Retail Boom: Natural Personal Care Items

Healthier lifestyles now include using natural shampoo and other grooming products, sparking strong sales growth.

By Laura Kennedy, Researcher-Reporter, the Kiplinger letters

January 10, 2008

Organic and natural personal care products are hot sellers -- and getting hotter -- as more big consumer products firms and retailers rush to supply growing demand for natural toothpastes, skin creams, soap, shampoos, makeup and the like.

Sales of products with either the "natural" label or the U.S. Department of Agriculture's (USDA) official organic seal will jump by more than 50% over the next five years to about $10 billion a year. "The 'be healthy' constellation of things has been expanding" beyond initial interest in organic and natural food, says Bill Bishop, president of Willard Bishop Consulting, a retail industry consulting firm. "You get into that broader definition of wellness and feel that you're making one additional move in that direction with natural personal care products."

Big consumer products firms are on the prowl for niche organic care products they can buy. The Clorox Co.'s November acquisition of Burt's Bees, the fourth-largest natural personal care manufacturer, will be followed by more deals between established consumer goods companies and purveyors of natural products. The large companies will add distribution channels for organic and natural goods, many of which have been sold via direct marketing and the Web. More such products will go on sale at CVS, Walgreens, Target and other major chains.

Thanks to the vendor expansion, organic and natural goods will grab a bigger share of the total personal care market, which falls in the neighborhood of $50 billion and will average about 3% growth per year. Consumers are willing to pay a premium for products with organic or natural labels. "They're in the bull's-eye of the trading-up phenomenon," Bishop says. "[Consumers think], 'That sounds pretty cool, it's really made of natural honey or beeswax,' and they'll spend another couple bucks." Shoppers are currently able to buy a wide variety of products with the natural label. But new on shelves this year will be the first line of USDA certified-organic shampoo and conditioner, among other organic products.

Stricter standards for classifying natural goods will help boost sales. Expect guidelines for natural certification from the Natural Products Association (NPA) by summer, spelling out for manufacturers and sellers which ingredients fall under the "natural" umbrella. At the same time, industry members have filed several petitions with the Food and Drug Administration to encourage the agency to establish federal standards for natural cosmetics. Currently, the FDA considers "natural" a marketing term and polices the products using the same consumer safety provisions that it does for other cosmetics. "We'll do our thing," says Daniel Fabricant, vice president of scientific and regulatory affairs for the NPA. "I imagine at some point in the future [the FDA is] going to move on this. We can show them a system that works and has been in place."

Meanwhile, food-grade organic certification for personal care products follows standards set by the USDA: Goods made with between 70% and 95% organic materials can display organic certification from USDA-accredited agents, and products made with 95%-100% organic materials can display the official USDA food-grade organic seal. Still, various organic industry groups are likely to release their own organic standards this year.

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