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Natural Products Outperform the Overall Personal Care Market

By: Nancy Mills, Kline & Company
Posted: November 19, 2010

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With large competitors such as Unilever, Procter & Gamble, Avon, and L’Oréal already entering this segment on a global basis to diversify their existing product lines and meet the new demands of consumers, no doubt the local and regional players will see increasing competition in the coming years.

Asia Continues Climbing

Buoyed by a longstanding tradition of herbal remedies, Asia remains the largest market for natural personal care in the world, but now ranks second to Brazil in its pace, posting double-digit growth in 2010. Here, truly natural formulations hold a larger share at nearly one-fourth of the market, but growth in natural-inspired products is gaining strength as consumers demand mass products at lower prices.

Interestingly, the market for naturals in Indonesia is well-established, dominated by multinationals like Unilever, which has been on the ground there for more than two decades. Indonesian consumers seem to follow Western trends, despite the largely rural population, with the foreign origin of a brand commanding priority as a status symbol over its natural positioning. In contrast, truly natural products account for about one-third of the total market in India, which ranks second in the region behind China in terms of overall naturals growth. The competitive pricing of domestic brands and a strong belief among consumers in the medicinal properties of ayurvedic formulations are driving growth in the segment.

Also poised for double-digit growth, the market for naturals in Asia is expected to surge by a nearly 14% CAGR through 2015, buoyed by rapidly increasing urban population and greater awareness of natural products, especially in China, India, and Indonesia. Renewed interest for natural products—and a change in the perception of naturals from that of cheap alternatives to mass brands—is creating healthy competition and encouraging domestic brands to invest in research and development to improve product quality. The dominance and wide acceptance of herbal natural products in China and India will ensure ongoing demand in the natural segment.

Renaissance in Russia

Despite a deep economic downturn over the last two years, the natural personal care market in Russia enjoyed a growth rate significantly better than the country’s overall lackluster economy. Here, direct sales has emerged as a leading channel, offering low- and medium-priced natural cosmetics to meet the needs of cash-strapped Russians, both from an affordable pricing perspective and as a supplemental income opportunity. As the natural trend continues its slow but steady uptick, the Russian market provides plenty of potential for growth as consumers are increasingly attracted to new trends and novelties and embrace the natural and/or organic lifestyle.

U.S. Upswing