Despite the economic downturn, the personal care industry remains an attractive market for suppliers of performance ingredients aimed at delivering the results consumers demand from hair and skin products. The market is ripe for savvy suppliers who can find the right niche and the right buyers for their innovative products to capitalize on the demand for anti-aging, anti-wrinkle, and other products that offer pharmaceutical-quality results without the prescription or the high price.
For chemical suppliers geared toward the construction and automotive industries, the last 18 months have been tough as the housing, finance, and automobile markets crawled to a near halt amid the worst recession in recent history. However, suppliers in the personal care space enjoyed solid gains in 2008 as personal care specialty chemicals have been able to maintain their specialty status and healthy margins, while other classes of polymers, additives, and engineered plastics, once considered specialty products, have been commoditized.
Specialty products represent about 40% of the $10 billion-plus personal care ingredients industry, with an array of performance products, including actives, delivery systems, film formers, sensorial agents, rheology-control agents, and specialty surfactants, among others. As consumers demand better performance at lower costs, there remains ample opportunity for specialty suppliers to leverage the current economic and technological developments to remain competitive, and even thrive, in an otherwise dismal industry.
Economic Woes Good for the Industry
Personal care remains an attractive industry partly as a result of the poor economy. As laid off workers and those struggling financially learn to adjust their spending habits to compensate for the reduction in disposable income, they begin to seek alternative treatments for their once-costly hair and skin care treatments. Demanding better performance from off-the-shelf products, versus physician or salon treatments, consumers are exploring mass retail distribution channels as a cost-effective source for their products. Products in this space, particularly those with anti-aging and anti-wrinkle qualities, are thriving.
| GLOBAL PERSONAL CARE MARKET GROWTH AT RETAIL LEVEL 2008 |
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In addition, unemployed or under-employed consumers who once enjoyed employer-sponsored healthcare benefits are now doing more to take better care of themselves in an effort to avoid costly out-of-pocket medical expenses. This trend, coupled with a desire to maintain personal appearance in a bid to improve their employment prospects, will likely buoy the personal care industry right through the worst of the recession and beyond.
Complacency is Bad for Business
Even given these positive trends, innovation remains a crucial component to success for suppliers of specialty actives and delivery systems for the personal care industry. Staying ahead of the curve will remain critical: developing exciting new products, working with customers to devise strategic “packaging” and marketing initiatives, as well as leveraging the at-home-treatment trend, can all help to drive growth for companies with the right approach to the market.
Products that promise specific results—especially those for which claims can be scientifically substantiated—will continue to be a boon to the industry. Synthetic peptides, for example, have revolutionized the anti-aging industry by bringing pharmaceutical strength to off-the-shelf products in nearly all distribution channels. To take a lesson from history, continued investment in R&D to develop new actives with heightened and specific efficacy will pay off for future growth.
Similarly, delivery systems that offer longer staying power or improved penetration give consumers a better return on their investment, helping to drive sales and foster repeat customers. There has been a great deal of buzz surrounding the use of microcapsules to deliver skincare actives, such as retinol, retinyl palmitate and vitamin E acetate for anti-aging. Particularly in the wake of negative publicity surrounding nanoparticles and their perceived danger of allowing the absorption of actives into the body through the skin, microcapsules are considered a safer alternative.
Natural Infusion Spurs Growth
The naturals trend continues to infuse growth into the industry as botanical ingredients such as grape seed extract for anti-aging, green tea for anti-wrinkle, and other organic sources garner proof of efficacy. The opportunity here is for chemical suppliers to devise the most efficient method to extract the specifically-desired molecule for the activity desired. An efficient harvesting and extraction process would reduce manufacturing costs and help boost the appeal of botanicals-based products for both formulators and consumers.
The “packaging” of synthetic actives with botanical ingredients could also provide a powerful strategy for suppliers whose individual products are unable to withstand the current economic forces. A combination of actives, such as a synthetic peptide-green tea mix, could leverage the combined benefits of both actives and help hold down the cost of the final product.
In addition to product innovation, specialty actives suppliers might consider an innovative channel marketing approach to reach a wider audience. While products at the luxury end of the scale have suffered a bit in the weak economy, mass products are holding their own. For suppliers whose customer’s lines include brands at both ends of the spectrum, like L’Oréal and Procter & Gamble, there could be opportunity to infuse lower-cost brands with higher value actives in a cost-effective way by leveraging existing formulation lines and economies of scale.
Convergent Markets = Diversified Customer Base
The recent convergence of the personal care, pharmaceutical and nutrition industries to form new markets in cosmeceuticals, nutraceuticals, and nutricosmetics bodes well for specialty actives suppliers who can market innovative ingredients designed to provide specific benefits in these areas. By combining the power of pharmaceutical-grade actives with the perceived safety of natural ingredients and sound nutritional overtones, actives suppliers could diversify their sales across the various end-use industries for personal care, nutrition, and pharmaceutical applications.
Consumers’ interest in environmental protection and healthier living over the past six to seven years has helped to carry the nutrition market well through the recession, raw materials suppliers in the personal care industry might take a lesson from this success to stay ahead of the tide in difficult times.
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