Apr 14, 2022
European cosmetics manufacturers facing new sourcing crisis
Apr 14, 2022
European perfume and cosmetics manufacturers are facing shortages of paper, glass, and some essential oils and alcohols, as Russia’s invasion of Ukraine has further disrupted the industry’s supply chain, driving up prices at a time when demand remains high.
The global cosmetics industry, worth an estimated $500 billion, is grappling with the fallout from the war in Ukraine. Beauty products manufacturers use alcohol derived from organically grown cereals and beets for their perfumes, and sunflower oil for their cosmetics – in other words, the Ukrainian agricultural sector’s key crops.
The energy crisis triggered by the invasion of Ukraine has also caused the prices of glass and paper to skyrocket, while repeated lockdowns in China are preventing companies from sourcing components used to manufacture perfume and lipstick packaging.
“We are in crisis management mode on these procurement issues,” said Emmanuel Guichard, delegate general of French beauty industry association FEBEA (Fédération des entreprises de la beauté), in an interview with Reuters.
Price rises for packaging, energy and raw materials have led to a 25% to 30% increase in manufacturing costs in the cosmetics industry, a challenge for producers of mass-market cosmetics, even though demand for personal care products remains high, according to Federica Levato of consulting firm Bain & Company.
Italian perfume manufacturer ICR is expecting sales this year to exceed pre-pandemic levels, but the company is facing a 30% annual increase in the cost of alcohol, in addition to a 10% rise in the cost of glass and paper, according to its vice-president Ambra Martone.
While major groups, whose profit margins are higher, have greater financial clout and flexibility, helping them cope with the situation, the challenge is particularly significant for small and medium-sized European producers.
Glass-makers have struggled to cope with the demand for vials for Covid-19 vaccines, after they had reduced their output at the start of the pandemic, switching off their furnaces in Italy for the first time in decades.
The cost of the paper used to manufacture luxury product boxes for clients like Dolce & Gabbana and Ferragamo has doubled, prompting Italian group Isem to increase its packaging products’ prices by 10% to 40%, as its CEO Francesco Pintucci told Reuters.
The management of Italian cosmetics producer Intercos said they hiked up prices by about 5% at the end of 2021, and are considering a further increase during the summer.
(Reporting by Valentina Za and Francesco Zecchini in Milan, Mimosa Spencer in Paris, Silvia Ognibene in Florence; French version by Anait Miridzhanian, edited by Jean Terzian)
© Thomson Reuters 2023 All rights reserved.