Contents:

EXECUTIVE SUMMARY 2007 brought the highest growth rates in the past decade Premium cosmetics become a key segment in the industry Multinational brands expand, local manufacturers shrink Store-based retailing remains the key distribution channel Moderate growth and fierce competition expected KEY TRENDS AND DEVELOPMENTS Half of local producers fail to comply with EU standards Local companies struggle to compete with multinationals Cosmetics and toiletries fairs and presentations boost the sector Multinational companies define the cosmetics and toiletries market Direct sales move the local cosmetics and toiletries market MARKET INDICATORS Table 1 Sales of Cosmetics and Toiletries by Sector: Value 2002-2007 Table 2 Sales of Cosmetics and Toiletries by Sector: % Value Growth 2002-2007 Table 3 Sales of Premium Cosmetics by Sector: Value 2002-2007 Table 4 Sales of Premium Cosmetics by Sector: % Value Growth 2002-2007 Table 5 Cosmetics and Toiletries Company Shares by NBO Retail Value 2003-2007 Table 6 Cosmetics and Toiletries Company Shares by GBO Retail Value 2003-2007 Table 7 Cosmetics and Toiletries Brand Shares by Retail Value 2004-2007 Table 8 Penetration of Private Label by Sector by Retail Value 2002-2007 Table 9 Sales of Cosmetics and Toiletries by Distribution Format: % Analysis 2002-2007 Table 10 Sales of Cosmetics and Toiletries by Sector and by Distribution Format: % Analysis 2007 Table 11 Forecast Sales of Cosmetics and Toiletries by Sector: Value 2007-2012 Table 12 Forecast Sales of Cosmetics and Toiletries by Sector: % Value Growth 2007-2012 Table 13 Forecast Sales of Premium Cosmetics by Sector: Value 2007-2012 Table 14 Forecast Sales of Premium Cosmetics by Sector: % Value Growth 2007-2012 APPENDIX Gift Sets DEFINITIONS Sources Summary 1 Research Sources LOCAL COMPANY PROFILES - BULGARIA ALEN MAK AD - COSMETICS AND TOILETRIES - BULGARIA STRATEGIC DIRECTION KEY FACTS Summary 2 Alen Mak AD: Key Facts Summary 3 Alen Mak AD: Operational Indicators COMPANY BACKGROUND PRODUCTION COMPETITIVE POSITIONING Summary 4 Alen Mak AD: Competitive Position 2007 AROMA AD - COSMETICS AND TOILETRIES - BULGARIA STRATEGIC DIRECTION KEY FACTS Summary 5 Aroma AD: Key Facts Summary 6 Aroma AD: Operational Indicators COMPANY BACKGROUND PRODUCTION COMPETITIVE POSITIONING Summary 7 Aroma AD: Competitive Position 2007 KRASNAYA LINIA BULGARIA LTD - COSMETICS AND TOILETRIES - BULGARIA STRATEGIC DIRECTION KEY FACTS Summary 8 Krasnaya Linia Bulgaria Ltd.: Key Facts Summary 9 Krasnaya Linia Bulgaria Ltd.: Operational Indicators COMPANY BACKGROUND PRODUCTION Summary 10 Krasnaya Linia Bulgaria Ltd.: Production Statistics 2007 COMPETITIVE POSITIONING Summary 11 Krasnaya Linia Bulgaria Ltd.: Competitive Position 2007 RUBELLA BEAUTY AD - COSMETICS AND TOILETRIES - BULGARIA STRATEGIC DIRECTION KEY FACTS Summary 12 Rubella Beauty AD: Key Facts Summary 13 Rubella Beauty AD: Operational Indicators COMPANY BACKGROUND PRODUCTION COMPETITIVE POSITIONING Summary 14 Rubella Beauty AD: Competitive Position 2007 STS COSMETICS OOD - COSMETICS AND TOILETRIES - BULGARIA STRATEGIC DIRECTION KEY FACTS Summary 15 STS Cosmetics OOD: Key Facts Summary 16 STS Cosmetics OOD: Operational Indicators COMPANY BACKGROUND PRODUCTION COMPETITIVE POSITIONING Summary 17 STS Cosmetics OOD: Competitive Position 2007 DEODORANTS IN BULGARIA HEADLINES TRENDS COMPETITIVE LANDSCAPE PROSPECTS SECTOR DATA Table 15 Sales of Deodorants by Subsector: Value 2002-2007 Table 16 Sales of Deodorants by Subsector: % Value Growth 2002-2007 Table 17 Deodorants Premium Vs Mass % Analysis 2002-2007 Table 18 Deodorants Company Shares by Retail Value 2003-2007 Table 19 Deodorants Brand Shares by Retail Value 2004-2007 Table 20 Forecast Sales of Deodorants by Subsector: Value 2007-2012 Table 21 Forecast Sales of Deodorants by Subsector: % Value Growth 2007-2012 Table 22 Forecast Deodorants Premium Vs Mass % Analysis 2007-2012

Summary:

2007 brought the highest growth rates in the past decade In 2007 Bulgarian cosmetics and toiletries achieved a successful year as most of the categories saw positive growth rates, both in terms of value and volume sales. Well above the average was the growth rate of sun care, for example, but its impressive progress was actually mostly due to its initial low base and the category still generates the low sales levels. The majority of the colour cosmetic categories performed well, with many managing to achieve double-digit growth in value and volume sales. Oral hygiene, however, was the least dynamic category but has significant potential for future growth. Premium cosmetics become a key segment in the industry 2007 was the year when rising disposable incomes stirred the market and stimulated the growth of premium and high-end cosmetics. Although actual sales achieved were still low, that was a clear indication that the local premium cosmetics category is changing and will become even more profitable for the key players. Premium colour cosmetics and sun care were the most dynamically progressing products but it is premium fragrances and premium skin care that generate the highest value sales. Conversely, the low end of the category is notably shrinking as the quality is becoming more important than the price of a product. A decade ago consumers were choosing most of the products by comparing prices. In the review period, however, it became clear that the attention of the users of cosmetics can be kept by showing consistency in quality and ensuring positive perception for the manufacturer and the brand. Multinational brands expand, local manufacturers shrink 2007 saw expected success for global brands such as Avon, Nivea, L’Oréal, Dove, etc. All of the multinational companies maintained their shares and stabilised their positions. Most managed to expand their share at the expense of local manufacturers, which were unable to cope with the intensifying competition. In spite of the recent investments in quality improvement, major Bulgarian companies such as Aroma AD, Alen Mak AD and Rubella Beauty AD remain unable to halt their falling shares. The key factor which limits their potential is their limited financial background, which does not allow them to invest in marketing and advertising. As a result, even new launches remain unnoticed while foreign companies invest massively in advertisements, which facilitate their progress further. Store-based retailing remains the key distribution channel Store-based retailing was the key distribution channel for cosmetics and toiletries in Bulgaria. Health and beauty retailers account for the greater part of the value sales in the industry, alongside perfumeries and independent small grocers. The importance of the grocery stores is increasing, mainly because of the growth of sales of the large supermarket/hypermarket chains as they are able to negotiate bigger discounts and offer popular brands at slightly lower prices. Along with that, the direct sellers like Avon and Oriflame have also managed to strengthen their distribution networks, resulting in growth of direct sales. Avon Bulgaria EOOD, which was the company with the largest overall share, is the major distributor of cosmetics and toiletries and successfully operates in categories including skin care, colour cosmetics and fragrances. Moderate growth and fierce competition expected The forecast period promises stable positive growth, driven by rising disposable income, which will boost demand for high quality sophisticated products. Skin care and sun care will show the highest growth as these categories are still underdeveloped and have the highest potential for progress. The positive advance and the increasing unit prices are expected to intensify competition between companies and they will bring the rivalry to another level – instead of only attracting the attention of the potential consumers, leading brands will have to keep it and invest in creating sustainable brand loyalty.

Companies Mentioned

ALEN MAK AD AROMA AD KRASNAYA LINIA BULGARIA LTD RUBELLA BEAUTY AD STS COSMETICS OOD