27th July 2020
MADARA Cosmetics AS
MADARA plans to benefit from the powerful market trends. Besides its domestic market, Latvia, the Company’s core markets include Northern European countries, where demand is high for quality organic products as people in this region have high disposable incomes and more advanced online shopping habits. This does not in any way preclude efforts in other European countries, though a focus closer to home is natural in the short term, with further opportunities identified over the longer term. One of the main markets for MADARA is Finland, where the trend towards natural beauty and personal care products is becoming more mainstream. The use of natural products first emerged with smaller, organic, and premium brands, though it is now spreading to more widely used products. Natural ingredients have featured in the vast majority of new product launches, including those from leading mass brands, such as Unilever and L’Oréal. Competition is therefore intensifying, with several other international best-selling, naturally-positioned brands with innovative ingredients entering the Finnish market in recent years. Skincare, haircare, and makeup are widely using organic care products, collectively accounting for nearly four-fifths of the global organic personal care and cosmetic products market. The cosmetics industry is highly competitive, with the skincare segment set to remain the dominant part, accounting for nearly one-third of the market by 2022. According to many research reports, a larger, ageing population is helping drive growth in this segment, feeding off increased demand for natural and organic anti-ageing creams, moisturisers, and body lotions. Consumers perceive natural and organic products to be safer and of higher quality, with oils from natural sources such as argan, marula, almond, aloe vera, and coconut proving to be particularly popular ingredients for organic skincare products. For a variety of reasons, consumers are seeking ways of embracing a more natural lifestyle, a trend that also applies to cosmetics. Those with the money are moving away from mass-produced items towards those marketed as a part of a healthier, wellness-oriented lifestyle. This is a worldwide trend based on a preference for organic products that have been developed ethically and in an environmentally friendly way through the entire value chain. The visibility given to organic skincare products by the entry of large multinationals to the segment has generated additional demand and accessibility. Therefore, retailers who promote product quality, transparency, and sustainability are doing better than ever. Sustainability as a concept is growing in importance – consumers are becoming more aware of the term and show a preference for products manufactured under its principles: using renewable energy, recyclable packaging, and locally sourced ingredients. In response, the major brands operating in the industry are altering their products mixes, shifting the types of their ingredients used and acquiring natural skincare brands. The main advantages for the larger market players are that they produce natural cosmetics with advanced formulas at a lower cost. However, the higher costs of smaller manufacturers and, therefore, higher prices seem to have relatively little effect on consumer preferences, as they are willing to pay a premium for natural cosmetics. The rise of the individual consumer is an important trend underlying the shift in consumption patterns. After scientific research started highlighting the damage inflicted on the skin by environmental factors (radiation, free radicals and the like), antioxidants were hyped as potential offsets. This gave rise to the trend of using plants that contain very high concentrations of powerful antioxidants in skin creams. The key to success on the market seems to be in combining multiple antioxidants to provide the fullest spectrum of protection possible. Active players in the market invest in research and development to introduce innovative products. These are sold mostly through supermarkets, brand outlets, department stores, drug stores, pharmacies, non-store retail formats, and concept stores. These traditional retail
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channels still dominate the global cosmetics market. However, increasing rates of internet penetration worldwide, together with ease of availability and attractive discounts, has led to a growing preference of consumers to buy through the online sales channel. This trend should give a further boost to online sales of organic personal care and cosmetic products in the coming years. It is estimated that e-commerce formed 12-13% of the global beauty market in 2018. For many companies, online sales has become the channel of choice, allowing them to increase market penetration, consumer reach, and expand their consumer base. Therefore, while demand for organic cosmetics is growing, the customer’s interaction and experience, using diagnostic tools and digital apps, as well as electronic payments and delivery, are also transforming the industry. For e-commerce sales, retailers must continue to invest in omnichannel presence, bundling together retail, online, and mobile app stores with other methods of engaging with a customer. Several communication channels give the customer the ability to remain in constant contact with a retailer through multiple means. The return on investment generated by more positive customer experiences can be quantified by correlating it with customer loyalty.
Company Overview
MADARA was established in 2006, aiming to create effective and innovative organic skincare products, which are sustainable, safe and fully natural, and draw on examples of the best practices. With this ambition, the Company has managed to develop a competitive brand within the organic skincare niche that is distributed through both conventional and speciality channels. The ‘MADARA’ brand became a local pioneer in the field of natural cosmetics. Each product is exclusively developed and manufactured in MADARA’s own laboratories and production facilities, enabling it to take 100% control over all processes. Organic ECOCERT certification, GMP and ISO standards, in vitro and in vivo researches emphasise MADARA’s passion for quality and perfection in every detail. The Company exports its own brand products worldwide as well as offers contract manufacturing services.
MADARA Cosmetics Group The MADARA Cosmetics group is made up of several companies. AS MADARA Cosmetics is the parent company responsible for the development, manufacturing, and sale of organic cosmetic products under two brands: ‘MADARA’ and ‘MOSSA’. MADARA Cosmetics has three fully owned subsidiaries: MADARA Retail SIA, Cosmetics NORD SIA, and MADARA Cosmetics GmbH. MADARA Retail SIA manages four MADARA brand stores in Riga, located in shopping centres – “Galerija Centrs”, “Spice”, “Alfa”, and “Akropole”. The newest store in “Akropole” was launched in April 2019. In 2019, MADARA Retail SIA generated revenues of EUR 0.94m (+28% y-o-y), accounting for nearly a third of the Company’s total sales in Latvia. Cosmetics NORD SIA is focused on rendering contract manufacturing services using the production infrastructure and capacity of MADARA, with sales amounting to EUR 0.6m in 2019, down 15% y-o-y. However, the management claims that Cosmetics NORD SIA attracted several new customers last year as well as performed development of several new products for contract manufacturing customers. MADARA Cosmetics GmbH provides cosmetics marketing services in Germany and organises the distribution of MADARA products in that market. Also, there is a 19% minority shareholding in SIA Farmācijas, biomedicīnas un medicīnas tehnoloģiju kompetences centrs and a 9% holding in SIA Pharma and Chemistry Competence Centre of Latvia. Both facilities have been formed within the framework of the state aid programme ‘Competence Centres’, being implemented
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