Polish cosmetics market set for steady growth

By Simon Pitman

- Last updated on GMT

Related tags: Cent, Cosmetics market, European union, Poland

If current economic conditions prevail, the cosmetics market in
Poland should experience steady growth, market analysts predict.
But the issue of tax on personal care products remains a
significant hurdle to overcome.

According to the Polish Market Research (PMR), the market for cosmetics and toiletries products grew by 3.1 per cent in 2005 to reach PLN8.7bn (€2.21bn), and is set to grow a further 3.5 per cent this year pushing that figure to PLN9bn.

But there is a significant challenge for the Polish cosmetics industry to overcome. Currently Polish government levies on all cosmetic and toiletry items sold in the country, pushing retail prices up.

Poland is the only country in the EU to levy such a tax, a factor that many market experts say causes domestic sales to be held back.

Considering that excise tax on cosmetic and toiletry products is currently levied at 10 per cent, it certainly has a significant impoact and puts the country out of kilter with the other 24 member states in the EU.

"This contributes to the situation in which prices of cosmetics, primarily in the luxury segment, are 10-20 per cent higher than on other Western European markets."​ According to Patrycja Ciosek, PMR analyst and co-author the report.

However, if the goverment goes ahead with plans to scrap this excise tax in January 2007, this should spell good news for the industry, and in turn help to boost sales significantly.

Currently the Polish economy is looking reasonably strong, with GDP set to grow at 5 per cent this year, something that is being translated into an increasing retail spend.

One of the country's biggest problems has been its stubbornly high unemployment (est.18.3 per cent in 2005), which is one of the highest in the European Union, but as increasing number of Poles move to work in other parts of Europe, unemployment is now falling and often money is being sent home, boosting spend power.

PMR predicts that if current economic trends and government policies prevail, the cosmetics market should continue to grow beyond 2006, reaching a possible annual increase of 4 -5 per cent by 2007.

However, if the rate of emigration to other parts of Europe, especially the UK, Germany and France, continues, economists believe that it could affect economic growth as the population rapidly dwindles.

Indeed, according to the British government, an estimated 447,000 Polish nationals are believed to have applied to work in the UK since Poland became an EU member state in May 2004.

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