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Case Study: Steer for the Fast Track

By: Don Condit
Posted: October 5, 2009, from the October 2009 issue of GCI Magazine.
  • Commited consumers of products with natural and organic claims are not willing to change their commitment to these products, but they are willing to change their purchase habits.
  • This is a time to think entrepreneurially, move fast and launch at a price point that is strong enough to compete.
  • Production isn’t as sexy a subject as active ingredients or exotic delivery systems, but a production gain can have a direct impact on market-responsiveness and bottom-line profitability for customers at retail.

The impact of the recession on sales of natural and organic cosmetics has shown that this category is not just an alluring target when the world economy is running smoothly. In stormy weather, it’s a lifeboat for brands of all sizes. Early 2009 data for virtually all the major brands revealed weakening demand overall but surprising strength in naturals and organics sold through mass-market channels.

Globally, consumers are not about to give up their commitment to products they believe offer greater purity. But under the looming threat of layoffs and financial insecurity, they are willing to change their purchase habits. Trends underway before the downturn—including fast growth in private label and broadening distribution through mass retailers, supermarkets, and mainstream drugstores and pharmacies—have accelerated. Consumers hooked on naturals and organics still want those claims, but they are now shopping lower in the retail food chain to find these products at prices they deem more reasonable.

For brand managers, the equation for success in this category remains more or less the same—though some important variables have changed. As always, the biggest players may apply R&D and production resources to extend their brands with new natural and certified organic products. Or they may simply apply cash to acquire an established natural brand and its retail distribution. For everyone else, this is a time to think entrepreneurially, move fast and launch at a price point that is strong enough to compete with bigger brands.

To mitigate risk in a tough economy, the key is finding a contract manufacturer with plenty of experience working with natural and organic ingredients and the production savvy to ramp quickly for worldwide distribution. If market predictions unveiled at In-cosmetics 2009 prove correct, many of the most lucrative opportunities to be found during the recession will be in markets beyond North America and Europe.

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