Back in February Organic Monitor pointed out that natural personal care companies would be a key target for investors during the course of 2010.
Following a very difficult period for the personal care industry during 2009, there are now distinct signs that improved economic conditions should help to draw more investment activity in the coming months.
Big players back in the investment game
The economic downturn has hit big players such as L’Oreal, Procter & Gamble and Avon, particularly hard, forcing them to concentrate on getting their own houses in order.
As a result merger and acquisition activity in the personal care sector virtually dried up in 2009, but with consumers tentatively returning to their former habits, the big players are resuming the investment trail.
So far this year Shiseido has put the seal on its $1.7bn acquisition of mineral-based make-up provider Bare Escentuals, while only two weeks ago Avon announced the 100 per cent acquisition of natural skin care brand Liz Earle.
Small companies benefit from global distribution
Both acquisitions mean that the brands will be able to benefit from increased investment and support, but perhaps even more importantly they will also be able to tap into highly developed worldwide distribution channels.
Until now the Liz Earle brand has remained a largely UK phenomenon, while Bare Escentuals has been similarly confined to the North American market.
The emergence of these two brands into the global arena will help them tap into category growth that is currently providing healthy returns in an otherwise stagnant and depressed market.
Natural and organic cosmetics grow beyond niche
Although the market for organic and natural personal care markets remains relatively small, worldwide market growth is helping to boost it beyond being a niche category.
Organic Monitor predicts that during the course of 2010 sales of natural and organic personal care products in Europe will increase by approximately 13 per cent to around €1.7bn, while increases in the North America market are also expected to hit double digit figures.
However, the growth in the market also means that competition is hotting up. This is due to consumers demanding higher standards from natural personal care, which in turn means that companies are having to provide more targeted products that increasingly have to comply with certification standards.