13 April 2010 14:44 [Source: ICB]
Chemical companies are fighting hard times with sustainable beauty product offerings
THE SUSTAINABILITY theme in cosmetics and personal care remains a big driver for chemical companies in bucking economic woes since last year.
"The beginning of 2009 in particular was characterized by widespread uncertainty and destocking activities," notes Issberner. "The situation remains volatile, but we are optimistic that 2010 will see a further recovery in demand. Our wellness and sustainability-based strategy will remain a competitive advantage and a strong driver of growth."
Cognis's Care Chemicals business posted a 13.4% decline in 2009 sales to €1.5bn ($2bn) compared with the previous year. Volume was down by 4%, reflecting weak global economic conditions and demand, especially from business segments with industrial applications, notes Issberner.
"The personal and home care market segments proved more resilient, with volumes remaining stable," he says. "Key factors were the strong and innovative product mix, growing consumer awareness of the green trend, and a reduction in operating costs."
US silicones producer Dow Corning says it saw a significant recovery in its business in the second half of 2009. The company reported fourth quarter 2009 sales of $1.47bn, up by 13% year on year. Total sales in 2009, however, were 7% lower at $5.1bn.
"While it's still a volatile economic environment, the year ended with many positive signs," says Sahoko Takeuchi, global beauty care industry director for Dow Corning. "Anti-aging products, greater use of natural ingredients, broader demand for products offering sun protection, and innovative solutions for hair protection continue to thrive, even in the down economy."
Overall, sustainability has been and will continue to be one of the biggest themes for everyone in the industry, notes Philippe Villequey, sales and marketing manager, Europe, Middle East, Africa, for personal care at global chemical distributor Univar.
"From suppliers right through to end-consumers, sustainability continues to have a very positive impact on the sector," he says. "It is the heart of everything Univar does, and is becoming an every more important differentiator for industry players."
Univar's personal care business was comparatively resilient last year, despite the widespread destocking that affected market sales, notes Villequey.
"The diversity of our partnerships with both customers and suppliers in all segments of the market has helped. More importantly, we have resisted the temptation to halt strategic, and research and development investments, which put us in a stronger position to grow in 2010," he adds.
Villequey expects demand for natural products to continue on a steady growth path. "We are excited about the opportunities opening up, particularly in terms of improving aesthetics of these formulations."
THE NEW NATURALS
Through the global recession, the natural personal care market continued to post healthy growth of around 12% last year, according to US-based consulting firm Kline & Company.
The European market posted a 9% gain in sales last year compared with 2008, with an estimated value of €3.3bn at the manufacturers' level. The US market posted a sales gain of 8%, to $3.5bn, according to Kline.
Consumer preference for natural products continues to spark reformulation, says Nancy Mills, industry manager, consumer products at Kline. In Kline's ingredient analysis, Mills notes that nearly 75% of the so-called natural personal care products are not actually natural - rather, they are considered "natural-inspired," comprising mainly synthetics with enough natural ingredients thrown in to take advantage of low levels of consumer differentiation.
"As a clear indication of the growing naturals appeal, manufacturers are pushing the envelope of what passes for natural in order to get on the bandwagon," she says. "Unfortunately, the lack of explicit standards that define the degree of naturalness in most markets makes it possible for manufacturers in some countries to call their products natural just by adding a flowery label to the package."
Ingredient suppliers say they are aware of the growing skepticism surrounding how natural cosmetic and personal ingredients are, and agree on the necessity for standards. Rather than focusing on natural-based ingredients, suppliers also point out the importance of sustainability, which not only involves the safety and efficacy of products but the efficiency, cost economics and safety of their processing as well.
"A key development across cosmetic and personal care companies - large and small - these days is their ability to address and develop actions to support the sustainability theme," says Jeffrey Rogers, business director, Americas, at Netherlands-based AkzoNobel Global Personal Care. "Creating a better, cleaner and more environment-friendly world is a major activity by organizations in business-to-business and business-to-consumer environments."
Consumers still have high expectations when it comes to cosmetic products, Rogers adds. "Their tolerances for mediocre performance and loyalty have dramatically reduced, while at the same time their willingness to try new and different products has increased."
"Consumers want products that combine sustainability and wellness benefits"
Ulrich Issberner, global marketing personal care, Cognis
"Today's consumers want products that combine sustainability and wellness benefits, and the two megatrends are gradually merging into one new green way of life. They expect innovative, sustainable solutions that do not compromise on performance and come at a fair price," Issberner says.
For 2010, US-based market data provider Mintel expects claims such as "free from" and "sustainable" to appear in more products that simultaneously contain synthetic actives such as peptides, hyaluronic acid, ceramides or collagen.
Beauty manufacturers will also further explore simple formulas such as infusions and fluids, but formulate them with a new generation of phytochemicals, anthocyanins and fermented actives, notes Nica Lewis, director of Mintel Beauty Innovation.
"Beauty brands and suppliers continue to seek creative new ways to merge science, nature and sustainability for better results and more eco-friendly formulas and packaging," she adds.
In a report last month, Mintel estimated 2009 US sales of green personal care products to have increased at only 1.2%, compared with 18% seen from 2006 to 2008. Mintel defines green products as goods that minimize environmental impact, that include the use of recycled materials and that use less-energy intensive manufacturing processes.
"This segment is poised to resume rapid growth once consumer spending begins to recover from the current downturn," says Mintel analyst Chris Haack. "One-third of all consumers have never tried organic or natural personal care products, suggesting that there is plenty of room for growth in this market."
According to Mintel's Global New Product Database, new products with an organic or natural claim only encompassed 5% of all beauty and personal care product launches in 2006, but increased to nearly 10% in 2008 and held steady through 2009.
Product offerings from ingredient suppliers were also robust last year. UK-based specialty chemical company Croda notes 2009 as a terrific year for new product introductions.
The company's personal care sales last year were largely unaffected through the recession, despite a temporary impact from inventory reduction programs throughout the supply chain, says Kevin Gallagher, president of Croda North America. He adds that Croda was able to continue new product development programs without any letup.
"There was continued strong demand last year for ingredients that deliver specific proven performance claims. We also saw strong demand for sustainable products that can be used as substitutes for ingredients that are under regulatory scrutiny, like cyclomethicones," he adds.
This year is expected to be another robust one for product introductions, especially those targeting sustainability.
Cognis will introduce new personal care ingredients this year, such as light emollients that can be used as an alternative to cyclic silicones; surfactant blends for ethylene oxide (EO)-free and sulfate-free shampoos and shower gels; and thickening polymers that are free of EO or polyethylene glycol (PEG) for hair conditioners and skin care formulations.
Germany-based Evonik Industries will introduce a pure vegetable-based emulsifier this year; biotechnologically derived cosmetic esters for emollients; a hyaluronic acid-based anti-aging ingredient; and a phytochemical compound extracted from sandalwood seeds.
"Tolerances for mediocre performance and loyalty have dramatically reduced"
Jeffrey Rogers, business director, Americas, AkzoNobel Global Personal Care
The manufacture of Baycusan C also uses energy-saving and efficient procedures, while by-products and other waste materials are kept to a minimum, notes Steffen Hofacker, head of cosmetics at Bayer MaterialScience.
"Another requirement of green chemistry is the avoidance of hazardous starting materials in the production of cosmetic raw materials. Baycusan C meets this requirement as well," he adds.
STATE OF THE US BEAUTY INDUSTRY
Global market research firm Euromonitor reports the US beauty and personal care market reached $58.9bn (€43.8bn) in 2009, down by 1.3% from 2008. The premium beauty segment was the hardest hit, as footfall to department stores slowed and reluctance to spend sucked out the momentum for premium beauty products.
"The poor performance of the US economy, especially the rapidly rising unemployment rate, had a devastating effect on the US beauty and personal care industry, which has relied on the trading up trend throughout the middle of the decade," says Carrie Lennard, Euromonitor beauty and personal care industry analyst.
"Still, premium nourishers and anti-agers, some of the most expensive skin care products, grew by 1.5% in 2009. The resilience of this category was tied to the unrelenting fear of aging among the baby boomer population and aggressive claims made by the technologically advanced premium anti-aging treatments," she adds.
"Still some of the most expensive skin care products, grew by 1.5% in 2009"
Carrie Lennard, beauty and personal care industry analyst, Euromonitor
Other segments that bucked the recession woes included baby care, which maintained global sales growth of 7% during 2008/09; deodorants with 7% growth spurred by Latin American demand for scented roll-ons and sprays; and bath and shower products with a 6% growth rate buoyed by the swine flu epidemic, which lifted liquid soap sales.
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