Russia Halts Sales of Major Home Care Brands

On 25 August 2015, Rospotrebnadzor (the Russian Federal Service for Surveillance on Consumer Rights Protection and Human Wellbeing) informed retailers that they have to stop sales of several products from the range of famous dishwashing brand Fairy from Procter & Gamble and laundry care brands Persil and Vernel from Henkel. Safety concerns was the main reason for the restrictions. Both companies dominate Russian home care market with a combined value share of over 40% in 2014 and over 50% share in the mentioned categories. There were several other companies affected by this safety check including multinationals Colgate-Palmolive, Clorox, Werner&Mertz and local Nevskaya Kosmetika. This news was immediately connected to the ‘sanctions war’ among Russia and Western countries.

Both Procter & Gamble and Henkel are among the largest FMCG players in Russia. These two companies not only import products, but also have wide production capacities inside Russia. In June 2015, Henkel opened one more factory in Russia and announced that it is still interested in investments into local market. If these restrictions from Rospotrebnadzor are indeed connected only to insufficient quality of products, this issue will be quickly solved by manufacturers. However, if this decision has deep political roots, international companies will need to review their business plan for Russia, which will affect not only local consumers, but also thousands of employees.

The popular idea of import replacement which is proposed in Russia will be hard to implement in the case of home care. Multinational companies managed to get dominant positions due to strong brand names, which were consistently supported with innovative product launches and wide promotional campaigns. It will be hard for local companies to replace global players due to smaller business scale. However, Russian consumers always have alternative of Khozyaystvennoe bar soap or Belizna bleach that were widely used for all home care purposes before entrance of multinationals and are still used by consumers with lower incomes.