10 tips for doing business with European buyers of natural cosmetic ingredients

To successfully export your cosmetic ingredients to European buyers, you must pay close attention to particular characteristics. This study highlights 10 characteristics and in turn 10 tips to meeting them. If you and your staff master these characteristics, you will increase your chances of becoming and remaining a successful exporter to the European market.

1. Adapt to the business culture in the cosmetics ingredients sector

You need to know about the business culture in the European cosmetic ingredients sector. A key advantage of following this tip is that it will help you in your dealings with prospective buyers. A central disadvantage of not following this tip is that it will likely make your dealings with prospective buyers challenging.

Your prospective buyers will be consciously and subconsciously observing you and your behaviour, which will ultimately result in an ongoing assessment of the risk of doing business with you. Thus, always try to make a good impression; not doing so will likely result in you failing to do business with European buyers.

The business culture in the European cosmetic ingredients sector is similar to that of the chemicals industry. Many exporters who are already successful in the food ingredients sector do not make it in the cosmetic ingredients sector because they do not pay enough attention to this characteristic. Even if your ingredient is of natural origin, organic certified or from the wild, the common factor is that it is part of the chemicals sector, which concerns chemical substances and mixtures. Safety and efficacy are key issues.

You should familiarise yourself with the technical language of specifications, sector-specific terms and regulations. In addition, because the cosmetics industry is concerned about corporate social responsibility and natural origin, you should also familiarise yourself with commonly used regulations and terms. Table 1 shows terms commonly used in the European cosmetics industry.

Table 1: Terms commonly used in the European cosmetics industry

Most business contacts are made by email or over the phone. This is usually followed by the electronic exchange of documentation, sending samples and a company audit. After this, if they are still interested in your product(s), a face-to-face meeting works best. This can be arranged at a trade show in Europe. The supplier and product approval and ordering processes takes time, and it is fine to work with the calendar of major trade fairs such as In-cosmetics. It is not necessary to be an exhibitor when you attend for the first time if the focus is to meet potential customers.

2. Carefully setting your prices and giving a quote

Do not go to market until you have carefully worked out your prices and pricing strategies. Failure to do this is likely to result in you sustaining a financial loss, as you may end up selling your natural ingredient for less than its production cost. A key advantage of following this tip is that it reduces the likelihood of this happening. Additionally, it is essential that you have your pricing information ready anytime you are likely to communicate with and/or meet buyers. This will increase your business credibility on the European market.

Setting your prices

Setting pricing information starts with preparing accurate cost information. Here, you must answer the following questions:

• What does it actually cost to procure, process and deliver your goods to a certain point in the supply chain?
• What is the break-even point for your entire business? This is the number of products you need to sell to at least cover your costs.
• What margins have you attributed above the break-even level?

Not knowing the answers to these questions will put you at a disadvantage when presenting pricing information to existing or potential customers. It could also result in you sustaining a financial loss.

Know the different international commercial terms (Incoterms^®) for your products. Buyers usually want to know the FOB (Free on Board) price for your goods, where the carrier is decided by the buyer. Know how to calculate this price. Also, prepare price points for other Incoterms such as CIF (Cost, Insurance and Freight) and DDP (Delivered Duty Paid).

Cosmetic ingredients are sold in different size units. Ingredients can be sold in units of 25 kg up to container loads. Generally, the more expensive the ingredient, the smaller the unit size. Note that products are sold by weight, not volume, so quote on a per kg or per megatonne basis. Discounts are expected for larger quantities. Work these out accurately based on the higher or lower unit price for handling, transporting and warehousing the goods.

Apart from some retail prices for individual cosmetic ingredients, very few examples of prices for individual cosmetic ingredients are published on the internet or in directories. If you find pricing information that relates to your price points, this can be a useful reference, but you should not rely on it, because it is not absolute.

Issuing a quote

European buyers of natural ingredients for cosmetics usually require prospective suppliers to provide them with quotes. This is because the quotes will contain information that will help them determine if they want to do business with suppliers. It is important to try and keep your quote as short and as concise as possible and to ensure it does not contain any spelling and grammatical errors. According to European buyers, quotes should include:

• Product description and/or range (if you export a range of natural ingredients for cosmetics) – this should include the basic grade (conventional and/or organic), quality and certification information about your natural ingredient. You do not need to include a complete product specification, because you can send it as an attachment, which is something you should do, as it lends credibility to your business.
• Storage and shelf life – this is often based on industry experience. This is defined as the typical shelf life of an ingredient when it is correctly stored and handled. The typical shelf life of a natural cosmetic ingredient begins on its date of manufacture. This is only meant as a guideline and should therefore not be regarded as an expiration date.
• Price – this should be in euros (EUR), because you are targeting European buyers. You must state which Incoterms are used for the price along with the unit used (generally on a per kg or per megatonne basis). This is applicable to natural cosmetic ingredients in liquid form such as essential oils and in solid form such as shea butter.
• Estimated delivery/lead time – this is the estimated delivery time from the developing country you are exporting from to the European buyer. It is important to be aware that delivery times may be longer due to the global COVID-19 pandemic, because of forced quarantine measures and restrictions on the movement of goods, among other things. This is something that has been highlighted by European buyers of natural ingredients for cosmetics who have been interviewed for CBI.
• Capacity to export – this concerns information about quantities of natural ingredients you can supply and over what period. Note that the production of some natural ingredients in developing countries has been restricted and/or completely stopped due to government lockdown measures. This may therefore affect the quantities you are able to produce and export.
• Packaging – information about the type of packaging (for example, steel drum or kraft paper bag) and size (for example, in 25-kg batches) of your natural ingredient should be included here.
• Payment – although payment terms can be indicated, they can be negotiated later.
• Quote expiry – this does not always have to be provided. However, to avoid the effects of frequent price fluctuations, you can indicate that your price is not your final offer.

Figure 1: Example of a quote in the natural cosmetic ingredients sector

Source: Ecovia Intelligence

3. Adapt your sales pitch and marketing materials

European buyers of cosmetic ingredients are looking for ingredients that are innovative, high quality, ethical, natural and/or have unique or interesting origins. These are key selling points to include in your sales pitch and marketing materials (online and offline) that can be applied to both existing and new ingredients.

A key advantage of following this tip is that it will give you a competitive advantage when you are seeking to enter the European market, as it will set you apart from your competitors for the right reasons. Meanwhile, a key disadvantage of not following this tip is that it will become difficult for buyers to find you in an already competitive market. This will make it more difficult for you to enter the European market.

Offering innovation

Innovation, for example, could be applied to the supply chain or the process, not necessarily to the ingredient itself or its properties. Innovative ingredients will have similar properties to existing ingredients. A new vegetable oil, for example, will be like other vegetable oils or a new plant extract that has proven anti-aging properties.

Providing quality natural ingredients

European buyers of natural cosmetic ingredients require ingredients of the highest quality. Buyers therefore assess the credibility of prospective suppliers based on quality management standards. Thus, if your natural ingredient has been produced according to quality management standards, this will be 1 of its key selling points.

You must therefore ensure you clearly highlight this in your sales pitch and marketing materials, for example by displaying the relevant certification logo on your website, product portfolio and catalogue. Eco Products is an example of a small to medium-sized exporter of baobab oil which has done this.

Being ethical

At the very least, ‘ethical’ means you need to have policies and procedures in place which demonstrate your commitment to being responsible for managing an ethical supply chain and an ethical company. It does not necessarily mean Fair Trade certified. You could start by applying the SEDEX system to your business and supply chain.

Having a marketing story

Having a marketing story for your natural ingredients and displaying photographs taken by a professional photographer is 1 of the best ways of informing prospective buyers about your company’s key selling points.

For example, if you have implemented Corporate Social Responsibility programmes that benefit your workers, families and communities, you should include photographs of them on your website. The small to medium-sized Ghanaian exporter of shea butter Shea Tree Ghana Limited is an example of a company which has done this.

Figure 2: Shea Tree Ghana Limited’s corporate social responsibility marketing story

Source: Shea Tree Ghana Limited

Show your origins

Origin is another important key selling point and also underlines the need for traceability. Maybe your ingredient is harvested or grown somewhere different than the usual sources? A well-known example is the case of tea tree essential oil. For years, this was known as an Australian product, until EarthOil started to produce it in Kenya and started to compete successfully with Australian sources.

Show your naturalness

Natural is a long-term trend that is still relevant and important for the cosmetics industry. You should highlight the fact that your ingredients are natural. Additionally, having certification from COSMOS or from NaTrue, for example, can be an advantage. Thus, you should ensure you clearly highlight this in your sales pitch and marketing materials, for example by displaying the certification logo on your website and in your product portfolio and catalogue.

Putting it all together

To satisfy buyer requirements with your key selling points in your sales pitch and marketing materials (both offline and online), ensure they are effectively and professionally communicated to prospective buyers. For example, your website should include sections which clearly inform prospective buyers of who you are, why your natural ingredient is innovative and how it is sourced, processed and ethical, and the relevant certification. Having photos taken by a professional photographer that show these features is also a good idea.

Whenever possible, combine these key selling points into 1 product. Zuplex is an example of a company that sells a proven anti-aging extract from an indigenous plant found in South Africa. It is harvested by a women’s organisation and sold to a processing company that complies with the Nagoya Protocol, has incorporated the women’s organisation as a shareholder and has established targets for reducing its energy and water consumption as well as its waste. This ethical approach is attractive to many companies and is expected to become more important in the future.

4. Connect with government and non-government agencies

Being part of an export promotion programme can help increase your chances of doing business with European buyers. Investments that you will likely have to make to meet European requirements will be more likely to result in a return when you work with expert agencies that know about exporting. These are 2 key advantages of following this tip. The main disadvantage of not following this tip is that it will make it more difficult for you to enter the European market,

Organisations implementing export promotion programmes have a structured approach to supporting exporters, including training, coaching, distance guidance, trade fair participation and matchmaking with European buyers. They hire European sector experts who advise exporters on how to meet the market requirements and buyers’ expectations. Important agencies that assist producers in developing countries in exporting to the European market include:

• The Centre for the Promotion of Imports from developing countries (CBI) is a government-funded organisation supporting over 800 entrepreneurs in becoming successful exporters on the European market. CBI offers an export coaching programme with a comprehensive range of activities for exporters, including in-country training, company visits, coaching, distance guidance, participation in multiple trade fairs and market information.

CBI works with senior sector experts who work closely with the exporters during the export coaching programme. CBI also works with Business Support Organisations (BSOs) that help exporters develop their export businesses.

• The Swiss Import Promotion Programme (SIPPO) focuses on training and the exclusive development of selected BSO staff in countries of origin, particularly the training and coaching of BSO staff to increase their capabilities to provide improved services to exporters.
• The Import Promotion Desk (IPD) provides a platform where exporters from selected countries can meet European, especially German importers. It also prepares market reports.
• The International Trade Centre (ITC) is a developmental agency of the United Nations for sustainable trade. Most of its activities are intended for exporters which they help through their programmes. ITC provides export management, supply chain management, quality management, packaging, and marketing and branding programmes. The ITC has publications and an SME Trade Academy providing online courses (some at no cost). If you want to develop yourself as a successful exporter of natural ingredients for cosmetics, courses such as ‘Export Sales and Negotiation’ and ‘Helping SMEs Generate Export Business’ may be relevant for you.

Non-governmental organisations

Non-governmental organisations (NGOs) can provide support to exporters in developing countries. Africrops is a supplier and consultancy offering on-site capacity building and training in Africa.

Figure 3: Logos of well-known government agencies and NGOs supporting exporters in developing countries

Source: Various

5. Organise your product documentation

Regulations applying to exports to the EU state that you should ensure you have a well-organised and structured technical dossier. This is because it is an important source of information about your natural ingredients for cosmetics, and it can be used as proof of compliance with relevant legislation.

A well-organised and structured dossier about your natural ingredient will facilitate your dealings with existing and prospective buyers. Having a thorough understanding of your technical dossier content will allow you to answer and meet buyer expectations as a knowledgeable and reliable business partner. These are all key advantages of following this tip. Meanwhile, the disadvantage of not following this tip is that it will be difficult for you to enter the European market and trade successfully.

The technical dossier should contain all the known data and information about the ingredient, including safety, effectiveness, claims, patents, ethical and corporate social responsibility, health and safety, production, supply chain and traceability and updated price lists.

A technical dossier contains documents such as Technical Data Sheets (TDS), Safety Data Sheets (SDS) and Certificates of Analysis (CoA). Table 2 shows what is contained in the SDS, TDS and CoA to help you prepare these 3 important pieces of documentation.

Table 2: Contents of SDS, TDS and CoA

Source: Ecovia Intelligence

The whole dossier is an internal document and is not for circulation outside the company. However, the data and information should be used to prepare key documents such as the Product Specification, the Safety Data Sheet and promotional materials.

Grey literature and information on where your ingredient is used, such as in cosmetics and foods, especially information about any final-product companies using this ingredient (if available), should be kept in this dossier. Grey literature refers to research that is either unpublished or has been published in non-commercial form. Examples include government reports, conference proceedings, fact sheets, dissertations, maps and images, and photographs.

Having a comprehensive technical dossier is essential if you want to export to the EU. Failure to have 1 may result in European buyers refusing to trade with you. It could also potentially damage your reputation as a credible supplier of natural ingredients.

For example, when a European buyer of natural ingredients for cosmetics was asked about the importance of documentation, they stated “Yes of course, if you do not have them (technical documentation), there is not going to be a sale at all”. It is very important that you invest a substantial amount of time and resources in preparing a well-organised and structured dossier.

6. Meet common buyer requirements

European buyers of natural cosmetic ingredients look for quality and reliability; this is what underpins their buyer requirements. Quality covers not only the product quality, but also the company and the supply chain. Reliability covers not only logistics, but also raw materials, processing and communications.

A key advantage of following this tip is that you will likely be at an advantage in your journey to enter the European market. This is because European buyers are your main entry points into the European market. On the other hand, not following this tip will only be to your disadvantage.

Quality

In general, the quality of your product is presented in its Safety Data Sheet, Technical Data Sheet and Certificate of Analysis. These 3 documents must be well prepared, organised and structured; they should accompany every product you are offering.

European buyers often have specific requirements for natural ingredients regarding their composition, smell, texture and colour, as this determines their use in cosmetics. For example, the fatty acids and oleic acids in and relevant composition of vegetable oils is particularly important in the cosmetics industry. Indeed, a European buyer of avocado oil for cosmetics stated in an interview, “The palmitic and oleic content is important to us, and colour is also quite important”. Thus, you should find out if buyers have specific requirements and only commit to meeting them if you can.

Consistent quality is important to European buyers because it is central to the manufacturing of cosmetics. For example, 1 European buyer of natural ingredients for cosmetics stated, “A problem is the consistency in the goods, from batch to batch”. Thus, buyers prefer a consistent level of quality across all orders. Buyers also expect all orders to be delivered in suitable packaging based on order volumes. For example, high-quality essential oil in aluminium, lined or lacquered steel containers that can hold 25 kilogrammes for an order of that size.

Quality also includes an assessment of your company. A good company pays attention to corporate social responsibility, financial strength and documenting all its operations. You will be expected to have policies and procedures in place that cover key areas of labour, health and safety, environment and doing business, with targets set and measured. SEDEX is a starting point for an ethical audit.

Having documented processing operations, using at a minimum the Hazard Analysis and Critical Control Points (HACCP) methodology and ideally following Good Manufacturing Processes (GMP) and ISO9001 systems are good practices that will help you stand out from other companies.

Buyers are increasingly applying quality management standards to assess the credibility of prospective suppliers. Applying quality management standards gives credibility to your business, as it shows your commitment to delivering high-quality ingredients, which also gives your company a positive image.

Supply chain quality is assessed by traceability – in other words, knowing where and from whom the raw materials originate. Certification schemes, such as organic and natural, have the benefit that traceability is integrated. If you do not want or need organic or natural certification, consider how to offer a similar matching guarantee of traceability.

Reliability

Reliability is assessed by On Time In Full (OTIF) deliveries. It is also assessed by demonstrating certainty about available quantities of raw materials, demonstrating certainty about organising the logistics and being reliable in communication. It is important to note that delivery times are usually longer because of the global COVID-19 pandemic; reasons for this include mandatory quarantine measures and restrictions on the movements of goods.

7. Build long-term relationships with buyers

Once you have established yourself, you need to build on that achievement so you can maintain orders and find new business, so you can achieve sales targets for the current year and prepare sales targets for next year. A key advantage of following this tip is that it ensures the long-term viability of your business, and it may also result in higher profits. Meanwhile, the main disadvantage of not following this tip is the opposite happening.

It is important to work within the framework of performance and take appropriate actions if actual performance does not match targeted performance. Ensure that a culture of performance, targets, reward and openness is established and maintained in your company.

Targets can be established for any area of the business. Targets on the supply and processing side of the business usually focus on cost reduction and value for money. Targets on the sales side of the business focus on sales value, prospective sales and the ratio of sales contacts to sales contracts. Involve your staff in developing these targets.

Company owners and senior managers have a role to ensure that the targets are SMART (Specific, Measurable, Achievable, Relevant and Timed) and move the company forward towards it goals. Set up regular, weekly meetings with department managers to review the progress against the targets, identify areas that are drifting off course and take corrective action quickly.

Figure 4: SMART explained

Source: Kazoo

After every order delivered to a new customer, it is good practice to review that order internally and identify what went well and what you can do to improve the entire order process in the future. This has 2 objectives:

1. To achieve greater efficiencies within your company; and
2. To achieve better customer service.

Once per year, request your customers to provide you with an evaluation of the previous year’s business. Here, broadly ask the same questions about what went well and what can be improved for the future. Combine this with the annual review of orders and plans for the following year.

When you are in business with international customers, you might only receive 2 or 3 orders per year, and those might be the only communications you have with that company. That is the minimum level of communication necessary to maintain that relationship.

Consider developing a newsletter or being active on social media to communicate with your existing and future customers. Social media and tracking website traffic in particular are essential elements of building your business. Furthermore, ask the principal contact at your customer’s business if they would like to receive an article for their own newsletter or website, so they can use it for their own communications.

8. Always send high-quality samples to interested buyers

European buyers of natural cosmetic ingredients usually require prospective suppliers to provide them with samples which they will use to determine whether you are a suitable business partner. In particular, they will use these to determine whether your natural ingredient complies with the EU’s requirements and their buyer requirements. Samples are then tested and analysed at laboratories.

For example, a European buyer of natural ingredients for cosmetics said in an interview, “We always test in-house to make sure the product is of a good standard”. A key advantage of following this tip and providing samples is that it is likely to increase your chances of starting a business relationship with European buyers. Failing to do so is likely to result in them losing interest in doing business with you.

When buyers request a sample, you should ensure you provide them with samples as per their request. This will concern the:

• Type of sample (for example, organic or conventional and refined or unrefined);
• Quantity (for example, 300 grammes of refined shea butter);
• Packaging (for example, kraft paper bag and/or steel container).

You should therefore ensure you send samples which are of the highest quality and the correct quantity on time. Additionally, European buyers regularly test natural ingredients they have purchased, usually on a per batch basis. For example, in an interview, a European buyer of natural ingredients for cosmetics stated, “We always test in-house to make sure the product is of a good standard, because that is what our clients demand”. Another buyer stated they test their products “all the time, every batch”.

You must therefore ensure you always supply natural ingredients of the highest quality. Failure to do so could result in your business relationship with European buyers ending, as you do not meet their strict quality requirements.

Figure 5: Frankincense essential oil sample

Source: Alibaba

9. Act in a professional manner when dealing European buyers

Behaving professionally is essential to creating and maintaining a positive and reliable business image in Europe. A key advantage of following this tip is that it gives your business credibility and shows that you are a reliable business partner. Meanwhile, not following this tip is likely to have the opposite effect, which is likely to result in European buyers losing interest in you. You should therefore ensure you always uphold a good standard of professionalism in dealings with European buyers.

Your behaviour reflects on your company and plays an important role in how European buyers perceive your business. When doing business, several factors help to create and portray a professional business image, including:

• Dressing and behaving appropriately – dressing in appropriate business clothing and behaving and speaking in a polite and courteous manner and tone;
• Being punctual – being on time for meetings and discussions as agreed. Being late is considered unprofessional;
• Being transparent – taking responsibility for any mistakes. Immediately take full responsibility and apologise to your buyers if you make a mistake. Then, take steps to ensure similar mistakes are not repeated in future and inform buyers about these steps to reassure them;
• Being honest – not making false claims about your natural ingredients, as you will have to substantiate them later. For example, claiming to have organic or fair trade certification when you do not;
• Fulfilling agreements – meeting contractual agreements made with buyers, for example concerning quality, quantity and delivery. You must communicate any changes that occur quickly and clearly to your buyers. You should also try to work constructively with buyers to find solutions to any unexpected issues.

Competition is fierce in the European natural cosmetic ingredient sector. Buyers receive lots of requests from prospective suppliers of natural ingredients. It is therefore essential that you go above and beyond to win them over.

10. Read our studies to get practical help

CBI has carried out several studies about doing business in Europe. A key advantage of following this tip and reading these studies is that they will provide you with further information about the European natural cosmetic ingredients sector. This will help you gain a better understanding of it, which is essential when you are seeking to enter the European market. More importantly, these studies offer practical tips which can help you increase your chances of successfully entering the European market.

This study was carried out on behalf of CBI by Ecovia Intelligence.

Please review our market information disclaimer.