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The pace of natural and organic product launches has been accelerating since 2002, when 624 such introductions were recorded by Mintel’s Global New Products Database (GNPD). In 2004, the GNPD reported 2,900 new natural or organic cosmetics and toiletries launched. As reported in GCI last May, Mintel saw natural-oriented launches across all categories including lip plumpers by companies such as Jason Natural Products and organic hair colorants by Tints of Nature from Herb in the U.K. This past January, Baby Bouquet released a new line of natural baby skin care products. Aubrey Organics launched its sun care line including a tinted sunscreen SPF 20 Natural last month at the annual Natural Products Expo West. Numerous launches aside, the segment is not without its challenges.
What’s in a Name?
Darrin Duber-Smith, MS, MBA, president of Green Marketing, Inc., said one of the challenges for the natural personal care industry is that the term “natural” has never been adequately defined, making it impossible for the industry to draft a common standard and certification process for the purpose of enforcement and consumer understanding. The International Association of Natural Product Producers has been working on drafting just such a standard for the past 16 months, and Duber-Smith said the group recently posted its first draft of a standard for review at its Web site, www.ianpp.org. “The group’s efforts could eventually redefine how the word natural is used in marketing and packaging,” said Duber-Smith.
“Organic ingredients, on the other hand, are defined by the USDA and enforced by the FDA and FTC,” said Duber-Smith. “Recent concerns that organic regulations didn’t apply to topical personal care products have been addressed, opening an entire universe for companies wishing to gain product differentiation and competitive advantage by positioning brands as organic.” He added that organic foods and beverages have been growing at rates of more than 20% annually for quite some time.
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Producers of natural and organic products around the world work under different regulatory and standard criteria, but abiding by the standards and using the available logos and indicators are an important way to communicate with consumers about the quality of their products.
Waleda, the 85-year-old Swiss manufacturer of organic and biodynamic body care products, is certified by the BDIH, a European organization that follows a broad range of criteria to ensure its standards are met. Compliance allows manufacturers to use a special mark acknowledging quality ingredients, products and business practices, according to Jennifer Barckley, Weleda public relations and communications manager. U.S. brands Zia Natural Skin Care and Jason Natural Products, both part of The Hain-Celestial Group, are free of animal-derived ingredients and it is company policy to not test on animals or use ingredients that were tested on animals. “This commitment is very important to our consumers and (is) indicated on our packaging through the leaping bunny symbol,” according to company spokesperson Laura Setzfand, director of marketing for both companies. “The recycle symbol and natural ingredients logo are also extremely important to our consumers.”
The challenges for this segment don’t end with definitions and standards, however. Zia and Jason are two examples of what Duber-Smith characterized as “the wave of consolidation” that has been going on in the natural and organic personal care segment in recent years. “This is significant,” said Duber-Smith, “because consolidation usually forewarns of a maturing market.” Burt’s Bees, Dr. Hauschka, Avalon and others also have undergone some kind of acquisition or equity funding in recent years, according to Duber-Smith.
Changing Attitudes, Changing Channels
Growth in the segment shows no signs of slowing, due mainly, said Duber-Smith, to the expanding base of U.S. consumers who report using natural and organic personal care products. “Growth is driven by increasing attitudes in favor of health and wellness and environmental sensitivity as well as more product availability,” said Duber-Smith. “Products are available in an increasing number of channels as evidenced by major players like Tom’s of Maine and Burt’s Bees enjoying success in mass retailers like Wal-Mart and Target, the expanding role of e-commerce and other direct channels, and the continued growth of natural, spa, salon and prestige channels,” he said.
For Korres, a natural products company established in Greece and with roots in the first homeopathic pharmacy in Athens, the channel strategy varies upon the special characteristics of every market. “In Greece, our products are distributed to more than 5,000 pharmacies,” said Maggie Vasilyadis, spokesperson for Korres Natural Products. “Selling our products in Greek pharmacies is therefore very natural as we ourselves also started from a pharmacy.” In other countries, the concept of a pharmacy is very different and doesn’t always fit the Korres image. Korres works instead with well-known department and beauty stores, which often have a special area for the niche beauty and lifestyle brands from around the world, according to the spokesperson.
“In the United States, as awareness has grown about our brand’s quality and effectiveness, our distribution has expanded from small independent beauty boutiques shops to prestige beauty chains. Thirty percent of our business is currently represented through our independent accounts, and 70% through the prestige beauty chains. In the short term, we see a continuous growth and awareness of our brand within the prestige market,” said Vasilyadis.
Korres distributes through a variety of retail operations around the world including Sephora in the United States, France and Italy; Henri Bendel and Whole Foods in the United States; Harvey Nichols, Liberty, Harrods and Selfridges, in the U.K.; Ludwig Beck, Quartier 206, Apropos in Germany; Le Bon Marché, La Samaritaine and Pharmacie du Corner in France; and Kit Cosmetics in Australia. Korres also distributes in stores in Singapore, Hong Kong, Malaysia, Kuwait and Dubai, and six Korres stores in Athens, London, Barcelona and Helsinki.
For Zia and Jason, the distribution strategy has and will continue to focus primarily on the natural channel, given the tremendous opportunity to continue to improve depth of distribution in these outlets, according to Setzfand. “In recent years, specialty stores and mass outlets with a commitment to natural, health and wellness have offered additional opportunities for our lines as consumer awareness and demand for natural products has increased. We will continue to evaluate these opportunities to grow our brands and educate consumers about the difference between natural and mainstream products,” Setzfand said.
Just last month Jason introduced Red Elements Skin Care based on red tea. Red Elements is advertised as combining the power of red tea, advanced peptide technology and powerful elements from the earth to firm, tone and fight the signs of aging. The nine-product Red Elements line includes gel and lotion cleansers, toner, day and night moisturizing creams, an exfoliating scrub and more.
For Weleda, the natural market is the primary distribution channel and they are committed to that direction for the future. In the United States, the company distributes in natural markets such as Whole Foods Market and other organic food stores, co-ops and apothecaries. “In addition, we work (as a small percentage of our market) with various professionals at spas, wellness centers and with doctors and pharmacists,” said Barckley. Weleda opened its flagship store in North America in Palisades, New York, 15 miles outside New York City. “In the short term, we do not see this changing for us. We see a great deal of development potential in our existing markets, particularly in the natural industry,” Barckley said.
Baby Bouquet, the Santa Ana, California marketer of luxury natural baby care products, finds itself facing the challenge of building a niche within the naturals niche. It has worked to create winning formulations. Its packaging is a hit with mothers for its hands-pump. Its logo, whimsical. Still, it struggles with promoting to the naturals channel. “Many stores have tried baby lines early on and did not have very much luck them. They are very hesitant to try them again,” said John Dee, company owner. “But the market has changed over the past five years. The fastest grow “new parent” age group is the 35-to-45-year-olds.” These parents have established careers, college degrees and lots of extra income, Dee said, and are willing to spend money on the best products available to keep their babies safe, happy and healty. They are also part of what’s driving the success in the natural foods space, said Dee.
Sales data showing continuing growth in the category are borne out by what marketers are seeing in the stores. Consumer interest in natural and organic foods appears to extend to personal care products, as well, according to Jason Naturals’ Setzfand. “Most consumers are introduced to natural personal care through their interest in food,” she said. “Enhanced packaging and marketing are also encouraging nonusers to try natural for the first time and formula improvements are changing the perception that natural products are less effective.”
Weleda sees consumer response to its products growing throughout the world. “We are very well-established in Western Europe, however, in the United States and Canada, we are also expanding,” said Barckley. She said the growth and brand exposure can be attributed to two factors: The organic market is growing overall in both the food and personal care categories; and, Weleda is increasing its marketing through ads in targeted trade publications and communication support at the retail level.
Consumer response to Korres natural products seems to be fast-growing, according to Vasilyadis. “Both our product quality that promotes purchase repetition and our strong image have contributed to that progress. In Greece, we are now very well established as we have become the leading Greek skin care brand in Greek pharmacies. Our export activity is also growing. The choice of the right distributors has been definitely a parameter of great importance.
“Moreover, especially in the UK and the United States, we have experienced a great progress. This positive feedback is definitely the result of our strategic move to operate in these two countries through our own subsidiaries. We are now, therefore, closer to both our retailers and consumers.” Vasilyadis continued. In addition, U.S. consumer demand has grown significantly due to the press the company receives in consumer fashion and beauty publications. “Our retailers reinforce our brand image and offer credibility and product awareness to our brand as well,” she said.
As personal care product marketers, natural products companies face the same challenges as any company doing business in the fast-moving and highly competitive personal care market. A commitment to producing natural and organic products, as can be imagined, brings its own set of challenges, chiefly product stability and preservation.
“Product stability and preservation have always been a challenge, especially as the industry has taken a paraben-free stance,” said Setzfand. “Jason has been paraben-free since 2002 and will continue to research and evaluate alternative methods of preserving our products effectively.” Educating consumers about the difference between a truly “natural” brand such as Jason or Zia and a natural brand in name and marketing only is another big challenge for the company. “There is significant consumer confusion regarding the definition of natural and organic and how natural means vastly different things to different brands,” said Setzfand.
“The organic personal care market in the United States is becoming increasingly competitive with newcomers to the market with fresh marketing approaches,” said Weleda’s Barckley. So, the company works continually to differentiate itself from competitors, communicating product quality, history, brand philosophies, efficacy and more.
It stands to reason that a company committed to producing and marketing natural and organic products would seek to extend the product benefits to the environment and to push that thinking along the supply chain.
Weleda uses recyclable packaging that is safe for its products and safe for the environment. They use either glass bottles or aluminum tubes with protective plastic coating to protect the formulations, or polyethylene terephthalate (PET) bottles. Their packaging serves to preserve its products as no synthetic preservatives are used in their formulations. Therefore, packaging is very hygienic. “We are also constantly working to make our packaging even more user-friendly and globally sustainable for both the end user and for the environment,” said Barckley.
At Zia and Jason, they seek to utilize materials made from renewable resources and recycled materials. This extends to marketing collateral, labels, packaging and packing material. “In the past, sourcing such materials has not only been challenging, but also in many cases cost-prohibitive,” said Setzfand. “However, our suppliers have been very responsive and supportive as our volume and demand for environmentally friendly materials grow.” In addition, technological advances have led to the creation of more sustainable materials that are more cost-effective. Increasingly, items are made from corn-based resins instead of petroleum, and post-consumer waste paper has improved dramatically over the last few years, said Setzfand.
Zia will launch a new line, Brilliance, in May 2006. Packaging will utilize unit cartons made from post-consumer waste materials and manufactured with wind power. The company’s store displays are made from renewable, non-petroleum-based resources.
“As a manufacturer, we are not only committed to using recycled and renewable resources. We also support local and regional communities to implement more recycling programs and education about sustainable living,” said Setzfand.
Korres is a member and financial contributor of the Hellenic Recovery and Recycling Corporation (HERRCo SA / EEAA AE) that was established by industrial and commercial companies either distributing packaged products to the Greek market or manufacturing different types of packaging.
“Moreover, we support the use of recyclable materials. Being a cosmetics company, we have to use plastic as one of our major packaging materials, said Vasilyadis. The company uses polyethylene (PE), polyethylene terephthalate (PET) and polypropylene (PP), which are common recyclable plastics. Korres avoids the use of polyvinyl chloride (PVC), due to its toxic emissions when burned,” said Vasilyadis.
With so much attention paid these days to how products flow through the entire supply chain, it is no surprise that natural product companies seek to carry their commitment to natural products throughout the chain.
Weleda maintains its own biodynamic gardens throughout the world and claims to have the largest biodynamic gardens in Europe “Many of our ingredients for both our medicines and body care products are harvested here by our expert team of farmers. We also develop Fair Trade projects in various areas of the world to attain the highest quality of organic and purely natural ingredients for our products and to support local communities,” said Barckley. Weleda’s new production facilities and offices throughout the world utilize innovative, low-impact systems such as water recycling systems, solar panels and natural cooling systems. “As an environmentally friendly company, we always pay extremely close attention to our impact on the environment,” Barckley said.
Regarding our raw materials and packaging, we always seek to find suppliers that follow green business practices,” said Korres’ Vasilyadis. “This is not always feasible, but the further expansion of our green supply chain is always a challenge for us.”
“Our goal is to extend our commitment to the natural products industry and the environment throughout our supply chain. This commitment is important to our consumer and an integral part of the brand,” said Setzfand.
Room to Grow
According to Duber-Smith, all natural segments are experiencing healthy growth, but he said that for men’s care, color cosmetics and fragrance, demand is high but supply in the naturals area may offer opportunity for growth.
As GCI reported last September, Euromonitor International predicts overall sales of male grooming products will surge 67% to $19.5 billion by 2008. Brands including Nivea for Men, MenScience Androceuticals and Metro Male offer men’s skin care products ranging from eye cream to shave cream. “Natural personal care brands need only position their products to men with slight formula adjustments to begin capturing this market,” according to Duber-Smith.
Zia Natural Skincare offers a men’s line including five products said to cleanse skin utilizing the properties of the active natural ingredients without dehydrating or causing irritation. The line includes HydraClean Face Wash, ActiClean Face Scrub, HydraShield Shave Cream, ActiShield Shave Gel and DualAction Face Lotion.
Color cosmetics offers opportunity as well. “Many female consumers are more aware of what putting synthetic ingredients on their skin, and around their eyes and lips, can do,” said Duber-Smith. “The rising demand for natural products has been consistent and well-documented. The vast majority of females wear makeup of some sort. You can do the math.”
Finally, fragrance is an underdeveloped area. According to Duber-Smith, only 3% of the fragrances in personal care products are natural. “Most pure essential oils are unstable, can cause allergies and are expensive,” he said. He believes, however, that addressing these concerns will allow natural ingredients marketers to enjoy increased penetration into the category. Aubrey Organics introduced its line of natural fragrances at Natural Products Expo West last month. Scents include Spring Floral, Jade and Spice, Light Citrus Floral, Ocean Waters, Musk and Angelica. Each is packaged in a two-ounce spray.
Despite the many challenges, marketers are finding ways to translate the broader world of cosmetics and personal care products into the natural and organics market, bringing their customers new options in skin care and color cosmetics and breaking into new segments such as men’s products and fragrance.