Natural Market Is Heating Up

By Tom Branna, Editorial Director | April 11, 2006

What is a natural? Household and personal product formulators have been contemplating that question for decades without reaching a definitive answer. While chemists scratch their heads, CFOs at multinational corporations have been sharpening their pencils and snatching up some popular players in the natural product arena. For example, last month Colgate-Palmolive acquired Tom’s of Maine for about $100 million and on an even grander scale, L’Oréal spent more than $1.1 billion to acquire The Body Shop. These acquisitions underscore the growing importance of natural product lines to multibillion dollar corporations.

But rather than run for their lives, smaller companies may actually be able to compete successfully in this bigger arena. Organic Monitor notes that The Body Shop’s products contain “synthetic preservatives and chemicals that are not found in most natural and organic personal care products.”

The folks at Organic Monitor insist that some consumers will switch to smaller brands because of ethical reasons. A couple of brands that may benefit from a change in consumer sentiment include Dr. Hauschka and Weleda.

Perhaps most importantly, category-killer Wal-Mart is taking a new look at the natural category, which some observers estimate is worth about $37 billion (retail). Last month, a new Wal-Mart Supercenter opened in Plano, TX featuring more than 400 organic foods. If the test store is successful, you can bet that Wal-Mart will strong-arm suppliers to adopt more sustainable business practices and larger organic offerings. After all, the retailer successfully employed the same tactics in its everyday low-pricing strategy. With Wal-Mart placing a big bet on natural products, the rest of the market is sure to follow.

But despite the growing demand for everything green, marketers, suppliers and their retail partners must develop some sort of guidelines to decide just what constitutes “natural.” It’s time for the industry and its trading partners to move ahead of fringe environmental groups and take the lead on the issue. With sales flat in so many household and personal care categories, developing successful green products could be the best way for a company to do something for the environment and boost its bottom line.


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