Naturals Here to Stay
With more than a 15% CAGR over the last five years, the naturals trend seems to have solidified its position as more than just a passing fad. While the trend is growing steadily worldwide, what makes it most interesting is the diversity of impact in each region. Kline's Natural Personal Care 2009 report-the only such study to examine the naturals industry in the United States, Europe, Asia, and Brazil-reveals significant differences among the major markets with regard to consumers' adoption of the trend, the popularity of products, the competitive landscape, and the degree to which so-called natural products really live up to their billing.
As a clear indication of the growing naturals appeal, manufacturers are pushing the envelope of what passes for natural in order to get on the bandwagon. Kline's ingredient analysis finds that nearly 75% of so-called natural personal care products are not so natural after all. The overwhelming majority are considered 'natural-inspired,' comprised mostly of synthetics with just enough natural ingredients thrown in to take advantage of low consumer differentiation. Unfortunately, the lack of explicit standards that define the degree of naturalness in most markets makes it possible for manufacturers in some countries to call their products 'natural' just by adding a flowery label to the package.
Booming in Brazil
As the second-largest single country market for naturals in the world, Brazil is one of the most attractive opportunities for natural personal care marketers. Growing consumer purchasing power and greater supply of products have also made it the fastest growing, up more than 15% from 2008.
Dominated by a single supplier that commands about two-thirds of the total market, Brazil has also benefited from a weakening U.S. dollar that has made the importation of natural products more affordable. Consumer differentiation remains quite low here as well, with most so-called natural products merely natural-inspired.
The Brazilian market could be a challenge for some brands in that direct sales dominate the distribution channels. The channel has fallen off in many developing nations over the past 10 years, and most brand marketers are not equipped for this kind of distribution. However, drug stores here have also begun dedicating more shelf space to natural personal care products, boosting sales in this channel significantly.
Attractive in Asia
By the sheer size of its population, growth in GDP, and disposable income among consumers, the Asian market is quite attractive to global marketers. Posting a healthy growth rate in 2009, the region collectively commands a 40% share of the global market for natural personal care products.
A rich heritage of Ayurvedic and herbal medicine, particularly in India and China, means that consumers are quite familiar with the principals of natural remedies. Ironically, this tradition does little to stem the tide of highly synthetic products passed off as naturals. With no labeling standards in place in some countries and a low degree of consumer differentiation between truly natural and natural-inspired products, the market is currently led by manufacturers who remain more committed to profits than their natural positioning.
Also, contrary to what one might expect, while domestic brands are currently quite strong here, foreign brands are highly regarded as more technologically advanced, further opening the door of opportunity for global brands to infiltrate this booming market.
In Asia, as in most other parts of the world, makeup is a fast-growing category. In January 2010, Tokyo-based cosmetics giant Shiseido acquired mineral makeup pioneer Bare Escentuals in a move that will no doubt continue the proliferation of natural makeup products across Shiseido's already strong presence in the regional marketplace.
A key differentiator in this market is the variety of distribution channels from one country to another. In China and Japan, the growing appeal of Western-style department stores has drawn shoppers in for cosmetics and skin care products, while direct sales remain quite strong throughout the more rural areas of the region. Unique to the Indian market, kiranas - the equivalent of mom-and-pop stores in the United States - are responsible for the majority of naturals sales in this country.
Truly Naturals Growing in Europe
The European naturals market is thriving on an increase in the supply of products and the expansion of specialized skin care offerings with anti-aging and sun protection benefits. While less than one-third of the overall market comprises truly natural products, this segment is growing here as marketers reformulate their products to meet increasing demands of certifying bodies. In Europe, a pan-European standard for natural certification is brewing, which presents a great opportunity for international brands that rank at the higher end of the naturals scale.
Makeup is the leading growth category here as well, with product innovation in organic and mineral-based formulations by leading worldwide brands leading category growth. The top marketers here are large domestic brands with broad appeal and considerable clout in the personal care industry, such as Oriflame and The Body Shop.
Value Drives Growth in the United States
Stymied considerably by the recession, the U.S. market for naturals posted relatively modest growth in 2009, but was still remarkable compared to the cosmetics and toiletries market as a whole. Here, as in Europe, marketers are reformulating their products to beef up their natural positioning to appeal to more skeptical consumers and meet increasing scrutiny over the true naturalness of ingredients.
Challenging this move to more natural ingredients, the recession forced U.S. consumers to seek out more mid-range, mass-marketed products that provide greater value and cost less.
Hair care is the fastest growing category in the United States, with new product innovation in shampoos, conditioners, and even hair styling products boosting growth in this category. Manufacturers have struggled with limited availability of raw materials that produce the cleaning, lathering, and shining qualities consumers are accustomed to with traditional synthetic surfactants and polymers, but recent advances are helping to drive gains in the category.
How Long Before Naturals Reach Critical Mass?
With overall growth in the naturals industry expected to average just over 12% through 2014, the trend will no doubt spark even more product innovation as marketers reformulate products to capitalize on consumers' interest.
Most critical for marketers, however, is developing a thorough understanding of the nuances of each individual market. In Asia, for example, the long-standing tradition of Ayurvedic and herbal remedies makes the naturals concept more familiar, but, as it turns out, most products available here are not all that natural after all. In the United States, consumer demand for naturals is growing, but so is the skepticism that should incite marketers to develop truly natural products that deliver more than marketing hype.
As the trend pushes forward over the next five years, Kline believes that the industry is moving toward a critical mass of acceptance and demand. As marketers combine natural ingredients with overall sustainability practices that appeal to consumers, one wonders just how long this growing trend will continue before it becomes a way of life, and natural personal care products solidify their position as a stalwart in the industry.