Cosmeceuticals. The word creates a great deal of confusion within the personal care industry, as misconceptions dominate the landscape, but the category is driving natural personal care growth to new heights. First, let’s clarify a few things. Cosmeceuticals are not recognized by FDA as a bona fide category, although it is certain that this “gray area” will have to be dealt with in much the same manner as supplements almost a decade ago. The supplement category was created primarily to classify those products that were neither food nor drugs, but that had an effect on the structure/function of the body nonetheless. Several decades ago, a scientist who wanted to describe products that fall between cosmetics, substances by definition with no therapeutic effect on the body and more bioactive over-the-counter (OTC)/drug products, used the word “cosmeceutical.” Today, just as is still the case with supplements, the industry must now deal with a regulatory/marketing quagmire of unclear rules and regulations.


What are Cosmeceuticals?
Cosmeceuticals are best described simply as “functional ingredients,” much like aromatherapy has been described as “functional fragrance.” These products have an effect on the body and by definition cannot be “cosmetics,” but they are neither formulated nor regulated as “OTC/drug” products. Some cosmeceuticals are naturally-derived and some are synthetic. Global Cosmetic Industry Magazine estimated the size of the U.S. cosmeceutical market to be $2.8 billion in 2001, but for these purposes, it can be discussed within the framework of the smaller, but faster growth natural personal care market.

Natural cosmeceuticals, if they are to be considered truly natural, must be, as much as possible, free of synthetic ingredients such as fragrances, preservatives, additives, surfactants and emulsifiers, as well as artificial colors and sweeteners, irradiation and animal testing. They must also be minimally processed, and extensive research and development over the past several years has made it possible for almost every synthetic ingredient to be replaced by any of several naturally-derived counterparts. This is especially important with regard to functional personal care ingredients, or cosmeceuticals. Natural cosmeceuticals, like supplements, are considered to be less invasive than OTC/drug products. When looking toward the future, it is important for marketers to consider all of this in the strategic planning process.


Trends
*Consumer Behavior & Attitudes: Key trends are always rooted in the consumer, and these attitudes and behaviors are in a constant state of flux. According to the Natural Marketing Institute (NMI), Harleysville, PA, 28% of the general population agree that natural personal care products should be fortified with functional ingredients. However, “Well Beings,” the primary target for health and wellness products as defined in NMI’s Health and Wellness Trends Database (HWTD), representing 17% of the general population, are 32% more likely than the general population to agree with this statement.

When asked if they prefer to buy products with specific benefits or claims, another hallmark of the cosmeceutical category, 43% of the general population agrees, and “Well Beings” are 50% more likely to agree. This is consistent with findings in another HWTD measure asking whether consumers prefer to buy products that are clinically proven effective, a statement with which 37% of the general population agrees, while Well Beings are 50% more likely to agree.

Well Beings are clearly the natural cosmeceutical primary target market, although it is important to remember that other segments of the population are also buying these products at differing rates. Research also demonstrates that natural cosmeceutical usage is already fairly prevalent among natural personal care users, and the next few years will show how quickly this area will really grow.

*Natural/Mainstream Convergence: It is no secret, nor is it a surprise, that the larger suppliers and marketers are entering the natural products marketplace. Many simply “dust” their products with non-functional amounts of ingredients intended to be functional so that a label claim can be made, while others “greenwash” by marketing products as natural and sustainable when they are neither in reality. We can all think of a few glaring examples of this behavior. However, some large companies are getting the message that consumers see through these types of smokescreens. Organizations that seek to understand these end-user attitudes and behaviors, regardless of where they are in the value chain, will effectively penetrate the true health and wellness marketplace and realize tremendous gains. Look for more of these companies to formulate and market along these lines.

Conversely, companies traditionally operating within the natural channel are growing up and expanding their horizons. Organizations like Jason Natural Cosmetics, Kiss My Face and Tom’s of Maine are battling with the large stalwarts across multiple channels for shelf space and brand equity. Market research, advanced strategic planning, slotting fees and complex partnerships are concepts that must dominate thinking within these marketing departments if they are to compete favorably with companies utilizing greater resources.

*Aromatherapy-“The Functional Fragrance”: Aromatherapy is one of the most recognized natural products concepts in the mainstream today. As such, it is an excellent bridge between general population consumers and those that can be described as having a natural bent. Applications span across every segment of the personal care market (i.e., hair, skin), as aromatherapy products are both cosmeceuticals (since they have a functional effect on the body) and fragrances, which is an area comprising a substantial part of the total global beauty market. Mainstream companies are already incorporating aromatherapy into their product offerings and retail concepts, so this important bridge will serve to further educate consumers on the benefits of using natural products, increasing both penetration and usage frequency.

*Ethnically-Positioned Products: Much has been said about this trend in the mainstream health and beauty market, as products are increasingly differentiated on the basis of ethnic applications and sold to specific target markets. The natural cosmeceuticals world is also affected by this trend, and especially so in the world of botanicals.

Many cosmeceutical ingredients are botanically-derived and these plants are found all over the world. They are therefore already customized to the original ethnic people living in the areas in which they grow! Botanicals, if sourced properly, are pre-positioned to target certain ethnicities, each with its own physical and cultural issues, and the needs which personal care products seek to address.

What does this really mean? Larger companies will seek to obtain these ingredients and build upon already existing traditional usage and clinical research with their own proprietary studies. Intellectual property can then be obtained from process and composition of matter patents, so that each company has it’s own unique and effective botanical blend for their own natural cosmeceutical products.

*Condition-Specific Products: There are several rapidly growing areas within the natural cosmeceutical category and hundreds of ingredients to watch. A few are listed below:

1.	Sun care-This is an area that, like aromatherapy, also encompasses most personal care areas. Companies are adding botanical ingredients, like green tea and genestein, to hair care products, skin care products and many others as skin damage becomes more prevalent.
2.	Antioxidants-These are related to sun care in that antioxidant protection is necessary for protecting from the sun’s harmful rays, but natural antioxidants like vitamin C and sea buckthorn are finding their way into all kinds of skincare products as stress and pollution become more difficult to avoid in our daily lives.
3.	Anti-aging products-These are driven by the somewhat vain baby boomers but adopted as preventatives in earlier generations who also share this attitude. Some of these ingredients such as chaparral and white tea, address wrinkles, while others, such as ursolic acid from the botanical uva ursi, deal with lightening skin tone. There are literally countless possible combinations and many ingredients have multiple functional properties.
4.	Anti-cellulite-As obesity becomes more endemic, more products will be created to address the symptoms. Skin firming agents such as bupleurum are becoming more commonplace.
5.	Anti-bacterial/Anti-inflammatory-Natural cosmeceuticals now address skincare problems like acne and other types of inflammation, including wound healing and rashes along with many others. Ingredients such as avocado, tea tree oil, uva ursi, echinacea and even rosemary have properties dealing with these issues.

Summary
Clearly, there is quite a lot going on in the world of natural cosmeceuticals. Natural personal care is growing more rapidly than any other area in natural products, besides organic foods, and therefore affords much opportunity for both the smaller natural products manufacturer and the mainstream personal care company that strives to produce truly natural products. The rise of this gray area category can be largely attributed to the national trend toward self-treatment, environmental awareness and overall health and wellness. Consumer attitudes and behaviors must be tracked and measured so that companies can produce, position and market the right products to the appropriate target.

About the author:
Darrin Duber-Smith, MS, MBA, is strategic marketing director for the Natural Marketing Institute, Harleysville, PA. He can be reached at [email protected].