Limited resources for natural cosmetics

Raw materials for natural cosmetics are in great demand. The supply is limited, the number of interested parties and the quantity required are increasing. Many ingredients have become expensive - and there is no end in sight.

The natural cosmetics industry is facing strong financial competition. As more and more consumers look for natural ingredients in their products, they have become a relevant and thus interesting target group for the conventional industry. The prices for required raw materials are rising.

Prices partly doubled

“We purchase around 650 different raw materials and grow more of them in our own gardens”, explains Bas Schneiders, Head of Strategic Purchasing at Weleda. Recently, new buyers have appeared on the market. “The aroma industry is increasingly relying on natural ingredients”, observed Schneiders. At the same time, the market for aromatherapy is growing rapidly in the USA. “The prices for essential oils have risen by ten to 20 percent, for some exotic oils they doubled in 2017”, says Schneiders. Corporations such as Unilever and Nestlé sometimes buy up a producer's entire harvests. They benefit from the positive environment. “Fewer and fewer producers and suppliers can commit to prices in the long term”, says the Weleda purchasing manager. He cites vanilla as an extreme example.

No easing in sight - strategies of the manufacturers

Meanwhile, the end customers are also experiencing this problem. Andrea Dahm, Product Manager at Primavera, sees a long-term development here: “We had to pass some of this on to the end consumer.” Because Primavera does not expect a relaxation for the time being. In order to at least secure the quantities required, natural cosmetics companies try to conclude long-term contracts without fixed prices. For almonds, for example, farmers usually wait for the flowers to bloom. Then they estimate their yield and calculate the price on this basis. “When almonds were scarce a few years ago, we had extra costs about one million euros”, Schneiders recalls. Weleda has concluded a ten-year contract with an Italian supplier for the purchase of sea buckthorn. The quantity is fixed, the price fluctuates.

Large companies usually rely on several suppliers from several regions. This is how they offset when a producer is unable or unwilling to deliver. Smaller manufacturers cannot do this easily. So, Fairsquared had a problem with almond oil in 2017. “Someone bought the entire harvest in Pakistan”, company founder Oliver Gothe complained. Fortunately, he quickly found a replacement in Uzbekistan.

In addition, many cultivation areas are located in politically unstable countries. Primavera has a special cooperation for tulsi, citronella, palmarosa and lemon grass in Terai in southern Nepal. The Foreign Office's travel information says about this region: “In recent years, the Terai, southern border country to India, has often been the scene of conflicts between various political groups and the security forces“. “Fortunately, we have never had political problems in the past and have always been able to absolutely rely on our suppliers”, says Dahm.