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Health and Beauty We examine the trends underlying the growth of the global marketplace in health, beauty and hygiene. Our analysts will point the way forward by highlighting critical innovations and behaviours that are driving industry evolution.

The Different Faces of Natural Skin Care

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Natural skin care has been generating a buzz in the industry for some time now. An increase in both the availability and popularity of natural and nature-inspired skin care has led to an increasing number of players enter the category. While growth in the category has been driven on the one hand by continued demand for more skin-friendly formulations, on the other hand premium and pharmacy brands with natural credentials are also fuelling interest in the natural arena. Furthermore, increased consumer familiarity with certain harsh chemicals has given rise to many products with “free-from” claims, which have more tangible perceived benefits for consumers.

Consumer perception creates a multi-level market

Despite the emergence of more specialised high-tech skin care, there has been sustained interest in natural and natural-positioned skin care products. This has been driven by demand for more skin-friendly formulations but also by an increase in the availability of natural skin care alternatives. Beyond the various definitions established by different certification bodies, the common perception among a majority of consumers of what is “natural” is much broader in definition, and includes plant-based and nature-inspired products, pharmacy brands and non-certified natural skin care.

Further consumer interest has been driven by pharmacy brands which use thermal water as their key ingredient. La Roche-Posay, Avène and Vichy are all paraben-free and use the healing properties of spa water in their high efficacy skin care. Brands such as Origins and Clarins, which are plant-based but not organic, also have a natural premium positioning which appeals greatly to consumers as they combine the benefits of natural and high-tech results.

Niche players benefit

While natural cosmetics have been growing in popularity and certain brands are performing well across Western Europe and the US, the vast availability of natural-positioned brands makes it difficult for individual labels to gain significant share of the overall market. This has been the result of not only fierce competition between the increasing number of niche natural brands but also major multinationals launching natural lines and retailers bringing out natural private label alternatives. Boots in the UK and DM in Germany have offered natural skin care lines for many years.

Success stories in France include NUXE and Caudalie, natural pharmacy heritage brands which have not only doubled their sales in their home country but also increased availability across Europe and the US. Both brands have been rumoured to be potential acquisition targets for large premium-focused players. Their strong brand image and pharmacy heritage have also been sought by consumers in the East, with Caudalie opening a spa/boutique in Hong Kong.

In the UK, one of the most impressive gains has been achieved by Bulldog, a niche men’s skin care brand widely available through supermarkets and parapharmacies/drugstores. Transparency in terms of ingredients and simple language in product positioning have appealed to male consumers in the UK, who appear to be just as concerned about chemicals in their products but are more price-sensitive than women.

Local players making waves in emerging markets

In emerging economies, the natural space has strong local players which have a significant hold over their domestic markets. Chinese herbal medicine and Indian Ayurvedic practices have been around for centuries and thus local brands which use such practices have natural credibility in consumers’ minds, despite many of these products still containing chemicals.

India, which has now imposed a ban on animal testing for cosmetics, is expected to add another half a billion to the skin care category by 2018. With yearly double-digit gains, many international natural players will seize the opportunity to move into this lucrative space now that the animal testing ban has been put in place. However, despite their higher prices, there are strong local players in the market which combine Ayurvedic practices and natural ingredients and do not test on animals, such as Forest Essentials, which raises the barriers to entry for international companies.

Local players such as the Chinese company Herborist are also broadening their price ranges, launching high-end products in mid-2013 to target anti-ageing. Diversification has also been seen with the introduction of men’s lines, and as local brands are becoming more sophisticated and targeted, they are also expanding beyond their home markets. Herborist, which offers natural skin care inspired by traditional Chinese medicine, has been available in Western Europe through Sephora and entered Germany through Douglas in 2013. The brand’s successful expansion showcases that consumers in the West are increasingly drawn to products with an Eastern heritage and which offer a natural positioning.

Furthermore, local players are continuing their expansion in Asia, with South Korean brands Innisfree, Beyond and Sulwhasoo from AmorePacific currently expanding rapidly across Asia and adding natural skin care lines to their portfolios, thus further intensifying the competitive landscape. Sulwhasoo, which has achieved sales worth nearly US$20 million since 2011 and uses herbal medicine in its offerings, is moving into China, leveraging the confidence of being South Korea’s leading premium skin care brand.

Pharmacy brands boost the natural market

While increasing demand for natural skin care has seen many truly natural skin care brands such as Burt’s Bees grow strongly, plant-based and pharmacy brands appear to be an equal driver, including Estée Lauder’s Origins and Aveda, Avène and L’Oréal’s La Roche-Posay and Vichy. These brands have been increasing their presence globally and are generally perceived as natural and more skin-friendly. The pharmacy heritage of pharma brands also gives them extra credibility and they are viewed as more effective, mainly due to this positioning. Beyond that, their more accessible prices in comparison with other premium skin care brands, with Vichy retailing at around US$31 for a facial moisturiser in comparison with US$95 for a similar Lancôme product, have helped them sustain their share even in Southern Europe where most premium skin care has been suffering.

Furthermore, the diversified landscape and different perceptions and positionings in emerging and mature markets showcase both the industry’s as well as consumers’ confusion around natural skin care. While this not only makes it hard to grapple the market it also shows how competitive skin care has become. Natural claims alone are not enough to attract consumers, with brand image and product efficiency remaining more important in the long run.

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