Natural Beauty: Global Opportunities Remain

Jul 1, 2014 | Contact Author | By: GCI Editors
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Title: Natural Beauty: Global Opportunities Remain
growthx Brazilx Chinax naturalx fragmentationx pricingx
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Keywords: growth | Brazil | China | natural | fragmentation | pricing

Abstract: Despite variable economic conditions, the natural beauty and personal care market continues to see strong growth, posting a healthy 10.6% increase globally to reach $29.5 billion in sales in 2013.

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Natural Beauty: Global Opportunities Remain, Cosm & Toil 129(6) 8-9 (Jul/Aug 2014)

Despite variable economic conditions, the natural beauty and personal care market continues to see strong growth, posting a healthy 10.6% increase globally to reach $29.5 billion in sales in 2013. Brazil and particularly China are the fastest-growing natural personal care markets, with sales in China increasing nearly 24% in 2013 and slowly challenging the United States’ global market share, according to a report, “Natural Personal Care: Global Market Brief,” by Kline & Company.

Growth within mature markets, driven by the large number of brands competing on price and product efficacy in these regions, remains impressive as exemplified by a 7% increase in the United States and 6% increase in Europe. Further, natural beauty has evolved immensely in recent years, and is now no longer just the domain of niche players, as is clear by the many high-profile brand launches in the past few years. In terms of distribution as well, natural beauty brands have gone more mainstream, according to Euromonitor International.

Since as far back as 2008, the natural beauty and personal care market has experienced double-digit growth, with a compound annual growth rate (CAGR) of 11.3%, and it is projected to post an increase of 9.2% to reach $46 billion by 2018. Carrie Mellage, vice president of Kline’s consumer products practice, notes, “Although growth numbers have settled, many factors—including a focus on new natural ingredients, the opening of new channels of distribution, and consumer movement demanding greater transparency in labeling—are stimulating the industry. Moreover, marketers are offering products designed for specific demographic groups like men and babies, thereby opening up greater opportunities.”

Fragmentation

The natural beauty market across the globe is extremely fragmented, with only six companies enjoying a share of 3% or more. Leading brands differ regionally; Aveeno and Bare Escentuals in the United States, L’Occitane and Saishunkan in Japan, Chando and Inoherb in China, and Yves Rocher and Oriflame in Europe. Despite increasing demand for natural beauty in fast-developing countries like China, India and Russia, however, such products face challenges above and beyond what’s inherent, according to Euromonitor International. First is the issue of how one defines and perceives natural. While various standards and certifications have been established, some question whether these criteria are actually causing more consumer confusion.

Kline states that the channel mix also varies significantly between regions. In Europe, pharmacies dominate the scene while mass outlets post the highest growth. Direct sales lead in Brazil; and health and natural food stores rank first in the United States.

Pricing Strategies

Pricing strategy is one area of opportunity for natural beauty brands. In countries such as India, some manufacturers have priced natural and organic products up to 10 times higher than standard product offerings. One example is Forest Essentials, which is focused only on natural products and charges a premium for them.

However, wider pricing issues for any natural or organic brand should not be ignored, states Euromonitor International. Brands must use a higher percentage of organic ingredients to gain organic certification, which comes at a higher cost. In some cases, due to high manufacturing costs and the limited capabilities of natural preservatives, nature-inspired products are preferred, offers Kline. However, encouraged by growing consumer awareness and improved technology, several companies are seeking to reformulate their existing product lines to remove synthetic ingredients.

An updated report from Euromonitor International is available in the July/August issue of GCI, and online at www.GCImagazine.com.