Natural and Organic Cosmetics in China: the Challenges Behind the Shift

“Natural”, “organic”, “clean label”, “sustainably sourced” etc. are new drivers of consumer purchasing preferences in China’s cosmetics sector. Cosmetic enterprises are increasingly incorporating some or all of these elements during new product development, marketing strategies etc., as enterprise fight to stay relevant and win or maintain market share. China’s regulatory framework has failed to stay abreast of developments in these rapidly emerging market segments, and as such compliance issues associated with the development, labeling, retail and advertisement of organic and natural products have inevitably occurred.

Organic, natural, green and vegan cosmetics are all new concepts in China’s market. More and more consumers are choosing these products because they think that they are healthier and more environmentally friendly. This trend has been proven by the data from Tmall Global (one of the largest cross-border e-commerce platforms in China), the sales of natural and organic cosmetic brands in 11.11 shopping festival 2019 rose by more than 400% YoY. This is also why Tmall Global has decided to invest more in this category in 2020. [1]According to a research report by Grand View Research, the global organic personal care market size was estimated at USD 13.33 billion in 2018 and is projected to register a compound annual growth rate (CAGR) of 9.4% from 2019 to 2025 [2]. At this rate, the global organic personal care market will expand to USD 25.1 billion by 2025. Increasing demand for cosmetics and skin and hair care coupled with a rising need for environment- and animal-friendly products is expected to drive growth.

North America is no doubt the pioneer and market leader for these product categories, with Europe coming in as the second biggest market for organic products. The Asian market is still getting to grips with the increasing importance of this segment. In Asia, people’s awareness of personal health and safety and their awareness of using environmentally sustainable products is gradually increasing. The rise of the middle class in China, India, Vietnam, Thailand, Malaysia and the rest of the Asian Pacific region has been nothing short of phenomenal. As expected, increased wealth and living standards have translated to increased demand for higher quality and ultimately safer products.

The Chinese Consumer

How about Chinese consumers’ attitudes toward natural cosmetic products? A report by AlixPartners titled “Naturally Beautiful: Millennials and Preferences in Beauty and Personal Care Products” [3] may tell us the answer. The report asked consumers how much importance they place on beauty products being “healthy,” “clean,” and “natural.” Researchers surveyed a combined 4,500 consumers in the following countries: China, France, Germany, the United Kingdom, and the United States.

The AlixPartners survey found a common interest in natural and organic beauty products across the five surveyed nations, but Chinese consumers are more committed to green beauty than consumers in the other four nations. While 72% of all respondents said purchasing “healthy or clean products” was important to them, 90% of the Chinese consumers surveyed fell into this category. In contrast, only 56% of British consumers regarded green beauty products as important.

However, defining the scope of these product categories is one of the major problems for brands. Standards for these products tend to vary across borders, or there may be no standard definitions or regulations at all. This leads to misunderstanding and confusion among consumers and offers opportunities for more unscrupulous brands to mislead consumers. This situation makes it difficult for well-meaning brands to build consumer confidence. Therefore, brands need to understand what kind of products are regarded as natural or organic by consumers.

AlixPartner also asked consumers how important each stage of the product life cycle was when broken into five stages: ingredient sourcing, ingredient quality, manufacturing, logistics, and marketing. Quality of ingredients was the most important factor for 77% of millennial and Gen-Z consumers, while the majority of 18-34-year-old respondents cited the source of ingredients and type of manufacturing as important. Logistics and marketing were considered comparatively less important. Older respondents held similar preferences but were less likely to regard each of these factors as “important.”

Regulations about natural/ clean/ organic beauty products

As mentioned before, China doesn’t set a specific definition for organic/natural/clean cosmetics. There are also no specific regulations about organic/natural/clean cosmetics because it is very difficult to set standards for these kind of cosmetics.

In China, there are four regulations for organic products:

• Organic Product Certificate Catalogue (2018) [4]
• National Standard for Organic Products (including GB/T 19630.1-2011; GB/T 19630.2-2011; GB/T 19630.3-2011; GB/T 19630.4-2011) [5]
• Organic Product Certificate Management Measures (2014) [6]
• Organic Product Certification Implementation Rules (2014) [7]

However, organic cosmetics are not included in the latest Organic Product Certificate Catalogue. The main content of National Standard for Organic Products is production, procession, labeling and management of plants, animals and microbial products. Cosmetics are also not mentioned in this National Standard. Labeling is also a major stumbling block; on July 1st, 2012, the Certification and Accreditation Administration of the People’s Republic of China announced the cancellation of organic certification of cosmetics. In 2015, the government banned the use of “organic”, “zero added” (note: zero added means no added chemicals such as preservatives) and “100% natural” labelling claims on cosmetics in China. From then on, even if overseas brands have obtained relevant European Union certifications such as Ecocert certification or German natural organic certification BDIH, they still cannot not be declared as “organic products” when entering the Chinese market. As long as the English word “organic” appears on cosmetic ingredients imported from overseas, they could be detained by customs.

Challenges for developing natural/ organic cosmetics in China

If natural or organic cosmetic brands want to develop in China, they need to overcome these challenges:

Strict regulations

The Chinese government doesn’t recognize organic cosmetics and also holds a cautious attitude to natural cosmetics, which means that natural brands who want to enter China’s market will encounter certain barriers. However, the development of cross-border e-commerce provides an option for these brands because there are fewer limits for products entering China in this way. As long as products are on the List of Import Goods through Cross-border E-commerce (2018 Edition), they can enter the Chinese market through cross-border e-commerce platforms, but it is worth noting that the Chinese word “有机” (organic) is not allowed if a Chinese label is added to the product package. On the other hand, the English word “organic” is still permitted.

Strict ingredient regulation

As we know, cosmetics that use ingredients that are not listed in the Inventory of Existing Cosmetic Ingredients in China (IECIC2015) require registration in China. This gets in the way of the development of natural and organic cosmetics to some extent. Recently, ChemLinked editors took part in China International Beauty Expo (CIBE) 2019 in Guangzhou China. We have seen some exciting new ingredients trends, including the research and development of some plant extracts, herbs, and ingredients from the ocean.

The good news is that in the Cosmetic Supervision and Administration Regulations (Draft), which is passed by China State Council on Jan 3, 2020 (note: this means the final version of this regulation is expected to be released soon), new ingredient registration will be much easier. Under pending regulatory reforms, management of new ingredients will be stratified based on the inherent risks of the ingredient. Under this framework, new cosmetics ingredients will refer to natural or artificial ingredients used for the first time in China. Antiseptic, sunscreen, coloring, dyeing, whitening new ingredients, and other high-risk new ingredients will need to be registered at National Medical Products Administration (NMPA). Other new ingredients will be subject to filing with the National Medical Products Administration 30 working days prior to being used. If NMPA has questions, they shall come up with questions within that 30-day assessment period. Besides this, it is worth noting that if a whole plant is approved as a cosmetic ingredient, then it is not necessary to apply for each individual ingredient derived from the different parts of the plant.

A chaotic market

At present, the natural and organic cosmetic market in China is quite chaotic. Both well-meaning brands and some unscrupulous brands are competing. According to the report Naturally Beautiful: Millennials and Preferences in Beauty and Personal Care Products, 38% of consumers in China don’t know where to buy reliable natural cosmetics. The price is another problem as natural products usually have a shorter shelf-life, which often translates to a premium price. The good news is that Chinese respondents were significantly less likely than other nationalities to report cost as a barrier to purchasing (just 36% of respondents mentioned price as a barrier to purchase compared to 56% in other countries).

In summary, organic, natural, sustainable, clean-label etc. are all key trends driving growth in China’s cosmetic sector. Harnessing consumer demand will require careful consideration of retail channels and compliance strategy, which must be key parts of any successful Chinese market entry strategy.

References:

[1] Natural and Organic Cosmetics Sales Increase over 400% YoY, Tmall Global adds investment in this category

[2] Organic Personal Care Market Size, Share & Trends Analysis Report By Application (Cosmetics, Skin, Oral, Hair Care), By Region, And Segment Forecasts, 2019 - 2025

[3] Naturally Beautiful: Millennials and Preferences in Beauty and Personal Care Products

[4] Organic Product Certificate Catalogue (2018)

[5] National Standard for Organic Products (including GB/T 19630.1-2011; GB/T 19630.2-2011; GB/T 19630.3-2011; GB/T 19630.4-2011)

[6] Organic Product Certificate Management Measures (2014)

[7] Organic Product Certification Implementation Rules (2014)

[8] Young Chinese Want ‘Green’ Beauty (But Who Will Give it to them?)

Disclaimer: This was a non-sponsored guest post written by ChemLinked. Covalo is not responsible for the accuracy of any of the information supplied by the guest writer.