EUROPEAN COSMETICS MANUFACTURERS FACE NEW SUPPLY CRISIS
by Mimosa Spencer, Valentina Za and Francesco Zecchini
PARIS/MILAN (Reuters) – European perfume and cosmetics makers face shortages of paper, glass and some essential oils and alcohols as Russia’s offensive in Ukraine has further disrupted supply chains, leading to higher prices in a context of strong demand.
The $500 billion global cosmetics industry is grappling with fallout from the war in Ukraine as cosmetics producers use alcohol made from organic grains and beets for their perfumes and oil sunflower for their cosmetics – the key crops of Ukrainian agriculture.
The war-triggered energy crisis in Ukraine has also sent glass and paper prices soaring, while the lockdown in China has prevented companies from sourcing components to make packaging for perfumes and lipsticks.
“We are in crisis management mode on these supply issues,” said Emmanuel Guichard, general delegate of the Federation of Beauty Companies (FEBEA), in an interview with Reuters.
Rising prices for packaging, energy and raw materials have led to a 25% to 30% increase in production costs in the cosmetics industry, which is a challenge for mass cosmetics producers, even though demand for personal care products remains strong, according to Federica Levato of consultancy Bain & Company.
While Italian perfume maker ICR expects sales to exceed pre-health crisis levels this year, it faces a 30% annual rise in the cost of alcohol, in addition to a 10% increase in the cost of glass and paper, said its vice president Ambra Martone.
While large companies, with higher profit margins, have greater financial strength and flexibility to deal with the situation, the challenge is particularly acute for small and medium-sized enterprises in Europe.
Glassmakers have struggled to keep up with demand for COVID-19 vaccine vials after cutting production at the start of the pandemic, turning off kilns in Italy for the first time in decades.
The doubling of the cost of paper used to make luxury packaging boxes for clients such as Dolce & Gabbana and Ferragamo has prompted Italian group Isem to raise the price of its products by 10-40%, its manager told Reuters. CEO, Francesco Pintucci.
Executives at Intercos, an Italian cosmetics supplier, said they had raised prices by around 5% at the end of 2021 and were considering a further hike during the summer.
(Report Valentina Za and Francesco Zecchini in Milan, Mimosa Spencer in Paris, Silvia Ognibene in Florence; French version Anait Miridzhanian, editing by Jean Terzian)