Last week the annual Naturkosmetik Branchenkongress (Natural Cosmetics Conference) took place in Berlin: two days of stimulating presentations, interesting people and so many new ideas, inspirations and things to research that my head is still spinning.
This year the conference was all about trends and changes: how the organic beauty market is changing and how it might look in five or ten years. Topics included customer journeys, the way that consumers are changing the retail market (social media, peer reviews, shit-storms…) and how they are starting to influence what brands are doing, the role of e-commerce and how this is changing C&T distribution and how authenticity and transparency are amongst the most important factors in successful brand management.
I will be splitting this article into two separate posts – Day One and Day Two – which should improve the readability. It is still a long text though. You have been warned!DAY ONE
The German organic market
The Natural Cosmetics Conference traditionally starts with an overview of the German organic beauty market. Now, as you might or might not know, Germany is the biggest organic market in Europe and the second-biggest worldwide, after the US.
Organic beauty has become completely mainstream in this country; certified organic products are available everywhere you look: in discounters, supermarkets and drugstores, perfumeries and department stores and, of course, specialist retailers.
Brief excursus for my international readers: when you are discussing the European organic markets, and especially mature markets like Germany or France, it is crucial to distinguish between certified organic and non-certified, near-natural beauty brands. The biggest certifying associations in Europe include BDIH, NaTrue, Ecocert, CosmeBio and Demeter. Then there is the general EU organic seal and a whole range of other certifications, with an entirely new pan-European seal, Cosmos, to be introduced at some point in the future. Incidentally, the plethora of organic labels in Europe and the inevitable consumer confusion is a major topic of discussion at any organic beauty industry event! Anyway, over here cosmetics are only considered organic if they carry the seal of one of the big certifiers or if the ingredients are high-quality enough to receive such a certification – getting a beauty brand certified is very expensive and many small brands simply can’t afford the official label.
The drugstores, especially DM and Rossmann, have very strong certified own label brands and this has definitely contributed to the success of organic beauty in Germany, especially over the past decade. You can go into any DM or Rossmann outlet and buy a certified organic face cream for around 3 Euro. For more information on the German market you can also check out the ECM Organics Feature 2014 I wrote for ECM Magazine back in April.
In 2013, the market for certified organic cosmetics grew 7% to 920m Euro, according to consultancy NaturkosmetikKonzepte (one of the organizers of the conference). They are also estimating sales of over 1bn Euro for full year 2014. And it looks like this forecast will definitely come true: in the first half of 2014 the market has already grown a further 11%, at the expense of the near-natural market, i.e. the pseudo-organic “green” brands. This is good news because it means that consumers are learning to differentiate between real organic and green-washed brands.
Drugstores remained the most important retail channel for organic C&T in 2013 with a 39% market share, followed by organic stores/supermarkets/Reformhaus stores with 26%, and specialist retailers. Pharmacies were stagnating in 2013 whilst sales in perfumeries and department stores were growing, albeit slowly. And online retail/e-commerce is becoming an increasingly important retail channel for organic cosmetics in Germany.
The C&T market/the role of organics/e-commerce
The next presentation, by Susanne Eichholz-Klein from IFH Institut für Handelsforschung, dealt with the development of the general personal care market and the role that organic cosmetics play in this sector. Now, in Germany certified organic C&T accounted for 7% of the entire C&T market in 2013 and I think it is safe to say that this market share is only going to increase over the next years.
And indeed, as Eichholz-Klein pointed out: organic beauty and near-organic brands are playing a major role so the entire C&T market is getting greener. Premium C&T is another market driver and while it might be considered a competitor to organic C&T – there are plenty of certified organic beauty brands with a very premium price point, by the way! – both segments are also influencing each other: premium beauty is getting greener and organic products are becoming more premium.
Convincing e-commerce concepts are becoming very important for both the conventional and organic beauty market, Eichholz-Klein said. Although drugstores and specialist retailers/organic supermarket remain the biggest retail channels for organic C&T, e-commerce is playing an increasingly important role, especially for smaller and niche brands. Looking at the general C&T market, stationary retail is by far the most important channel and although online retail is becoming more important, it is still lagging behind – especially in the classic personal care categories, bath and body care, hair care and so on.
This is not surprising, Germany has a very high density of drugstores so it is much easier to buy this type of product in a bricks & mortar store – and as a matter of fact, there are very few online stores for mass market personal care in Germany. With premium C&T, niche brands and fragrances it is a different matter – here e-commerce is an important retail channel.
Speaking from personal experience, I buy my organic cosmetics both online and offline – bath and body care, hair care and styling etc. as well as most colour cosmetics and some skin care in drugstores and whatever I can’t find there (I’m a fan of niche brands, especially from the Baltics and Scandinavia), I buy online. It’s as simple as that. However, the bulk of my shopping is done in stationary retail outlets.
The last part of the presentation looked at how personal care distribution is likely to change over the next ten years. Eichholz-Klein presented the results of a poll conducted by IFH Retail Consulting. The majority of industry experts polled agreed that online retail would become more important in future and that drugstores will continue to grow. Retailers, however, thought that supermarket/grocery retail and pharmacies were going to grow in importance whilst the manufacturers argued that perfumeries would become stronger.
There was a similar difference of opinion regarding how online retail is going to change the C&T market – some of the experts polled thought that online stores were a good way to tap into new consumers groups and to help new brands to enter the market, while others were of the opinion that e-commerce would only fuel the price battle that the German perfumery sector is suffering from anyway, and that online retail is also decreasing the number of impulse buys that take place in stationary stores.
However, while this might be true to a certain extent, all is not lost: consumers often research a product or brand online and then buy it in a bricks & mortar store. Retailers can therefore profit from an attractive online presence. The customer journey has changed radically, these days consumer no longer use a single retail channel, they get their information about a brand from various sources – print, TV, social media and e-commerce and then buy online or offline. Medium-priced brands are actually going to profit from online retail – and in any case, unless e-commerce concepts are becoming more innovative and attractive, stationary retail doesn’t have that much to fear anyway.
The organic market in France in 2025 – scenarios
Betty Santonnat from CosmeBio spoke about the French market and outlined four potential scenarios of how the French organic market might look in 20 years – a very interesting approach; I particularly liked the strategies she listed for dealing with the respective scenarios.
The first scenario depicted an emerging market dominated by a confusing number of organic seals, stiff competition between organic brands and conventional brands and amongst organic brands themselves, and a growing influence of international brands. Driving factors in this market would be a wide range of innovative and independent organic brands, with organic products sold in organic shops only and little mass market retail. The competition with conventional beauty brands would mean that many of the smaller brands (and the French organic market is dominated by small and really small brands) would have to pool resources to boost export and strengthen their position, with a strong focus on innovation and quality. An equally important aspect would be to build strong relationships with customers.
The second scenario described the organic beauty market held up as an example to conventional cosmetics, as a point of reference. This scenario would be triggered by, for example, environmental and product safety scandals of conventional cosmetics, stronger environmental awareness of customers and support from activist consumers as well as stricter European organic standards. The organic market would expand, with consumers viewing organic products as safer than conventional cosmetics – customer communication would of course focus on the certification of a product; there would be an increased production of organic brands, consequently lower prices and probably an increased distribution. Strategies to further boost this scenario (which I personally like!) would be to make CSR (corporate social responsibility) an integral part of brand marketing, use locally produced materials in the manufacturing process and develop product innovations promoting social values like co-creation – basically increasing participative consumer behaviour.
Scenario three showed organics as big business. In this scenario, organic cosmetics have conquered new markets by adapting the principles of liberal market economy – the triggers of this scenario would include, for example, repeated financial crises and a resulting proactive strategy of larger retail groups, market consolidation and market concentration. This would also mean small companies taken over by larger players, an increased distribution in supermarkets and other chain outlets. New companies would appear on the market which might even create a kind of retail bubble. Strategies to deal with this kind of scenario would be for small players to join forces and pool resources, work with major industrial groups and adopt more agressive marketing strategies.
And scenario four sees a series of scandals affecting the organic beauty industry – ingredients and product scandals and as a result, failing consumer trust and falling sales. Add to this poor crisis management, a failure to regain consumer trust and competition from international organic brands and you would end up with a fragmented market dominated by large brands, a multitude of small and weak labels, and a turnover increase of near-natural cosmetics and conventional brands. The way to deal with this situation would be to target niche markets, promote the intrinsic qualities of the product rather than the certification, develop social selling strategies – Tupperware-type home-selling parties, or sales through social networks – and in general emphasise the “fun” aspect of the cosmetics.
Personally I would prefer a combination of scenarios 1 and 2! The strategies outlined in scenarios 1, 2 and especially 4 were all spot-on and nicely pragmatic – German organic brands, for example, could definitely benefit from a little more fun and glamour…..!
Mark Wuttke from Wuttke Group spoke about the global organic market situation, highlighting the current situation in the US. The global natural personal care market was showing double-digit growth in 2013, with Asia and Brazil amongst the fastest growing regions in 2013. In fact, Asia accounted for more than 35% of the global natural markets, followed by Europe, Brazil and the US. China showed the highest increase in 2013, growing almost 24% with skin care as the most popular category.
However, these global figures also include near-natural and other green brands – as a result, the market share of truly organic products was only 21% of the Asian total. In Japan at least, real organic products accounted for 42%, in China, on the other hand, the share of real organic beauty was just 3%. Looking at the US market, real organic products account for almost half of the total – but according to the charts in the presentation, real organic products showed a higher growth than natural-inspired brands so there is hope yet! On the whole it looks like all the featured markets are becoming greener and more eco-aware – which is a very good thing.
The role of product testing magazines in consumer purchases – Ökotest
The first afternoon presentation was rather interesting: an interview with the editor of Ökotest, one of Germany’s most influential consumer test magazines. Now, Ökotest tends to polarize the German consumer goods industry: Ökotest tests all sorts of products – food, cosmetics, household cleansers, toys, baby bottles, fabrics etc., for dangerous substances and then publishes detailed test protocols in their magazine. Products that fail the test receive a low score. And products with a good Ökotest ranking can pretty much expect an immediate turnover increase.
The majority of German consumers trust in Ökotest’s opinion and over the past decade the company’s approval or disapproval has become a major influence in purchasing decisions. Any product that has received a good score will immediately slap the Ökotest seal on its packaging. As a result, many German consumers confuse the Ökotest seal with an organic seal – they see the Ökotest logo and think: “Great, this is an organic product!”
Which it isn’t, of course, the seal just indicates whether a certain substance or ingredient is present in the product or not. There is another product testing magazine, Stiftung Warentest whose test methods and parameters are different, and there are many cases in which a brand, for example, has received a low Ökotest score and a high Stiftung Warentest score.
Here is a typical example: looking at a nail polish, Ökotest might give the product a low score because a certain chemical substance is included while Stiftung Warentest might test the durability of the polish and give it a high score because it lasted for seven day without chipping.
SciencePlus, Do-It-All, Extreme Nature and Tech Vital!
The next presentation was by trend researcher Lola Güldenberg who identified four major trends that will change our lifestyle and consequently affect our purchasing behaviour – a very interesting presentation indeed: the four trends are SciencePlus, Do-It-All, Extreme Nature and Tech Vital.
SciencePlus describes how science and technology is changing our lifestyle; how hybrid disciplines help create new product features – organic technology, nano-technology, advances in ingredients and packaging are changing the C&T market, both conventional and organic brands. This trend is also affecting our consumer patterns, as witness the popularity of DIY; advances in technology are allowing us to create many consumer products ourselves.
Do-It-All: this describes how consumers are starting to emancipate themselves from things that are traditionally supplied by big companies or manufacturers – like telephone providers, electricity groups and banks – and instead develop their own ways of supplying these needs, without having to depend on big businesses. An increase in creativity: rediscovering the joy of making/creating things oneself. This applies also to beauty, as witness the success of skin supplement companies and personalized cosmetics.
Extreme Nature depicts how companies and brands are becoming ever more transparent – or rather, how Internet and online resources help consumers to check out and verify everything these companies say or do. There is an increased eco-awareness on part of the consumer, so fair trade and sustainability will form a crucial part of any CSR profile. And manufacturers and brands need to let consumers play a role in the brands and products they offer – here is the participative consumer behavior again.
And Tech Vital describes the synthetis of organic and non-organic material – muscle cells on prosthetics, for example – resulting in new product categories and product properties. Again this trend is affecting consumer preferences like colours or textures. This might give rise to packaging innovations, for example, with colours or fabrics produced by organisms like algae or bacteria. I already knew about algae-derived colours – at this summer’s DMY design festival there was a company which specialized in algae colours. They are a fascinating material; algae colours do not remain stable but change their hue according to light or heat exposure. Interactive fabrics!
The second part of the trend presentation dealt with consumer types (naturalites, conventional, drifters etc.) – interesting but not particularly new to me. I am very much a hybrid consumer myself so I am familiar with various aspects of different consumer types. However, Güldenberg also pointed out how these days a company can only manage a brand to a certain extent – and how it is almost impossible to control what people say about a brand, especially in the social networks. Consumers, in particular those who are active in social media, are taking an increasingly active role in brand management. They share their brand experiences with their connections, like or dislike a product, post positive or negative reviews and discuss how the brand handles this or that problem. The best way for a company to handle this situation is to involve these consumers into the brand – here you have the importance of participative behaviour yet again!
The final presentation of the day dealt with eco design in packaging. Aude Charbonneaux from packaging manufacturer Albéa Group in France spoke about innovations in C&T packaging and described how her company is analyzing the life cycle of a product and then develops ways to reduce the weight of a plastic tube, for example, come up with a lighter cap design or increase efficiency in the manufacturing process. She also described the challenges of working with bioplastics. I know very little about how C&T packaging works although I use cosmetics, and therefore packaging, every single day – so I found this presentation rather interesting.