The natural and organic sector has been one of the most talked about areas of the C&T industry in recent years but is there still potential to grow? Emma Reinhold went along to the Natural Beauty Summit America (7-8 May) in New York to find out
Any manufacturer looking to go down the natural or organic route is faced with a minefield of potential pitfalls and obstacles. Increasingly obscure labelling requirements and spiralling certification costs combined with the big question of who to actually certify with have prompted some in the industry to question the real value of going green.
Yet despite the numerous difficulties, for many manufacturers and their wider distribution network, the natural and organic sector is a market that holds great potential despite still being relatively small. Organic Monitor says the global sales for the natural and organic market reached close to $8bn in 2008 yet still only accounts for 2% of the total C&T market share. North America and Europe continue to be the leading regions, accounting for 90% of sales, and Germany the leading market, taking a 5% share of the market.
CONVERGENCE OR DIVERGENCE?
The number of standards has grown exponentially in recent years and the current challenge facing the industry is defining these standards, according to Amarjit Sahota, director of Organic Monitor. In North America the introduction of NSF, OASIS and NPA has opened up options, while in Europe the long awaited COSMOS standard (see p5), and NaTrue aimed at small and medium sized enterprises have been introduced in the last 18 months. In addition a number of retailers have introduced their own private standards, creating a very varied and often confusing standards landscape.
According to Curt Valva, general manager, Aubrey Organics, a recent study of 1,500 US women found 78% of those asked thought that natural personal care is currently regulated and 97% think it should be. “Half the stuff on the internet about natural is garbage. When you see companies that are clearly not natural but are advertising themselves as natural, that’s when you realise you need certification,” he said.
Developing a more uniform approach to certification is the key to moving the sector forward said Sahota. “The main challenge is to create some harmonisation,” he explained. “This is beginning to happen in the case of COSMOS in Europe but there is still a lot of work to be done here.”
“The industry needs a label where everyone is saying the same thing,” added Katherine DiMatteo, president, International Federation of Organic Agriculture Movements (IFOAM). “If you don’t know where you are going then don’t start. You can’t think that it will all be done in three months – a good standard is painful to set and to follow but necessary and the ones with integrity will stand the test of time.”
While the reality of one universal standard for natural and organic C&T products is still very much a pipe dream, and to many in the industry a non-starter, harmonisation between existing standards is at least underway on both sides of the Atlantic.
The European NaTrue label and the US NSF/ANSI 305 standard have reached agreement on fast-track certification, which means companies with NaTrue certification do not have to go through the certification process twice to gain NSF accreditation. NaTrue says it is also currently working on a mutual recognition process with the Natural Products Association (NPA).
And in Europe the creation of the COSMOS standard, which brings together six European associations including certification bodies and standards, paves the way for further harmonisation. But it has not been plain sailing. Six years in the making, the COSMOS standard has had numerous rewrites and the final agreement does not include a seal, as previously proposed. “You must remember that many of the organisations involved in COSMOS are competitors,” says Harald Dittmar, md, BDIH. “It’s still a rocky road.”
Joe Smillie, senior vp Quality Assurance International believes that progress on harmonisation and the wider organic movement in the US will take on a new impetus thanks to the election of a new government administration. “It’s not just an organic garden at the White House – it’s change for the industry,” he said. “The real news about standards in the US is that we have a new administration that is moving organic on. The deputy secretary for agriculture has already pledged $50bn for organic agriculture and I’m hoping we’ll soon have federal action to clean up the marketplace.”
The current gold standard for organic products in the US is the USDA NOP label, which was originally created for the food and agriculture industries and is considered quite restrictive for the C&T industry. Smillie believes the NSF/ANSI 305 standard provides a tangible alternative to NOP and complements rather than competes with it, allowing the use of more ingredients and chemical processes that follow green chemistry practises, which are not allowed by the USDA standard.
“NSF/ANSI was not designed to conflict or overlap with NOP and in my opinion there are three standards that should be adopted in the US – USDA NOP for organic products over 95%, NSF/ANSI for products containing at least 70% organic ingredients and NPA for natural claims,” he explained.
The problem with creating a harmonised natural and organic cosmetic standard in the US is that the certification process is still evolving. Gay Timmons, chair to the board of directors of the Organic and Sustainable Industry Standards (OASIS) believes the standards used for farming are unsuitable for cosmetics and as such there is much work to do in order to create a realistic and attractive harmonised standard that really caters for the cosmetics industry.
“There is an inherent difference between farming and cosmetics,” said Timmons. “The cosmetics industry is more susceptible to the technological advances that are being introduced so any standard is going to be affected by change and innovation on a regular basis.”
Timmons pointed out that the OASIS standard, which is described as a process standard focusing on the processes used for making ingredients and products is continually evolving. “The materials list is intended to grow and we hope that over the next two to four years enough cosmetic ingredients will be made from organic feedstock that the minimum organic content will rise to 95% [currently it’s 85%]. It’s a dynamic process,” she explained.
The speed at which the natural and organic sector has been grown from a relatively niche market to one which spans every retail channel from mass to premium has been remarkable but it poses a challenge for existing companies in the natural and organic sector. L’Oréal’s high profile acquisition of The Body Shop and Sanoflore for instance, new natural and organic products launched by large brands such as Origins and the growth in retailers launching organic own brands has meant existing brands have found themselves in an increasingly crowded marketplace.
“If you are a pioneer in this market how can you compete?” asked Sahota. The answer for these companies he suggested was to evolve their offers with other green initiatives such as sustainability. “Natural and organic is not enough in this market anymore as the competitive stakes increase,” he said. “Natural and organic should be the baseline, the bare minimum. Consumers are now looking for something else.”
In the current economic downturn, where many companies are looking to cut costs, adding brand value through these kinds of initiatives and staying true to existing sustainability philosophies is even more important.
“In tough economic times, the soft stuff goes first – companies only think about the bottom line,” explained Mike Indursky, chief marketing and strategic offices, Burt’s Bees. “It’s the planet versus promotion. However 69% of consumers view business as the chief cause of environmental problems so don’t abandon your basic principles – this is a temporary situation. The economy will get better but the environment won’t.”
Initiatives such as Burt’s Bees’ Greater Good business model and Weleda’s commitment to building sustainable value chains are ensuring these pioneer brands continue to lead the field in the natural and organic sector. They rely primarily on common sense, rather than rocket science.
“Sustainability is the foundation of our business and is bigger than the beauty of cultivating profit,” says Weleda North America ceo, Jasper Van Brakel. “We need to look at the environmental and social values first which in turn can become economic values. Our industry continues to grow despite the recession and this is important to remember.”
Fair trade has emerged as one of the most tangible ways for companies to promote sustainability and provides benefits for both producer and manufacturer. Maya Spaull, senior manager, new category development, TransFair US, a third party certifier of fair trade products in the US market believes the cosmetics industry could benefit greatly from fair trade. “Fair trade used to just be coffee and bananas but there is the potential to use the fair trade standard in about half of cosmetics and toiletries produced globally,” she explaind. “It maximises brand credibility for consumers and helps growers and communities at the beginning of the chain.”
Carbon neutral initiatives are another area of sustainability with a growing following and Brazilian company Natura is working to reduce its total emissions by over a third in the coming years. According to Daniel Gonzaga, director of research and technology at Natura, the company has invested in a multi-level approach to reduce emissions, which includes offsetting, reforestation and renewable energy initiatives to reach its ambitious target.
FOOD FOR THOUGHT
Alongside botanical ingredients, food ingredients have become a popular choice for manufacturers of natural and organic C&T products. Certified organic food ingredients in particular are enjoying a growth in usage as there is a certification alignment between many food and cosmetic products.
“Food ingredients can offer opportunities for cosmetics manufacturers and suppliers to tap into a consumer health and wellness trend which is starting with nutrition,” commented Organic Monitor’s Judi Beerling.
“Organic food contains 30% more antioxidants compared to conventional food ingredients,” said Aveda founder Horst Rechelbacher. His latest project Intelligent Nutrients, a range of certified organic health and beauty products, uses the seeds of a number of fruits as a core ingredient base which Rechelbacher believes provides a safe and effective alternative to synthetic products on the market.
“I’ve been in the industry long enough to be educated and I’m terrified by the chemicals in some products,” he continued. “The future is in organic and Obama is supporting this. The organic industry has grown from $1bn to over $20bn in ten years and it is projected to grow to $63bn by 2010.”
And while there may be many hurdles to going down this route, whimsical brand Yes to Carrots believes the point of difference it creates is worth it. “We like to do things differently and because we are a small company we can,” said ceo, Ido Leffler. “This industry is based on negativity and a don’t do this, don’t do that attitude. We need to start saying ‘yes’, so let’s hear more about what we should do rather than what we shouldn’t. There is never going to be a global seal so just choose one.”
He cited a recent publicity stunt in Paris where the company branded the free Vélib’ bicycles with Yes to Carrots logos. “It was totally illegal but we planned the fine from the French government into the marketing budget. Being different gets you noticed but you have to do it for the right reasons.”
SUPPLY AND DEMAND
“Natural is a great marketing opportunity but it’s been terribly abused,” pointed out Paul Flowerman, president and ceo, PL Thomas. “A lot of consumer trust is being lost and there is a need for sustainability and efficacy studies.”
Many suppliers are promoting their green chemistry initiatives as well as developing new antioxidant, preservative and emulsifier systems that work within the boundaries of natural and organic certification requirements.
“You should be totally confident about your ingredient and know everything about it,” commented Lakshmi Prakash, vp, innovation and business development, Sabinsa Corporation. The supplier’s Saberry antioxidant, derived from the amla fruit, is one such example. “We ensured we standardised the ingredient as improperly standardised extracts containing residual gum constituents may irritate the skin.”
Symrise meanwhile has introduced a range of actives, emulsifiers and preservatives which are all claimed to meet Ecocert standards for natural and organic cosmetics. “The challenge for formulators is the high percentage of ingredients that have to be certified organic,” said Ravi Pillai, global product manager, active ingredients at Symrise. “But there are options out there and we are working towards others.”
The natural and organic sector is clearly making progress towards creating a more uniform market. However, this kind of commitment requires a certain level of financial commitment and in the current economic climate are natural and organic manufacturers prepared to invest to progress?