Sustainable beauty

Sustainability of beauty industry

  • “Sustainability” in beauty industry overseas has been a hot topic over the past few years. Beauty products are not only very diverse, but are also classified as nondurable goods that require frequent purchase. The industry also produces massive amount of small sized samples. Therefore, we witness a high level of overpacking in beauty industry.
  • In addition to packaging materials, beauty products often contain ingredients such as surfactants, silicones, and micro plastics that are harmful to the environment. These substances are not only harmful to the skin, but also require longer time to break down in nature. Thus, consumers can contribute to the environment simply by not purchasing products that contain harmful(artificial) ingredients.
  • Global market size of sustainable packaging is estimated to be 250 billion dollars. It is growing at a yearly average rate of 5%, and the proportion of beauty and personal care in the market is slightly over 10%.
  • As more people are alarmed about the impact of cosmetics products on environment, the theme of sustainability is becoming more widely known. Indonesian consumers are particularly interested in this topic. Figure 3 shows the level of interest of consumers on sustainability by country.
Figure1.Global sustainable packaging market size | Source: Transparency Market Research
Figure2. Sustainable packaging market share by industry | Source: Grand View Research
Figure3. Percentage demand on sustainable cosmetics(2016) | Source: Statista

Change in management

  • According to Arnaud Meyselle, CEO of American skincare brand REN Clean Skincare, 70% of the waste generated by beauty industry comes from packaging. This implies that the easiest step for companies toward sustainability is to reduce packaging or at least make packaging materials environmentally friendly.
  • L’Oreal is a leading corporation that focuses on sustainability. When evaluating brands, L’Oreal gauges factors such as the renewability of raw materials, efficiency of transport routes, minimization of use of plastic, etc. The company also changed more than one hundred of its operational cars into hybrid cars recently.
  • About a month ago, L’Oreal and Albea(global leading cosmetics container manufacturer) revealed the first-ever paper-based tube and pump container. Products using these containers will be commercialized from the second half of 2020.
  • In 2018, Unilever launched the brand Love Beauty and Planet with full focus on sustainability. All products are packaged in 100% recyclable materials. Unilever’s another brand, Dove, decided to pack all its products in recycled plastic, and not to use any plastic for its beauty bar (soap) packaging.
  • Increased interest in sustainability has led to a shift from the past market structure dominated by large conglomerates into more horizontal scope with many niche brands. For synthetic ingredient-based cream market, the market share of top 10 largest companies were three times larger than that of top 10 companies in natural ingredient-based cream market (1985 ~ 2017). This suggests that big names do not have a big position in natural, organic ingredient-based cosmetics market.
Figure4. Top 10 companies’ patent share in synthetic ingredient vs natural ingredient-based cream market

Shift in consumer perception

  • Consumers seem to be willing to pay higher prices for products that take into account environmental impacts. According to a Nielsen survey last year, 38 percent of consumers worldwide are willing to pay a premium for products that use environmentally friendly or sustainable ingredients.
  • Millennials, in particular, are leading the move. As shown in Table 1, millennials are very sensitive to the topic of sustainability compared to other generations.
  • In conclusion, as sustainability becomes more of an important matter, there will be more opportunities for niche brands to grow. Especially if they target millennials, there is a higher chance than they will gain strong support.
Figure5. Percentage of consumers that is willing to pay premium for each features | Source: Global Consumer Confidence Survey with Nielson(2Q18)
Table1. Sensitivity on sustainability by generation | Source: Global Consumer Confidence Survey with Nielson(2Q17)
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