Benefits predicted under a more regulated natural cosmetics category
Cosmetics companies are forgetting glamour and going back to nature as natural and organic brands become among the most sought after on the market. Behind this trend is a growing concern about the chemicals that go into many cosmetics and toiletries.
As consumers become even more informed, however, natural brands will be held to higher standards, potentially slowing the development of the trend and reducing the category to a limited number of high-quality players.
The US$269.6 billion cosmetics and toiletries market achieved a 5% CAGR 2001-2006 in fixed exchange rate terms and according to Euromonitor International’s latest analysis demand for products that claim to be natural or organic is one of the key drivers behind this dynamism. Not only are these brands injecting innovation into the market, but they are also contributing to value growth, coming as they do at a 30-50% premium over standard products.
Euromonitor International’s analysis shows the trend has emerged as one of the foremost in the global beauty market. In Western countries, it comes as a reaction against conventional brands, and natural alternatives are considered a high-end niche. In contrast, many emerging markets, such as China, India and Russia, have a tradition of using natural products, often founded in ancient medical practices such as Ayurveda, and consumers can be suspicious of synthetic, imported brands. In Brazil, for example, home-grown cosmetics firm Natura leads the market with a 13% share thanks to its use of locally-sourced ingredients.
Top trends in natural/organic personal care
Natural and organic cosmetics and toiletries have been making headlines for some years now and in 2006 natural ingredients at least became a mainstream offering. Driving the trend is the increasing focus on health and wellbeing, the rising incidence of allergies, and concern about the safety of the countless number of chemicals people are exposed to every day – over 170 in the course of an average grooming regime according to some estimates.
Government initiatives have also helped raise awareness. In the EU, for example, new legislation came into force in July outlawing many potentially harmful chemicals used in cosmetics and toiletries and requiring others to be safety tested before use. The European Commission is also working on a voluntary code of conduct for use by developers of nanotechnology. The spread of retail concepts such as Whole Foods, The Organic Pharmacy in the UK, and Wal-Mart’s Natural and Organic Bodycare Oasis have also helped lift the profile of natural and organic products.
The fact that multinationals are buying into the trend is a sign that natural/organic ingredients are here to stay. L’Oréal, for example, is working to enhance its ethical profile through acquisitions, including that of natural beauty retailer The Body Shop and French organic cosmetics and toiletries manufacturer Sanoflore. Colgate-Palmolive is also tapping into the trend and last year purchased natural oral hygiene firm Tom’s of Maine. Even more compelling is the emergence of private label alternatives; the first retailer-owned organic body care line was launched by UK supermarket chain Tesco in February.
Regulatory issues refine the category
As demand for natural/organic personal care continues to boom, however, consumers may become aware of a conflict between these products and another emerging trend – that for eco-friendly and socially ethical brands.
Replacing synthetic ingredients with natural ones is creating sustainability issues particularly given the trend towards the use of scarce, exotic flora such as those derived from the Amazon rainforest. It was this issue that prompted one ingredients manufacturer, Symrise, to launch a conservation campaign to protect the supply of alpha-bisabolol, an active ingredient widely used in personal care and derived from the Brazilian candeia plant. Regulatory efforts are also being stepped up to deal with the challenge.
The UN is calling for international policies to protect aquatic resources as marine extracts become popular beauty ingredients and in New Zealand the government is taking steps to block “biopiracy” as international cosmetics firms spot the value locked within the country’s unique biodiversity.
Another threat to the development of the trend is increased consumer information and the potential for this to expose products that do not live up to expectations of “naturalness”. With no definition of what makes a cosmetic “natural” and no unified standards around organic certification, it is possible for brands to make natural claims while still using potentially harmful chemicals. Such products can no longer hide in Canada, where new regulations, introduced in November last year, require all cosmetic ingredients to be featured on packaging labels. In the US, there are plans to introduce new standards for organic personal care products, which would similarly expose brands that exaggerate natural claims by requiring labelling to state whether products are 100% organic, 95% organic or made with organic ingredients. This issue will only become more acute as regulators worldwide come under pressure to establish internationally harmonised rules around both chemical and natural cosmetics.
The result will be a thinning out of the category, with only those brands with a high percentage of natural ingredients and an eco-friendly stance remaining as credible players. While potentially undermining development of the natural/organic trend, this is actually good news for the industry and consumers alike, a point which is illustrated by some brands’ attempts to drive self-regulation in the category. Burt’s Bees, Aveda and The Body Shop are just three of the more than 500 beauty firms that have signed a pledge to eliminate toxic ingredients from their products within the next three years.
The former also launched a campaign early this year to set standards for natural personal care in North America. Poor quality natural and organic brands can damage consumer trust and turn them off the category, but products that can prove their credentials stand to make even higher price premiums. At present, supply issues mean there are few brands than can claim to be 100% natural and none that are completely organic. Higher standards for the category would give manufacturers more of an incentive to invest in research and development of effective replacements to chemical ingredients and could eventually mean a broader array of truly natural cosmetics and toiletries.