A Natural Progression in Personal Care

January 7, 2009

A look at the past, present and future of the natural and organic personal care category.

A Natural Progression in Personal Care

A look at the past, present and future of the natural and organic personal care category.

Darrin Duber-Smith
Green Marketing, Inc.
Boulder, Colorado

Mother nature is not only difficult to fool, she is also tough to ignore. As a 20 year veteran of the natural and organic products industry, I am still amazed at the level of growth sustained year after year, especially with regard to personal care and household products. In 2007, the natural and organic personal care market, once merely a novel, yet bothersome, sub-segment of the beauty industry, reached $9.23 billion at an annual growth rate of 23.3% (Nutrition Business Journal 7/08), and now represents more than 15% of the total cosmetics market.

Aveda's Uruku lip pigment contains 100% certified organic aroma.
The natural and organic products industry began with the efforts of that famous health enthusiast, Will Keith Kellogg, and a handful of early pioneer companies such as lozenge maker Thayer’s, soap manufacturer Dr. Bronner’s and vitamin provider KAL. The industry grew very, very slowly until the zeitgeist embodied in culture of the 1960s, as well as the ortgeist in places like San Francisco, Boulder and New York City, fostered an overall concern for personal health and the environment never seen before. There are probably 1000 lines around the world with natural or organic product positioning in an ongoing effort to exploit a trend that has been building for more than 70 years.

During that time, health food stores sprung up everywhere, most of which still do a brisk business despite competitors such as Whole Foods Market and larger mass market players. Products were found in some specialty stores, but mostly in what is still termed “the natural chan nel,” a nationwide group of retailers that determined what was really natural or organic since government regulation did not exist. Larger players such as Aveda were very progressive for their time, while other brands (which shall remain nameless) resorted to the practice of “dusting” products with a minute amount of a particular botanical and “greenwashing” the product’s positioning. Core natural channel brands, including Burt’s Bees, Jason, Kiss My Face, Nature’s Gate (Levlad), Avalon, Alba, Zia and others, dominated this tiny, but rapidly growing industry.

Eventually, research providers began to segment consumers in an attempt to identify and better define this target market which was simply clamoring for natural and organic alternatives. It was clear that “better living through chemistry” would be put to the test as numerous reports profiling “health and wellness” consumers became available for use in strategic planning.

My terribly biased interpretation is that the Lifestyles of Health and Sustainability (LOHAS) study first published around 2000 (and developed in conjunction with a trade show and trade publication by a team of industry veterans that included yours truly) is the most comprehensive.

Defining Organic and Natural

Regulation with regard to products marketed as “organic” developed first at the state level in places such as Oregon and California before reaching the national level using a network of third party certifiers with USDA oversight. Food regulations have been long established, and personal care regulations are currently being finalized. The result is a growing number of products now bearing the USDA Organic or Europe’s Ecocert symbol, validating the product’s status as 95% or more organic.

Potent & Pure skin care from Kiss My Face contains 65% recycled packaging.
Products marketed as natural, however, posed more of a problem. Other than a couple of programs offered by European certifiers (such as BDIH), there existed no definition of natural, little industry regulation and a complete lack of government oversight. After publishing several articles on the subject, I was compelled to form a committee of 25 organizations, including companies such as Jason and Bath and Body Works, whose sole mission was to define the term “natural” for the industry. The International Association of Natural Products Producers (IANPP), although obscure and short lived, got the proverbial ball rolling and eventually passed on its work to the Natural Products Association (NPA), the natural products industry’s most influential organization.

As it stands now, the NPA has defined the term and has started to issue seals similar to the aforementioned organic marks. As of this writing, the FDA has refused to define natural for personal care and the FTC has refused to regulate its use. In the absence of government regulation, the industry is compelled to self regulate so that the consumer’s best interests can be served. Abuse of the term will continue, but the seal will at least provide a benchmark and opportunity for consumer identification.

The Current Period

Now that the second decade of the 21st century is around the corner, the industry stands as a bona fide segment within the health and beauty market. Not a fad like “the macarena,” these products have penetrated every product category and every channel and are growing at, to some, an alarming rate. Boulder, CO-based Nutrition Business Journal, offered the following product category figures for 2007, identifying total revenue, segment growth rates over 2006, and overall health and beauty category revenues (see list at right). You can figure out the natural/organic “market penetration” yourself:

Color Cosmetics, a $14.7 billion market
• $380 million in NOPC (12.1% growth)

Hair Care/Coloring, a $10.2 billion market
• $1.5 billion in NOPC (22.2% growth)

Skin Care, an $8.8 billion market
• $2.9 billion in Natural/Organic Personal Care (NOPC), (12.1% growth).

Fragrances/Aromatherapy, a $6.3 billion market
• $332 million in NOPC (10.5% growth)

Oral Care, a $4.9 billion market
• $563 million in NOPC (11.7% growth)

Bath/Toilet Soap, a $3.8 billion market
• $926 million in NOPC (14.3% growth)

Feminine Hygiene, a $2.7 billion market
• $87 million in NOPC (28.4% growth)

Shaving Products, a $1.7 billion market
• $127 million in NOPC (14.5% growth)

Deodorants, a $1.6 billion market
• $198 million in NOPC (14.1% growth)

Nail Care, a $720 million market
• $22 million in NOPC (5.9% growth)

Baby Care, a $620 million market
• $134 million in NOPC (35.1% growth)

Bath Items, a $590 million market
• $138 million in NOPC (17.3% growth)

A breakdown by channel, also provided by Nutrition Business Journal, further illustrates the sheer power of this trend and reflects 2007 total revenues and growth rates:
• Natural Channel (Core Brands): $2.22 billion (14.5% growth);
• Department Store/Spa/Salon /Boutique: $784 million (11.2% growth);
• Specialty PC Stores: $582 million (10.5% growth);
• Network Marketing/MLM: $1.56 billion (4.3% growth);
• Other Direct Channels: $817 million (8.5% growth) and
• Mass/Beauty Supply Discounters: $1.32 billion (61.3% growth).

The LOHAS Consumer

Finally, I would be remiss to exclude the latest LOHAS segmentation numbers as part of what is now a very compelling case. The study, which was first conducted in 1999 by LOHAS, and since then by Harleyville, PA-based Natural Marketing Institute, identifies five distinct segments in the general U.S. adult population. There are three segments of interest to marketers offering natural/organic options totaling 63% of all adults in the U.S.:

• The LOHAS consumer represents 19% of the general population and represents the core target market for all things healthy and sustainable. These highly motivated consumers are opinion leaders, early product adopters, demonstrate high rates of product usage and are very much interested in integrating products into their healthy lifestyle.

• The Naturalites represent another 19% of the population and also a primary target for natural/organic personal care. While being completely green is not as much of an imperative, this important segment of “light green” consumers is interested in personal health and demonstrates a propensity to buy natural and organic packaged goods through a variety of different channels and are good for mainstream target marketing.

• The Drifters are 25% percent of the population and represent a huge segment of potential customers. They are younger, financially unstable, and have rather underdeveloped value structures since many are still under the direct influence of their parents. They want to be green, but either cannot or will not based on priorities that only the young can interpret.

Clever marketers can reach all three segments with one communications plan or they can easily reach the LOHAS and Naturalite segments at the same time. Each segment can also be targeted individually with specified media and vehicles appropriate for their personal characteristics. Great stuff if you are a marketer!

Still to Come

When looking ahead, you can expect more of the same. The market is driven by a perfect storm of consumers, non-profits, industry, media and government, all of whom have a stake in the demand for more natural and environmentally sustainable products. New players emerge every week, some large and others still stirring concoctions in their kitchens and bathtubs. More and more shelf space in an increasing number of retail outlets is devoted to these high growth categories, offering an opportunity for growth seldom found in a mature industry. The consumer base continues to grow and regulations with regard to synthetic compounds and “green” business practices continue to proliferate.

The juggernaut that is natural and organic personal care is likely to continue moving at a brisk pace. The existing economic crisis will quell the growth only temporarily and opportunities for success abound for the organization truly committed to the category. Time will tell, as it usually does.
About the Author

Darrin C. Duber-Smith, MS, MBA, is president of Green Marketing, Inc., a Colorado-based strategic planning firm that has offered marketing auditing and planning, marketing plan implementation, sustainability planning, branding, product development, and other consulting services to natural products companies in all stages of growth for 10 years. He has 20 years of specialized expertise in the natural, organic and sustainable products industries and is also visiting assistant professor of marketing at the Metropolitan State College School of Business in Denver, CO.
More info: DuberSmith@GreenMarketing.net or www.greenmarketing.net