The January edition of the Matinales de la Cosmétiques, the monthly event organized by SRC Consulting, was dedicated to the ability of the organic cosmetics to meet consumer expectations. Marie Alice Dibon (Alice Communications) and Sandie Jaidane (SJ Consulting) have investigated the gap between consumer expectations regarding natural and organic cosmetics and the real market offer. According to them, despite favourable market trends, which result in undeniably strong sales, natural or organic cosmetics did not succeeded to convince consumers they are able to meet all of their expectations.

Small market

Despite double digits annual growth rates in many countries, the organic and natural beauty market remains a niche market. In France for instance, while sales rose at an average of 25% per year between 2005 and 2011, natural and organic cosmetics accounted for only 2% of the total market in 2011, according to Deloitte [1]. In Germany, where they hold the biggest share of the market, natural and organic cosmetics account for 6.5% of the market, not more.

Paradoxically, the number of players in this narrow market has skyrocketed and launches have boomed. According to research firm Organic Monitor, the French market witnessed the highest number of launches in Europe [2]. Ethical SMEs that pioneered the market have been joined by other types of players offering new organic or natural brands for all the market segments, and also by conventional brands expanding their offering with organic lines.

In such a competitive environment, the early signs of a market downturn are necessarily having damaging consequences. Thus, the group Clarins decided to put an end to the market life of the Kibio brand it had acquired in 2010. Despite significant investments, the brand never really succeeded to impose itself. Earlier in 2012, Jean-Paul Agon, CEO of L’Oréal, had already expressed its disappointment regarding the growth of the organic market as a whole and the results of its Sanoflore brand in particular. However, in addition to these iconic brands, many small brands have disappeared after two or three years trying to find a place in a quite limited market.

Failed expectations

Yet, despite the economic crisis, all studies show the persistence and progression of environmental and ethical concerns, and the high expectations regarding health and wellness among consumers. The trend remains strong in Europe and in North America, despite slower growth rates than in the past. According to Deloitte, the French market is expected to grow at a steady pace (around 10% per year), while marked "by the stronger requirement of consumers in terms of corporate social responsibility and product benefits.

Indeed, even when they are highly aware about ethics and the environment, consumers are not willing to give up their demands for quality and efficiency. According to Marie Alice Dibon, the proliferation of logos and certifications has not been an adequate response to consumer expectations. "Actually, none of the existing certification currently covers all of their main concerns: effective but healthy products, sustainable and environmentally friendly products, ethical products.

Another problem is that, in a market where dreams and pleasure are important parts of the shopping and consumption experiences, natural and organic brands have adopted a very basic positioning. For a long time, their main selling argument has been limited to the absence of supposed harmful ingredients in their formula. It was the famous "free from" trend: free from parabens, free from phthalates, free from aluminium...

Market restructuration

In a competitive environment, which remains increasingly harsh, especially with the rise of retailers’ brands, organic and natural brands must strive to convince consumers about the sincerity and consistency of their approach, but also to reassure them about their effectiveness. Organic and natural brands, especially those with a high-end positioning must also develop an attractive brand universe in order to appeal to consumers and being capable of conveying the expected dreams.

Actually, required investments in R&D and in marketing should increase significantly therefore leading to the exit of the weakest players and a restructuration of the market through alliances and buyouts.

The year 2013 will also be marked by important regulatory changes with, in the one hand, the full ban on animal testing in Europe and, on the other hand, the entry into force of a new European legislation that is particularly demanding about safety. The increasingly stringent regulatory framework, combined with sometimes very ambitious sustainability initiatives from traditional players such as Unilever, could both increase the barriers to entry into the market while limiting the differentiation opportunities for new players. The development of an ISO standard to harmonize global definitions of natural and organic cosmetics may have similar effects.

Eventually, according to Sandie Jaidane, “organic products are not becoming the standard, but the standards are becoming more organic and natural.