Natural and organic market evolves into two-tier industry

The latest developments in the market are the result of continued growth that is far and away outstripping average growth within the personal care sector as a whole and is in turn leading to a market that is showing signs of maturing as it develops specific niches and specific characteristics. In recent years growth within the naturals and organic market in North America has continued to steam ahead at double digit figures, and is currently running at around 20 per cent per annum, according to the latest report from Organic Monitor, entitled The North American Market for Natural & Organic Personal Care Products. This growth, driven by an increasingly knowledgeable consumer, means that the share of the personal care market held by organic and natural category is rising significantly - currently standing at 8 percent and projected to grow to 15 percent within the next few years. Alongside the obvious expansion in product development - with individual lines and brands becoming more elaborate and more wide-reaching - there has also been a significant expansion in the availability of natural and organic personal care products in an increasingly wide variety of retail channels throughout North America. Most notable is the fact that such products are now getting more and more aisle space in leading mass market outlets such as Wal-Mart and Target, which is not only serving to increase sales of such products significantly, it is also helping to raise the profile, leading to what Organic Monitor refers to as the 'mainstreaming' of such products. Currently mass market retailers are busy expanding their offerings in the category to keep up with demand, which is promoting some of the biggest brands in the market as well as giving way to a crop of private label products. But it is not just the mainstream retailers that are profiting. Indeed, it is still natural food stores that dominate the retail scene, accounting for a 45 percent share of the total spend for the category, dominated by retail outlets such as Trader Joe's and Wild Oats, who have also developed private label ranges. Alongside the fact that the market for organic and natural products is being fed by two distinct retail channels, it is also evolving into what Organic Monitor terms a 'two-tier' market. The report outlines how the first-tier comprises companies that have grown significantly in recent years, partly on the back of increased sales and partly thanks to increased capital injection, often as the result of M&A activity. The increased capital is in turn driving even greater growth for companies within this group, helping them to gain in market share as they expand distribution and develop their product portfolios, something that has proved the case for leading brands such as Aveda and Jason Natural. At the other end of the spectrum, second-tier companies are continuing to grow, but at a smaller rate, as they continue to specialize on more traditional retail channels that are more closely associated with natural and organic products. According to Organic Monitor, this is leading to a widening gap between the first- and second-tier companies, and it is one that is expected to widen still further as the two markets continue to evolve.