In 2009, growth stagnated in the market but according to Organic Monitor’s president Amarjit Sahota, 2010 saw 10 percent growth. Sales exceeded $5 billion during the year and the market is expected to reach $8 billion by 2017, the company said.
Private labels set for success
While the entry of large multinationals helps attract consumer attention to the trend, Sahota highlighted retailer private label products as those likely to have the most success.
“Retailer private labels are expected to have most success as they offer quality products at affordable prices,” Sahota told CosmeticsDesign.com USA.
“Large retailers also tend to promote their own brands more than manufacturer brands,” he continued, before adding that the trend in the beauty industry was reflecting the success of private labels in organic food.
The popularity of retail private labels can also help stimulate growth in the market more generally, over and above the labels themselves.
“We expect retailer private labels to have a positive impact on market growth. First, they raise visibility and awareness of natural and organic personal care products. Thus, many consumers are encouraged to try these products for the first time; if they have a positive experience, these consumers are then inclined to try other brands and products,” Sahota explained.
However, Sahota said it was unclear what this would do to the market for organic ingredients. Increasing demand could cause short-term ingredients shortages, raising prices, but higher demand could motivate suppliers to up production, reducing prices in the long run.
Growing gap between big and small brands
In addition to growth in the market overall, the difference in market share between large and small brands is growing, according to the market research company.
“A two-tier market has developed…and the gap between the tiers is widening as large brands – such as Burt’s Bees and Bare Escentuals – use capital inflows to expand market share,” the company said.
However, according to Sahota, this does not mean there are no longer opportunities for startup ventures.
“The North American market for natural & organic personal care products still holds many openings for new entrants, including new start-ups. The growth rate is higher than that for conventional personal care products and consumer interest is very high, so there are ample opportunities,” he said.
Small companies with focused strategies, such as targeting specific market segments or sales channels, are likely to be the most successful, he added.