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Natural Selection: Opportunities for International Brands in Fast-developing Markets

By: Nicole Tyrimou, Euromonitor International
Posted: December 21, 2012, from the January 2013 issue of GCI Magazine.

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Despite disposable incomes rising in India and the rapid acceptance of such products, natural consumers are still primarily in the high-income group, leaving a large untapped consumer base behind. Thus, international brands could place their own natural beauty offerings at lower and more affordable price points than the leading natural domestic players to increase their penetration in these markets.

However, wider pricing issues for any natural or organic brand should not be ignored. Brands have to use a high percentage of organic-certified ingredients to gain organic certification, which come at a higher cost. (See “The Lure of Organic Ingredients” for more information on this topic.)

Taking Lessons From the Wise

Another effective way for international beauty companies to penetrate the natural market in fast-developing regions could be through acquisition. This strategy, for example, was undertaken by Coty, which acquired the Chinese herbal brand Tjoy in 2011, and increased its exposure to the skin care market in China through the transaction. And although niche natural beauty brands may not always have the capital to buy the competition, there are still other ways to increase their competitive advantage, including mergers, distribution deals and more.

Further educating consumers in emerging markets of beauty brands’ natural credentials and heritage, projecting a stronger image over domestic brands, is another viable method for market penetration and growth. Consumers in emerging markets tend to want to buy international brands in general, as they are considered more fashionable. L’Occitane is one example, with its strong presence in skin care in both Russia and China (L’Occitane grew by 22% in China in 2011), two of its best-performing country markets. L’Occitane’s success can be mainly attributed to the following factors: a strong presence though stand-alone stores and a Chinese website; a relatively affordable and wide variety of products; attractive packaging; and strong natural credibility.

Thus, despite the challenges, there are distinct opportunities for international natural beauty brands in these fast-developing countries.

Nicole Tyrimou is a Euromonitor International beauty and personal care analyst.