The Case for Natural Selection

European Cosmetic Market, February 2003

The word natural has penetrated every aspect of everyday life, including cosmetics, but what does it actually mean? Jane Fiona Cumming of Article 13 examines its meaning for consumers, retailers and manufacturers and asks how it can provide a competitive edge.

Being natural, looking natural, feeling natural, doing things naturally, eating natural – ‘natural’ in all these contexts is part of our everyday language and very much in vogue. But what does ‘natural’ mean in the context of cosmetics today: to the consumer, to the retailer, to the cosmetics industry, to a business? And where has this ‘natural trend’ originated?   In this article we will assess the business implications of working with naturals and ask if the trend towards natural products can provide opportunities for competitive edge.

Initially, it might appear a limited and niche concept, but research shows that competitive edge can be gained through increased customer understanding and loyalty, through staff involvement and through the supply chain. These opportunities can be harnessed to deliver to your business and bottom line.  The concept of natural in the cosmetics industry can be linked to the overarching business issue and emerging concept of corporate responsibility and governance relating to risk identification. 

The Guide to the Cosmetics Products (Safety) Regulations ( www.dti.gov.uk):  describes ‘natural’ as: “any substance or preparation of synthetic or natural origin used in the composition of a cosmetic product“.

In a joint research project undertaken for ECM, Article 13 worked with The Research Business International., taking the definition of ‘natural’ to a wider audience and examining the products, terminology, positioning and product delivery from the perspectives of a number of interlinked actors in the industry: companies, customers, supply chains, ingredients producing communities and not for profit or campaigning organisations. The prodject identified potential misconceptions in workplace and found that their resolution can lead to consumer understanding and loyalty.  It is also considered the role of employees and how issues regarding the supply chain can be resolved through schemes such as stewardship initiatives or Fairtrade.  Consumer perspectives on ‘natural’ revealed a number of differences in attitude according to social, geographical and age. 

Article 13 works in the area of corporate and government responsibility and the voluntary sector, with particular expertise in the area of supply chain.  The natural trend is a usefull illustration of how business is adapting to address new sources of risk, and identify opportunity and innovation. For this research project, we conducted literature review and website review research to establish ‘where we are now’ in the marketplace and then conducted key informant interviews and consumer focus groups to help us identify what the future trends may be. 

A parallel industry – the Food industry spent a lot of time considering what is, and is not, a natural ingredient in the late 80's and early 90's. This industry’s issues of safety, quality and provenance echo those of the cosmetics industry and consumers perception of threats to food safety resulted int eh phenomenal growth of the organic industry, which in the UK alone was worth over £800m in 2000-2001.The EU now sets standards for the production of organic ingredients, and the Soil Association certifies organic health and beauty care products.

For the food industry, natural ingredients are those found in nature and may be animal, vegetable or mineral. However, in most circumstances references are to plant based ingredients. 

From the website research of product positionings natural can be taken to mean a variety of approaches along a spectrum from untouched plant materials through to the most rigorous scientific approach to purity. A typical product description might be: “Developing and manufacturing a wide range of personal care and beauty care products that are truly botanical in origin".  Claims of no animal testing also appear in association with the word natural:”Taking the latest scientific research and combining it with the most effective natural ingredients with no artificial colours, unnecessary chemical additives, animal ingredients or animal testing" is one such example.  The organic theme also appears in association with natural as a sign of authenticity: "100% natural hair, skin and body care- Certified organic in 1994”. 

Natural origins

So where did this natural trend start?  One might say that the use of ‘natural’ personal care dates back centuries, even millennia. In ancient Egypt Cleopatra bathed in asses' milk; in Elizabethan times, the ‘natural’ took on a different meaning, with women using mixtures of vinegar and white lead to achieve their pale complexions.   Next in the ‘natural’ procession was the flower power generation in the 60’s and then the ‘Women’s Lib’/Jane Fonda era of the 70s.  At the same time, traditional natural and herbal remedies have been passed down through generations by women of all cultures, be it the soothing properties of rose water and witch hazel in Europe or the Ayuverdic cleansing properties of turmeric and neem in  Asia. 

This passage through time yields more terms associated with natural, relating to how the wearer feels or their approach to life, encompassing links to the social issues of the day as well as national or regional cultural approach to overall and holistic well being.

The implications of this wider spectrum yield the opportunities for new sources of competitive edge for the cosmetics industry today.   The key to unlocking them is the same as it has always been in the cosmetics industry namely understanding the wants of women (and increasingly men) and their links with aspirations and social issues for the day.  As recent high profile events have shown from Gap, Nike and Shell misunderstanding these issues can also result in a loss of corporate reputation. 

The potential business benefit of a natural positioning may lie in more than an ingredient listing or product positioning.  However, personnel in industry and in campaigning organisations have highlighted that there are major supply chain risks involved in sourcing what is often termed ‘sustainable’ natural ingredients.

The term sustainable can be defined in many ways but, most usefully, it is generally taken to mean ‘lasting into the future’ – which implies the continuance of the ingredient in the same form as currently for the use of future generations.  It also is closely linked to the sustainable future of businesses using that ingredient.  This has been graphically demonstrated with the fishing industry and the loss of their livelihood through ‘unsustainable’ fishing of cod stocks.  

Detailed knowledge of the supply chain is therefore indispensable.  There are clear opportunities for using consumers and their thirst for information to deliver the natural experience incorporating all the aspects of the natural ingredients, their production and sources.

To inform this article we conducted key informant interviews with a number of opinion formers in the supply chain;. 

• WWF-UK, international science-based conservation organisation
• Traidcraft, the UK’s largest Fairtrade organisation
• Rainforest Alliance, leading international conservation organization

As with any other industry, cosmetics companies must be acutely aware of who is doing is what all along the supply chain.  As Dr Suzanne Schmitt, international plants conservation officer at WWF-UK explains: “The key issue for the botanical supply chain is traceability”.  This is particularly important for the cosmetics industry since most companies source their ingredients in bulk from wholesalers. 

To put ‘traceability’ into context, last year the UK food industry was rocked by accusations  that slave labour was being used to harvest cocoa and produce chocolate.  With a similar supply chain structure to the cosmetics industry, market and brand leading companies were not able to reassure their consumers that their chocolate was not produced using slave labour.   Article 13’s experience across all industries and markets suggest early warning signs that consumers are becoming increasingly interested in the ‘world behind the product’.   This is further supported by the World Summit on Sustainable Development in Johannesburg in September 2002, which proclaimed the commitment to promote consumer information that will encourage sustainable consumption and production. 

Aside from consumer concerns, poor supply chain management can result in heavy fines if suppliers do not meet local or national regulations on child labour, health and safety conditions in factories and pollution.  Share prices may also suffer when campaigners catch wind of this and companies with a bad reputation have trouble attracting, motivating and retaining staff

Turning risk to advantage

So just how does working with ‘naturals’ provide a competitieve edge and satisfy the the consumer’s quest for knowledge and a holistic approach?  The Aveda Corporation points the way ahead. Established in 1978, it was purchased by cosmetics giant Estee Lauder in 1997 to match Lauder’s stated key driver for growth of innovation in this cosmetics arena.

The Aveda case study also illustrates why staff are becoming so important to commercial success delivering the story of natural.  The strong philosophy on which Aveda is founded forms its unique selling point. 

Aveda is also extremely active in the corporate responsibility arena, with initiatives covering the environment, education, employees, and this is reflected in the company’s core mission statement. The company says it encourages innovation and group interaction between its employees.  It is an ‘Equal Employment Opportunity’ employer and, through the Aveda Institute, assists students in their careers with scholarships, grants and graduate placement assistance.  The company recognises that the ‘natural trend’ can motivate staff not just in the buying departments, but in product placement, marketing and retail personnel.  The Aveda case study demonstrates how their products and staff ‘live’ their story through training and support.

The role of retail

Having considered the industry approach, the supply chain and a case study of an approach to consumers and staff, where is the focus that will yield results with consumers?  To answer this question Article 13 with the Research Business International ran visioning workshops with a cross section of women from UK, Europe and America.  We asked them to help us consider the term natural in relation to the cosmetics industry and suggest where the opportunities lay for manufacturers to better meed their needs.

The discussions highlighted a number of opportunities.  For consumers, natural comprises the whole sensory experience, where the look, feel, packaging and even smell are all very important. This natural approach was not uniform and varied by nationality, approach to life, age and socio-economic grouping.  For example, younger respondents wanted the natural no frills approach, whereas older respondents wanted the indulgence carried through to the packaging.  For each though this approach required a stimulating environment and they expect highly trained, information rich staff.  The key to unlocking the purchase is an approach that could be personalised the individual and their circumstances.

The discussion highlighted a number of opportunities. For consumers, natural comprises the whole sensory experience, where the look, feel, packaging and even the smell of the product are all very important. This natural approach was not uniform and varied by nationality, approach to life, age and socio-economic grouping. For example, younger respondents wanted the indulgence carried through to the packaging. For each, though, this approach requires a stimulating environment and they expect highly trained, information-rich staff. The key to unlocking the purchase is an approach that can be personalised to the individual and the circumstances.

Four key opportunities were revealed:
• Older affluent women, whose children had left home. They respond to a natural and luxurious positioning, particularly if it carries a promise of making them feel better and hence look better. 
• Women of all ages who were into their ‘lifestyle’.  A natural and holistic approach attracts these women, especially where there is an interest in complementary health and in overall well being.  The support provided by the knowledge that a particularly beautiful looking culture has relied on these remedies and potions adds to the motivation and credibility. 
• Younger consumers (15-18). These teenagers enjoy an ‘on the go’ natural approach.
• Natural milimalists, who seek out designer minimalism and ultimate quality with a natural image.
In each of these cases, the story behind the products was key, but the retails environment, staff, supply chain and packaging were all important factors which supported the care of the natural positioning.

The conclusion of our focus group research is that the world natural is short hand for everything that is considered good in skincare and cosmetics.  But companies must beware of damaging positive connections by over-use or less than rigorous use. One example of this is provided by current issues concerning organic food.

Customers see the key benefit of natural relating to “me” the individual; and more altruistic concerns such as environmental issues. The concepts of fair trade and ethics are secondary considerations. For most consumers, naturals are highly aspirational and, as such, command a premium price.  There is plenty of scope therefore for further developments featuring natural as the entry point when used in combination with other benefits such as luxuriousness. In the retail environment packaging has a key role to play in conveying natural plus benefits messages.

The cosmetics market place and our focus groups demonstrate that the natural trend is here to stay.  Natural is a value-laden word and as such there are real risks and opportunities associated with this trend. The risks in the supply chain are real and must be resolved in order to exploit this trend for commercial success. The concurrent opportunities for innovation and competitive edge are great, and present multiple avenues to follow. These avenues include building staff involvement and enhancing their ability to innovate, increasing customer loyalty and understanding, and maximising the aspirational quality of natural products to command a premium price.

For further information please contact Lucy Shea at Article 13, 020 8731 7700, www.article13.com