Navigating the naturals market: formulating and selling products with natural ingredients is easier today than ever before, or is it?DEPENDING ON HOW YOU LOOK AT IT, it has never been easier--or more complicated--to formulate and sell products with natural ingredients.
Thanks to greater availability and consistency of functional botanicals and efficacious extracts--and growing consumer appetites for all things "green"--creating products with a natural slant has become, well, second nature for some companies. As a result, sales of green products are booming.
According to industry estimates, sales of natural personal care products topped $7 billion in 2007, making it the shining star of the beauty industry. Naturals are also heating up in the household product sector. Mainstream marketers are adding new "green" cleaning products and buying up niche firms to establish themselves in what could be the next boon for natural ingredients (see Household Cleaning's Going Green, Too, p. 70).
But here's the catch. With products proliferating, there's greater pressure being placed on the marketplace to come clean. Hardcore natural product firms and related organizations are protecting their turf from (and in some cases, pointing fingers at) companies they believe are hurting the natural movement. And to further complicate matters, key retailers have developed their own standards about "natural" products, and customers are demanding greater transparency and accountability regarding issues such as sustainability and fair trade.
With natural products and sales skyrocketing, some of the companies that founded the natural personal care movement appear to be getting lost in the shuffle. Once happy to quietly grow their eco-businesses by word of mouth, a few firms--backed by interested organizations--have become more vocal about the new kids on the block.
According to hardcore natural product companies, there is hardly anything "natural" about many of the new natural products on the market, and in fact, their makers are doing the natural products market--and consumers--a disservice. By using natural as a marketing tool rather than a corporate philosophy and formulation methodology, companies are watering down the meaning of what is truly natural and causing confusion for consumers.
The Natural Products Association (NPA), the U.S.'s largest and oldest non-profit organization dedicated to the natural products industry, is out to set the record straight. In May, the group unveiled a new voluntary standard and certification program that defines natural and includes a special seal.
At the May press conference, Mike Indursky, chief marketing and strategic officer of Burt's Bees and chair of NPA's Natural Personal Standard and Certification Program, said companies--even those well intentioned--are misleading consumers by selling "products that aren't natural, but are positioned that way."
Experts on the panel suggested as little as 20% of the products in the $7 billion natural personal care products marketplace are truly natural.
NPA's new criteria states that the product must be made up of at least 95% truly natural ingredients or ingredients that are derived from natural sources and it can't contain ingredients with any suspected human health risks or use processes that significantly or adversely alter the purity/effect of the natural ingredients. In addition, ingredients must come from a purposeful, renewable/plentiful source found in nature (flora, fauna, mineral). Non-natural ingredients can be used only when viable natural alternative ingredients are unavailable and only when there are absolutely no suspected potential human health risks, according to NPA. (For a closer look at the standard, see Happi.com).
NPA members on the advisory board are billing the standard as a way to bring clarity and transparency and clear the "clutter" in the marketplace--not to point fingers or "slam" synthetic ingredients. But others are taking a more hard-line approach.
Family-owned Dr. Bronner's Magic Soaps, for example, has filed a lawsuit in California Superior Court against numerous personal care brands to force them to stop making misleading organic labeling claims. Companies named in the lawsuit include Jason, Avalon Organics, Kiss My Face, Juice Organics, Nature's Gate, Estee Lauder, Stella McCartney's CARE and Ecocert, the French certifying body, among others.
David Bronner, president of the Escondido, CA-based company, which is celebrating its 60th anniversary this year, didn't mince words in a statement released to the press: "We have been deeply disappointed and frustrated by companies in the 'natural' personal care space who have been screwing over organic consumers, engaging in misleading organic branding and label call-outs, on products that were not natural in the first place, let alone organic."
In response, Hain Celestial, Kiss My Face and Nature's Gate released a statement in which they, "strongly support the need for clear and verifiable standards for the use of the term 'organic' in personal care products. Currently, there are several competing standards regarding the use of organic materials in personal care products, none of which have been adopted by U.S. Department of Agriculture and incorporated into its National Organic Program. The statements and claims advanced by Mr. David Bronner appear to be more about the lack of action by the government to settle the standards issues than about the products he mentions. We are confident that the allegations about our companies' products will be proven to be without merit."
Not on Our Shelf
To further complicate matters, the definition of natural, as a retail concept, is changing as well. Large retail chains have set their own benchmarks when it comes to natural products sold in their aisles or manufactured for their private label business.
In March, Whole Foods Market--the natural and organic foods supermarket with 270 stores in the U.S., Canada and the UK--unveiled its Premium Body Care standard and labeling seal. The firm says the goal is to help consumers decipher which body care products in its Whole Body departments contain the most natural and highest quality ingredients. Similar to NPA's standards, outlawed ingredients include parabens, polypropylene and polyethylene glycols, sodium lauryl and laureth sulfates. Whole Foods Market, which worked on the standard for more than two years with chemists and body care experts, allows "milder preservatives" (such as potassium sorbate and sodium benzoate) and "gentle types" of surfactants (like decyl polyglucose and sodium stearoyl lactylate) to be used.
More recently, CVS Caremark, one of the U.S.'s largest retail pharmacy chains with approximately 6,300 stores, announced a new cosmetics safety policy in which it will remove chemicals linked to adverse health outcomes from its house-brand products and will replace them with safer alternatives. CVS said it would also prompt similar action by its manufacturing partners. (See Newsfront, p. 14).
Shades of Green?
The lack of harmonious standards regarding what constitutes natural and organic in personal care is a major issue that must be addressed, according to marketers and natural ingredient suppliers.
"Challenges remain as governmental regulations around the world struggle with defining the terms natural and organic to ensure they are both accurate and provide the consumer with a defined benchmark for product claims," said Steven Rogers, manager, sales and marketing, personal care, Vertellus Performance Materials Inc.
But as industry pioneers, retailers and organizations call for tougher restrictions regarding natural and organic claims, what will come of the white-hot "naturals" market? Will there still be room for brands that want to highlight the natural botanicals and extracts they use alongside their current chemistry? Can a brand be a little natural and still be considered green? After all, each company (and end consumer, for that matter) sees "natural" in a different light.
"A constant challenge is addressing the differing customer definitions of natural," said Gary Neudahl, production manager, personal care ingredients, The HallStar Company. "Customers have their unique perspectives on sourcing and on processing which are critical to their product position in the market, and so are an important part of their ingredients selection and product development process."
For example, when it comes to sourcing, what's your company's stance on genetically modified organisms or use of animal-based products? Would your chemists and marketing department sign off on synthetic processing or a non-organic essential oil?
Arch Personal Care echoed the need for greater clarity regarding words like natural, organic, green and sustainable.
"There is much confusion in the market as to the meaning of these terms and how it affects purchasing specifications," said Lisa Bouldin, senior manager of technical marketing and sales. "As there is no standardized definition of natural, and no harmonized global standard on naturals, it leaves a lot of room for interpretation, which in turn creates what we call 'natural confusion.'"
According to experts, the current state of affairs makes communication between supplier and formulator even more critical. The best suppliers and their distributors will work closely with their customers to source natural ingredients and in some instances navigate the moving waters of the marketplace and help them define their goals.
When formulating a natural product, Josef Koester, director of marketing, Care Chemicals North America, Cognis, suggested companies ask themselves several questions including how "green" is the end product supposed to be, and which ingredients should be used to achieve this level of greenness?
Another key issue to consider is whether your company or your product line would benefit from an environmental label, seal or certification. "They play an increasingly important role in consumers' purchasing decisions," added Mr. Koester.
According to Steven Pettigrew, vice president of sales, DeWolf Chemical, it boils down to the level of green a company seeks. "Finding the balance between searching for the benefits of using products derived from natural ingredients and the financial impact of those ingredients, and the social impact of harvesting those ingredients is a huge challenge," said Mr. Pettigrew. "Again, it comes down to how green a customer wants to be."
There are firms using small percentages of natural ingredients for marketing purposes only, but more personal care marketers have come to realize the tangible benefits natural ingredients can have on their formulations and their bottom lines. Natural and organic ingredients can give a brand an edge in a competitive marketplace where consumers will pay more for aesthetically pleasing formulations that deliver results with fewer chemicals.
"Today's consumers are looking for natural products that offer excellent performance, proven benefits and that are safe with no side effects," said Mr. Koester. "They want to combine the benefits of nature and science that deliver the best of both worlds."
To achieve that, companies are looking for unique natural ingredients that can set them apart, as well as products with what Mr. Neudahl of Hallstar called "performance pedigrees"--those that are certified organic or have favorable processing.
According to Mary Ann Siciliano, national sales manager, Arista Industries, while traditional vegetable oils are still of interest in personal care, "organic oils which have been cost prohibitive in the past, seem to have become more popular."
Christian Waetjen, co-founder of Inca Oil, also pointed to rising costs. "All companies are concerned about increasing costs of natural raw materials. The demand for certified organic products has skyrocketed this past year which has created challenges to purchasing managers," he said.
Growing interest in natural and organic ingredients also stems from the simple fact that more products are readily available and batches have greater consistency than in previous years.
"Shea butter may be more exotic than cocoa butter, but now there is more of it grown and it is more consistent too," said Gregg Friedman, general manager of International Sourcing Inc., a supplier of extracts, natural vegetable oils, seaweeds and other exotic naturally derived ingredients for the cosmetic and spa industries. "The industry is taking natural ingredients more seriously, and offering higher quality products that are more reasonable in price. They may not be as reasonable as citric acid, but cosmetics companies are realizing cheap ingredients aren't better." He asserts that consumers are willing to pay more for better cosmetic products using quality natural ingredients at a proper use level.
Above all, functionality remains the key issue at the bench, especially as companies look to harness the power of natural ingredients in more complex areas such as anti-aging.
According to Tom Kovats, vice president, cosmetic ingredients, Centerchem, natural ingredient science is making strides in new areas of efficacy. "We are getting more toward anti-age claims that we can deliver with pure straight botanicals," said Mr. Kovats, adding that Centerchem has natural ingredients for skin brightening and smoothing currently undergoing the organic certification process.
As with any new ingredient, a natural must deliver results consumers can see and feel if it is going to be used.
The challenge "is to adopt natural alternatives without compromising on the performance aspects of finished formulations," said Ralph Manrique, global marketing manager, National Starch Personal Care, which recently unveiled Naviance, a line of certified organic biopolymers for use in organic and natural personal care products.
Where (and How) Did You Get That Jojoba?
Sustainability has become a much more critical issue in the natural ingredient marketplace. As an industry with inherently more at stake in regard to sustainable farming, there is a call for greater accountability when it comes to fair treatment of and fair trade with local communities from which suppliers and their partners source their botanicals and extracts.
"Five to 10 years ago, customers only wanted to know which country the plant came from and now there is more interest as to which farm it has come from and who has picked it," said Dr. Jane Tiedke, head of marketing at Cosmetochem International AG. Her firm recently joined with Outback Spirit Pty. to launch Outback Spirit Botanicals, a range of ethically sourced indigenous Australian fruits and plants for use in personal care.
Along similar lines, Arch recently formed a relationship with Centroflora, Inc., a Brazilian firm that drives sourcing of organic raw materials under its Partnership for a Better World program. According to Centroflora, advantages of the program are to supply clients with high quality extracts, encourage needy agricultural communities and to promote extracts production, with a focus on soil cultivation to the final packing of the ingredients. This program "provides a positive impact to the communities growing the ingredient through the entire supply chain to the consumers using the ingredients," said Steve Hinden, director of new business development, Arch Personal Care.
Sustainability and product development also go hand-in-hand at Laboratories Serobiologiques. For example, the firm's Argan Program, which works in partnership with local community groups, has led to the development of new ingredients for skin care, including an Ecocert-certified argan oil; Arganyl LS 9781, a flavonoid-rich extract that strengthens cutaneous structure; and Argatensyl LS 9735, which in several clinical tests exhibited immediate tightening effects on wrinkles and lines in the crow's feet area as well as long-term biological anti-wrinkle activity.
Do Your Homework
When it comes to partnerships and alliances in the naturals market, companies must make sure they are working with reputable companies and organizations.
"Customers need to ask pertinent questions of their suppliers to ensure that there are tangible and measurable benefits for local communities," said Dr. Teidke.
If your firm doesn't do its homework when it comes to the supply chain, you put your reputation at risk. Said Ms. Bouldin, "Our company understands that we are only as good as the people that we rely on for sourcing raw materials."
Looking for the next hot botanical or organic extract? A list of new natural ingredients begins on page 74.
RELATED ARTICLE: Household cleaning's going greener, too.
SKYROCKETING SALES of natural personal care products hasn't gone unnoticed by makers of household cleaners. According to the Mintel Global New Products Database (GNPD), 34 new hard surface care products with environmentally friendly claims (defined as organic, all-natural and ethical) were launched in the U.S. in 2007. As of May 13 of this year, the company had tracked 58. Similar growth is occurring in the dishwashing category. The 41 products with an environmentally friendly claim launched so far in 2008 is more than double what Mintel tracked in all of 2007.
While much of the activity in the natural cleaner category has historically come from small firms, larger companies are entering the segment. Some of the biggest names in the cleaning business have added their own "green" household cleaning products and are buying niche companies to take an early lead in what could be the next boon for natural ingredients.
One of the higher profile launches came at the beginning of the year when Clorox introduced Green Works, a line of household cleaners made from plant-based ingredients derived from coconuts and lemon oil. To promote the brand's commitment to the environment, Clorox forged an alliance with the Sierra Club, and since Earth Day has featured the Sierra Club's logo on Green Works' packaging.
S.C. Johnson is getting into the game too. The Racine, WI-based company announced plans to acquire Caldrea, a maker of green cleaning products. The Minneapolis-based company's eponymous brand, sold at approximately 2,200 specialty shops, includes household cleaners, hand soaps and lotions and laundry care products. The company also touts Mrs. Meyer's Clean Day, an "aromatheraputic" cleaning brand available at 4,500 doors. Mrs. Meyer's offers household cleaners, laundry care and baby's room products, as well as pet care products such as shampoo and odor removing carpet spray.
Will green cleaners backed by mainstream marketers help propel the natural cleaning category? According to Information Resources, Inc., for the 52 weeks ended April 20, 2008, sales of Green Works all purpose cleaner/disinfectant were $3.78 million, representing a .88% share of the $431.6 million all-purpose cleaner/disinfectant category at supermarkets, drugstores and mass merchandisers, outlets excluding Wal-Mart, Club stores and C-Stores. In the $149 million glass/cleaner ammonia category, Green Works glass cleaner has captured a 1% share of the market with sales of $1.59 million, according to the Chicago-based market research firm.
S.C. Johnson plans to introduce Mrs. Meyer to more households. According to a report in the Minneapolis Star Tribune, a local agency is working on a national ad campaign slated to debut this fall.
The green movement is also impacting the industrial and institutional (I&I) market, where calls for more environmentally sensitive alternatives are on the rise, but cost-performance issues are critical.
"Every one of our customers wants to be environmentally responsible," said Mark Christeon, executive vice president of Sea-Land Chemical, a Westlake, OH-based company representing Air Products, Seppic, Lanxess and BioSystems in the household and I&I markets. "They all recognize they have to be green because there is a growing segment of their market that demands this."
Mr. Christeon continued, pointing to a critical issue for manufacturers of household and industrial and I&I products: the cost of naturally based ingredients. "Price is a very important consideration. All of the green chemistries are higher in cost than the tried and true chemistries. Cost-performance is very much a function of the process," he said.
With more activity in "natural" cleaning products, will the Natural Products Association step in--as it has in personal care--and create its own way for consumers to decipher natural cleaning products? "We'll walk before we run," said Daniel Fabricant, vice president of scientific regulatory affairs, NPA.
In related news, Green Seal--which already has environmental standards for general purpose bathroom, glass and carpet cleaners for household and I&I--is proposing a new standard that would define environmental performance criteria for residential cleaning services. The purpose of the new standard, according to Green Seal, is to promote sustainable residential environments through healthy and environmentally responsible cleaning services and reduce negative chemical impact on human health and the environment by reducing exposure to cleaning chemicals and reducing chemical waste.
In early May, the non-profit organization started a seven week "scoping phase" to identify what should be considered when researching and drafting the standard. Comments Green Seal receives from stakeholders will be categorized in the following areas: cleaning procedures, vulnerable population, chemical use requirements, floor care, kitchen and dining area care, restroom care, disinfection and labeling requirements for certification, among others.