According to Organic Monitor, the European natural and organic personal care products market should record single-digit growth this year, for the first time over the last decade. The latest research of the London-based company shows the growth rate has dropped from double-digits because of the “debt crisis” impacting retailers and consumer expenditure.
Slowing growth rates in major markets
The UK market has been the most adversely affected by the crisis. Revenues have been slowly increasing by about 6% per annum since the financial crisis started in 2008. The harsh retail environment - with some historical high-street players such as Woolworth going bankrupt - has led many UK natural and organic brands to target export markets for growth. Indeed, many British brands have made significant inroads in the Nordic market. Some like Bulldog have gone further a field, exporting to the US, Australia as well as to parts of Europe.
Germany is showing sluggish growth this year. This is a bad news for natural and organic beauty brands since the country has the largest market for these products and also leads in terms of market share; natural and organic products comprise 7% of total personal care products. Organic Monitor also notes that private labels have had most success in the German market, with Alverde of DM drugstores being the third leading natural brand, housing over 300 products.
In France, where the market has witnessed the largest number of new product launches in recent years, competition is at the highest. “Many large cosmetic companies have introduced natural and organic lines. L’Oreal is marketing a range of products under popular brands, such as Garnier, Ushuaïa, Biotherm and Mixa. Other multinationals, including Henkel and Unilever, have also developed certified organic lines for the French market. Although mass market distribution has increased significantly, the channel comprises less then 15% of natural and organic personal care product sales,” says Organic Monitor.
Brands target new distribution channels
Rising competition and slowing market growth rates are not only pushing brands towards export markets but also lead them to explore new retail channels.
While specialist retailers - the traditional channel for natural and organic brands - still comprise most sales, with 40% market share, Organic Monitor observes that brands are making most inroads in drugstores, pharmacies, beauty retailers and department store.
Dr. Hauschka, for instance, is targeting high-end outlets, including beauty retailers and department stores. The Jerodia group (Phyt’s, Bionatural, Gamarde, Françoise Morice, Institut Jerodia), through its Gamarde brand, tries to strengthen its position in para-pharmacies, whilst Primavera is targeting the spa channel. Many are taking the direct route and opening concept stores. Korres and Melvita are frontrunners with their international retail networks.
As far as mass market is concerned, although many supermarkets and hypermarkets have launched private label ranges, the crisis is not boosting the organic segment in this channel and its market share remains below 10% at the European level.
In its upcoming European market report , Organic Monitor expects market growth rates to recover as economic conditions improve. “However, competition is expected to remain intense as natural and organic brands increasingly jostle for shelf-space with large cosmetic firms. Brands that have a clear strategy in terms of product offering or distribution are expected to succeed in the changing market landscape,” explains the market research firm.
Organic Monitor will also give an update on the European natural and organic personal care products market in the upcoming Sustainable Cosmetics Summit, which will be held on 21-23rd November 2012, at the Crowne Plaza Paris-République hotel, Paris, France.