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The Honolulu Advertiser
Posted on: Monday, September 8, 2008

Consumers gravitating toward organic personal care products

By Betsy Vereckey
Associated Press

Hawaii news photo - The Honolulu Advertiser

Ido Leffler, left, and Lance Kalish are co-founders of Yes to Carrots, which is based in Israel and sells organic products in more than 17 countries. The company has Yes to Cucumber products on the way.

Yes to Carrots photo via AP

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NEW YORK — One whiff of a "bath bomb" and Latoya Bembry was hooked.

Friends introduced her to Lush, the company that makes the quirky natural product in options like Sex Bomb and Big Blue. Bembry, who describes herself as "obsessed" with the items, now also uses the company's body cream to withstand the dry Las Vegas climate.

With more Americans discovering eco-friendly products, sales are on the rise — but at $22.55 for an 8.4-ounce jar of Lush's "Dream Cream," they aren't for budget shoppers.

Bembry, a 27-year-old account executive, admits she's spent hundreds of dollars on these products in recent weeks. Still, she says it's worth it.

"The most telling thing about organic products is that they deliver results right away," she says.

Sales of natural personal care products are growing strongly, despite a softer U.S. economy. Even with high prices for food and energy crimping people's splurges, analysts say the boom isn't going to end anytime soon.

Last year, U.S. sales of such items rose 12.5 percent, when adjusted for inflation, to $465 million, according to a report from research firm Mintel. The Chicago-based group estimates the inflation-adjusted figure will rise to $513 million this year, even given the tough U.S. economy.

The Natural Products Association estimates the natural personal care industry is growing five times faster than regular personal care products. The interest is twofold, says Daniel Fabricant, a spokesman for the trade group — concern about the environment and a desire among consumers for healthy products free of synthetic ingredients.

Interest in natural personal care products can be traced back to natural-grocery retailers that helped popularize the organic food movement. The Organic Trade Association estimates that U.S. sales of organic food and drinks will reach nearly $23 billion this year, up from $20 billion in 2007 and just $1 billion in 1990, the trade group said.

While about three-quarters of sales last year came from natural grocery stores, drug stores and mass merchandise chains have noticed the opportunity in personal care products and are clearing out shelf space to add more natural products to their lineups, the group found in a 2007 survey.

Despite their economic worries, Americans need to buy necessities like lotion and shampoo, and are looking for little indulgences. Natural items fit the bill and are the "poster child for consumers trading up," says Scott Potter, managing partner of private equity firm San Francisco Equity Partners, which led a $14 million investment in the Yes To Carrots brand.

The Israel-based company, which makes hair and skin products that contain beta-carotene, has seen its sales double since it debuted in the U.S. last year.

Consumers "can't afford the vacation or BMW," Potter says, "but can spend a couple more bucks to buy something to make them feel good."

With a growing awareness of health and environmental concerns, the industry is still trying to devise guidelines for exactly what makes a product natural. Earlier this year, the Natural Products Association created a certification program allowing products to carry a seal of approval if certain criteria are met.

As the organic movement picked up momentum, big companies snapped up organic brands, while other retailers began offering smaller brands in places consumers typically shop.

Walgreen Co. teamed up with Yes To Carrots to be the sole retailer at the products' launch. Target now also carries the brand.

The funding infusion in Yes To Carrots is intended to boost product distribution in North America and support the launch of more products, including Yes To Cucumbers, which contain aloe, green tea and minerals from the Dead Sea.

"It's no secret that the organic, natural space is becoming huge and raising awareness with consumers," Potter says.

Burt's Bees, a niche company known for its beeswax lip balm, went mainstream when consumer products giant Clorox Co. bought the company for $925 million in 2007. Colgate-Palmolive Co. paid $100 million in cash for toothpaste maker Tom's of Maine, while cosmetics maker L'Oreal acquired Britain's Body Shop International in 2006.

Analysts agree the industry is still ripe with prospects as consumers gravitate toward organic products. Stifel Nicolaus analyst David A. Schick also credits the sheer size of the aging baby boomer population for boosting demand for the items seen as more natural.