As a result of environmental awareness, trends led by young consumers, and greater knowledge about wellness, many of today’s consumers are demanding greater transparency in the products they purchase. More consumers want to know where their products come from and what their ingredients are.
The result of this lifestyle shift has been more straightforward in the food industry, as non-GMO varieties and additive-free products have been introduced to the market. However, other high-growth natural consumer product categories such as baby care, personal care, household products, and cosmetics have also transitioned their offerings to cater to this new generation of consumers.
- Many of today’s consumers are demanding greater transparency in the products they purchase, including knowing where their products come from and what their ingredients are.
- According to a report by global consulting and research firm Kline & Company in 2018, the "natural" trend is the most important trend in the personal care industry.
- Traditional makers of personal care products, including Unilever, Colgate-Palmolive Co., and Proctor & Gamble, Co., have acquired smaller companies and built out their own natural divisions in order to compete with niche companies and startups in the industry.
The Natural Trend in Personal Care
A study by global consulting and research firm Kline & Company suggests a growing number of consumers are choosing to pay a premium for products that are natural or that they “perceive to be natural.” In addition, according to Kline, the "natural" trend is the most important trend in the personal care industry. In 2018, Kline reported that the growth of the natural personal care market in the U.S. has recorded its strongest growth in the last five years. The trend-driven natural and organic personal care industry is projected to be worth $25.1 million in 2025, according to a report by Grand View Research in 2019.
An example of a consumer goods company launched with the intention of creating eco-friendly products is actress Jessica Alba's privately-held Honest Co., which has been successful at stealing away market share from other legacy leaders in the industry. The mission of Honest Co. is to “redefine the family brand” by offering a wide range of safe, eco-friendly, and affordable baby, beauty, and household products.
In 2018, Honest Co. received a round of funding from L Catterton, a private equity firm that invests in health and wellness brands. Their minority stake in the company is worth $200 million. In Spring 2019, Honest Co. expanded internationally and is now located in Germany, France, Spain, Italy, the Netherlands, and Australia. In 2016, the company’s revenue was $300 million, and in 2017 the figure reportedly increased by 34%.
The success of these more niche players has come at the expense of more traditional makers of personal care products. However, over the past few years, companies like L’Oréal, The Body Shop, and Estée Lauder have launched new lines of organic products.
Natural Product Trend Drives Industry Acquisitions
Although they have sometimes been slow to transition, traditional, large-cap consumer goods companies have taken note of the demand for natural products. The rapid growth of niche companies and startups in the industry has led these larger companies to either acquire their smaller rivals or build out their own natural divisions. In fact, it's rare to find a natural products company with annual revenue of more than $200 million that hasn’t already been acquired or isn’t in the process of considering strategic alternatives.
In 2016, Unilever acquired the Vermont-based green household product maker Seventh Generation in a deal estimated to be worth between $600 million and $700 million. In 2017, Unilever further demonstrated its commitment to sustainable business by introducing a new “nature-inspired” product line for its Dove brand for men, Dove Men+Care Elements. This line of grooming products for men incorporates nature-inspired ingredients, including sage, charcoal, and sandalwood.
Major Consumer Brands Launch Natural Product Lines
The vast majority of major consumer brands have found success with their natural product lines. Clorox Co. said its earth-friendly, personal care line Burt’s Bees delivered double-digit sales growth for the period ending on September 30, 2019. Colgate-Palmolive Co. said that its Tom’s of Maine business was strong during its most recent quarterly earnings call on January 31, 2020. Noel R. Wallace, president and CEO of Colgate-Palmolive Co., also stated during the company's earnings call that they were going to increase the investment behind their naturals and lifestyle brands, including Tom's of Maine, which manufactures and sells natural toothpaste, deodorant, body care, and baby care products.
In February 2018, the CEO of Procter & Gamble Co., David Taylor, said, "We continue to develop new, superior product offerings that address the needs and wants of 'naturals' consumers who are increasingly concerned about the ingredients in their products, and 'sustainability' consumers who are increasingly concerned about the environmental impact of how their products are produced, packaged, used and disposed of."
In 2016, Proctor & Gamble Co. introduced its first natural detergent, Tide Purclean. Since then, it has expanded its 'naturals' portfolio. In 2019, it acquired the firm This Is L., a maker of feminine hygiene products with natural ingredients.
A New Generation of Consumers
The trend of introducing products with a shorter ingredient list and greater transparency is likely to continue for both larger, traditional companies and new, niche competitors who want to cater to this growing consumer base.