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Perfumes and cosmetics could become more expensive again due to the crisis caused by the war in Ukraine

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European perfume and cosmetics manufacturers are facing a shortage of paper, glass and some key oils and spirits, as Russia’s invasion of Ukraine adds new disruptions to the supply chains for beauty products, writes Reuters.

Like the food industry, the $ 500 billion global cosmetics industry is facing the consequences of the war, as producers use grain-derived alcohol and organic beets to make perfumes and sunflower seed oils to make cosmetics. all key cultures in Ukraine.

The energy crisis has made glass and paper more expensive

At the same time, the war-torn energy crisis has pushed up sharply glass and paper prices, while China’s restrictions on Covid-19 have hampered companies’ ability to obtain packaging components for $ 100-per-bottle perfumes and $ 30 lipsticks. of dollars.

“We are in crisis management when it comes to these supply issues,” Emmanuel Guichard, secretary general of the French cosmetics association FEBEA, said in an interview with Reuters.

The consulting firm Bain & Company estimates that higher prices for packaging, energy and raw materials have led to an increase in production costs in the cosmetics industry by an average of 25% -30%, representing a challenge for mass cosmetics manufacturers, although the demand Personal care products remain strong, according to EMEA luxury practice partner and leader Federica Levato.

Bulgarians are struggling with rising alcohol prices

Italian perfume maker ICR expects sales to surpass pre-Covid levels this year, but perfume maker Bulgari and Salvatore Ferragamo are struggling with a 30% annual increase in the cost of alcohol, in addition to a 10% increase in the cost of alcohol. glass and paper, said Vice President Ambra Martone.

Global beauty sales are surpassing 2019 levels of $ 538 billion this year, up from $ 518 billion in 2021 and $ 458 billion in 2020, a McKinsey report said.

This is one of the other industries that have been disrupted by the war, including the global packaged food industry, which is estimated to be worth more than $ 2 trillion this year, according to the latest Euromonitor estimates.

Russia’s invasion of Ukraine has disrupted commodity and edible oil markets, pushing global food prices to new heights.

Deficit and price increases even for pumps and caps

While larger companies with higher profit margins have more financial strength and flexibility to deal with – L’Oreal’s luxury division, which sells Giorgio Armani and Valentino branded makeup and perfumes, e.g. , has an operating margin of 22.8% – the difficulty is particularly high for small and medium – sized companies in Europe.

“We are facing a deficit and price increases at every turn: from essences and alcohol to glass and paper – even for spray dispensers and Surlyn plastic used for lids,” said Marco Vidal, general manager of the Venetian manufacturer. Mavive, the owner of the company.

Problems are growing as consumers continue to buy beauty products at higher prices, including perfumes made with a higher concentration of oils and more unusual raw ingredients.

Perfume sales have grown steadily over the past three years. In the United States, sales increased by 15% in 2021, according to the latest data from NPD Group.

“It’s a disaster and you just can’t find a bottle,” said Alba Chiara De Vitis, founder of Alchemia Essenze in Florence, whose perfumes sell for up to 180 euros ($ 196) a bottle.

European cosmetics manufacturers, which exported goods worth 22.6 billion euros ($ 24.6 billion) in 2020, according to Cosmetics Europe, have seen an increase in competition for packaging materials following the coronavirus pandemic, which stimulated e-commerce by increasing paper consumption amid efforts to reduce plastic use.

Dolce & Gabbana, Ferragamo and Givenchy have increased their prices by 10-40%

Glassmakers, meanwhile, have struggled to meet demand for vaccine vials after slashing production in the early stages of the pandemic, shutting down furnaces in Italy for the first time in decades.

Gas prices are now exacerbating problems for both industries, forcing Italian paper mills to temporarily halt production to renegotiate selling prices.

Doubling the cost of the paper it uses to make luxury rigid boxes for customers such as Dolce & Gabbana, Ferragamo and Givenchy has led Italian group Isem to increase the price of its products by 10% -40%, CEO Francesco Pintucci told Reuters.

Italian glassmaker Bormioli Luigi, which produces bottles for spirits, perfumes and cosmetics, with annual revenues of 480 million euros, expects additional energy costs of 80 million euros this year, half of which will be borne. of its beauty division, whose customers include the French brands Chanel and Dior, said the head of perfumes Simone Baratta.

“Before the war, the cost of a bottle from distributors was 0.75-1.40 euros, now it is 1.00-1.50 euros,” said De Vitis.

Glassmakers in France, where larger cosmetics companies have started placing orders months earlier than in the past, have calmed down, said Guichard, who anticipates that they too will likely feel soon the energy crisis.

“I think it will be difficult for us to get gas to make perfume bottles,” he said, noting that there will not be enough time to convert gas ovens into electrical systems.

Meanwhile, the directors of Intercos, an Italian supplier of cosmetics for branded companies, which signed a five-year trade agreement with Dolce & Gabbana on Tuesday, said that the company increased prices by about 5% at the end of 2021 and that it takes into account consider a new growth in the summer.

“In the luxury beauty sector, we expect the burden of these higher costs to be borne by consumers, after a transitional period that could take several months,” said Levato.

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