Natural and Organic Beauty: Growth Drivers

March 30, 2011

Consumer awareness, innovation, and the desire to meet certification standards are a trifecta driving growth in the natural and organic beauty market.

Despite trailing economic conditions, the market for natural and organic beauty products is growing worldwide. In the United States alone, the natural personal care market is predicted to reach $6.7 billion in 2015, forecasts Kline & Co. (Parsippany, NJ).
 

What Recession?

The increasing demand for products containing natural and organic ingredients actually benefits many ingredient suppliers, which have weathered the recession well.

“The demand for natural and organic ingredients has not been affected much by the recession,” says Eric Lippay, senior marketing manager, personal care North America, DSM Nutritional Products (Parsippany, NJ). “Sales are growing steadily and will continue to be strong.”

Business slowed last year for Draco Natural Products (San Jose, CA) but is now on the rise. “The recession has adversely affected the demand for natural and organic ingredients, but only to a small degree,” says Michael Irwin, director of business development.

In fact, growth in the natural and organic category is outpacing growth of the personal care market as a whole. “Although not immune to the downturn in the global economy, the natural personal care market seems to have recovered more quickly than other segments,” says Nancy Mills, industry manager, consumer products, Kline & Co.

When compared to the total market for personal care products in the United States, the natural and organic personal care sector shows a higher growth rate, echoes a recent report by Mintel International (New York City). For instance, the market for bath and shower products is forecasted to grow only 8% during 2009 through 2011, compared with a 30% growth rate predicted for the natural and organic bath segment.

The fact is that consumers are committed to the category-which is greatly influencing market growth.

“Many consumers are dedicated to using only natural and organic products. Many more utilize a combination of traditional products along with many natural and organic personal care products,” says David Browne, a Mintel senior analyst.

Why the increase in demand? For one, more consumers are reading product labels. “Consumers are more aware of the possible dangers of synthetic chemicals in cosmetics and toiletries, as well as the benefits of natural and organic ingredients,” says Amarjit Sahota, managing director for organic market specialist Organic Monitor (London).

Beauty brand Aubrey Organics says its consumers know exactly what they want in a product. “They’re doing research on the Internet before they even get to a store to purchase,” says Karen S. Ress, executive director of national sales. “I believe that people who are buying organic are continuing to buy organic, despite pricing. It’s a choice of lifestyle, a choice to be healthy,” she says.

Aubrey Organics in fact reported double-digit sales growth last year. “Our sales have hugely increased,” confirms Ress.

The same is true for Burt’s Bees, a top seller in the natural personal care product category. “We’re now seeing accelerated growth, which shows real promise that the economy is on the upswing. During the downturn, we made the fortunate choice to lean in, rather than pull back. We’re expanding our team and building our global business in over 25 new markets,” says John Haydock, senior vice president, global marketing.

LEAP Organics, a new organic soap and personal care company in business since last July, seems to have established itself at exactly the right time. The brand’s certified-organic skincare line has been generating a lot of interest from retailers over the past six months.

“Revenues have exceeded our expectations,” says Luke Penney, founder and CEO. “Our soaps have been one of the fastest-growing soaps, in terms of sales, at Whole Foods Market stores,” he says. The brand is currently in all Whole Foods stores in the North Atlantic and mid-Atlantic regions and may expand to the West this year.

“There has been a definite push driven by consumer demand, due to a greater consumer awareness of ingredients,” adds Penney.

Suppliers such as Draco Natural Products agree. “Formulators are not only concerned with, but highly focused on, the content of their ingredient listing-a sure sign that consumer awareness is driving ingredient demand,” says Irwin.
 

New Formulations

New products with innovative formulations are driving market growth. Consumers may be demanding all things natural, but they also only want products that work.

“More consumers are ‘natural interested’ but are unwilling to sacrifice efficacy,” says Burt’s Bees’ Haydock. “Innovating solution-based products with compelling ingredient stories and clinically proven results has been critical to bringing new consumers into the truly natural segment. We have really raised the bar on our innovation, with a focus on truly breakthrough natural products with clinical backing.”

New products include Burt’s Bees’ Natural Acne Solutions, described as the “first and only truly natural acne line.” Burt’s Bees also launched body lotions that can moisturize for up to 24 hours, as well as new, tinted lip balms.

Aubrey Organics has a new line of sun products that not only offer protection from harmful rays, but moisturizing and antioxidant benefits as well. The long list of natural ingredients includes green tea extract, pomegranate, vitamin E, organic shea butter, jojoba, musk rose (Rosa mosqueta), macadamia nut oil, and Aloe vera.

Another new launch, Johnson’s Natural, is a line of baby and child personal care products, formulated with 98%-natural ingredients derived from plants and fruits. The products exclude parabens, dyes, or allergens.
 

Rising Demand for Natural Ingredients

Naturally, as supply and demand of natural and organic beauty products grows, it’s sparking increased demand for natural and organic ingredients.

Suppliers are responding. New natural alternatives to traditional surfactants and preservatives continue to develop. Natural ingredients that are sustainably sourced and provide numerous benefits when used in personal care products, such as skincare, are also available.

In fact, natural ingredients are being requested more often than organic, according to suppliers.

“From what we see on the market, natural is the majority. Our customers request natural more often than organic,” says Ellen Delisle, technical sales manager, cosmetics and personal care, for ingredient supplier Bio-Botanica Inc. (Hauppauge, NY).

Lippay, of DSM Nutritional Products, agrees. “Natural is more often requested,” he confirms.

Irwin says that Dracos’ line of organic extracts has grown to be a significant part of its business-but that the majority of requests are still for its line of conventional natural extracts.

The Desire to Be Certified

More companies aiming to launch products that are certified natural or organic is also driving innovation. Certification seals are also being displayed more prominently on packaging, as marketers realize their value in communicating information to consumers about a product’s ingredients.

“We’re seeing many marketers with products that are natural-inspired reformulating to fit more within the truly natural segment,” says Kline & Co.’s Mills.

Products are often reformulated in an effort to meet certification standards. One such certification seal is the Natural Products Association’s (NPA; Washington, DC) Natural Seal, a nationally recognized standard in the United States.

“Consumers notice certifications on packaging, and they know the difference between self-labeling and true, third-party certification,” says Cara Welch, PhD, vice president of scientific and regulatory affairs for NPA.

Aubrey Organics was the first natural cosmetic manufacturer to have a complete makeup line certified by NPA, three years ago. Burt’s Bees’ products display the NPA seal on their packages, as well as the percentage of natural ingredients in the products.

Retailers such as Sephora and Whole Foods have been implementing their own certification standards for natural beauty products. Sephora has its Natural Seal, and Whole Foods Market offers its Premium Body Care symbol.

Since the launch of Whole Foods’ Premium Body Care standard three years ago, many brands have reformulated products in an effort to meet its criteria, according to the retailer.

And don’t expect the development of new certification programs to end soon. Just last month, NSF International (Ann Arbor, MI) and NaTrue (Brussels, Belgium) announced plans to develop a new certification program for natural personal care products. “Personal care in the United States will finally have a national standard for natural personal care products that is accredited by the American National Standards Institute,” NSF International and NaTrue stated.

NPA has argued against the project, stating that introducing another seal for natural personal care products will confuse the marketplace.

USDA’s National Organic Program (NOP) is the most stringent organic certification standard in the United States, and it is the standard required for food products. LEAP Organics uses the USDA NOP seal on its skincare line.

The USDA NOP logo is not used by many beauty brands because allegedly, compliance can be difficult. Some products, such as bar soap, require manufacturing processes that aren’t allowed under the USDA NOP standard. For this reason, some personal care manufacturers believe that organic personal care products shouldn’t be held to the same standards as food.

Others, such as Whole Foods, disagree, believing that organic shouldn’t be defined one way for food and another for personal care products. The retailer recently took a stand on this issue. By June, all organic personal care products sold in its stores must be certified according to USDA’s NOP standards.

“The consumer doesn’t expect the meaning of the word organic to change from one aisle to the next,” said Joe Dickson of Whole Foods’ quality standards team, on the retailer’s blog.

Will Supply Keep Up with Demand?

As the demand for natural and organic ingredients grows, will supply grow as well? Also, will lower prices result, benefitting consumers as well as the entire industry?

Jody Villecco, Whole Foods’ quality standards coordinator, stated in a blog post that since the creation of the Premium Body Care symbol, the availability of natural-based ingredients has expanded significantly-especially for natural surfactants, emollients, and fragrances.

Villecco says that Whole Foods’ standards have even encouraged the development of new ingredients and formulations, some specifically created to meet the standards.

“There are natural quats (quaternary amines) made from sugar cane, and natural thickeners for hair-styling products that are available now. Surfactants are being made from a larger quantity of natural materials. Preservative-free surfactants are now available that were made to meet Whole Foods’ criteria,” says Villecco.

LEAP Organics’ Penney feels slightly differently. He agrees that certification standards for natural and organic products, such as policies implemented by Whole Foods, have increased the demand for certain ingredients. However, he is experiencing the downside to this demand.

“There is a definite shortage of certain organic ingredients right now, and as a result, higher prices. Supply can’t keep up with the demand,” he says. He cites palm and coconut oils as examples of organic ingredients whose prices have increased significantly during the past year.

Other organic ingredients, however, are plentiful, and Penney acknowledges the positive effect Whole Foods’ certification standards have had on the industry.

“Hopefully more suppliers will change over to being certified organic in order to meet the demand for these ingredients-and this will lead to better prices in the long term,” he says.

 

 

Sidebar 1: Green Alternatives to Common Beauty Ingredients

Many commonly used ingredients for cosmetic and personal care products, such as traditional types of preservatives and the surfactant sodium lauryl sulfate, aren’t allowed under many certification programs for natural and organic personal care products. Suppliers are working on meeting the industry’s demand by developing new natural alternatives.

Ingredient supplier Sabinsa’s (East Windsor, NJ) research and development group has developed innovative ingredient compositions for use in cosmetic and personal care products. SabiLize is a natural antimicrobial, introduced last October, containing blends of natural active fractions of various essential oils and phytoextracts. It is natural-compliant and ideal for manufacturers that want to formulate a certified-natural or certified-organic beauty product. When the antimicrobial is used at 0.5% in creams, active ingredients were proven to be more effective than in products with conventional parabens.

“We screened over 150 blends, based on their preservative efficacy potential and their compatibility in cream formulations. It took over two years of painstaking research, so you know that the best ingredients were chosen and approved,” says Shaheen Majeed, marketing director.

Draco Natural Products (San Jose, CA) is ramping up production of its certified-organic glycerin, which it hopes to be producing at full capacity by summer. This will benefit formulators striving to reach required organic levels for certification.

“Conventional glycerin may come from unknown or questionable source materials. We ensure a certified-organic source of the raw material from which the organic glycerin is manufactured,” says Michael Irwin, director of business development. The supplier’s line of certified-organic ingredients meets the criteria set by the USDA National Organic Program and the European Union’s EEC.

Draco also launched a new natural surfactant that can be used as an alternative to sodium lauryl sulfate. Water-soluble Gynostemma pentaphyllum powdered extract has surfactant qualities similar to Quillaja saponaria, or soapbark, according to the supplier. It is ideal for use in a shampoo or facial wash. The natural ingredient is also available in a certified-organic version.

Gynostemma pentaphyllum also has a long history as an ingestible dietary supplement, which offers several advantages, according to Irwin. “It won’t cause stomach upset, so it can be incorporated in oral-care products that require a mild foaming action,” he says. Another benefit is the ingredient’s mild taste, which is not highly astringent.

Cognis Nutrition & Health (La Grange, IL) manufactures a sugar-based surfactant, alkyl polyglucoside (APG). APG surfactants are biodegradable and manufactured from natural, renewable resources such as vegetable oil and cornstarch. During the manufacturing process, no environmentally harmful intermediates are formed, and no harmful by-products are released. The process follows the twelve principles of green chemistry and meets the requirements of many green labels, such as Ecocert and Green Seal.

Cognis APG surfactants also have excellent performance characteristics, including high-foaming properties, according to the supplier. They are ideal for use in a variety of personal care products, including shampoos, bath products, and facial cleansers.

 

Sidebar 2: Whole Foods Market Defines Organic

Whole Foods Market has implemented new standards for organic personal care products. June is the deadline for full compliance.
If a product is making an organic claim, the product must be certified to the USDA’s National Organic Program (NOP) standard and must contain more than 95% organic ingredients. Products listing an organic ingredient must ensure that the ingredient is certified to the USDA NOP standard.

Whole Foods also supports the USDA NOP standard for “made with organic” or “contains organic.” Products making a “made with organic” claim must be certified to the USDA NOP standard of containing more than 70% organic ingredients.

Products making a “contains organic” claim must be certified to the NSF/ANSI 305 Organic Personal Care Standard. This is a consensus-based industry standard accepted by the American National Standards Institute and managed by NSF International (Ann Arbor, MI), a U.S. testing and certification organization committed to protecting the environment and public health.

 

 

Sidebar 3: Sustainable Sourcing

Using ingredients that are sustainably sourced is an important requirement for many certification standards. Ingredient suppliers such as Draco Natural Products (San Jose, CA) and Bio-Botanica (Hauppauge, NY) are marketing ingredients that they say are ethically harvested.

“All of the items we carry are sourced sustainably, especially the items that are sourced through channels that practice ethical wildcrafting,” says Draco Natural Products’ director of business development Michael Irwin.

Ethical wildcrafting is based on the premise that the harvesting occurs in protected wildcrafting areas that are specifically set aside by a governing agency. These areas are assessed on a regular basis to gauge the population of specific botanical species. Once the assessment is completed, the governing agency sets a limit on the amount of harvesting that can occur.

“Only trained harvesters are allowed in the protected area, and by permit only,” explains Irwin. “Harvesters are trained in the proper method of harvest, which leaves the least amount of impact on the plant and soil environment.”

Bio-Botanica has long-term relationships worldwide with farmers who grow only responsibly wildcrafted herbs.

“We have strict guidelines that farmers must adhere to in order to protect the plant and the environment. We won’t work with or purchase plants from farmers who overharvest or employ other harvesting means that are detrimental to the plant or the environment,” says Ellen Delisle, technical sales manager, personal care division.

Draco Natural Products supplies several natural products ideal for personal care formulations. Blue honeysuckle berry extract is known to protect skin cells from UVA damage and aging. Sanguisorba extract inhibits elastase and promotes type I collagen synthesis, necessary properties of antiwrinkle formulations. Japanese elm extract is often used for its anti-inflammatory effects.

Bio-Botanica launched a line of tropical fruit extracts for the personal care industry, which includes acai, gogi, noni, coffee seed, pomegranate, and mangosteen. “All of these natural ingredients are high in antioxidants,” says Delisle.

DSM Nutritional Products (Parsippany, NJ) is marketing a new line of natural ingredients, which the supplier acquired upon the purchase of Pentapharm. Alpaflor Alp-Sebum is an ingredient in the range extracted from the rare alpine plant Epilobium fleischeri. This flavonoid-rich plant species has strong soothing properties, making it ideal for use in skincare products.

“We selected the species Epilobium fleischeri among other Epilobium species because of its high content of both flavonoids and Oenothein B,” says Eric Lippay, senior marketing manager, personal care North America, DSM Nutritional Products.

Oenothein B has important sebum-regulation properties and is useful in the treatment of problem oily skin. “These benefits are proven in both in vitro and in vivo studies,” says Lippay.

The Alpaflor product range is certified by Ecocert and Natrue. The ingredients for the line are extracted from rare mountain plants in the Swiss Alps, which are organically cultivated by a cooperative of Swiss mountain farmers. The farmers use Bio Suisse–certified cultivation methods, which preserve natural sites and protect rare plants.

“The cultivation also ensures better biochemical knowledge of the harvested species, avoids any crossbreeding, and guarantees a total traceability, from the seeds to the active ingredient,” says Lippay.

Cognis Nutrition & Health (La Grange, IL), now part of BASF (Ludwigshafen, Germany), says that sustainability is an important part of its business.

“We place an emphasis on the use of renewable raw materials. We believe that sustainability and innovation are inseparable,” says Laura Troha, marketing manager.

The supplier is offering several new natural ingredients that can be used to maintain skin hydration and elasticity: Covitol natural vitamin E; Plantalin, which is pomegranate, acerola, and Aloe vera; and Xangold natural lutein esters, derived from marigold flowers.

Another one of the supplier’s new ingredients is Betatene natural mixed carotenoids. These are sourced from algae that are cultivated in ponds in Australia.

“The sites are managed by Cognis in an environmentally responsible manner. We control the process, from raw material to finished product, which enables us to deliver high-quality and consistent natural products,” says Troha.

“With all our ingredients, we also provide labeling and marketing guidance,” she adds.

Palm oil is often used to make soap bases, and if not sourced in a sustainable manner, can cause major harm to forests and wildlife. Stephensen Group (UK) is now offering soap bases made with palm oil certified as sustainable by the Roundtable on Sustainable Palm Oil (RSPO). The personal care manufacturer partnered with New Britain Oils last November, which operates a sustainable palm oil refinery in England. Its palm oil comes entirely from known certified-sustainable plantation sources in Papua New Guinea.

The RSPO logo conveys to consumers that the palm oil is certified by a coalition of environmentalists, palm oil growers, traders, and users dedicated to preserving forests where palms are grown. According to the coalition, many personal care products are expected to carry the RSPO logo in the near future.

 

Sidbar 4: Natural Personal Care: Growing Around the Globe
  • In the United States, the natural personal care market grew by 11.9% in 2010 and is expected to reach $6.7 billion in 2015.
  • In Asia, the largest market for natural personal care in the world, sales are expected to grow to $16.2 billion by 2015. This represents a 14% combined annual growth rate since 2005.
  • The European market for natural personal care products grew by 11.7% from 2009 to 2010 and is expected to reach €6.0 billion by 2015.
  • Brazil is the fastest-growing market, with sales of natural personal care products totaling R$7.5 billion in 2010. It is expected to surpass R$13 billion in 2015. “The increasing supply of locally sourced raw materials makes natural products more affordable and accessible for the Brazilian consumer,” says Nancy Mills, industry manager, consumer products, Kline & Co.

Source: Kline & Co.