Oriflame to start up lipstick manufacturing in Russia

By Simon Pitman

- Last updated on GMT

Related tags: Investment

In line with the approaching completion of its CIS Supply Centre,
Oriflame has announced that it is hooking up with machinery
supplier Weckerle to establish a lipstick manufacturing facility.

Weckerle is a leading supplier of lipstick moulding equipment, and Oriflame​ has signed an agreement that will ensure the specialised machinery is in place by the first half of 2006, when production is expected to begin.

Oriflame said that the partnership will cover the full sourcing of lipstick and related products, including both the product and packaging, within the Supply Centre site.

The agreement is in line with Oriflame's objectives to reduce both the total cost of this key product area as well as cutting back on lead times in order to maintain service levels in its markets.

Oriflame said that it will invest up to €4 million over a three year period in addition to the investment plans of €30 million for the CIS Supply Centre.

Oriflame Cosmetics took the decision to construct a production and distribution centre in Russia back in 2002 in an effort to muscle in on significant growth seen throughout the Common Wealth of Independent States.

The company purchased a building spot just outside Moscow in September 2003 and a ceremonial groundbreaking took place on 30 September 2003, with planning preparations following this event.

However, delays in getting planning permission for the construction have caused set backs for the project, although the company says that the project is now back on track.

The Sweden-based direct sales player has been investing heavily in both the CIS and China markets of late, in an effort to tap into what is deemed to be the huge potential in these markets. Indeed, so great has been the investment, that operating margins are expected to be impacted for the next two years, despite significant increases in sales.

The company has invested huge sums to develop its business in Russia, but the dividends are showing. Euro sales for the CIS and Baltic region grew by 13 per cent in local currency terms, to reach €103.1 million.

As well as manufacturing eyeliners and lipsticks, Weckerle​ has been involved in the business of supplying machinery and services to major cosmetic manufacturers for over 35 years.

The company provides a number of lipstick moulding and filling machines, including WO90E and the top of the range MM180, that can achieve production speeds of up to 3,600 pieces per hour.

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