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Through what channels can you get natural ingredients for cosmetics onto the European market?

Takes about 24 minutes to read

Which segment of the European market for natural ingredients for cosmetics you can target depends on your ingredient. What does it do? In which cosmetic products can it be used? You can reach these market segments through European importers or processors. There are growing opportunities to add value locally and supply to processors directly. If you produce speciality botanicals, essential oils or vegetable oils, small importers or processors are good options for you.


1 . Which market segments to target?

Following the order of a sales pitch, we can segment the market for cosmetic ingredients into several levels by answering the following questions:

  1. What does your ingredient do?
  2. For which industry segment is your ingredient useful?
  3. For which type of company is your ingredient interesting?
  4. What is your Unique Selling Point? What makes your ingredient more interesting than that of your competitors?

For a definition of natural ingredients used in this study, see our study of Buyer requirements for natural ingredients for cosmetics.

2 . What does your ingredient do?

Most ingredients either have:

  • functional properties (affecting the final cosmetic product’s form, texture, appearance, consistency, fragrance and delivery system); or
  • active properties (with a cosmetic effect on the skin/hair).

If you know what your ingredient does, it can help you to determine which segment and company you should target and how you can stand out in the market. This is vital on the current market for cosmetic ingredients. Adding natural ingredients to a cosmetic product simply because they are natural is less of a value proposition on the current cosmetic market. This approach is not only becoming less common, but the ingredients bought for such a purpose will often be worth a low price.

Functional and active properties of ingredients differ per product group. There are three general product groups: botanicals, essential oils and vegetable oils. Botanicals are a large group of products that are usually either solvent extracts from plants or powders milled from seeds, shells, leaves, and so on.

Botanicals

Table 1: Functional and active properties of botanicals
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Cosmetic manufacturers mostly use botanicals in products for their active properties. Botanicals have the widest range of active properties (see Table 1).

Sometimes, these two segments overlap; for example, with botanicals with high levels of antioxidant activities. These can be added for their function (improving the stability and shelf life of a cosmetic product) or for their activity (as an anti-ageing agent). In order to make these claims for functional or active properties, you need to provide evidence that supports the claims.

Under REACH, botanical extracts are defined as mixtures of substances. Some of the substances in these mixtures may need to be registered if the volumes in the mixture imported into Europe exceed 1 tonne per importer per year.

Tip:

Essential oils

Table 2: Functional and active properties of essential oils
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In cosmetic products, manufacturers mostly use essential oils for their fragrance and aromatherapy properties. These two properties can overlap, because aromatherapy benefits come from the different scents of essential oils. If you want to market your ingredient with anti-microbial properties, be careful only to use officially permitted preservatives.

Tips:

Vegetable oils

Table 3: Functional and active properties of vegetable oils
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In general, cosmetic manufacturers use vegetable oils for their functional properties (see Table 3). These properties are similar for all vegetable oils.

The active properties that a vegetable oil has are often the result of its functional properties. These oils can be used in anti-ageing cosmetics, because they have skin conditioning properties.

Because functional properties are the same for most vegetable oils, it may be difficult to stand out from other oils with your product. The fatty acid profile is the most common way to differentiate between different vegetable oils, in addition to their physical state (liquid or solid at room temperature). Still, vegetable oils are one of the most important ingredients used in natural cosmetics. Vegetable oils are ideal to increase organic content in final cosmetic products, as they are generally more affordable than botanicals or essential oils and can be used in higher percentages. Formulators like to be able to choose from a range of different oils to stand out from their competition.

The main differences between oils come from distinctive fatty acid compositions, as this aspect affects their properties. Cosmetic manufacturers also use fatty acid profiles of vegetable oils as a basis for active properties, but mostly in marketing claims. Cosmetic producers especially use these marketing claims for pure oils. Once vegetable oils are included in a finished product, it becomes difficult to prove a specific claim.

Vegetable oils also differ in their melting points. Industry sources indicate a growing demand for oils with higher melting points, as they do not need chemical processes to increase their melting point. At the same time, which oil the companies are interested in depends a lot on the type of product in which the oil is used, as well as the preferences of the brand and formulators. For example, oils with lower melting points are better for massage-type products.

Tips:

  • Be careful in any claims that you make for active properties of vegetable oils. You need to substantiate your claims, which can be difficult to do for the active properties of these products.
  • Find out whether and how your vegetable oil performs a function better than competing oils.
  • Give your potential buyers data on the chemical profile and performance tests of your oil. Show them how these are different from competing oils.
  • For more information on vegetable oils with specific properties or content, see our study of Vegetable oils for conditioning.

3 . For which industry segment is your ingredient useful?

In 2017, the European cosmetic market amounted to € 77.6 billion. The European cosmetic industry has five segments:

  • skin care;
  • hair care;
  • decorative cosmetics;
  • fragrances & perfumes;
  • toiletries.

These industry segments need different types of functional and active properties in their formulations. See Table 4 below for more information.

Cosmetic companies also use ingredients from a specific origin to build a product message around a certain ingredient. They use such an ingredient in products from different segments. For example, a product range may include baobab oil or rooibos extract to sell it as “African”, or it uses sandalwood oil or bamboo extract to market it as an Asian product range. To sell it as a South American product range, companies may include sacha inchi oil.

Some types of products within these segments use few natural ingredients, judging by the definition of “natural” in the REACH regulation (see our study of Buyer requirements). Examples of these product types include nail polish and hair colouring. There can be various reasons for this choice:

  • It is not possible to formulate such products with natural ingredients, because natural ingredients cannot do the same as the substance that does not occur in nature. For example, there is no natural alternative to acetone that can be used to deliver nail colour in nail polish with the consumers’ expectation of quality and performance.
  • Natural ingredients are too expensive or need to be used in much higher quantities to become effective. A good example is colours. Natural colours are interesting in foods, but consumers’ performance expectations in the cosmetics industry mean that fewer natural colours can be used.
  • There is no particular advantage to using natural ingredients; for example, when formulators use such small quantities of substances that do not occur in nature for the final cosmetic product still to be considered “natural”. Most natural cosmetic products can contain a small amount of substances that do not occur in nature. Companies can use this fact for ingredients such as preservatives and colourants, which have very few natural alternatives. If a cosmetic company wants to adhere to an allnatural philosophy, they would not use any substances that do not occur in nature. However, there are very few companies in this very niche end of the market.

Skin care formulators use natural ingredients much more often. The use of natural ingredients in hair care and toiletries also continues to increase. However, decorative cosmetic products still contain very few natural ingredients.

Which industry segment you should target also depends on the type of ingredient that you export:

  • Botanicals have most opportunities in skin care. The industry segment or product where botanicals can be used depends on their specific active and functional properties.
  • Essential oils are mostly used as fragrances, both in skin/hair care and as perfumes. Essential oils have a high potential in hair care, skin care and toiletries.
  • Although all vegetable oils have similar properties, their derivatives can have very different functions such as thickeners, foaming agents or surfactants. These properties can be used in a wide range of segments and products.

Have a look at Table 4 to see what the potential of your ingredient is in the industry segments.

Tips:

  • Use the active/functional properties of your ingredient to find out in what type of products it can be used, once you know what your ingredient does. Which product type your ingredient can be used in can help you to find interesting parties and traders.
  • Have a look at our product fact sheets such as palm oil alternatives, essential oils for aromatherapy and anti-ageing extracts for more information on how natural ingredients are used in specific product types.

Table 4: Use of natural ingredients for cosmetics in industry segments

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4 . For which kind of company is your ingredient interesting?

To determine where to find interesting players, we can categorise cosmetic manufacturers across two axes (see Figure 2):           

  1. conventional cosmetics vs natural and organic cosmetics;
  2. niche brands vs big brands.

It may be difficult to reach manufacturers directly, because these do not generally buy directly from developing countries. They generally buy their ingredients through distributors or importers. See the section on Market channels below for more information.

Figure 2: Cosmetic brand segmentation

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Conventional vs Natural and/or Organic certified cosmetics

Both types of cosmetic manufacturers use natural ingredients, but in different percentages. Growing numbers of conventional cosmetics manufacturers use natural ingredients at low percentages to make a marketing claim. They might use higher percentages for a specific functional or active property. Even if quantities per product are low, large manufacturers probably buy higher total volumes of natural ingredients for popular or widely marketed products than small companies. Small companies may use a higher quantity per product, but they sell lower volumes of such cosmetic products.

Natural cosmetic products commonly contain much higher quantities of natural ingredients per product. What quantities are used depends on:

  • maximum usage levels (especially for essential oils);
  • price;
  • minimum quantity that formulators need to get a certain benefit.

Niche brands vs big brands

More often than big brands, niche brands are trendsetters, especially in terms of natural or organic cosmetics. They can be particularly interesting if you supply new, innovative ingredients. They also need lower volumes of ingredients for their cosmetic products. If you struggle to meet the volume requirements of big brands, niche brands can be an interesting option.

Big cosmetic brands such as The Body Shop offer better opportunities for established ingredients, as long as you can ensure stable quantities and qualities, and you can deliver them on time. They often pick up interesting and long-lasting trends from niche brands.

What is interesting is that a big brand using a natural ingredient in small volumes may result in a greater demand for that natural ingredient compared to a niche brand that uses natural ingredients in higher percentages. See the example in Table 5 below.

Table 5: Illustrative example of shea butter usage in big and niche brands

  Big brand Niche brand
Brand size 1,000 outlets in 20 countries 20 outlets in 1 country
Annual sales of body cream product (unit of 250 g) 500,000 units 10,000 units
Share of shea butter in final product 5% 20%
Total demand for shea butter 6.25 tonnes 500 kg

Tips:

  • Use the segmentation in Figure 2 to determine what kind of player may be interested in your ingredient.
  • Target small, niche brands instead of massmarket brands. Many of these niche brands exist in Europe. You can often find them through national cosmetics manufacturers’ associations, trade press or blogs. For example, Eluxe Magazine identified Supermood from Finland as a key naturalfocused cosmetics brand to watch.
  • Target big brands producing conventional cosmetics if you can produce larger volumes of established ingredients.
  • Want to find buyers in these segments? See our study of Finding buyers for natural ingredients for cosmetics.

5 . What is your Unique Selling Point?

Finally, you need to find out how your ingredient stands out from its competition. Is it a commodity ingredient or a speciality ingredient?

Figure 3: Segmentation in speciality and commodity ingredients

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Commodity ingredients

Commodity ingredients are commonly used ingredients, such as standardised extracts or commodity oils (for example, palm oil or coconut oil). They are often traded at high volumes, which leads to low margins along the value chain.

The cosmetics market is very competitive. An ingredient’s price is key when manufacturers choose which commodity ingredient to use and in what quantities per product.

For essential oils and botanicals, the situation is less straightforward. On the one hand, some of these ingredients have a maximum allowed level of use in cosmetic products because of the specific compounds that they contain. On the other hand, some will also require a minimum level of use to achieve a desired effect.

Speciality ingredients

Speciality ingredients most commonly offer:

  • an interesting market benefit (such as story or efficacy);
  • traceability;
  • assurance of sustainability (with certification).

If cosmetic producers include speciality ingredients, they can make their final product more interesting to consumers and potentially increase the price of final products. Consequently, producers could pay a higher price for their ingredients as well. They would also be willing to pay a higher price if you can reduce risks.

Speciality ingredients are usually traded in small quantities and prices can be high. For example, commodity vegetable oils such as sunflower oil and flaxseed oil are priced between € 3–5 per kg. A speciality oil such as sea buckthorn goes for around € 100 per kg.

Some importers and distributors actually focus on speciality ingredients, especially botanicals and vegetable oil.

Tips:

6 . Through which channels can you get natural ingredients for cosmetics on the European market?

The best way to get your natural ingredient on the European market depends on the type of ingredient that you export: botanicals, essential oils or vegetable oils. However, there are some similarities in their market channels; see Figure 4 below.

Figure 4: Market channels for natural ingredients for cosmetics
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Targeting importers

European traders and distributors are your most important market entry point. Of these, distributors are importers that often make contracts with their suppliers. These importers can trade in up to 500 species, together with other substances that do not occur in nature.

Importers can also act as a security screen for their customers. They can help to ensure that the products which they trade comply with regulations. By buying ingredients through importers, cosmetic manufacturers and processors have a guarantee that the quality and traceability of the ingredients that they buy is sufficient.

Importers are involved in:

  • global sourcing;
  • analysis and quality control;
  • rectification (correct quality or other issues);
  • blending;
  • product documentation to ensure that ingredients comply with buyer and legislative requirements;
  • sales to processors and cosmetics manufacturers.

Often, established importers have already registered their imports under REACH (Registration, Evaluation, Authorisation and Restriction of Chemicals), which is required for many cosmetic ingredients.

Aside from importers, agents are important in speciality niche products. They can be interesting if you:

  • have limited experience on how to export to Europe and need guidance on export processes;
  • need an intermediary that has the knowledge to evaluate and select interesting buyers, especially if you have a new ingredient for the European market;
  • need a partner who is trusted within the sector and can make up for your lack of sector reputation.

Small importers often specialise in either the cosmetics, pharmaceutical or food and food supplements industry. Larger players supply to all these industries, and work with both raw materials and processed ingredients.

Both small and larger parties can be interesting for you. This depends on:

  • the size of your company;
  • the type of products that you export;
  • certification;
  • documentation needed.

Targeting the European processing industry

Europe also has a large processing industry. Processors mostly buy raw materials from importers. However, in some cases – and in particular with strategic ingredients – they import natural ingredients directly from developing countries. They can specialise in:

  • oil crushing;
  • refining or derivative production;
  • extraction;
  • compounding ingredients for fragrances;
  • further ingredient processing.

Most natural ingredients can be imported and used in cosmetics without additional processing, with the exception of specialised extracts and vegetable oils that need refining. Ingredient processors create ready-to-use cosmetic ingredients. For example, they isolate active components from raw materials or combine components from different ingredients into proprietary cosmetic ingredients. They often sell these ingredients to cosmetics manufacturers. Smaller processors might work through distributors.

Large processors often supply to producers of cosmetics and health products, while smaller companies specialise in one of these sectors.

Targeting cosmetics manufacturers

Cosmetic manufacturers develop and make final cosmetic products. They often specialise in one or more industry segments (see Figure 4). Large cosmetic companies such as L’Oréal are active in all segments. Cosmetic manufacturers rarely source ingredients from developing countries directly, preferring to buy from European processors and importers.

The bulk of finished products are sold through retail outlets, both mass-market and speciality stores. However, direct sales through web shops are becoming more important in the natural cosmetics sector. Companies are increasingly targeting consumers directly instead of going through retailers.

Speciality and certified ingredients usually have short trade channels. This situation means that there are fewer steps between you as a supplier and the cosmetics manufacturer. Buyers of these ingredients would like to know the source of the ingredients as specifically as possible so they can use this information in their marketing campaigns.

Consumers are also asking increasingly detailed questions on the provenance and sustainability of cosmetic products. As a result, you can expect that buyers will need more information, data and documentation on the traceability and sustainability of your ingredients. For example, they want data on the local impact of your ingredients in terms of number of households benefited or local developments. The cosmetic brand Body Shop shares several impact stories on their website supported by data, such as how their use of Brazil nut oil has helped to protect 8,000 hectares of Amazonian rainforest or how buying beeswax from Cameroon gives a fair wage to 1,000 beekeepers. Distributors such as IMCD are likewise interested in these data, which they must provide to their clients – cosmetic manufacturers.

Tips:

7 . Market channels and trade hubs for botanicals, essential oils and vegetable oils

Depending on the specific natural ingredient that you produce, there are different channels to get your product on the European market.

Botanicals

Botanicals can be imported either as raw materials (medicinal and aromatic plants to be processed in Europe) or as extracts. Traditionally, most extraction took place in Europe, but this is gradually shifting to developing countries.

However, further processing into ready-to-use cosmetic ingredients and developing proprietary ingredients (with intellectual property rights) based on extracts still predominately takes place in Europe.

European importers and processors play a dominant role in the global trade in botanicals, especially in terms of innovative and proprietary extracts. They supply European and North American cosmetic producers.

Germany is the main hub for trade in botanicals originating from developing countries. The country is an important importer and exporter of both raw plant materials and extracts. In 2017, Germany imported 67,000 tonnes of raw plant materials and 7,000 tonnes of extracts. Of these imports, 45–50% originated in developing countries. Germany is also home to the largest extraction industry in Europe.

When looking at raw plant materials, Portugal became the largest European importer in 2016 and 2017. Since 2013, Portuguese imports have increased by 114% annually. Only 0.2% of these imports originated from developing countries in 2017. Most Portuguese imports originate from Spain, followed by Belgium and the United Kingdom. In the case of extracts, however, Portugal is a large importer from developing countries; in 2017, these suppliers accounted for 90% of Portugal’s extract imports.

Italy, Spain and France are large trade hubs for botanicals as well, both for raw plant materials and for extracts. They are the largest traders and processors of botanicals in Europe. France plays a particularly important role in the botanicals trade focused on cosmetics applications. In addition, the Netherlands and Ireland are important importers of raw plant materials.

Tips:

  • Look for importers of raw plant materials in the countries listed above or collaborate with extractors in your country if you cannot produce an extract yourself.
  • See our study of Trends for natural ingredients in cosmetics for additional information and tips.

Essential oils  

It is easier to sell essential oils directly to European processors and cosmetic producers than botanicals and vegetable oils. Essential oils are commonly traded in small volumes and often do not require further processing.

European companies can add value by:

  • transformation of oils (if required);
  • isolation of specific fragrance compounds;
  • repackaging and labelling.

The European fragrance industry combines different essential oils and fragrance compounds into fragrances for cosmetic producers.

The leading trade hubs of essential oils are included in Figure 5.

Together, the top five importers accounted for 73% of the total European imports in 2017 (volume). The same year, they also accounted for 69% of the export volume. These countries are also the largest importers of essential oils from developing countries.

France is a large importer of high-value oils (such as rose geranium and jasmine absolute), which are most commonly used in cosmetics. In 2017, France was the largest importer of essential oils in terms of value, at € 391 million.

Tips: 

  • Target importers if you can supply large volumes of essential oils. They generally buy larger quantities than cosmetics manufacturers.
  • Target cosmetics manufacturers or fragrance houses directly if you supply small volumes of essential oils.

Vegetable oils

Some commodity raw materials, such as cocoa beans, are still mostly processed into vegetable oils by the crushing industry in Europe. However, this situation is changing. Specifically, non-commodity oilseeds and nuts are increasingly crushed in the countries of origin, such as passionfruit seed and sacha inchi nuts.

Some commodity raw materials are processed more often into vegetable oils and fats in the country of origin as well because they are used in the cosmetic sector. An example of this process is shea butter. The food sector uses 90% of all shea butter. For this purpose, shea nuts are imported and processed in Europe. However, several cosmetic manufacturers choose to use shea butter produced in the country of origin. Cosmetic brands can use this locally produced shea butter in their marketing campaigns.

Vegetable oils are often filtered in their country of origin. Whether further processing is feasible depends on the quality of your oil, the available volumes and your buyer’s needs.

Most vegetable oils arrive in Europe as a crude oil. Here, they are then further processed into a refined oil or higher-value derivatives (such as emulsifiers or surfactants). Oils do not require chemical processing for use in cosmetics; this processing is optional.

Most large-scale cosmetic manufacturers prefer to use refined vegetable oils. Using refined oils reduces the risk of variations between different batches. At the same time, there is a strong consumer interest for crude oil in cosmetics, which does not have the same shelf life as refined oils.

Manufacturers often use organic oils directly in cosmetic products, because chemical processing is restricted for such certified ingredients. At the same time, allergens do need to be removed from allergenic oils, usually by filtration or by refining processes. Refining, bleaching and deodorising can be done according to organic regulations.

It is very rare for small exporters from developing countries to supply to refiners directly, because they usually cannot provide sufficient volumes. Some refiners do work in smaller volumes, such as 100 kg. Small exporters do not supply to derivatives industries directly either, because these are complex industries.

Direct supply to derivatives producers is more feasible if you supply speciality oils. You need to be able to supply sufficient volumes of a consistent quality and find a company that is interested in small volumes.

France and the Netherlands are the largest trade hubs for speciality vegetable oils in terms of total imports and imports from developing countries (recorded under Harmonised System code 1515.90). These countries are among the six largest exporters as well, together with Denmark, Italy, Spain and Germany.

The Netherlands and Denmark host large vegetable oil refiners. They both import a large share of oils from developing countries, at 49% and 82% respectively.

Other large importers of vegetable oils in 2017 include Austria, Sweden, Germany, Belgium and Italy. These countries only import a small share of oils directly from developing countries.

Tips:

  • Try to find a partner in your own country to reach a sufficient scale for processing if you do not have the capacity to process your raw materials into oils. You can also look for a company that can process the materials for you.
  • Determine whether you can find a European refiner to which you can supply directly if you produce speciality oils.
  • See our studies of specific vegetable oils for more information on market channels, such as the fact sheets on shea butter and sacha inchi oil.

Please review our market information disclaimer.

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