August 2016

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Innovation Report

The Effect of Innovation

on the Cosmetics Market
How advances in product development and supply-chain
management are enabling more efficacious products
by Brenda Porter-Rockwell
 The Effect of Innovation
on the Cosmetics Market
by Brenda Porter-Rockwell

Generally speaking, in business if you don’t innovate, you die. It appears the
cosmetics market’s ability to innovate will be key in sustaining growth.
“Innovation is key for ingredient manufacturers wishing to prosper in the future,”
stated John Madden, global head of ingredients research, Euromonitor International, in
a 2013 podcast. “However, innovation is an increasingly difficult aspiration due to the
recession, regulatory obstacles, and media and consumer attention toward certain
ingredients in beauty and personal care.”
A report from Grand View Research anticipates the global organic personal care
market will reach USD$16 billion by 2020. Experts predict future product innovations in
natural and organic ingredient sourcing (and possibly consumer health) will fuel industry
growth as consumers demand more easily identifiable ingredients in their products.
These issues have become extremely important as natural cosmetic companies try to
differentiate their brands, and not just on price. In the background, ingredient suppliers,
manufacturers and key players in between are turning their attention inward to form
stronger supply chain partnerships.

New Product Concepts

As consumers start to ask more questions and demand more authenticity from their
beauty brands, the global cosmetics industry is being catapulted toward including
Natural Products INSIDER | The Effect of Innovation on the Cosmetics Market

organic and natural ingredients.

Ingredients once primarily targeted at dietary supplements are now finding their way
into new cosmetic applications, according to Madden. For example, the antioxidants
lutein and zeaxanthin, from the carotenoid family, have traditionally been linked to
improving eye health. But research has highlighted the importance of these two
antioxidants in improving skin elasticity and UV protection, the latter an area Madden
sees with innovation growth potential.
Lutein and zeaxanthin are found naturally in the skin and various everyday foods. As
part of a 2007 study, the ingredients were given either orally, topically or in combination.
After 12 weeks, researchers found the ingredients may improve skin hydration, skin lipid
content and skin elasticity, while minimizing lipid peroxidation and enhancing
photoprotective activity in the skin to resist free radical damage.
“As a potent antioxidant, lutein has a role in protecting the skin against oxidative
damage and providing increased antioxidant status,” explained Lynda Doyle, senior vice
PAGE president of global marketing, OmniActive Health Technologies. “Lutein’s role in skin
2 health is an emerging area of research and will be an exciting future opportunity for
marketers as the science continues to build. With current science, we can talk about
 the fact that lutein helps support healthy, hydrated skin, or helps protect against
oxidative damage. As evidence continues to grow, more claims will be available
to marketers.”
With new research opening doors to topical cosmetic applications, some skin-health
nutrients are still best absorbed through diet, spurring the nutricosmetics market.
Omega-3 fatty acids are known for anti-inflammatory properties. Dietary intake of
omega-3 and -6 polyunsaturated fatty acids may be a critical factor in quieting
inflammatory skin conditions such as acne, psoriasis and rosacea (J Clin Aesthet
Dermatol. 2008 September;1(3):22–26).
“As research indicates new uses for well-known ingredients, it’s fine to explore their
validity and appropriateness as topical formulations. But while people love a product
they can apply to the area they are trying to improve (i.e., skin, hair, nails), beauty really
is grounded in proper nutrition and the foundation of health is a good diet, including
ensuring we have all of our essential nutrients,” said Keri Marshall, MS, N.D., director of
global lipid science and advocacy, DSM. “In fact, because omega-3s control a large
number of cellular processes that
directly impact skin health, skin may It’s fine to explore the validity and
often be the first visual indicator of appropriateness of ingredients as topical
an omega-3 deficiency.”
formulations. But while people love a
Functional nutrients such as the
emerging baobab fruit will
product they can apply to the area they
increasingly be integrated in both are trying to improve, beauty really is
topical and internal products. grounded in proper nutrition.
“I see a synergistic blend of
traditional plant knowledge and cutting-edge advances in biochemistry driving
Natural Products INSIDER | The Effect of Innovation on the Cosmetics Market

innovative product development this year,” said Luc Maes, N.D., founder, Kaibae.
“Baobab fruit powder contains prebiotic fiber, essential fatty acids, minerals and
antioxidants, while baobab oil is moisturizing and improves skin elasticity. Baobab fruit
will be a force in the U.S. market as it provides powerful nutrients that benefit our
health and skin--inside and out.”
Personalized beauty products, according to Euromonitor, will continue to be a draw
for consumers, allowing manufacturers (during these times of economic constraints)
to speak directly to an individual’s sense of style and personality.
“Making it your own, or individualized products, is not new to the beauty industry,
as major brands have been customizing products for years with custom-blended
foundation and individually blended fragrances,” said Ameann DeJohn, CEO and
founder, Ameann Solutions. “The key to the success of individualized beauty products
is to scientifically measure the results of the products after application. Brands
currently measure the success of their products in independent clinical studies, but
PAGE
expect to see these clinical testing and measuring devices in the hands of consumers
3 in the coming years.”
 The next wave of individualized beauty creams will be proven with at-home scientific
clinical measuring devices, not on personality or preference, she added. “It is one
thing to think that your beauty cream works but when you see the analytical results
on the measuring device then you know that it is working. This will give consumers
proof-in-the-pudding and have them stick with their products for longer-lasting
results,” DeJohn explained.

Technology Innovation
Advances in lab technologies have allowed stem cells to be extracted from plants.
Stem cells are believed to work by naturally reversing the signs of aging through cell
regeneration and also to help boost skin rejuvenation by maintaining and preserving
skin stem cells.
Antioxidants are important active ingredients in anti-aging products, noted Frost &
Sullivan’s vice president of industry, Shomik Majumdar. Traditional extraction from
botanical sources currently leads to contamination and unstable compounds. Through
new technology, plant stem cells are extracted and cultured in a laboratory in such a
way yielding “pure and stable” ingredients.
“Many of the leading cosmetic companies are launching their products by using
plant stem cell technology due to the rising demand for advanced skin care products
in the market,” according to research firm
RNCOS in its report, Global Cosmeceuticals
Market Outlook. The company’s most recent The global cosmeceuticals
projections suggest that the global market will reach
cosmeceuticals market will reach
US$61 billion by 2020.
US$61 billion by 2020.
Natural Products INSIDER | The Effect of Innovation on the Cosmetics Market

Green Chemistry
As consumers force the hand of beauty brands to innovate more with what can be
found in nature, it’s worth mentioning green chemistry, a developing category of R&D.
Green chemistry is based upon 12 principles, identified in “Green Chemistry: Theory
and Practice” and adopted by the Environmental Protection Agency (EPA).
Effective Oct. 1, 2013, California’s Safer Consumer Products law, also known as the
Green Chemistry Initiative, was the first to attempt to make hundreds of consumer
items sold within its borders, including personal care products, safer for the consumer.
The idea here is consumers shouldn’t have to guess what the conventional ingredient
will or won’t do to them; the question should be why the ingredient is needed at all.
“It’s difficult to make a definitive judgment on what consumers want as time passes,
but the current trend has been quite consistent: green cosmetics continue to make
inroads into consumer choice,” said Andy Corr, managing director, Accenture Strategy,
and former SVP consumer and industrial ingredients, Elevance Renewable Sciences. “If
PAGE you actually look at what’s happening in the market, it feels like the green aspect of
4 ingredients will eventually be a ‘cost to play’ for new innovative materials.”
 Consumers are still, and probably always will be, looking for natural to perform just as
good as synthetic and cost about the same.
“Natural products are here to stay--mostly due to ‘chemophobia’ and the desire to
use ‘safe’ materials,” said Bill Ross, chief technical officer at Ross Organic. “It will
eventually impact sustainable product development by increasing the selection of raw
materials and reducing processing costs produced by sustainable means requiring less
energy input and the use of enzymes.”
Elevance, for example, is one of California’s Safer Consumer Products
many companies working in the green law, also known as the Green Chemistry
chemistry space. Its Renewicals line is
Initiative, was the first to attempt to
said to deliver quality performance in
natural products that couldn’t be
make hundreds of consumer items sold
achieved before, with a more within its borders, including personal care
attractive environmental footprint. products, safer for the consumer.
Sustainable Supply Chain
There are risks and rewards involved with sustainable supply chain management. In
general, it can be difficult for companies to get buy-in from corporate boards that look
only at short-term revenues versus long-term investments and future rewards like
customer loyalty.
On the rewards side, you have issues such as a focus on sustainability and
traceability for customers. However, it could increase costs or time to market to find an
appropriate supply chain partner.
Many big corporations say they are committed to sustainable sourcing, but they are
also committed to meeting customer’s needs, especially on price.
“Many companies are creating mission statements with regard to sustainable
Natural Products INSIDER | The Effect of Innovation on the Cosmetics Market

sourcing,” explained Sarah Jindal, senior innovation and insight analyst - beauty and
personal care, Mintel. “But one big question still remains: How far will they go to actually
pursue and adhere to their own sourcing mission statements? That remains to be seen
because as you read through some of the information, it is all written in the future
tense--’Striving to be’ or ‘We envision influencing’ are common phrases that can be
translated to the fact that no commitments have been made or will be anytime in the
near future.”
Seals or certifications, holograms and QR codes offer consumers a look inside the
supply chain and validate efforts. Further, online and social media have presented
supply chain avenues.
“With robust growth of online retailing, cosmetic suppliers have started to focus on
e-commerce to enhance their customer experience,” Majumdar said. “Long-term
relationships with consumers and distributors create responsibilities for cosmetic
manufacturers to maintain their supply chain management. Constant evaluation of
PAGE
suppliers by cosmetic manufacturers helps them to stay ahead in the competition.”
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 According to Diagonal Reports: “For a distinctive and influential consumer segment,
there is now a more level playing field between commercial brands with their
complicated supply chains and the hand- or homemade with its transparency and
traceability. The make-your-own movement is part of the spirit of the times, but also
offers those who are or feel more financially fragile a way to save money yet maintain
their skin and hair care standards.”
EcoLips’ CEO Steve Shriver said the company has found a way to balance
sustainable supply chain decisions and keep costs in line. “We typically work with
plant-based certified organic and Fair Trade ingredients that are not necessarily
commodities,” he said. “Suppliers of these ingredients are inherently more caring for the
environment, the growers and the supply chain. We audit the paper trail fairly heavily
and work on a personal level with people as close to the source as possible to ensure a
greater level of transparency.”

Future of Natural Beauty Innovation

The future of natural beauty innovation will focus on consumers’ growing interest in
natural and organic ingredients. Many consumers worry what they don’t know about their
product formulation can hurt them. But to genuinely pull off real transparency, manufacturers
will start to pull back the curtain and reveal deepening relationships throughout the value
chain to prove exactly how green they are.

Brenda Porter-Rockwell has been writing and editing content for print and online publications for both business
and consumer publications for more than a decade. A version of this article was originally published in 2014.
Natural Products INSIDER | The Effect of Innovation on the Cosmetics Market

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