Specialty additives meet diversified demand
By Staff -- Purchasing, 1/11/2001 2:00:00 AM
Though they cost more, specialty additives are driving demand for cosmetics chemicals and personal care products. To gain market share, suppliers are sourcing expensive additives, such as botanical extracts, proteins, or vitamins, because end users view these ingredients as more natural or healthy. Specialty additives will command higher tags, while other chemical prices will remain stable.
According to a recent report by market research firm, The Freedonia Group, based in Cleveland, Ohio, specialty additives are the fastest growing segment of the cosmetic and toiletries chemical market. Expected to rise over 9% annually through 2003, demand for active ingredients such as plant acids, enzymes, polymers, proteins, vitamins and botanical extracts is increasing as consumers seek performance that maximizes the use of pharmaceuticals. For instance, the Freedonia study finds that consumers are concentrating on herbal extracts and vitamins in topical applications because they view these ingredients as promoting health, especially as they have been marketed to users of dietary supplements.
Perception of health drives demand
Overall, demand for cosmetics and toiletries will grow over 5% annually to $6.3 billion through 2003. Consumers are expecting that these products, which include personal soaps, will support their health. As a result, personal care products will feature more complex ingredients that stem from advances in pharmaceuticals. This is increasingly important to an aging population.
Other demographics driving demand for cosmetic chemicals are ethnic groups. Products that meet different needs among minorities are rising. In addition, personal care product sources continue to create new markets with wider specialty product offerings.
Not only do consumers differentiate among themselves by ethnicity, but they also view their needs based on exposure to environmental stressors, such as heat, pollution and sun, reports Freedonia. With a population that expects to have more control over the aging process, the market for ingredients associated in the past with health-oriented products rather than beauty, will continue to escalate.
In contrast, chemical volume will grow only modestly at 2.2% annually through 2003 due to higher focus on water-based formulations in skin care and other cosmetic products. This shift away from traditional chemicals is compounded by tighter restrictions on VOCs (volatile organic compounds), particularly for hair products.
Flavors and fragrances, which account for nearly a quarter of total cosmetic chemical market value, will grow at a steady pace over the next year. Freedonia reports demand for fragrances will grow over 6% annually through 2003, more than most other cosmetic chemical categories. Essential oils and botanical extracts will account for a significant portion of increased demand.
Specialty additive prices on the rise
Prices for specialized additives are higher than for other chemicals due to higher demand because these more costly ingredients are expected to yield stronger performance. For instance, the Freedonia study points out that enzymes and complementary blends of vitamins and plant acids are available in more anti-aging products, increasing competition for these ingredients. However, some specialty additives, such as alpha hydroxy acids, have saturated the market, stabilizing their prices. Traditional chemicals will not command significantly higher prices because demand is increasing more slowly.
Tags for cosmetics chemicals, especially specialty additives, are affected by availability. There are few suppliers for many natural cosmetic ingredients, and annual crop yield can cause prices to spike rapidly. There also are a relatively small number of first- and second-tier suppliers that dominate segments such as fragrances, surfactants and oleochemicals. These suppliers influence certain markets either because they focus on specific chemicals or because they handle such a large product selection that the cosmetic chemicals are simply part of the portfolio.
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