The natural personal care industry has continued to gain momentum over the past year despite a crippling global recession.
Driven by consumer demand not only for natural products, but also for
sustainable manufacturing processes among brand marketers, the naturals
market is expected to maintain a healthy growth rate over the next few
years.
This is great news for raw material suppliers.
Indeed, they now face a tremendous opportunity to innovate and develop
key raw ingredients that not only meet formulators’ and consumers’
demand for naturalness, but also offer the performance required to be on
par with their synthetic counterparts.
On a global scale, the natural personal care market is approaching $300
billion at the retail level, with the BRIC countries (Brazil, Russia,
India, and China) and Argentina expanding their share at a rapid rate.
In Europe, still the largest region, the natural personal care segment
posted nearly 14% growth in 2009, compared to the overall market at just
4%. In the United States, the segment peaked at 8%--still quite robust
considering the overall performance in the industry as a whole.
Green is Growing
A number of key drivers have converged to spur growth in the natural
personal care market from the consumer, retailer and brand marketer
perspective. These forces make the naturals market quite attractive to
ingredients suppliers:
Growing environmental awareness among consumers has lead to a global
shift in their desire, behavior, and attitude toward natural products.
Going green is no longer considered an eccentric behavior of a small,
but highly committed segment of the population. Now, the average
consumer has become more aware of his or her impact on the planet and
has begun taking steps to reduce that impact wherever possible.
Innovative product development in the naturals category has made green
products more widely available, fueling consumers’ demand for more
environmentally friendly products. As green products become more
accessible and affordable, it becomes much easier for consumers to adopt
them as a viable alternative to traditional synthetic formulations.
Mainstream acceptance of organics and “locavore” eating habits, whereby
consumers source food products from their local region, has also
prompted greater interest in natural personal care products. As
consumers strive to avoid pesticides and other synthetic growth
supplements in their food, they’ve also begun reducing the incidence of
other synthetic chemicals with which they come into contact.
Media hype and marketing have also played a significant role in the
growing green trend. The powerful combination of brand marketing
tactics, retail promotions, celebrity endorsements and widespread media
coverage have reinforced consumers’ awareness of and desire for more
sustainable products and practices. In Europe , where regulation under
the REACH act makes available the certification seal for products that
meet certain requirements, this adds to the marketing appeal of natural
products.
As a result of these factors, major global marketers have stepped up
efforts to meet consumer demand and capitalize on the market
opportunity, as evidenced by key acquisitions that have brought some
niche naturals brands mainstream. Estée Lauder’s string of acquisitions
that began with Aveda in 1997 has made the company a naturals powerhouse
in the personal care market. L’Oréal, Colgate-Palmolive, and Clorox
have also recognized the potential, throwing the power of their
mega-marketing machines behind previously unknown, small brands like
Tom’s of Maine and Burt’s Bees.
The Problem of Performance
Amid all of this attention, suppliers are working overtime to develop
the natural ingredients to meet the demand. While great strides have
been made in some ingredient categories to deliver the natural
positioning and the performance required, some categories remain a
challenge.
Specialty Surfactants
Of the $600+ million specialty surfactants market, only about 10% of
the raw ingredients available in this category are naturally derived.
Natural alternatives for these products, which reduce skin and eye
irritation of commodity surfactants and boost foaming properties in hair
and skin care rinse-off products, are gaining traction particularly in
the mass market product categories. Growth in the naturally-derived
segment is expected to reach nearly 4% CAGR through 2013. The leading
product in this segment is alkyl polyglucoside (APG), supplied by Cognis
(the market leader), Clariant, and Croda. APGs are manufactured from
plant-derived materials such as vegetable oils and starch.
Specialty Emollients
Among the most widely used ingredients in personal care, emollients are
effective in facial creams and cleansers, wipes and other skin-care
products for their moisturizing, softening and anti-aging properties.
Here, naturally derived products have a stronger share at just over 50%
of the market, which totals in excess of $400 million, and this market
is expected to grow by more than 3.5% CAGR through 2013. By their very
nature, these ingredients are more readily available, accessible and
affordable to derive from natural sources, such as mineral and vegetable
oils, and there is a general movement in the industry away from
synthetics and animal-based ingredients (such as lanolin).
Conditioning Proteins
Similarly in conditioners, there is a strong shift away from
animal-based to plant-derived proteins for the likes of skin and hair
products. Now more than 60% of the conditioning market consists of
plant-derived products, supplied in large part by Croda and Cognis, the
clear market leaders. Despite their broader acceptance, botanical
proteins remain less economical to produce leading many manufacturers to
consider fish-based proteins as possible alternatives, as well as milk-
and silk-based proteins, which have also shown some potential.
Hair Fixative Polymers
Even more than surfactants, fixative ingredients used in hair sprays
and other hair styling products prove to be a significant challenge when
it comes to developing an effective, viable natural alternative.
Synthetics, like vinyl, acrylic and polyeurethane polymers, make up 99%
of the active ingredients on the market. It seems that, with the
possible exception of corn starch-based formulas, devising the fixative
properties from natural ingredients to meet the hairstyling demands of
consumers is a formidable challenge.
Substantiated Specialty Actives
This unique class of ingredients backed by scientific testing are 100%
naturally derived and used by formulators specifically to make
performance claims in the skin care product category. Driven largely by
the demand for anti-aging properties, this category is expected to post a
healthy CAGR of 7% over the next three years as the enormous baby
boomer population turns to these products to stave off the signs of
aging. These ingredients, including peptides, bio-tech actives and
enzymes, and their associated claims are key to formulators in the
luxury, high-end mass market, professional and specialty trade classes
as they cater to this mature population, which typically enjoys a higher
level of disposable income.
Innovation is the Key to Growth
The growth in the naturals market presents a unique opportunity for
raw ingredients suppliers to carve out a strong position as a leader in
this industry. To do so would likely require a blockbuster R&D
breakthrough to discover and develop a viable natural alternative to one
of the more vexing performance issues, such as surfactants or
fixatives. While just about every player in the supplier market has
built a “green” portfolio, much work remains to be done to solve the
problems of performance, availability and pricing that make the naturals
proposition a significant barrier, especially in the hair care and
cleansing product lines.
With the naturals trend well-entrenched around the globe, ingredients
suppliers are eyeing the burgeoning opportunity in the Asia-Pacific
region. Some, Cognis included, have already established production
facilities, particularly in China, to leverage the anticipated growth
here and compete directly with local, domestic suppliers.
As suppliers and formulators strive to reduce the amount of “science”
in their products to achieve a more natural slant, there is an overall
movement toward a more collaborative, interactive relationship. Working
together to develop multi-functional ingredients that solve multiple
performance challenges not only helps reduce the number of ingredients
in the product, which imparts a more natural position, but also works to
reduce the overall cost of production—which benefits both parties, as
well as, ultimately, the consumer.