners’ bathroom shelves. The name Ecodenta, I believe, is very catchy and foreign customer-oriented,” Cereska notes.

The director, however, says the domestic market “has its limits,” therefore, BIOK is eyeing a larger expansion abroad. BIOK’s export revenue made up 6 percent of all income last year, and the export share is expected to increase to 10 percent this year. The enterprise sends its cosmetics to over 10 countries, but the bulk goes to Italy, Georgia and Belarus. “With those countries we have been working successfully for a while; we are set to deepen the business. The good thing is, we have received more orders for our production from them. It means we are on the right path,” says Cereska.

With the global cosmetics giants playing tough, it may seem that producers as small as this Lithuanian company have no chance to squeeze into the extremely competitive market and slice off a share. But the BIOK example shows all is possible with a robustness in effort, a well thought-out strategy and means.

Marketing tricks

Whether to try to make a stride into export markets using your own trademark, or to sell Lithuanian goods wrapped in foreign labels, is probably one of the most crucial questions the local cosmetics makers have to answer. “Sure, ideally, most local entrepreneurs itch to make their own trademarks recognizable abroad. However, risks of losing money while doing so, and the possibility of failure, are just too high. Having researched the foreign markets, we decided to look for strong wholesalers in them and sell our goods with their names,” says Jurgita Zilvinskaite, director general of Panevezys-based Naujoji Ringuva, which produces cosmetics as well as household cleaning goods.

Cereska, in that regard, has not conclusively decided yet what the best is for BIOK. “We will sell our production to Scandinavian countries with foreign labels most likely. However, in the countries with a large community of Lithuanian emigres, like Great Britain and Ireland, we will go with our own brand,” says the BIOK director.

His expectations in Georgia are also very high. “We are currently in talks over distribution and sales of our output in a large Georgian retail chain, which manages not only local pharmacies and clinics, but also runs local pharmaceutical production. The business partner has a good distribution network. Talks are not over yet, though we are already working with another Georgian partner,” Gusakoviene said to The Baltic Times.

When it comes to the domestic market, he says the company retains leadership positions in the segments of facial creams and scrubbers. “We are planning to augment our position in the traditionally strong segments and slice off a bigger share of the market in sales of shampoos, shower gels and liquid soap,” says Cereska.
He says success is about not only remaining active in the market and introducing new products for picky customers, but also about being exceptional when it comes to the product ingredients, packaging and sale locations.

With malls, drug stores and specialized cosmetics store chains the main channels for sales, BIOK has recently started selling its products in tourism information centers, some hotels, spas and even in some bookstores. “Obviously, a bookstore is not a place where one could possibly look for cosmetics, but the place serves the goal quite well, as life itself dictates the decisions,” the company director stresses. He adds: “The bottom line is this: be as close to the potential customer as possible.”

Competition is tough business

The 2008 crisis and its aftermath have not become a big challenge for the company. “On the contrary, it has worked for our benefit, as many cosmetics buyers, unable to afford foreign products, have turned to our make-up, toiletry and hygiene items. This is for one reason: because we are always cheaper. Even with the economy rebounding, many such ‘cosmetic converts’ remain our customers,” Cereska says.

Customers are more cosmetics savvy, too. “Upon seeing people scrutinizing the labels and the ingredients, comparing the prices and considering the value, I am not surprised anymore,” the cosmetics entrepreneur admits. He also notes that Lithuanians are not as much charmed by foreign products as before. “Today the customer chooses a product, not a label, as before. The time when a foreign-label commodity was nearly worshipped is gone. With the striving for quality and, recently, ecology, the Lithuania products often edge out famous trademarks,” the director says.

Jonas Ragelis, commerce and supply director of Koslita, another local cosmetics and hygienic goods producer and distributor, says that the market players have divided the market and do not usually step on each other’s toes. “For example, Naujoji Ringuva makes mostly shampoos, as BIOK Laboratorija focuses on cosmetics. Meanwhile, Koslita’s segment is liquid washing products,” he says.

Ragelis is also convinced that Lithuanian authorities should encourage more consumption of local production; meanwhile, he says, Lithuanians ought to support the local industry buying its products. He says that support for the local cosmetic production brings in considerably more taxes than from the imported products.

Careful search for local partners

The second largest producer of body care and hygiene in Lithuania is Naujoji Ringuva, which inherited its name from the pre-war, 1920s firm. It sells its production under such well-known brands as Smile, Tindi, Balance and Ringuva X. The company exports its goods to nearly a dozen countries, including Sweden, Finland, Norway, Latvia, Estonia, Germany and France. Naujoji Ringuva reported a 15 percent increase in turnover last year, compared to the previous year.
“I attribute the growth to our customers’ increasing interest in novelties, Lithuania-made products, made from nature-friendly ingredients,” Zilvinskaite, the enterprise’s director, said to The Baltic Times.

Explaining the company’s export strategy, she says that the cosmetics’ maker works only with large cosmetics wholesalers abroad. “Directly working with smaller businesses, like supermarket chains, would bring more risks, be more expensive, and require more resources,” the director says.
While the company sells some products with Swedish cosmetics brand names, some goods, like cosmetics for allergies, Balance Neutral, are being sold in Sweden with the name Naujoji Ringuva. “In order to make our items stand out on the shelves, we are seeking to obtain the EU Eco-label certificate, which will signify our orientation to ecological and natural products,” the director says.

Ambroozija, a lot smaller than BIOK and Naujoji Ringuva, also focuses on production of ecologic and hand-made cosmetics. The enterprise has recently opened a specialized hand-made “live” cosmetics store in Vilnius which, Ambroozija claims, is the only cosmetics store of this kind in the country.