A sparsely populated and geographically isolated country, Iceland made news the world over in 2008 because of its collapsing finances. Despite this, its mature cosmetics industry has proved strong during the turmoil and is now looking to the future.
From 2003 to 2008 the C&T sector in Iceland has reported an overall growth of 27.5% according to recent industry calculations.
In 2008 the C&T market was worth around $84.6m and the per capita retail expenditure on cosmetics stood at around $279 per head, per year.
Premium cosmetics (including premium facial make-up, eye make-up, lip and nail products) and hair care represented the most profitable sectors of the Icelandic C&T industry followed by colour cosmetics, skin care and fragrance in that order. In 2008, fragrance was the most dynamic segment, recording a growth of 10.4% on 2007. Colour cosmetics meanwhile jumped by 9.3% followed by the 9.5% growth of premium cosmetics and 7.9% for skin care. These results are certainly uplifting to hear bearing in mind that just last year Iceland was so financially vulnerable as a country that it had to apply to the International Monetary Fund (IMF) for emergency financial aid – the first western country to do so since 1976.
Back to nature
With a small population of around 300,000 inhabitants, Iceland is traditionally known for its affluence and high standards of living. However in 2008 the credit crunch hit the country dramatically and circumstances suddenly changed exposing Iceland’s vulnerable economy to the disbelieving eyes of the world.
According to The Economist, Iceland’s finances still remain in a shocking state: “The budget deficit is running at 13% of GDP and public debt is well over 100%. The Icelandic Krona has lost half its value against the Euro since January 2008.”
Interestingly the recent crisis has pushed Icelanders back to their roots. It has stimulated growing concern about the country’s natural resources since they are likely to represent the key to recovery moving forwards.
A debate has also emerged about how these almost untouched resources should be used ethically in beauty products while at the same time respecting the land, which is dear to Icelanders. Meanwhile the global rise in ethical consumerism has propelled the demand for natural beauty products here too.
This, alongside the desire to buy more local products to keep the economy afloat, has in turn meant that several Icelandic manufacturers who have traditionally used natural ingredients have in fact partly taken advantage of the economic chaos of the last year. On the other hand, as a result of the crisis some multinationals have stopped trading in Iceland altogether, including some of the giants that used to dominate the market.
The few local C&T companies in the market are trying to keep hold of a positive and realistic image of their particular sector.
Ása Brynjólfsdóttir, director of research & development at Blue Lagoon, a company that manufactures skin care products and spa treatments says: “The sector isn’t very big overall and there aren’t many Icelandic cosmetics brands present. However, because of the financial issues and political unrest, local brands have become more competitive. Now the market has stronger reasons to buy products made in Iceland itself, and because there’s an increased interest in natural cosmetics, we can offer that as a country. The importance of natural, active ingredients is felt strongly here and there’s high awareness of key trends too.
“One step we took following the global economic crisis was to place increased emphasis on our online shop instead of focusing on department stores for distribution as we feel online is a growing trend.”
Asta Syrusdóttir, owner and founder of the local natural skin care company Purity Herbs, explains the Icelandic appeal. “Iceland has a real crisis on its hands so we are focusing our efforts on our Icelandic products to support each other. Everything that is hand-made, from cosmetics to knitting and sewing, is really gaining in popularity in Iceland at the moment. Many people who never used Purity Herbs before the crisis are now happy to do so and don’t buy other brands. Our strength during this crisis is that we also sell abroad, so part of our income is in euros which is good, plus Purity Herbs is sold in tourist focused retailers where we enjoy success.”
Syrusdóttir also points out the good and the bad sides of the Icelandic C&T industry: “In this country we don’t have much by way of pollution and are very close to our herbal sources. People here have been conscious of the healing effects of herbs for a long time now. We are also close to our customer base because the country is geographically small and has relatively few inhabitants so we can get feedback and advice easily when we are developing new products. Customers are willing to try new things and share their experiences with us. The negative aspect of our market is that we are far away from the rest of the world and transportation costs are very high.”
It is also an industry that has noticeably evolved in the past few decades. Gigja Kjartans Kvam, founder of domestic company Urtasmidjan (The Herbal Workshop), explains: “In the old days, Icelandic housewives created home-made ointments from herbs but they stopped once the pharmacists started to produce chemical-based skin creams and salves which they then marketed as medicinal. All cosmetics which have been available in Iceland in the last decade have been imported from abroad. It was only around 20 years ago that Icelanders started to take an interest in natural products so companies were marketed in Iceland that advertised natural cosmetics. But the truth was that they did not produce anything themselves as the cream bases were bought from abroad. Things have changed now though I am pleased to say. We produce natural and organic skin care ranges from start to finish using locally sourced ingredients and this is our point of difference when facing our foreign competitors.”
Changing consumers
Following the recent economic crisis, Icelanders have radically changed their habits and lifestyle: “They used to choose very expensive, premium cosmetics without really thinking about quality or ingredients. Since the crisis hit us, Icelanders are choosing less expensive cosmetics and this may have opened their eyes to products like ours that offer high quality at very reasonable prices,” says Syrusdóttir. “Plus over these past few years consumers have been more aware of the natural way of living and have chosen both food and cosmetics that are natural and organic.”
Kvam confirms this, saying that the public’s interest in natural cosmetics has grown regardless of the economic situation. “In Iceland, as well as abroad, consumers are asking for good quality natural products without chemical ingredients and which contain both natural preservatives and antioxidants. People always ask what herbs and what ingredients are used in the final product and whether it is actually made in Iceland itself.”
According to Brynjólfsdóttir: “Icelandic consumers are very aware of major international brands and generally follow international trends. They are knowledgeable and interested in cosmetics and they also place great emphasis on renewable production methods. Over the years, consumers have evolved to gain an even greater awareness of the trends in the C&T market than ever before. The primary consumers of Blue Lagoon are Icelanders and also international visitors to Iceland who have a strong interest in our brand. We have also built up a loyal consumer database through our online shop on our website, with many of our online customers making repeat skin care purchases”.
Another Icelandic skin care company called Villimey is clear about what Icelandic consumers want. Company owner, Adalbjorg Throsteinsdottir, says: “People have less money to spend these days and want to know that the product delivers on its promises. The focus has definitely shifted to local C&T items because it’s easier for them to track these products down.”
Naturally rich
Iceland as a country is an environment of extremes that features mineral-rich volcanic soil, high altitudes and thermal waters.
The unpolluted air and the 24 hours of daylight during the summer months contribute to the steady growth of the precious wild herbs that are vital ingredients for many C&T manufacturers.
Syrusdóttir says: “Because of the climate and conditions we have in Iceland, we have a plentiful supply of herbs for use in cosmetics. Icelandic herbs are unique, powerful, healing and clean. People are now getting allergies from many of the ingredients used in chemical cosmetics and this is a reason why they start looking for something natural to use. At Purity Herbs we create 100% natural skin care products using synergistic blends of hand-picked Icelandic herbs, natural springwater and genuine essential oils. In 2008 we launched our facial serum, Viking Balm, that has been highly acclaimed when it comes to treating eczema. Our products are sold all over Europe, in America and Australia and in 2008 our turnover stood at a healthy t500,000.”
Meanwhile Kvam explains the core philosophy behind her company: “We wanted to produce a natural and organic cosmetic line free from chemicals. To do this I started manufacturing a healing salve from a mix of local herbs, ointments and oils. Today we don’t only produce health related products but also several types of natural cosmetics. Our healing Icelandic herbs are handpicked out in the northern wild terrain of the country. Out here the herbs grow more slowly than in warmer climates and research has shown that this enhances the amount of active substances in them. This is why Icelandic herbs are special when it comes to their strength, potency and quality. Each herb is handpicked at the time when its strength should be at its most potent and the whole process is a work of preciseness to ensure that the best quality herbs are used.”
The Villimey brand has a similar story. Throsteinsdottir initially began to make home remedies developing her unique salves and ointments using traditional recipes but as her confidence grew she developed her own formulations. Word of her products quickly spread to the wider community, as is often the case in a country as small as Iceland and she started to trade in cosmetics as a business in 2005. “Our strategy is to work with nature – all of our products are certified organic and the actual land we get our herbs from is also certified as organic. We hand-pick all the herbs we use from the west fjords of Iceland which are considered the best for clean air and clean water,” says Throsteinsdottir. Among Villimey’ s best selling products is the Muscle&Joint Magic rub.
Exploiting the powers of the geothermal water of the Reykjanes peninsula, the Blue Lagoon itself is a spa that was formed in 1976 in the middle of a lava field. The geothermal water comes from 2,000 metres beneath the surface and is pumped directly into the Blue Lagoon.
In the 1980s people started to bathe in the lagoon and patients with skin conditions such as psoriasis noticed an improvement in their skin condition after applying the silica mud to their skin. Today, this ingredient forms the staple part of the Blue Lagoon’s own skin care line, launched in 1995. Brynjólfsdóttir comments: “The Blue Lagoon enhances health and wellness through a geothermal spa experience, treatments and products.” Last year the company launched 15 new professional spa products and opened a new city spa in Reykjavik. “Blue Lagoon skin care is positioned as harnessing the best of nature and in the production we only harvest natural active ingredients.”
Looking to the future
With a new government taking its place in January this year, with the immediate priority of restoring the public finances, Iceland has work to do in order to regain its wealth but people are hopeful.
Manufacturers remain cautious about spending money and not all companies risked launching new products in 2008, a trend that has continued throughout 2009. Bearing this in mind, Throsteinsdottir tries to keep realistic about the future: “Of course we might have to take action by upping the price of the products because we still have to import items such as jars, the prices for which have increased because of the crisis. But as a company we have not done that as yet because we are whittling down our existing stock before investing in more.”
Kvam adds: “The global economic crisis has had a very strong impact on us today and the next year will prove difficult. I don’t know if local companies will launch any new brands on the market soon but perhaps they will hold fire due to the economic situation they find themselves in. We have to buy all our packaging from Europe and there are still a few ingredients that you cannot buy here like herbal butters, waxes and oils. The economic situation is working against us today but we will keep on going as long as people love our products and buy them.” Results from the cosmetics industry look positive – a sign that beauty products are not something Icelanders will easily give up.
According to Brynjólfsdóttir: “In Iceland indications are that we will also see an increased interest in green renewable production methods. If this were the case, it would mean nothing but more business for local manufacturers.” Syrusdóttir is positive the worst is over and the future looks bright: “At the beginning of the crisis we experienced some difficulties it has to be said. But as time has passed we have reached an even keel as before and we are now trying to expand both in Iceland and abroad. I think the situation is getting stronger.”
While international retailers have had to increase their prices by up to 100% in Iceland, local cosmetics companies have kept rises to around 9% and at least for the handful of local companies, the rest of 2009 looks brighter.
Bringing the best out of Iceland
' Pure Icelandic was founded six years ago and its origins are certainly different. I am originally a chartered accountant and had been trading and working with Icelandic people for a while and then one day came in contact with a herbalist called Thury, who had a fantastic healing balm but no business plan or financial backing to bring the product to the market. After trying the product and seeing how well it performed I decided to offer Thury my help and Moa “The Green Balm was born. When Moa proved extremely successful, it made sense to further explore the cosmetic applications of Icelandic herbs and after some careful formulation, Pure Icelandic launched Taer. Meaning ' pure ' in Icelandic, Taer is a luxurious skin care line blending modern science with traditional Icelandic herbalism, so the products are natural and holistic as well as having anti-ageing benefits.
' Shortly after that, I met Dr Jon Bragi Bjarnason, Iceland s leading biochemist and one of the world s most renowned enzymologists. He had just obtained a patent for his marine enzyme formulation and numerous people reported on the product s outstanding skin care abilities, which led to the birth of Dr Bragi, a fantastic award winning high-end marine enzyme brand. Last year Dr Bragi won the CEW s Best Prestige Newcomer award and the products keep going from strength to strength in the market.
' Although Icelandic at heart, Pure Icelandic is very much a London-based company. To this day, Moa is still made by hand in Iceland, however the production of the Taer lines has been moved to the UK to enable a lower retail price and to dramatically lower the carbon footprint. Dr Bragi s enzyme products are made in Iceland under his strict supervision, however we have just commissioned a French company to manufacture the upcoming cleansing products as France was the best place to find the particular marine ingredients we were after for the range. '