LONDON—Sales in the North American market for natural and organic personal care products exceeded US $5 billion for the first time last year. In its market analysis report, Organic Monitor forecasted North American revenues to reach US $8 billion by 2017 with widening distribution and new product launches as the major divers. Penetration of natural and organic personal care products is increasing in supermarkets, drugstores, mass merchandisers and club stores, according to Organic Monitor.
New product launches are stimulating market growth. The entry of large multinationals—including Johnson & Johnson and Estee Lauder—is making natural products more accessible and visible to consumers.
As new entrants continue, the supply-side for natural personal care products continues to fragment. More than 600 brands are present in the North American market; however very few have significant market share. A two-tier market has developed, whereby large brands are occupying the first tier and small-medium size firms are in the second tier. The gap between the tiers is widening as large brands such as Burt’s Bees and Bare Escentuals use capital inflows to expand market share.
The industry is still struggling with consumer confusion regarding products marketed with natural and organic claims. Standards are having a major impact, with many companies looking at certification schemes to legitimize their natural and organic products. The adoption rate of standards is rising, according to Organic Monitor—about 8 percent of natural and organic personal care products were certified in 2010, up from 4 percent in 2007. The Natural Products Association (NPA) standard is the most popular, adopted by about 30 companies. Most certified products are, however, those of imported brands, such as Weleda and Dr. Hauschka. Interest in standards is rising as more retailers demand certified products.
High growth is expected to raise the market share of natural and organic products to 10 percent in many product categories. More mergers, acquisitions and investments are predicted as investors and large cosmetic firms are attracted by the high growth potential. Organic Monitor sees successful brands as those who build strong distribution and differentiate their products in an increasingly crowded marketplace. As has happened in the organic food market, growth opportunities are likely to become scarcer as the market matures.