Natural and Organic C&T - The simple life

Organic cosmetics and toiletries look set to follow in the footsteps of the booming organic food market as across the globe consumers are reacting to a number of scare stories surrounding certain preservatives and cosmetic ingredients. ECM investigates the reasons behind the success of this niche sector and reveals the problems faced by the organic industry.

The European cosmetic and toiletries markets are faltering, with the Big 5 reporting a collective growth of just 0.9% in 2005. The majority of new brands and products last just 12 months and even the big names are feeling the pressure. It appears odd, then, that a cluster of tiny, niche brands are experiencing a boom against all the odds and in the face of companies that spend upwards of £6m to support a single launch.

Far from being the preserve of a few, rebellious hippies, the organics market has gone mainstream. The global organic food and drinks market was worth an estimated £16.7bn in 2005 and penetration has now reached 65.4%, according to the Research Institute of Organic Agriculture, which translates to two in every three shoppers buying organic food.

And all indications suggest that the organic cosmetics market is set to go the same way. Lack of a single definition for the term organic, in terms of cosmetics, makes an exact figure for the market's value difficult to ascertain and often this means that the figures for natural and organic C&Ts are lumped together. The US market for organic non-food products (including personal care, flowers, pet food, household cleaners and nutritional supplements) was valued at $744m in 2005, up 32.5% on the previous year, according to the Organic Trade Association, while TNS Media Intelligence/CMR estimates that the US natural and organic cosmetics sector will reach $5.8bn in 2008, up from $3.9bn in 2003.

The Soil Association estimates that today the European market for natural and organic personal care is worth €700m-1300m, and per capita spend is equivalent to €2.6 per year, while Organic Monitor calculates that the European market is approaching t1bn.

Organic Monitor's European Market for Natural & Organic Cosmetics Report bills the US as the largest market for organic cosmetics, followed by Germany, Italy, the UK, Switzerland and France. In terms of cosmetic sectors, Euromonitor suggests that the most successful natural and organic lines comprise skin care, baby products, bath and shower products and hair care. Less common are colour cosmetics, hair styling products, oral hygiene products, depilatories and fragrances.

Product lines tend to be more or less restricted according to the organic philosophy of any given brand. Those with more stringent organic credentials often find it difficult to produce products across the entire cosmetics portfolio. “We currently do not have shampoos or deodorants, but these are areas we are researching and when we are happy that we can launch products which still adhere to our commitment to the purest ingredients only, we will launch additional ranges,” explains Amanda Barlow, board director of Spiezia Organics.

Biting back

In order for the organic C&T market to fulfil its full potential, however, there are a number of stumbling blocks that still need to be overcome. “The key market restraints are low consumer awareness of natural personal care products - less than 10% of Europeans buy natural personal care products and much of this is accidental purchasing - lack of national/regional regulation, growing threat of competition, no harmonisation of private standards (yet) and a lack of conclusive evidence to support the benefits of natural personal care products,” says Mary Holt, marketing manager at the Soil Association.

However, the primary concern for consumers and manufacturers alike is the difficulty of the categorisation of products as organic. At present, unlike organic food, there is no government regulation of the terms Organic or Natural for cosmetics in Europe and the US standard continues to leave a lot to be desired. In the US, the Department of Agriculture's (USDA) Organic Seal, which has long been applied to food, was extended to certain cosmetic products in 2005. However, the new requirement that products comprise 95% organic ingredients does not preclude other products claiming to be 'made with organic ingredients', or, more controversially, using the term organic as part of a trademark, regardless of content.

In Europe, the most widely used certification body is Ecocert, which originated in France. This, like the UK's Soil Association, Germany's BDIH (Bundesverband Deutscher Industrie und Handelsunternehmen) and Italy's AIAB (Associazione Italia per l'Agricoltura Biologica) and ICEA (Istituto per la Certificazione Etica Ambientale), is a private body that provides organic certification according to its own standards. However, despite the existence of these often trusted and well recognised private standards, a wholesale lack of public regulation means that there is nothing to prevent manufacturers using the term organic on their products.

The bodies themselves vary greatly as to what can be considered an acceptable organic content. Ecocert has two labels: Natural and Organic. The former must comprise 95% of natural or natural origin ingredients, of which 5% must be organically certified. Organic cosmetics must contain 10% organically certified ingredients and 95% of natural origin. In both cases synthetic dyes and perfumes, silicones, glycerines, carbomers, parabens, phenoxyethanol, quarternary ammonium and products derived from synthetic fatty acids must be absent from the ingredients list. The AIAB and ICEA also require that products exclude certain ingredients, do not contain genetically modified substances, do not test on animals, do not use ionised radiation and employ natural or certified ingredients where available. BDIH requires the use of plant ingredients wherever possible, does not allow testing on animals, does not permit radioactive sterilisation and additionally requires that companies incorporate socially responsible practices with regards to production and packaging. The Soil Association has two labels: the more stringent of which, Organic, requires a minimum of 95% organic content (excluding water) while the less strict Made with Organic Ingredients requires a minimum of 70% organic ingredients, with the remaining ingredients comprising a very restricted number of preservatives or actives that are not yet available in an organic form.

This variety of standards and a lack of any kind of regulation of the term organic, when not accompanied by certification, is confusing to consumers and detrimental to those brands that do pay out for the official seals. “The public currently doesn't differentiate between the word organic on a label and products that have been certified by recognised bodies,” says Dee Atkinson, director of Culpepper and Napier.

The huge variety of standards also makes export problematic, particularly for smaller brands. The cost of certification prevents the brand attaining a separate standard in each country, but brands run the risk that the local market will not recognise seals native to another country as authentic. “Certification is an issue - even in Europe there is no one consistent standard and this leads to further confusion for the consumer and makes export issues complex. This certification does limit markets as it is expensive to go through any certification programme and the subsequent labelling changes which would need to be made, preclude any small brand from going ahead,” says Barlow.

The Soil Association says it is currently negotiating a common standard. “We are working with a number of other European certification bodies to draft a European organic cosmetic standard - this includes Ecocert, ICEA and BDIH, plus others are soon to join. We hope to have a common standard in the near future, which will create more awareness and understanding for non-food products to be governed by law,” reveals Holt.

Pure to the core

Furthermore, the industry is not helping itself, given that many manufacturers are divided as to what constitutes an acceptable percentage of organic content. Broadly speaking manufacturers can be divided into exclusionists and inclusionists. The former tend to concentrate on weeding out any of the nasties, or ingredients blacklisted by the organic lobby, such as parabens and mineral oil. However, unlike the inclusionists, they do not believe that a product should be 100% organic above all other concerns. “We associate ourselves more with beauty products than organic products. Natural beauty products are no longer the domain of those seeking an alternative lifestyle,” says Simon Golding, director at mypure.

The inclusionists on the other hand are vocal about the purity of their products and, it has to be said, it is hard to argue with something that is 100% organic. “An adherence to a 100% organic standard across the range means that the consumer knows that there are absolutely no chemicals or additives in any of the products,” explains Barlow. “We opted for 100% organic content as we feel that anything else is a compromise.”

The difference lies, perhaps, in the end-consumer that each camp is targeting. As Amarjit Sahota at Organic Monitor explains, “The typical organic consumer meets one of two profiles. The first type is the concerned consumer who buys organic and natural cosmetics because they are concerned about chemicals in their personal care products. Traditionally these are consumers who have skin irritations or similar conditions. The second type is the affluent and quality-conscious consumer who buys natural and organic cosmetics because they are deemed to be of superior quality than conventional cosmetics. This type of consumer seeks premium brands. This selling point has opened up the market to a wider audience.”

This wider audience, although conscious of the negative press surrounding certain chemicals used in non-organic cosmetics, is still beset with the global appearance anxiety that has made the cosmetics industry what it is today. Women, and increasingly men, are susceptible to products that claim that they can nip and tuck, and the allure of a miracle product promising to reduce the appearance of wrinkles or slim down thighs often trumps. It is for this reason that several organic brands struggle with the balance between aesthetically pleasing, results-led products on the one hand and organic and environmental concerns on the other.

That is not to suggest, however, that efficacy and 100% organic standards are mutually exclusive. “Our products are genuinely organic. We aim for 97-100% organic contents for all of our products but we also understand that consumers want to enjoy an effective high-end product that has the same cosmetic attraction as the most luxurious ranges on the market,” claims Margo Marrone, co-founder of Organic Pharmacy.

Consumer confidence

Hartman & New Hope's consumer study reveals that there are four categories of organic consumer. The first, Organic Engaged, comprises 10% of the US population (27 million) and has a high interest level in organic products. This group has a long purchase history, is very knowledgeable about organic characteristics and bases its purchasing decisions on health and environmental concerns. The second group, Organic Attached, represents 22% of the US population (60 million) and has a moderate interest in organic products, with a shorter purchase history, adequate knowledge about organic characteristics and places high importance on health and environmental concerns. Third is Organic Borderline (28% or 76 million of the US population) who has a weak interest in organic products, is less knowledgeable about their characteristics and focuses more on health than environmental concerns when making purchasing decisions. The Organic Uninterested comprise the remaining 40% (109 million) who displays no interest in organic produce and focuses only moderately on health and barely on the environment when taking the decision to buy goods.

While the inclusionists trade well in the upper echelons of organic interest, the exclusionists should not be dismissed outright; they are producing more palatable products, in terms of the wider market, which are ultimately more accessible to the average consumer and undoubtedly contribute to educating shoppers and growing the market as a whole. And it is to this new consumer, the organic convert, that the industry owes its phenomenal growth. “Key market drivers are the growing consumer concern regarding chemicals, the growing consumer interest for 'all things natural', demand for organic foods that is percolating to natural personal care products and new product development of natural personal care products, leading to greater consumer choice,” says Holt.

Both sides of the argument are exploring various means to get the message out there. Some of the more stringently organic brands are pursuing a distribution strategy that enables them to be seen by a wider variety of consumers. Traditionally organic and natural cosmetic brands worked on a 'best friends stick together' basis, appearing in independent natural health food stores and alternative pharmacies or herbalists. Now a few supermarkets in Germany have launched organic cosmetics under private labels and Waitrose in the UK stocks organic brands such as Organic Blue. The majority of organic brands also sell through mail order and online catalogues - the perfect medium for smaller companies to reach a wide audience, despite a limited distribution on the ground.

Now, however, the growing popularity of the organic movement has prompted department stores to stock a number of niche organic brands. In turn, several of the brands have upped their game in order to compete more effectively with the prestige offering found in the beauty halls.

“We can consider the two to be separate channels. Some products are only found in organic retailers and others only in retailers like Harvey Nichols. Some manufacturers position their products as 'organic and natural', in which case they are well suited to specialist retailers like organic food shops. Others are positioning their products as 'organic and premium', and are making inroads in department stores, beauty centres and salons,” says Sahota. Jo Wood, for example, launched a line of premium organic products, with an orange juice base, in extremely upscale packaging. Dr. Hauschka is working on a more luxurious positioning for its already premium line. Spiezia has also rethought its packaging to give a more urban, youthful appeal to its products. “We've found that Harvey Nichols has been very beneficial in terms of highlighting our goods to a whole consumer group who would not have ordinarily been exposed to our products had we stocked them in a store such as Fresh & Wild, where there is a committed customer already,” says Barlow.

Putting on a premium

Positioning organic brands alongside conventional premium brands is a growing trend to attract more aspirational consumers. Another strategy has been to develop spa treatments and high-end retail outlets to spread the word. The Organic Pharmacy, for example, has a gradually increasing string of stores across London, culminating in the opening of the High Street Kensington site in late July, which also incorporates a treatment area. In addition, its spa treatments have travelled to 5-star spas in Austria, Cyprus and Italy. Spiezia distributes its products through spas as well as Harvey Nichols. Hair care and styling brand Aveda, which is known for using organic ingredients, has developed a unique format combining retail space with a treatment and styling zone to promote its range. Sephora now stocks Juice Beauty in the US, while A'Kin is marching across the world's department stores and large organic chains.

However, several brands use both channels, albeit to reach a different target audience. “We're a prestige brand first and we decided to take our brand to the top in terms of distribution. Then we could work down. In a department store you can install consultants who are able to explain the benefits of the products. This option just isn't available in more mass channels and we need to get our message out there first,” explains Christin Powell, founder of Juice Beauty.

It is this difficulty with making themselves heard, that makes it hard for some organic brands to compete with mainstream cosmetics brands. Budgets are limited and many cannot and do not advertise. “Initially we relied on PR, but as sales have increased we have begun limited advertising in magazines such as Organic Life,” reveals Golding.

Instead they rely on associating themselves with a well-respected retailer, PR, informative websites and leaflets, as well as trained consultants to spread the word. “A major problem that small companies face is how to compete with huge multinationals which have huge marketing budgets. Most companies undertake a niche strategy in which they target small specialist retailers where there is no competition from the major brands,” says Sahota. The right retailer, then, can be hugely influential in gaining publicity for small brands. “We would love to see Spiezia products stocked at Fresh & Wild as the consumer perception is that they are authorative in terms of their selection of products and their endorsement is a great marketing asset,” says Barlow.

With these more mainstream distribution outlets, many organic brands have been transformed from small cottage industries to full-scale businesses with a presence in several countries. The largest organic brands, according to Organic Monitor, are Weleda, Aveda, Dr. Hauschka and Jason Natural.

Although the industry is still made up of several small players, each company is growing apace. So far the industry has seen little consolidation. The BDIH currently certifies 22 independently owned cosmetic brands, including the native Dr. Hauschka, Lavera, Weleda, Martina Gerbhardt and Schupp, as well as New Zealand's Living Nature and Spain's Santa Verde. The Soil Association lists 14 manufacturers, including Eselle, Circaroma, Primavera and Neal's Yard, two retailers and six suppliers of essential oils. Ecocert now provides certification in 80 countries for 130 companies and 18,000 products worldwide.

Interestingly, the majority have remained resistant to acquisition and the big names are developing their own organic lines at present, rather than purchasing others within the industry. This may well be a reflection of a still young market or, alternatively, that the entire raison d'être behind the organic industry is to remain traceable. Indeed, L'Oréal's acquisition of the Body Shop has so far met vociferous objections from its consumers and these are the consumers who buy products because of their sustainable, charitable and health-conscious approach - exactly those who also buy into the organic movement.

The big brands are keen to get their foot in the door, however, and several have already developed organic lines under their existing brand names. Estée Lauder has brought out an organic range under its Origins banner, comprising three oils for the face, hair and body, which the company says are all 100% organic. Johnson & Johnson has diversified into more natural ingredients for its Aveeno baby care range and L'Oréal's purchase of The Body Shop is surely indicative of its future strategy.

As Sahota predicts, “Expect to see large companies in the market. Just like Heinz and Unilever have launched organic foods, cosmetics companies like P&G and L'Oréal are expected to launch natural and organic cosmetics.”

Sales of organic cosmetics are projected to rise by 10-25% a year and the impressive growth rate, particularly in the context of a market that is stagnating, will no doubt attract a number of the bigger players. Consolidation and competition are the future of this market. And the audience for organic C&T will increase - though not necessarily in the expected direction - A'kin is even intending to create a grooming range for pets.