Russian stores selling perfumes and cosmetics may run out of stock in August 2007, reports Pravda.ru, and the consumer could pay a higher prices for the few items remaining. As of July 1, 2007, information on purchasing, storing and selling any product containing more than 1.5% of alcohol is required to be registered in an electronic information management system.
This system was reportedly designed for regulating the wine and spirits market in Russia; however, the government now plans to use it for keeping track of all colognes, deodorants and cosmetics produced or sold on the domestic market and all producers of perfume and cosmetic goods will have to purchase, install and maintain equipment to comply with the regulation. Pravda.ru reported it is clear that companies will incur additional expenses while purchasing and operating new equipment. As a result, the retail price of the goods will increase.
Many manufacturers reported they simply cannot afford such costly equipment. Expenses relating to the purchase and maintenance of the new system equipment will total 2 million rubles during the first year, commented Tatyana Puchkova, chairwoman of the Russian Perfume and Cosmetic Association, according to the report. To cut down on expenses, Svoboda's factory has already stopped producing goods that contain alcohol. The factory’s product range has shrunk too. Allocating funds on the new system could result in the closure of small-sized companies, said the report, and incidentally, the majority of companies manufacturing perfumes and cosmetics in Russia fall under the category of small business.
Additionally, the sale of imported perfume and cosmetic goods containing additives that are not certified by Russian authorities will be deemed illegal in Russia. The lawmakers apparently believe that the new regulation will help to stop the import of unlawful alcohol disguised as perfumery. On the other hand, the restrictive measures may have a devastating effect on the Russian cosmetics and fragrance market.
“Manufacturers of elite perfume brands like Chanel or Dior will not change the formula of their products to tailor for the Russian market. They may as well leave the Russian market,” said Sergei Bolshakov, executive director of the National Association of Perfume, Cosmetic and Household Chemicals Manufacturers, in the report.