By Kirsty McHugh, OUP UK
Geoffrey Jones is the Isidor Straus Professor of Business History at Harvard Business School. He researches the history of global business and has written extensively on the evolution of international entrepreneurship and multinational corporations, specializing in consumer products including beauty and fashion, as well as services such as banking and trading. His most recent book is Beauty Imagined: A History of the Global Beauty Industry, and you can click here to see a video of Professor Jones talking about his work. In the original post below, he writes about the boom in natural cosmetics.
Next month, on March 24-26, the leaders of the natural cosmetics industry will assemble at the Sustainable Cosmetics Summit in New York City to discuss the boom time for natural beauty. Or, at least, what many are betting will be a boom. The event is organized by Organic Monitor, which recently issued a report outlining how large companies have been paying huge sums to buy iconic brands in this market segment. It has been quite a gold rush so far. In 2006 global industry leader L’Oréal paid over $1 billion for Britain’s Body Shop. Soon afterwards the bleach manufacturer Clorox – implausibly – paid $925 for Burt’s Bees, a Maine-based company which had begun making candles from the beeswax created as a by-product of their honey business twenty years previously, and grown to make $170 million of sales of organic beauty products. In 2008 Estée Lauder, an early mover in this domain which had bought Aveda in 1997 and grown the brand globally, took a stake in the trendy Indian business Forest Essentials, an ayurvedic cosmetics company which makes its products by hand in a village in the Himalayas. And this year kicked off with Shiseido, Japan’s leading beauty company, paying the enormous sum of $1.7 billion for Bare Escentuals, the San Francisco–based company which has built the minerals-based cosmetic market.
The natural cosmetics boom has been a long time coming. Entrepreneurs began to experiment making cosmetics from plants rather than chemicals as far back as the 1950s. In 1954 Jacques Courtin-Clarins, a young medical student who had observed that when patients were treated for circulatory problems with massage their skin looked better, started a small business making botanical body oils. At the end of the decade Yves Rocher launched a company which made plant-based cosmetics distributed through mail order in the rural village of La Gacilly in Brittany. The big problem for all these ventures was to find customers, who stubbornly preferred products which employed modern science to make them look younger and sexier. Natural cosmetics remained for decades an activity for the unusual entrepreneur who wanted to build a market rather than sell to an existing one. These included Horst Rechelbacher, who after hearing a prominent Indian guru speak at the University of Minnesota, followed him to India in 1970, and then studied the local use of herbs and plants to promote health and longevity. He founded the Aveda Corporation some years later in Minneapolis. The first product, a clove shampoo, was formulated in his kitchen sink. A visionary of a different kind was Anita Roddick, who in 1976 established a store selling skin and hair care products in Brighton, on the south coast of England. The decision to open a beauty shop was made after she and her husband Gordon sold their small hotel business to finance his wish to spend two years riding on horseback from Buenos Aires to New York City. Roddick wanted to use cheaper containers, and was also determined to use natural ingredients, an idea inspired by seeing the traditional beauty practices of women in Tahiti during her travels. The Body Shop’s subsequent success is the stuff of legends, but it was neither easy nor immediate.
Why is it only now that natural beauty is booming? It is partly, of course, is that we are all so much more aware of the need for environmental sustainability. As the fiasco at Copenhagen shows, there is a recognition that we can’t leave it entirely to governments to save the planet. But building the market has been a hard sell. Sustainability does not come cheap. Natural ingredients are typically more costly to purchase and process than synthetic ones. And their virtues are not easy to explain either. Consumers remain confused which brands are truly “green.” “Green-washing” grew alongside the market for natural cosmetics. While organic foods are highly regulated in many countries, beauty products are not. Most products labeled “natural” contain some synthetic fragrances or petroleum by-products. Plant-based preservatives have poor antimicrobial and antifungal properties. This is a major problem, as preservatives are essential to keep moulds and bacteria from growing in products containing water. It’s not even clear that being natural is truly environmentally-friendly. The quantity of plants needed to produce tiny amounts of certain ingredients for cosmetics would mean large areas of the planet would need to be cultivated. Growing food for the hungry billions is surely the greener option.
Despite the big premiums being paid for natural products companies, then, there remains work to be done. One recent estimate of the size of the global “purely natural and organic beauty products” market was $6.9 billion. The largest national market, worth $3.6 billion, was the United States, followed by Germany and France. This represented a mere 2 per cent of the global beauty market as a whole, but the market had high annual growth rates. It is sure to grow more. Baby Boomers have natural inclinations towards the organic and sustainable, they have a lot of money to help them resist the signs of ageing, and ten thousand people turn 50 every day in the United States alone. But more needs to be done to achieve clarity about what really constitutes an organic or natural product. The various bodies which now certify such products need to get their definitions aligned. As consumers become more knowledgeable, they are also more demanding, wanting not only natural ingredients, but also eco-friendly packaging. Meanwhile, as big companies struggle to nurture their own natural brands, successful small entrepreneurs who have built green brands can look forward to receiving a nice reward when they decide to sell.