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European Natural Brands Focus on Distribution as Growth Rates Slow

Posted: November 12, 2012

Natural and organic beauty brands are focusing on distribution as growth in the European market slows, as new research by Organic Monitor shows single-digit growth occurring in the European natural and organic personal care products market for the first time this year. The growth rate has dropped from double digits because of the debt crisis impacting retailers and consumer expenditures.

These slowing growth rates are leading brands to target new distribution channels for growth. Organic Monitor finds brands are making most inroads in drugstores, pharmacies, beauty retailers and department stores. Specialist retailers—the traditional channel for natural and organic brands—still comprise most sales however, with 40% market share. Although many supermarkets and hypermarkets have launched private label ranges, the market share for mass market retailers remains below 10% at the European level.

The U.K. market has been the most adversely affected by the financial crisis. Revenues have been increasing by about 6% per annum since the crisis started in 2008, and the harsh retail environment has led many U.K. natural and organic brands to target export markets for growth. Indeed, many British brands have made significant inroads in the Nordic marketplace, and some like Bulldog have gone further afield, exporting to the U.S. and Australia as well as to parts of Europe.

Germany, with the largest market for natural and organic personal care products, is showing sluggish growth in 2012. The country also leads in terms of market share; natural and organic products comprise 7% of total personal care products. Private labels have had the most success in the German market. Alverde of German drugstore DM is the third-leading natural brand, housing more than 300 products.

Further west, the French market has witnessed the largest number of new product launches in recent years. Many large beauty companies have introduced natural and organic lines. L’Oréal is marketing a range of products under popular brands, such as Garnier, Ushuaïa, Biotherm and Mixa, and other multinationals, including Henkel and Unilever, have also developed certified organic lines for the French market. Although mass market distribution has increased significantly, the channel comprises less than 15% of natural and organic personal care product sales.

Rising competition from new brands and slowing market growth rates are pushing brands towards new channels. Dr. Hauschka is targeting high-end outlets, including beauty retailers and department stores. Phyt’s is focusing on para-pharmacies, while Primavera is targeting the spa channel. Many are taking the direct route and opening concept stores. Korres and Melvita are frontrunners with their international retail networks.

In its upcoming European market report, Organic Monitor expects market growth rates to recover as economic conditions improve. However, competition is expected to remain intense as natural and organic brands increasingly jostle for shelf space with large beauty firms. Brands that have a clear strategy in terms of product offering or distribution are expected to succeed in the changing market landscape.

An update on the European natural and organic personal care products market, including marketing and distribution developments, will be given in the upcoming Sustainable Cosmetics Summit in Paris. Leading natural beauty brands, including Bulldog, Phyt's, Primavera, Korres and Apivita, as well as conventional beauty firms (L’Oréal, Beiersdorf, Unilever, Chanel and so on), will be participating in this summit.