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26 Jul, 2007 03:31

Beauty industry gets bigger in Russia

Russia’s health and beauty industry is attracting foreign investors, with the country's second-largest beauty salon chain recently agreeing to sell a major stake to Scandinavian private equity firm Mint Capital.

He’s young, smart and ambitious. Having tried himself in construction and real estate, Aleksandr Glushkov made his mark in the least masculine of businesses. He owns Mone, Russia’s second largest chain of beauty-salons.

“Our very existence proved to the market that enterprises in the beauty-services sector in Russia can be profitable, large in size and serious in their business approach,” he says.

The fast pace of growth caught the eye of a Scandinavian private equity fund Mint Capital. It agreed to pay about $US 8 MLN for a blocking stake it won’t disclose. The deal is the first of its kind in Russia’s health and beauty sector.

Mint’s Partner, Gleb Davidyuk, says while the investment is modest, it confirms the sector’s vast potential: “The wave of business development is coming to retail, to services, to real estate. Take any newspaper in Moscow and you’ll read a lot of articles – this is booming, that is booming!”

According to analysts, Russia’s health and beauty sector has finally ripened up to welcome investors.

“The health and beauty sector is just being shaped up. A while ago there wasn’t much in the sector to look at. Of course there was a bunch of entrepreneurs doing their business but no significant targets venture capital of private equity funds. Something had to be done in the sector, some critical mass had to be developed. And I guess the time is now,” suggests Anton Poriadine, A.T. Kearney analyst.

Up till now we grew organically. Now we expect revolutionary growth, planning to have 100 salons in various regions of the country within two years

Aleksandr Glushkov,
beauty salon chain owner

The beauty sector in Russia was worth around $US 5 BLN last year. Of that, about $US 1.5 BLN was spent on hair-care and related products, another $US 1.5 BLN on face and body-care products and the rest on beautician services

Unlike in Europe, where chains and franchises make up more then half of all beauty salons, in Russia they barely reach 1% of the total. Mone, with its 17 salons in Moscow and St. Petersburg, is well behind its main rival Persona, which has over 60. Opening new salons is the key to its continued growth, Mr Glushkov believes.

As disposable incomes rise and Russians start to spend more on pampering themselves, the health and beauty sector promises to become not only the most glamorous, but also one of the fastest-growing in Russia.