The system, which was originally designed for regulating the use of wine and spirits in Russia, will now be used to monitor any cosmetic or perfume product containing over 1.5 per cent of alcohol.
As of July 1, all perfume and cosmetic manufacturers will have to incur extra costs by having to purchase, install and maintain the special equipment needed for the government to keep track of colognes, deodorants and cosmetics containing alcohol produced or sold on the domestic market.
This has prompted industry concerns that a price hike for existing products on the market may be needed to keep up with the increased costs that are incurred by adhering to the implementation of the uniform electronic information management system.
The new law comes at a time when the Russian government strives to abolish alcohol problems associated with the country and attempts to curb dangerous alcohol consumption amongst its citizens.
According to Russian news and information agency Novosti there is concern that the price hike could amount to up to 20 per cent by the end of 2007, causing apprehension from many leading manufacturers, with some leaving the market altogether.
Only a small number of manufacturers on the market have obtained the necessary licences to continue producing product lines, with around 650 out of 3,500 official producers adhering to the new policy.
Allegedly expenses from the new regulation will amount to RUB2 million, affecting both brands imported from overseas, and local companies.
Indeed, internationally renowned brands such as Chanel and Dior will almost certainly leave the market altogether as the sale of imported perfume and cosmetic goods containing additives which are not certified by Russian authorities is deemed illegal as of next month.
Aimed to halt the importation of unlawful alcohol disguised as perfumes the new regulation will no doubt predominately affect the larger manufacturing giants, as they will be unlikely to alter perfume formulations simply for the Russian market.
The new regulation stemmed from a greater need to stem the dangerous lengths Russians will go to consume alcohol, with a report on the BBC recently stating that Russians have a 'willingness to swallow all kinds of domestic and industrial products, provided they contain alcohol'.
The regulation will hit the industry particularly hard as it becomes a hot spot area, reporting booming sales growth over the past few years.
Consumer expenditure is pitted to continue growing by seven to eight per cent every year, with average wages expected to rise by an annual eight to twenty per cent.
However, with the new laws introduced in the perfume and cosmetics industry, the increased consumer spending power could be directed towards different consumer goods instead.
