As the divide between food and cosmetics continues to narrow, and sustainable business practices gain more visibility, manufacturers of natural and organic products retain a wealth of opportunities in winning over “conventional” consumers.

The global natural and organic cosmetics market reached approximately $8 billion in sales for 2008, growing at about a 12% clip, or $1 billion annually, according to UK-based research and consulting firm Organic Monitor. However, in context of the broader cosmetics industry, this segment still only represents about 5% of the market, indicating significant room for growth.

Once viewed as a niche field comprised of mostly smaller players, high growth rates continue to attract large cosmetic firms, according to Amarjit Sahota, president, Organic Monitor, who spoke to an audience of entrepreneurs at the Natural Beauty Summit, held in New York City in May.

Moreover, many conventional cosmetic materials have come under fire in recent years—including various petrochemicals, parabens and other formaldehyde donor preservatives—leaving the door open for natural ingredients. Meanwhile, private labels offer growing appeal to cost-conscious buyers, especially in a down economy, Mr. Sahota noted. “The challenge for the pioneers and innovators will be to differentiate themselves in an increasingly crowded marketplace,” he said.

So how can the industry increase its reach while also extending the principles that have helped establish this advancing market?

Beauty Food

The use of food ingredients in personal care—and particularly skin care products—has become one of the largest trends in the natural beauty market, according to Organic Monitor.

“I always believed eventually there would be no difference between cosmetics and food. And that would be because of consumer intelligence,” said Horst Rechelbacher, founder of Aveda Corporation, who more recently founded Intelligent Nutrients, a biodynamic, organic functional foods and nutraceuticals corporation.

Judi Beerling, technical research manager, Organic Monitor, said that food ingredients produced on large scale can be cost effective, and many are very compatible with the skin. “This is an area people are tapping into because they can be used in very innovative products and they offer great consumer appeal.”

Ellen Kamhi, herbalist and nutritionist, Bio-Botanica, Hauppauge, NY, agreed, saying, “Consumers today want personal care products that are as healthy as the food they eat. Just as proper nutrition is linked to overall body health, the same principle can be applied to the body externally.”

Experts note that the concept of “beauty from within” deals with various aspects of health, not just the skin. Lakshmi Prakash, vice president of innovation and business development, Sabinsa Corporation, Piscataway, NJ, said that targeting specific wellness areas ultimately shapes the way we look. “Beauty from within is not only about skin health, but also digestion and immune support—all these things can affect appearance.”

As with dietary supplements and food/beverage products, cosmetic manufacturers have honed in on ingredients with high antioxidant value. So-called “superfruits” in particular have received much attention, as they offer proven nutritional properties while appealing to consumers’ taste for the exotic.

Pomegranate, acai, mangosteen, goji berry, red coffee berry, guava, papaya and mango, as well as blueberry, bilberry, blackcurrant, acerola and grape seed extract are all making a splash in topical and oral formulations due to their antioxidant and anti-inflammatory properties, which are key components to successful products marketed for anti-aging and skin health.

Topical applications may include sunscreen lotions and creams, skin creams, aftershave balms and lotions. However, offering “beauty in a bottle” has also become a notable trend in today’s market. For example, last year Nestlé launched its high-end beauty drink/dietary supplement Glowelle, which is sold exclusively at Neiman Marcus stores nationwide and Bergdorf Goodman. Glowelle contains green tea, lycopene, vitamin C, pomegranate extract, grape seed and beta-carotene.

From a marketing perspective, the product’s website offers a comprehensive list of references to clinical evidence supporting its efficacy and also encourages consumers to take part in a 30-day challenge.

Alongside superfruit-based beverages and topical formulations, spices are also gaining popularity within the cosmetic and personal care industry. “From the spice world you have some very effective materials, particularly turmeric, cinnamon and curry leaf,” said Ms. Beerling.

Experts also note that traditional antioxidant vitamins C and E—as well as the emerging “super” nutrient vitamin D—have all been acknowledged for their value in personal care applications. Backed by a significant body of clinical research, that trend has showed no signs of slowing down.

Marketing Strategies

The term “natural” has become a mainstay marketing pitch that many argue has lost some value in a maturing segment. While consumers continue to demand natural products, “‘natural’ alone will not provide continuity in use,” according to Alisa Marie Beyer, president, The Benchmarking Company, Washington, D.C.

Most importantly, products need to offer demonstrated efficacy. “Women ‘re-demand’ results,” said Ms. Beyer. “Natural skin care and cosmetic products must perform as well as traditional lines. If they don’t, she won’t repurchase them.” Ingredient claims certainly attract consumers, she added, but obviously these need to be validated and truthful. Also, consumers have come to expect results within one month of use.

Ms. Beyer acknowledged that cosmeceuticals, or nutricosmetics, present one of the biggest opportunities in today’s market, which is why so many big multinational companies are adapting to market conditions by scrapping petrochemicals for natural/organic alternatives.

Two thirds (66%) of natural beauty buyers purchase these products because they don’t want to expose themselves to synthetic chemicals, Ms. Beyer noted. “What’s not in the product will get her through the door, but product usage and efficacy will keep her coming back.”

Ido Leffler, global CEO, Yes to Inc. (Yes to Carrots), San Francisco, CA, said that many opportunities exist for the industry to expand its market share. But companies need to do a better job of offering a more positive pitch to consumers.

“This natural products industry is based on negativity,” he said. “‘Don’t do this, don’t do that. Don’t put this on your skin.’ We should stop saying ‘no’ so that our consumers can start saying ‘yes’.”

Intelligent Nutrients’ Mr. Rechelbacher agreed, saying that the industry should be more proactive in communicating with and attracting new customers. “The organic industry really needs a kick in the butt. We need to go out there and educate the consumer about the difference between organic and conventional products.”

Sustainability & Transparency

Growing interest in “ethical consumerism” has also translated to rising demand for natural, chemical-free products. However, as the personal care industry evolves, standing apart from the competition requires additional tools, especially given the flood of new products to market. “In the future, market winners will be companies [that] successfully position cosmetic products on sustainability values,” Organic Monitor’s Mr. Sahota offered.

Consumers have become savvy in their buying habits, he added. “Increasingly, they are asking about the origins of the product. They also want to support local communities and regional producers. They want something produced ethically, locally and with a low carbon footprint.”

With rising consumer expectations, companies would be well advised to take advantage of various industry resources. For example, fair trade certification offers added appeal to customers.

“Helping to empower farmers and workers in developing countries to improve their lives, the Fair Trade Certified label guarantees that a product was traded in a socially responsible manner,” said Maya Spaull, senior manager of new category development, TransFair USA, a non-profit, third party certifier of fair trade products in the U.S. market. TransFair is a member of Fairtrade Labelling Organizations International (FLO), the largest global social certification agency.

Jasper van Brakel, CEO, Weleda North America, Palisades, NY, said that establishing sustainable value in business helps to build trust with consumers. “Sustainability needs to be at the heart of your company and integrated into day-to-day operations. Interestingly, our industry is doing very well in this recession. I’m convinced that is because this crisis is really a crisis of trust. By building sustainable value I think we build trust.”

Mike Indursky, chief marketing and strategic officer, Burt’s Bees, Morrisville, NC, said that companies have to look beyond their bottom line, while adhering to their core principles. Especially since more than 60% of consumers view business as the chief cause of environmental problems, it’s important to consider a “greater good business model,” he said. “More and more consumers are ­saying ‘if you do something bad to the environment then I’m not going to support you’.”

Label Lingo

As the natural and organic cosmetics industry has evolved, new obstacles have followed. One significant challenge has been simply defining “natural and organic” cosmetics. To accomplish that goal, numerous stakeholders have worked to develop standards and certifications. So today, the new challenge has become: what qualifies as an acceptable natural and organic standard? And which one makes the most sense for your company?

In February NSF International’s “NSF/ANSI 305: Made with Organic Personal Care Products” was adopted as a national standard in the U.S., allowing for labeling and marketing of personal care products made with organic ingredients. Like several others, the standard allows “made with organic” claims for products that contain 70% or more organic ingredients and comply with other requirements. Products covered include rinse-off and leave on personal care and cosmetic products, as well as oral care and personal hygiene products.

Alongside the USDA certified organic seal, the Natural Products Association offers its own certification and seal for natural personal care products in North America and OASIS (Organic and Sustainable Industry Standards) offers its own certification services. In Europe, Cosmos and NaTrue standards have also been released in recent years.

While choosing one standard over another may feel like a painstaking decision, many experts say that there isn’t much difference between them. Joe Smilie, senior vice president, Quality Assurance International, San Diego, CA, said that the wide variety of seals and labels—including those that retailers are developing independently—has led to a lack of clarity. “We need to stop the confusion in the marketplace. It’s a mess,” he said, also predicting that the U.S. government will eventually step in to take action and “clean things up.”

While some people are hopeful that a unified system can be established one day, others are a bit more skeptical. “There’s never going to be a global seal,” said Yes to Inc.’s Mr. Leffler. “If there is, I’ll be the first to sign onto it. But I’m Jewish, and we’re still waiting for the Messiah.”

In the meantime, and for the future, buyers of natural beauty products will continue to demand more from their brand. How the industry adapts will leave a lasting impression on the face of beauty itself.