ICELAND: THE LITTLE MARKET THAT COULD
Byline: Natasha Singer
REYKJAVIK, Iceland — Iceland’s tiny population of 280,000 may be the equivalent of an average town in Europe, but its avid beauty-buying inhabitants are making the small Nordic nation a preferred test market for cosmetics manufacturers.
Established international brand names such as Estee Lauder and Shiseido are seeing significant shopping by Reykjavik’s well-groomed workaholics. Meanwhile, hip younger brands such as Hard Candy and Urban Decay are finding that Iceland’s well-traveled trendsetters are ideal consumers for their fashion-forward brands. Icelanders’ commitment to personal grooming also is encouraging local manufacturers to increase their market share.
Iceland wasn’t always such a beauty distributor’s dream — full of perfumeries offering Lancome, Helena Rubinstein, Christian Dior, Clarins and Make Up For Ever, and drugstores stocked with Vichy, Nivea, Maybelline and Max Factor. High inflation in the Seventies focused consumers’ disposable incomes on no-frills staples. But now with the gross domestic product (GDP) increasing at the rate of more than 4 percent a year from 1994 to 1999, Iceland’s primarily fish-based economy is booming, unemployment is down to about 1 percent and the population is shopping freely and frequently.
“In terms of size, Nordic countries are small markets to begin with, so the entire country of Iceland is akin to a small city in Sweden or Norway,” says Eric Ahrenkiel, Aramis brand manager for Scandinavia. “But in terms of spending, Iceland is the highest per capita market among the Nordic nations. It’s our biggest per capita market for Aramis brands, including Tommy Hilfiger and Donna Karan fragrances, in the Nordic region. It beats the number two Nordic market by a ratio of 1.6 to 1 and is up to four times bigger than some of the other Nordic markets.
“You might not think you could build such a substantial business in Iceland, but the population is very young, very uniform, very educated, with a very high standard of living. From a distribution point of view, it’s also very convenient because everyone lives either in or very near a city,” he said. Indeed, Iceland has the youngest population in Europe with 24 percent under the age of 15; meanwhile, 90 percent of the population lives in cities with 170,000 (or more than half of the people) concentrated in the area in or around the capital Reykjavik.
Even trendy boutique brands are finding a niche here. Forval, an Icelandic company founded in 1976 as an importer and wholesaler of hair care goods and now a distributor as well of upscale cosmetics and fragrances, is so pleased with the results of its Hard Candy launch that it plans to introduce Urban Decay to the country in March.
“In America, the Hard Candy audience is basically young fashionable women aged 16 to 24,” noted Haraldur Johansson, president of Forval. “We have that in Iceland as well, but we also have 42-year-old women who want to be fashionable and are buying Hard Candy, too. Icelanders are quick learners and lovers of new brands.”
Iceland was the second market in Europe, after England, to introduce Hard Candy, when it launched here in March 1998 in eight doors in Reykjavik. Johansson said he estimated the brand’s 2000 sales volume to be in the range of $350,000. When Iceland’s first TopShop unveils its lifestyle basement floor next month, Forval will add a new Hard Candy counter and also inaugurate Urban Decay here — which also represents that line’s second European launch after England. A total of five Urban Decay doors are planned for 2001.
But those two niche cosmetics are only two of Forval’s many brands. The company remains Iceland’s top hair care distributor with more than 100 outlets in supermarkets and drugstores for brands such as St. Ives, Wella and Pantene.
For the last 12 years St. Ives has been Iceland’s top shampoo, with 85,000 bottles sold in 1999, which is the equivalent of almost every household buying one unit in that year. Forval is also distributing high-end British brands such as TeTao, based on Japanese tea, and Indra, which appeals to Iceland’s aromatherapy enthusiasts.
Moreover, Forval is doing a roaring perfume business with Diesel, Iceland’s top fragrance for the last three years, as well as Fred Hayman Hollywood and Perry Ellis Portfolio. Johansson said 75 percent of the country’s perfume consumers come from the twentysomething youth demographic.
“Icelanders have very high purchasing power and are large consumers of makeup, skin care and fragrances,” said Ariel Gendzbourger, Shiseido’s commercial director for Scandinavia. Shiseido launched in Iceland in 1999 and now has five doors in Reykjavik. “Some brands go the pharmacy route and have 30 to 40 points of sale in the country. We’ve been highly selective about the perfumeries we’re in and we’re seeing very good results. What’s interesting now is that the market is changing, getting more aggressive and moving very fast. The old-fashioned traditional perfumeries are getting less popular and the department stores are coming in.”
The Estee Lauder brands are taking advantage of Iceland’s shop modernization trend and will form a significant section of Debenham’s beauty floor when the country’s first department store opens in September.
“Debenham’s opening will upgrade the beauty market,” acknowledged Gulli Christmans, managing director of Artica, the Icelandic distributor of Origins, Lauder, Clinique and the Aramis group. “I expect you’re going to see the six major brands — Lauder, Clinique, Clarins, Dior, Lancome and Helena Rubinstein — which entered the Icelandic market about 12 years ago, get stronger and some of the smaller brands fight for counter space,” he predicted. “But we can’t ignore the little boutique brands anymore either. We didn’t used to think of them as our competition, but they’ve gained a significant market share.” Clinique and Aramis have 22 doors in Iceland; Lauder has 18 points of sale, and Origins has nine outlets.
“We’re very big. The new Donna Karan fragrance is ranked either number one or two in stores, with Cashmere Mist ranked at about number nine. Tommy is about number four in sales in most stores. The total domestic consumption of prestige products is estimated at about $12.5 million,” he said. “There is high personal spending on fashion and beauty, which means in the long term other Lauder brands such as MAC, Bobbi Brown and Stila should be here, and they will eventually, of course.”