Natural & Body Care Drivers Growth

Natural body care is booming, with combined 52-week retail sales in conventional food/drug/mass (FDM) and natural supermarkets of $732.4 million. Skin care is the largest category and represents nearly one-third of overall segment dollar volume. Retail sales in conventional FDM surpassed the $100 million mark and, in natural supermarkets, approached $135 million. Amplified demand, resulting from an increase in total market size and consumer trends around wellness and healthy living, is driving growth of the natural body care segment. Average retail prices are also on the rise, which continues to fuel dollar volume growth—skin care prices increased by an average of 10 percent in conventional FDM and 5 percent in natural supermarkets. (All statistics © SPINSscan; current 12-month period ending 7/14/07)

The market size for natural body care has expanded, as products geared toward men and children gain in popularity. In addition, the growing desire of adults to look younger and improve their appearance, combined with escalating skin care concerns, has resulted in an increase in total market size. Wellness and healthy living trends also drive demand for natural body care products, as consumers become more conscious of the potentially harmful ingredients found in many non-natural body care products, and seek a more innovative and holistic approach. Consumers want body care products that deliver a combination of efficacy and purity. Products with antioxidant and aromatherapeutic benefits that also feature sustainable and renewable ingredients are gaining momentum.

At the same time, consumers are becoming more aware that items marketed as natural are not necessarily all-natural products. Body care labels can be confusing, with long lists of ingredients that are often impossible to understand; it can be difficult to determine whether an ingredient is chemical or natural. Adding to the complication is the lack of specific regulation around the use of the terms “natural” and “organic” on body care product labels. Natural and organic product standards are still in their infancy and can be misleading. Few brands currently meet standards that allow them to bear the USDA Organic seal. For a body care item to earn the organic seal, which carries the same standards as organic foods, it must be 95-percent organic, excluding water and salt, and the remaining 5 percent of ingredients must meet strict USDA regulations. In addition, items must be manufactured in a facility that operates in accordance with USDA organic rules, including how materials are received, warehoused, mixed, filled, cleaned and sanitized.

In this overview, we focus on natural body care products that are truly natural and made with pure ingredients. The natural body care segment, as reflected in the data, excludes products that contain non-natural, potentially harmful and toxic ingredients, such as petrochemicals, parabens, artificial colors, synthetic fragrances and phthalates.

The natural body care segment includes nine categories: aromatherapy and body oils; body care kits, sets and travel packs; cosmetics and beauty aids; deodorants; hair products; oral care; personal care and first aid; skin care; and soap and bath preparations. The three fastest-growing body care categories, cross-channel, are skin care, soap and bath preparations, and hair products. For the most recent 52-week period, combined growth of skin care is 22 percent; hair products, 19 percent; and soap and bath preparations, 13 percent. Conventional FDM is driving overall growth of top categories with a 54-percent increase in skin care, 55 percent in hair products, and 27 percent for soap and bath preparations. While growth is strong in conventional FDM, natural supermarkets still account for the majority of dollar volume, with a 57-, 78- and 70-percent share of sales, respectively, for skin care, hair products, and soap and bath preparations. These three categories are the most developed in natural body care, producing the most volume and cumulatively representing nearly two-thirds of the segment’s share. In conventional FDM, skin care, personal care, first aid and oral care generate the highest dollar volume; however, the growth of both oral care and personal care and first aid is fairly flat. On the conventional side, combined sales of skin care, hair products, and soap and bath preparations represent 49 percent of the overall segment, compared to a combined 65 percent in the natural channel.

Within the three top growth categories, skin care is by far the strongest volume category, representing 32 percent of total body care sales in the natural channel and 33 percent in conventional. However, the products generating this impressive volume vary by channel. In natural supermarkets, lip balms, facial cleansers and exfoliants contributed to the highest percent growth, each with a 10-percent increase in sales for the current 52-week period. In conventional FDM, growth is extremely strong in all subcategories; however, facial cleansers and exfoliants, followed by sun protection and tanning lotions, represent the most significant increase in sales, with growth of 111 percent and 109 percent, respectively. The volume rank of subcategories also varies by channel. Facial lotions and creams, and body lotions and creams, drive skin care sales in the natural channel, with a 58-percent share of category sales.

On the conventional side, lip balm is by far the number one subcategory; with the lowest average retail price in the skin care category—just $3.22—lip balms still generate 43 percent of total skin care dollar sales.

Natural supermarkets offer far more product variety, both in number of brands and items. In the latest 52- week period, more than 150 new skin care items have been launched in the natural channel—80 of which are body lotions and creams. There are also more than 340 active skin care brands, including 14 new brands that launched within the past year. In comparison, there are 106 active brands in the conventional channel, including 12 brand introductions during the past year. Top skin care brands in the natural channel include Burt’s Bees, Alba Botanica, Dr. Hauschka, Avalon Organic and Zia. Burt’s Bees, Alba Botanica and Avalon are also top volume skin care brands on the conventional side, as are Queen Helene and Jason Natural Cosmetics.

In soap and bath preparations, liquid soap and bar soap are the two highest volume subcategories, in both natural supermarkets and conventional FDM, with combined sales share of 57 percent. Volume generated by each subcategory is nearly equal, with liquid soap leading by a small margin in the natural and bar soap in conventional. The growth of liquid soap is outpacing bar soap in both channels, which should allow it to move into first place in a short time. In addition to being the No.1 volume category in the natural channel, liquid soap is also the fastest growing, with a 13-percent increase in sales versus a year ago. Subcategory growth in conventional FDM is double-digit across the board, with the exception of mineral baths; bubble bath and body wash account for the most significant sales increase, with 80 percent and 66 percent, respectively.

The natural channel currently has more than 260 active soap and bath preparation brands, including 15 new brands that have launched within the past year. In comparison, there are 100 active brands in the conventional channel, including 13 new brands this year. Top soap and bath preparation brands in natural supermarkets include Dr. Bronner’s, Jason Natural Cosmetics, Kiss My Face, South of France and Alba Botanica. In the conventional channel, top natural brands include Dr. Bronner’s, Jason and Kiss My Face, with Batherapy and Burt’s Bees also generating top sales for the category sales.

Hair products comprise the strongest growth category in both natural supermarkets and conventional FDM, with an 11-percent sales increase in natural supermarkets and 55 percent in conventional FDM for the most recent 52 weeks. Natural hair product volume is significantly stronger in the natural channel and represents 78 percent of combined channel sales. The volume-generating subcategories for hair products are similar in both channels. Shampoo leads in sales, followed by conditioner. These two subcategories represent a combined 69 percent of category sales in the natural channel, and 90 percent in conventional FDM. Shampoo and conditioner are also the two highest growth subcategories in conventional FDM, with respective increases of 65 percent and 54 percent versus a year ago. Styling gel, spray and mousse, followed by hair color products, account for the highest category growth in natural supermarkets, with 15 percent and 13 percent, respectively.

Natural supermarkets currently offer more than 150 active hair product brands, including five new brands that have launched within the last year. In comparison, there are less than 60 active brands in the conventional FDM channel, including seven new brands to the channel. Top hair product brands in natural supermarkets include Naturant, Giovanni Organic Cosmetics, Nature’s Gate, Jason and Avalon. Nature’s Gate, Jason and Avalon are also top volume natural brands on the conventional side, as are Burt’s Bees and Queen Helene.

There is clearly a lot of innovation and change across the natural body care segment. Natural and organic guidelines are slowly being implemented. Burt’s Bees has taken the lead in drafting a set of natural standard guidelines, dictating products that list “natural” on labels must contain at least 95-percent natural ingredients that come from renewable and plentiful resources. At the same time, USDA-approved organic items are hitting the market. Nature’s Gate recently launched a new assortment of organic body lotions, which contain the 95-percent organic seal, and Dr. Bronner’s continues to pioneer the manufacturing of USDA-approved organic items. As natural body care assortments continue to build, and demand continues to rise, it follows that sales growth will carry on at a steady rate.