Traditional products such as this fragrance, Classic by Pani Walewska from Miraculum S.A. are still very popular in Poland.

Already a comparatively healthy market for cosmetics, fragrances and personal care products, Poland is on its way to becoming an even more important center for the beauty business.

Having joined the European Union on May 1, 2004, Poland has instituted the financial reforms required to meet conditions of membership including a restraint on piracy and corruption, making the country a better place to do business, especially when inter-regional tariffs disappear.

Following independence in 1989, Poland experienced average growth rates of more than 5% along with massive influxes of foreign capital. The country is a favored location within Eastern Europe for outside investors in the cosmetics and personal care product markets. Johnson & Johnson, Unilever, Beiersdorf, L’Oréal and Avon have each established a presence in the country.

Poland’s tradition in modern cosmetics begins with the birth of Max Factor in the city of Lodz in 1870. Eventually, Factor 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 Communist Block, especially for the Soviet Union. A household name for Russian women, the Polish Pollena brand products were associated with higher quality. Pollena was the symbol of European beauty behind the Iron Curtain. 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. Most are small operations with only 13% of them employing over 50 people. Becoming a member of the EU and providing a lower cost labor force will make Poland a strong competitor to Germany. The Polish market has already caught 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). The new owners have introduced new products and upgraded the quality of the existing lines, by investing in new processing and packaging equipment.
Formerly state-owned Polish factories that have been privatized and remain independent (Pollena-Ewa, Miraculum).
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’Oréal, Avon, and Oriflame).

Portrait of Potential
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, growing by 5% over 2001. Overall, Poland’s cosmetics industry sales achieved $1 billion in 2002, but this total reflects no significant growth after 2000. The market has been flat due to 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 made up of domestic and imported mass market goods at low and medium prices. Imported luxury cosmetics embody only 5% to 6% of the entire market, 60% of which are perfumes, followed by skin care and make-up cosmetics. The remaining 4% is sold through direct sales, specialty outlets and “other” channels.

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. Germany, France, Great Britain, Italy and Spain are the major exporters to Poland. The best import sales have been achieved in beauty and make-up preparations, suntan cosmetics, body care and hair care products.

The private Polish company, Max-Box, supplies the carton for Max Factor Blasé. The EDT and body spray is imported from the U.K. by the Polish distributor JKR.

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 and Eastern European markets and 29% ($84.3 million) to European Union markets (EU). The main importers of Polish-produced cosmetics were Russia (18%), Hungary (14%), Lithuania and Ukraine (11% each), Germany (8%), and Great Britain (6.3%). The manufacturers that are exporting most of these goods are Avon, Miraculum, Cussons Group, Kolastyna, Eris, Ziaja, Pollena-Ewa and L’Oréal.

The undisputed 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’Oréal/Vichy (7%), Dax Cosmetics and Kolastyna (5% each), while others share the remaining 40%. The market for deodorants and fragrances is led by Coty, Cussons Group, Gillette, 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.

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 spends a small amount—approximately $7 a month—on cosmetics. Current consumption of cosmetics is four to five times less in Poland than in the European Union. But, in recent years, Polish consumers 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.

Most of the Western companies and brands, from prestige to mass, 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. Available brands include: Christian Dior, Guerlain, Yves Saint Laurent, Yves Rocher, L’Oréal, Clarins, Lancôme, Paloma Picasso, Guy Laroche, Yardley, Coty, Elizabeth Arden, Pierre Robert, Estée Lauder, Colgate Palmolive, Nivea, Jean Pierre Sand, Max Factor, Revlon, Maybelline, Biotherm and many others.

Distribution of cosmetics plays a major part in Polish beauty commerce and is becoming more professional and sophisticated. The highest priced cosmetics (Estée Lauder, Christian Dior, Lancôme, and Guerlain) are usually sold in upscale 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). Other significant cosmetics distributors include 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
Because of trade agreements, it is much easier for cosmetics manufactured in the European Union or Central Europe to compete in Poland. 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 in cosmetic products to Poland, despite high customs duties. Even with the high cost of doing business there, several U.S. cosmetic companies have established excellent positions in the market.

Estée Lauder opened its first flagship store in November 1993. The exclusive two-level store is located in one of Warsaw’s most prestigious shopping areas. The store combines retail sales and a very popular beauty salon. The company is expanding its activity by establishing retail stands in specialty luxury stores.

In 1992, an Avon Products Inc. wholly-owned subsidiary was established in Poland. Since then, Avon has become the leader of American marketers in the sales of cosmetics and related products in Poland. Distribution of Avon products is based on direct selling. In 2003, the company’s 240,000 representatives had a menu of 600 products to sell 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 Avon Operations Polska in Garwolin, its manufacturing plant near Warsaw. This state-of-the-art plant is one of the largest, most modern cosmetic plants in Europe and 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. This manufacturing operation uses all varieties of modern packaging required by Avon’s brands of fragrance, color cosmetics, treatment and personal care products.

Maybelline make-up products entered the Polish market in June of 1997 through the L’Oréal Company. Freeman Cosmetics Corp. 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 also very popular and have been available in Poland for many years.

Dermika, a domestic marketer, offers Rosarium, a facial mask with packaging—a frosted glass jar and matte gold cap—for a luxe look.

Back to Capitalism
Among the few formerly state-owned Polish companies that have been privatized and remain independent, Pollena-Ewa SA stands out as the manufacturer of the most recognizable cosmetic brands during the times of the Soviet Union. The company was founded by two businessmen from Lodz in 1919. The factory survived years of World War and Soviet oppression to become a leader in the Polish cosmetics market with a variety of effective products.

The collapse of the Soviet Union almost brought down Pollena as well. The company was on the verge of liquidation in 1991 but 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. Today, it is still the number one Polish cosmetic company controlled by domestic capital.

Pollena-Ewa offers a line of about 200 products that include Eva Natura flax line perfumes, Polish herb shampoos, and the skin-care line Acua Star. The company has also created a unique line of energizing skin care cosmetics made with amber.

Substantial investment has been made in processing, decorating and packaging equipment. The companywas certified for quality standards: in 1996, ISO 9001; in 1999, ISO 14001.

Krakow-based Miraculum S.A. with annual sales of $30 million was recently acquired by the Polish holding company Grupa Kolastyna. It is a market leader with an innovative 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, Mirasol, a skin care line, and the Generation X collection for men.

Miraculum has invested in modern packaging equipment and its 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.

Major multinational packaging producers such as Rexam are moving into Poland. There are small Polish companies with foreign capital such as Jannel and Dafo Plastics, which make high quality plastic packaging for cosmetics. Domestic glasswork company Czechi supplies fine glass products for the industry with licensed technology from Saint Gobain Desjonqueres (France).

In 2003, the carton for Max Factor Blasé was designed and manufactured by Max-Box, a small private Polish company. It won a prestigious award in the WorldStar packaging contest. Max-Box was founded in 1992 by Ewa Rudzinska. Based in Warsaw, it specializes in cosmetic packaging.