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Natural product manufacturers are looking to the mass market as their number-one avenue for growth in 2008, especially this March, when Target commits to stocking up to 8 feet of these items in all 1,591 of its stores.
This story first appeared in the January 25, 2008 issue of WWD. Subscribe Today.
Target’s embrace of natural care items speaks volumes to the validity of the category in the mass channel, manufacturers said. The chain, which is widely viewed as the hippest in the industry, will push sales of natural and organic body lotions, face creams and shampoos even higher in an already explosive industry.
“I have been at Dr. Bronner’s for 10 years. We always wanted natural products sold everywhere. And now it is happening and it is just awesome,” said Mike Stacy, national sales manager for Dr. Bronner’s Magic Soaps, which is part of Target’s new natural care set.
SPINS — a market research and consulting firm for the natural products industry — shared data culled from SPINSscan Conventional (powered by ACNielsen Scantrack), which shows that sales of natural care products in the mass market were approximately $177.7 million for the 12 months ended Dec. 1. Sales exclude Wal-Mart.
Nine product lines, including Kiss My Face, Burt’s Bees, Juice Organics, Jason Naturals, Alba, Avalon Organics, Dr. Bronner’s, Giovanni and Weleda are the brands included in Target’s natural care set rolling out in the next several weeks. According to Erk Schuchhardt, president and chief executive officer, North America for Weleda, the chain is adopting its own set of standards for its natural care display, which will only merchandise products that are free of parabens, phthalates and sodium lauryl sulfates. None of the products in the set have been tested on animals. Price points range from $2.99 to $29.99.
In a statement, Target said it is launching two cosmetic bags made of recycled fabric to coincide with the natural care set. One is a small tote with two shoulder handles and pink lining selling for $14.99, the other is a medium-sized, top-zip case with an embedded mirror and green lining, for $16.99.
The sets in Target are merchandised with a backdrop touting “Natural Beauty Care” accented by photos of green trees and nature elements, Stacy said. He added that before entering the category, Target became well versed on ingredients.
“When it comes to ingredients, Target has done their homework. It will be a one-stop shopping area with face products, body products and hair care,” he said.
Executives at Noah’s Naturals, which is not part of the Target natural care set, said sales increases of the category in the mass market would keep sales growth strong overall.
“It’s safe to say that there is no reason to think that the 18 to 20 percent annual sales increases the category has been realizing [in all channels] will slow down any time soon. It could even grow by 100 percent,” said Bill Neubauer, director of marketing and new product development at Noah’s Naturals, as retailers such as Target bring more awareness of naturals to consumers.
“Two thousand eight will be a very strong year, especially when you see gas prices flying through the roof and people looking for sustainability,” he added.
Last year, the big three (CVS, Wal-Mart and Walgreens) tested natural beauty products to see how they would sell in stores, years after food stores such as Albertsons, Safeway, Wegmans Food Markets and Fred Meyer took them in.
“They have had a lot of success. That’s why mass stores have caught on and contacted us,” said Stacy. “Everyone wants natural these days.”
Kathy Steirly, vice president and general merchandise manager of Walgreens Beauty and Fashion Division, said she is “very pleased” with the sets in place at her stores. Walgreens added 6-foot sets in June, which lead off with Burt’s Bees, Jason Naturals and Avalon, and stocks exclusives such as Weleda (which partnered with the drugstore chain as an exclusive to the drugstore channel) and Yes to Carrots, a line from Israel. “Some of it is new to the mainstream consumer, but I think they are becoming educated very quickly. There’s a lot of good buzz about the category,” said Steirly.
A spokeswoman for CVS predicted that 2008 would be a big year for the natural category at the drugstore chain.
“It is an area where we continue to add new brands and products throughout the beauty segment: hair care, cosmetics and skin care,” she wrote in an e-mail.
Among the brand introductions and expansions at CVS this year are Giovanni and Cristophe Pure Natural, a natural complement to the mainstay Cristophe Beverly Hills hair care line. Cristophe Purely Natural will exclusively sell three products — a daily shampoo, a clarifying shampoo and a conditioner — starting next month at CVS’s 6,200 stores nationwide.
G. James Guidotti, who owns Los Angeles-based Giovanni with his father, Arthur, said the natural hair and body care brand is kicking off in CVS’s California stores, which total about 290. About five years ago, interest in Giovanni from grocery chains started and the brand broke into Wegmans and Fred Meyer. Buoyed by interest from food, drug and mass stores, Giovanni’s distribution has ballooned from 3,000 doors to an estimated 15,000 doors, according to Guidotti. “[The natural movement] is not so much of a fad anymore. It is more mainstream, here to stay,” he said.
Wal-Mart is rolling out a new 4-foot natural care set this spring, which will include the Noah’s Naturals and Hain Celestial brands. It will vary from the set Wal-Mart implemented last year, which touted three Noah’s Naturals subbrands (It’s All Good, Heal Thyself and Honest to Goodness). About 26 products make up the new Noah’s assortment, 10 of which contain between 70 and 95 percent organic ingredients. Burt’s Bees, which is entering Wal-Mart for the first time this year, is speculated to be getting premium shelf space at the retailer, too.
Burt’s Bees, the leader in the natural segment’s charge into mass, made its debut at CVS and Walgreens in 2005, and the next year in Target, according to Mike Indursky, the firm’s chief marketing and strategic officer.
“As a lot of accounts on the forefront realized that natural personal care is the place to be, they wound up seeing that they are getting nice profit from this brand,” he said. “What would have been considered a niche brand is [now] a key contributor.”
Indursky said Burt’s Bees’ range has evolved from 20 stockkeeping units to 4-foot sets — or larger — with 30 sku’s or more.
“In all cases, we keep all of our brands together. We brand block rather than going in line,” he said. “We like to have a nice yellow presence that catches the consumer’s eye.”
Rite Aid, according to sources, is still studying the category to see when it would be wise to make a real commitment. The retailer did not return calls seeking comment.
Steirly, who said she is not making any dramatic changes to her set in 2008, noted that there is still confusion among consumers as to what is natural or not. “We don’t have a hard-core definition here for what is natural. I think that is something that several folks in the industry have to have finalized.”
Indeed, consumers in the U.S. don’t have much in the way of industry standards to guide them. However, the United States Department of Agriculture organic seal is placed on beauty products that meet organic food standards. Indursky has been working on a campaign called “The Greater Good” to help implement an industry standard for natural and/or organic personal care products, outside of the USDA seal. Next month, Burt’s Bees will launch an ad campaign to inform consumers about natural personal care products.
A recent online study called the Age of Naturals conducted by The Benchmarking Company, a beauty research and branding company based in Washington, showed that 61 percent of all women agree it’s difficult to tell which beauty products are natural or organic and which are not. Right now, the study said, 70 percent of women who buy natural beauty products and 31 percent of those who buy traditional beauty products claim to read labels carefully before buying them. And, 41 percent of all women said they’d be willing to pay more for a product that was 100 percent certified organic, while 45 percent of all women said the main reason they buy natural/organic beauty products is because of their fear of chemicals. The 40-minute online survey tapped a national sample of more than 1,800 women aged 18 to 50.
Indursky argued that mass retailers that don’t maintain high natural standards fare worse than those that do, and added that Burt’s Bees has been educating retailers on how best to sell natural products.
“It is really helping them commit to carving out a space to natural as opposed to putting it in line, to educate and try to explain what natural is and what natural isn’t, and to ensure the products in the natural sections are natural,” he explained.
Indursky doesn’t see the natural personal care products business peaking any time soon.
“There are still plenty of doors to go into,” he said. “Penetration of natural personal care has doubled in the last five years, and it is going to double in the next five years. It is really about getting more people into the fold. There is going to be a long future period of growth for this category and Burt’s Bees in particular is driving it.”
Weleda’s Schuchhardt agreed.
“This year the mass market is finally committing to it in a certain way just as we enter an economic climate where no one knows how [anything] will pan out. But this segment needs time. This is not just a fad that comes and goes. It’s not an ingredient trend. This is a fundamental paradigm shift. It will take a while before the mass market consumer gets it. The natural personal care industry is not like a hybrid car. It’s much more complicated. “
Retailers are taking a variety of tactics to educate consumers on what is now available in their stores.
“Each has a suite of programs that they feel is best to reach their guests,” said Hain Celestial’s executive vice president John Carroll. “Some accounts use shelf talkers, others use flyers, some have in-store assistance. It depends on the chain. They know their guests better than anyone.” Certain customer buying habits for natural care mimic the usual beauty buying impulse.
“It’s more about the type of product than price,” Carroll said of the mass consumer. “Skin care is what she is really looking for,” followed by bath and body and hair care.