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Forecasting 2023: Main points of the recent interview of the Group’s CEO, Mr. Christos Papaellinas, in InBusiness News

Our goal for 2023 remains the continuous evolution and constant transformation of the business in order to achieve our mission, for the benefit of our customers and associates, our staff and society at large.

In an interview with InBusiness News in the context of “IN Business Forecasting 2023”, the Chief Executive Officer of the Group, Christos Papaellinas, referred to the Group’s investment plans, highlighting the opening of the new Beauty Line and Holland & Barrett stores, as well as the opening of another beauty store with particular emphasis on services.

What is expected for the Cypriot economy and market in 2023?

2023 is expected to be a rather challenging year, for both the market and, more widely, the economy.

The sharp increase in consumption that followed the COVID-19 pandemic, coupled with the reduction in the global economy’s production capacity, created inflationary conditions. This has been further aggravated by the energy crisis and the shortage of critical raw materials caused by the ongoing war in Ukraine.

Central banks, after a prolonged wait-and-see attitude, one after another began raising interest rates in a bid to tame inflation, which reached double digits for the first time in 40 years in most of the world’s developed economies.

Obviously, the Cypriot economy cannot remain unaffected by these conditions. We already see rising prices affecting the real disposable income and the purchasing power of the households, while the increased cost of money will surely reduce business profits and slow down the pace of investment. Inevitably, the market will consequently be negatively affected in the coming year.

On the positive side, any impact on the Cypriot economy will be relatively lower compared to other European countries where the cost of living and the cost of production are both directly linked to natural gas prices. Furthermore, in recent years, Cypriot banks have strengthened their resilience and the Cypriot economy has made itself largely independent of Russia. It should be also noted that, over time, our economy has demonstrated a remarkable flexibility, adaptability and extroversion during tough economic times.

What are your predictions for the sector of beauty and cosmetic products, and the sector of consumer products as well, for 2023? Do you believe 2023 will turn positive, negative or will be the same as 2022?

The sector of beauty and cosmetic products, along with medicines, pharmaceutical products, nutritional supplements and consumer products, is a very important part of our activities. Notably with the presence of our Group in the retail market with the Beauty Line stores.

Any slowdown in the economy will have an impact on the beauty market as well. At the same time, however, this sector, in Cyprus and abroad, remains stable over time, without any particularly large fluctuations in relation to the wider economic environment. Spending on beauty products is only a small part of the family budget, while visits to beauty stores do not have the same frequency as, for instance, visits to food stores which are much more frequent. In addition, purchases of beauty products are more spontaneous than planned. For women consumers, buying a lipstick or a perfume is something that will cheer them up, something that will make them feel even more beautiful. These specific characteristics make the beauty market resistant to recessionary cycles of the economy.

On the other hand, we see the consumer products sector being affected to a greater extent. Most certainly in volume, but mainly in value. We already experience the consumers’ new attitude to shrink their basket, by buying fewer products, in an attempt to stem the value of their purchases. This is also expected to continue in 2023.

How did you finally decide to proceed with the opening of retail stores on Makarios Avenue? Do you expect the shopping street to rebound?             

Our decision to have a strong presence on Makarios Avenue was taken when Nicosia Municipality announced its plan to create a street with sustainable mobility, friendly to both citizens and the environment. Since the very beginning, we embraced the vision of a city centre reflecting the history of the capital, on par with other developed European cities. We wanted to be part of the regeneration and upgrading of the historic commercial centre of Nicosia, which suffered a significant decline in the last two decades due to the decent into urban planning anarchy and the successive deviations from the local development plans in the municipalities of the region.

The reopening of Makarios Avenue, the deviation in the implementation of the initial plan with the use of two traffic lanes turning the street into a standard urban road, and the uncertainty that succeeded this decision forced us to temporarily suspend the implementation of our investment plans.

However, with the implementation of the initial sustainable plan, we are now certain that the avenue will gradually and steadily regain its commercial character. Hence, we are proceeding with the opening of three stores. A new, innovative customer-oriented Beauty Line store, a new Holland & Barrett wellness store, the second in the centre of Nicosia, while we are also working on the opening of another beauty store with particular emphasis on services.

What are the important trends, events and developments to watch out for in your industry for 2023?

As I have already mentioned, the pharmaceutical sector is one of our key activities. Therefore, the implementation process of the second stage of GHS largely affects our organisation. As a Group, we are closely following the developments in the context of our participation in our industry’s professional associations, supporting this major reform. The degree of successful implementation of the GHS will determine the healthcare sector in our country and will in turn shape accordingly the landscape of the pharmaceutical market.

The increased cost of living and the constant rise in the prices of many consumer goods and energy also have a significant impact on us. As importers and distributors, we are forced, with great difficulty and despite continuous absorption efforts, to pass on a percentage of the increased costs to the final consumer. At the same time, however, we too operate with increased costs due to the fact that we are not only suppliers but also consumers of energy and other materials whose prices continue to rise. And then there is also the increased cost of borrowing, which is likewise expected to burden our profitability.

Finally, as a business group with a significant share of activity in the retail sector, we are concerned by the continued accumulation of power in large shopping centres which, for the most part, have been developed by way of derogation from local urban planning and operate outside, yet near, urban centres, condemning traditional shopping streets to prolonged decline. This situation does concern us since it does not only affects but threatens to destroy the small private-sector businesses, which are the core of small and medium-sized economic activity. And this is due to the fact that they cannot ensure their presence in shopping centres because of the excessive rents and large staffing needs to cover the opening hours, seven days a week. Indeed, the extension of the opening hours of all shops, in order for them to operate on Sundays as well, has somewhat enabled consumers, but at the same it has accelerated this tendency significantly, overturning the balance in the market. In order to have a healthy competitive environment, with more options and lower prices for the consumer, it is important, alongside the development of the malls, to keep alive the local shopping streets in the urban centres of our cities. That is why it is necessary to have the corresponding regulations that encourage economic growth in a balanced and sustainable way.

What should we expect for your group in 2023? What are your goals?       

Our vision and timeless mission is to make more and more people live and feel better. We strive to put this into practice through our various activities in the areas of Health, Beauty and Wellness. C.A.PAPAELLINAS Group, with the dedication of its people and the trust of its customers and associates, has managed in recent years to become the leading health and beauty product group in Cyprus.

The continuous evolution and constant transformation of the business in order to achieve our mission, for the benefit of our customers and associates, our staff and society at large, remains our goal for 2023.

The three pillars of our strategy for the new year are the continuous adaptation to the changing conditions of the new Healthcare environment in Cyprus as shaped by the introduction of the General Healthcare System, the emphasis on products and services that differentiate us and add real value to our customers, and the constant development and upgrading of our network of specialized stores, with beauty and wellness products.

At the same time, a large part of our investment plans is expected to be realised by the end of 2023, on the basis of our planning for the sustainable transformation of the organisation. This programme includes investments in installing photovoltaic systems on all available surfaces of our buildings aiming at the total green energy supply of our headquarters and warehouses, the renewal of our vehicle fleet with more environmentally friendly vehicles, the application of technologies to reduce energy use, and the reform of our processes across our entire range of activities in order to better manage consumables and raw materials.