Natural Cosmetics Conference: stagnating German market, international growth

The fifth Natural Cosmetics Conference was held on 25 and 26 September in Berlin. The programme ranged from contributions on market research, gripping discussion sessions and interesting examples of actual practice to outstanding lectures. On the first day, the focus of various lectures and panel discussions was market development in Germany and across the world. Whereas international markets are characterised by continuing growth, the natural cosmetics market in Germany is flatlining. (Picture: With 150 people present, the Conference was well attended)
It is likely that the natural cosmetics market in Germany will not grow in 2012. This hardly gratifying news was one of the key statements in the market analysis presented by Elfriede Dambacher who, among other things, publishes the annual report of the natural cosmetics industry (Naturkosmetik Branchenreport) and is the organiser of the Natural Cosmetics Conference. She gave a variety of reasons why, for the first time in many years, the German natural cosmetics market showed no growth in the first half of 2012. With a turnover of € 815 m and a market share of 6.5 % it is operating at a high level. However, growth had already slowed in 2011, when it fell to only 2.5 % in comparison with the 11 % recorded the year before. She pointed out that, among the reasons for growth in the past, improvements in distribution and the expansion of natural cosmetics product ranges in all sales channels were especially important. As an expert in the field of natural cosmetics she is, however, convinced that the current state of affairs is merely a consolidation phase and that market saturation has not yet been reached by a long way. In her view, the potential is 100 % of the market if strong brands can fulfil the expectations of customers and innovative retail concepts and multi-channel strategies can win over consumers to the cause of natural cosmetics. (Picture: Udo Funke, whose responsibilities at NürnbergMesse include BioFach and Vivaness, opened the Conference. NürnbergMesse is the cooperation partner of the Natural Cosmetics Conference)

If new customers are to be convinced, in Dambacher’s opinion both manufacturers and the retail trade have to show initiative (picture). She gave the practical examples of one-off and occasional buyers who can be turned into regular customers with attractive entry products, functional cosmetics and body care in all product groups, innovations and creative approaches on the part of retailers. As she saw it, there were still too few suitable outlets, and there was still a need for more strong brands: “The industry is not living up to the expectations of consumers.” What’s more, the words ‘organic’ and ‘natural cosmetics’ did not in themselves tell the whole story. Manufacturers had to rise to the challenge of a core statement in the communication analysis carried out by the magazine Brigitte in 2012 – “social issues are the new organic” – and they had to make a bigger effort to get this message across to the public in their own communication.

She continued by saying that the consumer’s decision whether or not to purchase was predicated on far more criteria than just effectiveness and functionality. This has been confirmed by the Otto-Trend Study 2012: 84 % buy ethically produced goods occasionally or more frequently. But, according to the study, 61 % feel they are not capable of making the right choice – something else for entrepreneurs to consider in their communication. Dambacher highlighted another trend in the trade, namely the domination of manufacturers’ brands that, according to GfK ConsumerScan had a market share in terms of turnover of 25 %, and as much as 50 % in terms of sales. Also online shopping and RFID code are increasingly influencing consumer behaviour.

According to the calculations of the market researchers Kline & Company, the turnover of natural cosmetics and natural-based cosmetics worldwide almost doubled between 2006 and 2011. Kline’s data show that in 2011 global turnover was $26.3bn, which is a share of 12 % of the global cosmetics market. The market research organization Organic Monitor in London puts the figure for natural cosmetics at US$ 9bn. According to Kline, Asia (in particular China, Japan and South Korea) accounts for the biggest slice of the cake, with 40 % of the total turnover of natural cosmetics, ahead of Europe, with 20 % - 50 % of which is attributable to Germany, France, Great Britain and Ireland. Brazil, with18 %, and the USA, with15 %, are also powerful contenders. The sustainability trend and the growing preference for natural cosmetics plus the extension of distribution were seen by Agnieszka Saintemarie as driving forces over recent years. Natural-based brands frequently rely on direct marketing. (Picture: Agnieszka Saintemarie gave an overview of the global market for natural cosmetics)

Kline has identified a number of country-specific trends in Europe: in France, for example, a wide variety of brands in many sales channels, and in Great Britain a high proportion of online marketing. They state that in the Scandinavian countries consumers are very well informed and that Germany is characterised by reasonably priced manufacturers’ brands, make-your-own cosmetics and by natural-based brands moving into certified natural cosmetics (picture). The market researchers are assuming that by 2016 there will be annual global growth of 10 %.

In a discussion session, experts from the USA, China, Russia and France contributed interesting accounts of their experience of the markets in their particular countries (picture). Management consultant Rick Scanlon from New York described the huge market as very difficult. In his opinion, the best place for natural cosmetics brands was natural food stores, health food stores and Whole Foods Market. Consumers were still looking for authentic products, and social media and mommy bloggers were increasingly influencing how people formed an opinion and decided what to buy. Mei Gräfe (picture) portrayed China as a market whose huge potential included natural cosmetics. She said that, especially because of scandals, people kept on being motivated to find alternatives. She expects the double-digit growth rate to continue.

Dr. Kirsten Hüttner (picture), an expert on Russia, estimates that Russia’s market share of natural cosmetics will rise in the next five years from the current 0.5 % to 3 % and that the country will become a serious player in the international scene. So far, pharmacies have been the main sales channel, but now internet sales are growing rapidly. Betty Santonant from the Cosmebio association predicted continuing dynamic growth of the market in France. She thought that sales could rise in three to five years from the current approximately € 350 m to € 500 m. Whereas in 2005 the wholefood trade was still the most important sales channel, today it’s the conventional retail trade with a market share of around 30 %. Pharmacies and institutes too have lost market share. After Germany, France is the most important natural cosmetics market in Europe.