Will Safe Cosmetics Pay Off?

NEW YORK, United States — When serial entrepreneur Gregg Renfrew decided her next venture would be a cosmetics company, she knew she wanted to use a peer-to-peer sales model in the vein of Avon and Mary Kay, with the addition of a direct-to-consumer e-commerce site. She also knew that she wanted the products to look, feel and perform as well as anything one would find at a luxury department store kiosk. But as crucial as those two elements were to the building of Beautycounter, which launched in March 2013, there was a third crucial factor at play: safety. Renfrew, who sold her first company, the Wedding List, to Martha Stewart in 2001 and has since worked with Bergdorf Goodman and Intermix, first became interested in product safety when she was CEO of children's clothing company Best & Co. Later, as a consultant to Jessica Alba, Renfrew helped lay the groundwork for what would become The Honest Company, the actress' line of environmentally friendly baby products. (Alba has since raised $52 million in venture capital funding to fuel the business.)

“The fact that we were exposing ourselves to toxins became an increasing personal concern and I started seeking out as much information as possible to find solutions for myself, my family and my friends,” Renfrew, who lives in Los Angeles, said. “Simultaneously, I was identifying a business opportunity in the beauty space for products that were high performance, sexy and also safe for your health.” Along with her first hire — Mia Davis, head of health and safety — Renfrew developed her own set of safety regulations for both formulas and packaging, communicating to consumers from the very beginning that Beautycounter’s products were as much about health as they were about looking good. While she declined to reveal revenue figures, Renfrew said sales tripled in the first year, while the number of consultants selling Beautycounter’s products has grown to more than 2,500 across the US.

Of course, Beautycounter isn’t the first brand to promote its products as healthier, more eco-friendly or sustainable. Back in 1967, Florida-based Aubrey Organics launched its line of natural hair and bath products, which used ingredients such as jojoba oil, evening primrose and chamomile. At the time, the company’s founder, Audrey Hampton, a phytochemist, had trouble screening ingredients. “In those days, there was not an abundance of literature surrounding the safety of cosmetics or the ingredients — or chemicals — used in their formulations,” said Curt Valva, general manager of Aubrey Organics. “Also lacking was the real ability to test product for safety due to the very high cost of the testing, especially for a small company with limited resources such as Aubrey.” Instead, to create the company’s early formulas, Hampton simply avoided ingredients that were questionable in favour of common food-grade ingredients like aloe and sea buckthorn oil. “We always use the safest possible ingredients, even at the expense of sales,” said Valva. Of course, now, as consumer awareness grows, the hope is that safe ingredients will help drive increased sales. From Burt’s Bees, now owned by Clorox, to Ilia, an independent line of lipsticks that uses predominantly organic ingredients, natural and organic personal care products generated $12.6 billion in sales in the US in 2013, up 11.2 percent from 2012, according to a May 2014 report by Sundale Research. That’s 17.9 percent of the entire personal care industry.

It's not surprising, then, that last April, American discount retail giant Target launched a major initiative dubbed "Made to Matter," collecting together and marketing a "handpicked" selection of "natural, organic and sustainable” products, some of which were limited edition and exclusive to Target. Yes To, the San Francisco-based company that uses fruits and vegetables in its products — Yes To Carrots, Yes To Tomatoes, Yes To Blueberries — launched Yes To Coconut as part of the programme. “Our guests are looking for products they can feel good bringing home without sacrificing price and performance,” said Target executive vice president Kathee Tesija in a statement. “We’re taking the guesswork out of buying better-for-you products by bringing together 17 trusted brands.”

There’s little doubt that a growing segment of shoppers are increasingly interested — and, in some cases, concerned — about the ingredients in their beauty products. But a lack of regulation in the US makes it difficult for American consumers to know which products are truly “natural,” “organic,” and “sustainable” and which are merely making this claim. In the US, only 11 substances are officially banned or restricted from use in cosmetics by the Food and Drug Administration. In contrast, the European Union prohibits nearly 1,400 substances. What’s more, European non-profit organisations have gone even further than the EU to inform the continent’s consumers. Brussels-based NATRUE (the International Natural and Organic Cosmetics Association, founded in 2007) identifies products that not only meet the EU’s legal requirements, but are free from synthetic fragrances and colours, petroleum-derived products, silicon oils or derivatives, genetically modified ingredients, irradiation and animal testing. Over 142 brands carry NATRUE’s distinctive label, including Dr. Hauschka and Weleda, although the organisation is quick to emphasise that it does not operate a certification programme. “As there is no current legal definition for natural and organic cosmetics, we actively contribute by working closely with European institutions to ensure safety and quality of natural and organic cosmetic ingredients and products,” said Dr Mark Smith, scientific and regulatory manager at NATRUE. “Our strict criteria avoids greenwashing and sets strict thresholds whereby chemically unmodified — also known as natural — substances must be dominant.”

While many US brands serious about their “natural” claims aim to follow the regulations set by the EU, many are hobbled by their suppliers’ lack of transparency. “The companies will get raw materials that are contaminated,” said Janet Nudelman, director of programme and policy at the San Francisco-based Breast Cancer Fund. Nudelman also runs the Campaign for Safe Cosmetics, a coalition founded in 2004. “They aren’t knowingly putting lead in lipstick, but their suppliers simply won’t tell them what ingredients they’re buying.”

Others use trade-secret protections to withhold ingredient information. The Campaign for Safe Cosmetics has unearthed everything from formaldehyde in hair-straightening products that claimed they were free of the known carcinogen to heavy metals in kids' face paint. One of the organisation’s most damning reports, released in 2009, claimed that Johnson & Johnson’s baby shampoo and other products contained formaldehyde and another toxin, 1,4- dioxane. Johnson & Johnson spent the next two years reformulating its baby products — which, in 2013, accounted for $2.3 billion in revenue — and plan to make “further enhancements” to the products by 2015, detailing the process online. “It’s a success story,” said Nudelman. “There has been a real paradigm shift in the way that some manufacturers are looking at the safety of cosmetics.”

But Johnson & Johnson, which in 2013 sold $14.7 billion worth of consumer products, was able to allocate $8 billion to research and development in that same year. What about start-ups like Beautycounter, which have limited funds? “A significant amount of the first two rounds of funding we raised went to research,” said Renfrew, who has raised roughly $10 million to date. Renfrew also made a shrewd move early on by hiring Mia Davis, who had worked for the Campaign for Safe Cosmetics. The duo established a “never list,” Beautycounter’s own list of ingredients — which includes animal fats, mercury and mineral oil — that it promises to never use. Davis’ experience working with suppliers meant she was already an expert on sourcing. She also established a screening process early on to ensure the products contained what the proprietors said they did. “Our focus is sourcing and safety,” said Davis. “You can have an ingredient that’s natural, but safety is about your health. Plant-based ingredients can still cause irritation. That’s why we screen every ingredient.” Beautycounter is also transparent about what it can’t control. The company uses shelf-stabilising preservatives in products that also contain water. “We use the smallest concentrations of preservatives that still get the job done and we’re on a continuous quest to find even better, safer options including bottle packaging technology that exposes less product to the air,” reads a statement on the company’s website. “We were shocked to learn how many companies are making certain claims that are straight-up not possible,” added Renfrew.

Whether greater attention to safety (and the investments this requires) will ultimately pay off remains to be seen, however. “I would estimate that we spend approximately 50 percent of our time and effort on researching our ingredients and products in research and development for purity and safety,” said Valva. “We demand assays and certifications from our suppliers up and down the supply chain. We test internally what we can and contract with outside labs for items we cannot. Purity of ingredients and safety are always of utmost concern.” Skeptics argue that while consumers do like products that are “safe” or “natural,” function and price are what ultimately win in the marketplace. “We’ve found that 40 percent of shoppers are concerned about the impact of chemicals. But they’re not going to pay more for it,” said Shannon Romanowski, a beauty and personal care analyst at market research firm Mintel. “Consumers want function; they want products to work. If a deodorant doesn’t work, they’re not going to buy it.”

Others believe that consumer demand for safer products is strong enough to push every cosmetics company to take a closer look at its ingredients list. “Consumers are driving the market,” said Nneka Leiba, director of research at the Washington, D.C.-based Environmental Working Group. Leiba leads the team that updates Skin Deep, a database launched in 2004 that contains the ingredient information of nearly 70,000 products, as well as the potential risks and hazards associated with them. The database has been searched over 250 million times in the past decade. “When we launched, there were only 7,500 products included. Now, many brands are submitting their products to us. Both consumers and brands are paying more attention. If you’re not on the train, you’re going to get left behind.”