A few years ago, Craig Noik was in South Africa on a trip to source for marula oil for natural beauty products company African Botanics — which he and his wife Julia founded in 2012 — when he was approached by someone unfamiliar offering to sell it to him.
Handed a small vial of the amber-colored oil, Noik proceeded to test it by rubbing it on his skin and drawing his nose closer to smell it. Following the meeting, Noik took the vial to a lab to test the purity of its ingredients, expecting to hear back about the sample in a week.
“After two days, they threw it out and told me not to bring that oil back because it was contaminated with chloroform,” Noik said.
Incidents like Noik’s are far more common than one would hope. The expanding pool of natural beauty companies is facing problems many never bargained for, including ingredient contamination and environmental factors prohibiting a consistent flow of resources. As a result of the growing need to access more naturally derived ingredients, many beauty companies are turning to vertical integration, the business practice of owning parts of the supply chain, rather than relying on third-party middlemen, to alleviate sourcing issues and innovate faster.
According to NPD Group, natural brands are outpacing the growth of all beauty categories in the U.S. including makeup, skin care and fragrance. This month, beauty incumbent L’Oréal joined the natural category with its launch of Seed Phytonutrients, a new label of cruelty-free, vegan, all-natural skin-care and hair-care products supporting independent American organic farmers and using sustainable packaging.
In 2017, a letter from the Food and Drug Administration to a member of Congress detailed that the FDA received over 3 million shipments of cosmetics, and tested only 364 samples. Of those samples, 20 percent had issues with bacterial contamination, ingredients that were not on the label as required and unsafe chemical substances like mercury.
On top of contamination, weather, soil, wind and global crop shortages can make working with raw, natural ingredients difficult, according to venture intelligence platform CB Insights.
“We were sometimes on pins and needles waiting for ingredients,” said RMS Beauty founder Rose-Marie Swift. Founded in 2008, RMS Beauty products are formulated with raw, food-grade and organic ingredients in their natural state and are sourced from countries around the world, including Thailand and Brazil.
“Since we now direct-source ourselves, we have become personally tied to these farms [and have] made these trusting friendships. It is much easier now, and we no longer need to worry,” she said.
The use of personal relationships to ensure quality as well as continued access to ingredients is something that natural beauty product makers increasingly rely on. Visiting the locations where ingredients are grown and meeting the people harvesting them allows companies to get a better sense of what lab tests cannot determine.
“With sourcing, it’s a uniquely challenging practice because if you know what you’re looking for, like heavy metals or pesticides, you can [find] it. But analytical testing can be very limited in articulating the holistic qualities and characteristics of an ingredient,” said Chase Polan, founder of skin-care company Kypris. “As a result, in addition to testing, we rely on our relationships.”
In order to maintain consistent supply, Santa Monica, California-based African Botanics relies on a combination of stockpiling ingredients and maintaining ongoing relationships with those that harvest marula fruit for oil, especially in case of issues like drought. But not every natural beauty business is as lucky.
“We’ve had one brand that had to discontinue a product because they couldn’t source an ingredient anymore,” said natural beauty store Aillea founder Kathryn Murray Dickinson. Other products she sells also face pricing issues because they aren’t able to directly supervise the supply of key ingredients.
By being close to the source of ingredients, companies can maintain better control, according to CB Insights analyst Anagha Hanumante. They can also use the proximity to accelerate the production of existing and newer products.
“Brands are looking to turn around their products more quickly and innovate faster, and be ahead of the curve,” she said. She added that we could see more beauty incumbents increase their partnerships with the agriculture industry to develop organic beauty lines, as the popularity of consumer interest for natural products could serve as an “impetus” for others to go natural.
For example, Tata Harper began using a 1,200-acre farm in Vermont in 2009 to conduct all its research and development, packaging and shipping. Every year, the company expands the plants in its certified-organic garden and works to determine how they can be used in products, said Tata Harper’s vp of research and development, Cara Bondi.
“Vertical integration creates the ability to observe the entire value chain, which really lends itself to a culture of systems thinking,” she said. In other words, seeing every part of the supply chain on a daily basis helps employees understand the influence that environments and ingredients have on one another.
“As a result, people think about how their decisions or actions affect the entire system rather than in their individual silo, and ask probing questions beyond their discipline,” she said.
