The North American Market for Natural & Organic Personal Care Products

The North American market for natural & organic personal care products is recovering from the financial crisis, with sales exceeding US$ 5 billion for the first time last year. Market growth stagnated in 2009, however healthy growth rates are resuming once again as consumer demand for natural products strengthens. In its new market analysis report, Organic Monitor forecasts North American revenues to reach US$ 8 billion by 2017. The major drivers of market growth are widening distribution and new product launches. Penetration of natural & organic personal care products is increasing in supermarkets, drugstores, mass merchandisers and club stores. (Picture: Aubrey Organics at Whole Foods Market)
 
New product launches are stimulating market growth. The entry of large multinationals – including Johnson & Johnson and Estee Lauder – is making natural products more accessible and visible to consumers. However, retailer private labels are expected to have most success. Two leading supermarket chains have introduced private labels for natural personal care products in the last 18 months, with more expected to follow suit. Organic Monitor expects demand for private label products to emulate that for organic foods. All leading mainstream retailers are marketing organic foods under their private labels; they have become so successful that O Organics (Safeway) and PC Organics (Loblaw) are the leading organic food brands in the USA and Canada respectively. As new entrants continue, the supply-side for natural personal care products continues to fragment. Over 600 brands are present in the North American market, however very few have significant market share. A two-tier market has developed, whereby large brands are occupying the first tier and small-medium size firms are in the second tier. The gap between the tiers is widening as large brands – such as Burt’s Bees and Bare Escentuals – use capital inflows to expand market share.
 
With many products marketed on natural and organic claims, consumer confusion remains a major industry concern. Standards are having a major impact, with many companies looking at certification schemes to ‘legitimize’ their natural and organic products. Organic Monitor finds the adoption rate of standards rising; about 8 % of natural and organic personal care products were certified in 2010, up from 4 % in 2007. The Natural Products Association (NPA) standard is the most popular, adopted by about 30 companies. Most certified products are however those of imported brands, such as Weleda and Dr. Hauschka.

Interest in standards is rising as more retailers demand certified products. High growth is expected to raise the market share of natural & organic products to 10 % in many product categories. More mergers, acquisitions and investments are predicted as investors and large cosmetic firms are attracted by the high growth potential. Organic Monitor sees successful brands as those who build strong distribution and differentiate their products in an increasingly crowded marketplace. As has happened in the organic food market, growth opportunities are likely to become scarcer as the market matures. More information is available here.