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Articles from 2004 In November


OTA Collaborates With Standards-Setting Institute to Resolve Personal Care Debate

Consumer demand for organic personal care products is growing, fueled by press coverage of potentially dangerous chemicals in conventional cosmetics and other personal care items. But the lack of federally defined organic standards for the cosmetic industry is creating controversy and confusion.

In April 2004, the U.S. Department of Agriculture (USDA) revised the National Organic Program, declaring that the program would exclude personal care products. That decision drew sharp criticism from the Organic Consumers Assn. (OCA) as well as industry representatives. “The Organic Consumers Association condemns the USDA failure to regulate organic labeling, in particular for personal care products,” said Ronnie Cummins, executive director of the OCA. He added, “Manufacturers of personal care products labeled ‘organic’ or ‘made with organic ingredients’ will be completely unregulated from now on— opening the door to massive labeling fraud— while punishing companies that have made significant investments in certified organic ingredients in recent years.”

The USDA’s decision was based on the fact that the original law establishing the agency mandated that USDA regulate agricultural products. In September, a scope document was prepared for consideration by the National Organic Standards Board that stated personal care products are under the jurisdiction of the FDA and may not display the USDA organic seal or imply they are produced or handled to NOP standards. The decision to exclude personal care products creates a regulatory vacuum, since FDA has thus far not stepped in and regulated organic personal care.


Natural & Organic Personal Care V

NPC Business
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Consumer safety concerns underlie strong growth in NPC; investors and suppliers show keen interest in the sector. Natural products have been used to care for and beautify the face and body for thousands of years. Evidence dates from Cleopatra’s milk baths and packaged Roman skin creams to beauty rituals practiced in ancient civilizations in India, China and South America. Over the past decade or so, a growing number of Western consumers have discovered the benefits of natural personal care (NPC) products, including skin care, hair care, cosmetics and other items.

At the beginning of 2005, the NPC industry appears to have reached critical mass. A convergence of factors has contributed to dynamic increases in sales of natural & organic personal care products in the U.S. Major media campaigns are raising consumer awareness about toxic ingredients in mainstream personal care products. At the same time, expanded distribution channels, scientific advances, ingredient breakthroughs and the acquisition of a few key natural personal care companies are propelling even stronger growth and attracting the attention of bigger health and beauty care players.

Perhaps the largest single issue remains the absence of standards defining ‘natural’ personal care products. As discussed in this issue, organic personal care standards are being hotly debated and should eventually be resolved. Yet many, perhaps most, products labeled or branded as natural, pure, botanical and herbal are benefitting from the marketing appeal of those terms without regulatory oversight. Thus, while firms like Procter & Gamble (which sells Herbal Essences) and Unilever (Suave Naturals) contain botanicals and evoke a certain ‘natural’ glow in the consumer’s mind, such products also contain ingredients that would not pass muster in natural retail stores, in ‘core’ NPC brands, or in NBJ’s picture of the NPC market.

Absence of natural and organic standards also makes market quantification difficult, so NBJ’s first order of business is to draw a map of the natural personal care market. The NPC market includes six basic and somewhat overlapping constituents: ‘Core’ NPC brands carried primarily in natural & specialty retail channels (see list on p.3); High-end department store/boutique brands and salon/spa or ‘practitioner’ sales (e.g., Aveda); Specialty personal care stores (e.g., The Body Shop, Bath & Body Works); Multilevel marketing (e.g., Neways, NuSkin, Melaleuca, Avon, Herbalife); other Direct & multi-channel sales (e.g., Jurlique and Bare Escentuals); and Mass market (supermarkets, club stores and pharmacy chains) and beauty supply discounters. With no standards to meet, ‘purity’ and ingredient integrity is inconsistent across all of these subcategories. However, we have endeavored to count those brands in each channel that differentiate themselves fairly clearly on the basis of their ingredients and/or ethical stance.

NBJ quantifies the NPC segment at $4.36 billion on 9% growth in the United States in 2003. Our preliminary growth estimate for 2004 is 12%, with growth strong in virtually every channel last year. SPINS reported NPC sales grew 14% to $295 million in natural supermarkets in the 52 weeks ending Nov. 30, 2004. Core NPC manufacturers reporting 2004 sales or growth figures to NBJ accounted for an agreggate 19% growth, although early reporters tend to be on the high end of the scale. Domestic multilevel sales and specialty NPC retailers are on a more modest track but still in the high single-digit growth range for 2004.

“The mainstream is recognizing the appeal of the natural products,” said Don Montuori, editor of Packaged Facts, which produced an NPC report in 2004. “But a lot of the drive behind the growth is just the changing demand of personal care consumers.” Popularity of retail chains such as Bath & Body Works, Body Shop and Sephora are enticing more consumers to try natural products, he observed. Demand is growing at both ends of the age spectrum. Baby boomers’ purchasing trends reflect their belief in natural products and self-care, fueling rising demand for anti-aging products. “That awareness is being passed down to their kids,” Montuori said, “and certainly there is an awareness and embracing of natural products by teenage girls, particularly.” While teenage boys have thus far not shown significant interest in NPC products, popularity of mainstream male grooming products such as Axe are appealing to young males, implying potential for natural counterparts. Products for men are one of the few categories showing growth in conventional HBC markets. Overall, Packaged Facts estimated the U.S. natural/organic skincare, hair care and cosmetics products market at $3.9 billion in 2003, up 52% from 1998 and forecast at $5.8 billion by 2008.

American & European Groups Raise Safety Concerns Over Chemicals
Grassroots efforts have drawn widespread attention to the potential risks posed by ingredients in skincare, haircare and other personal care products, resulting in regulatory reforms in Europe and heightened demand for natural alternatives in both Europe and the U.S. In Europe, the United Kingdom’s Women’s Environmental Network launched a successful “End the Cosmetics Cover-Up Campaign” two years ago. In October, the European Commission formally recommended that propyl paraben be prohibited as a food additive, following a report in the Journal of Toxicology indicating that parabens, which have estrogenic effects, may be linked to breast tumors.

In September, the European Union passed a law prohibiting cosmetic companies from using chemicals known or highly suspected of causing cancer, impaired fertility or birth defects. These chemicals include the phthalates DBP (dibutyl phthalate) and DEHP (di(2- ethylhexyl) phthalate) used in some fragrance, hair spray and nail polish. By 2005, those ingredients must be removed from any cosmetic products sold in Europe.

In the United States, a report to the FDA by the Environmental Working Group, an advocacy organization in Washington D.C., entreated the agency to assess cosmetic ingredients. According to the report, titled Skin Deep, 89% of the 10,500 ingredients used in personal care have never been evaluated by the government. The group spent six months doing a computer check of 7,500 products to determine how many have ingredients with known health effects. One in three personal care products had at least one ingredient classified as a possible carcinogen, and one in 100 had ingredients listed by the government as known or probable cancer-causing agents. Other ingredients are known endocrine disrupters linked to birth defects.

Top core U.S. natural personal care
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A consumer survey by Clean Water Action in Boston found most consumers were shocked to learn that personal care products are not tested by the government. Moreover, awareness is growing among the public of the potentially harmful effects of ingredients in personal care products. Recently, a coalition of U.S. health and environmental groups launched the Campaign for Safe Cosmetics. In late September, the group ran hard-hitting ads in USA Today to raise awareness among consumers that toxic chemicals banned for sale in Europe still appear on U.S. shelves. For example, an ad headlined, “Which company do you trust with your daughter?” berated L’Oreal, Revlon and Unilever for ignoring requests to remove toxic chemicals from U.S. products. The Breast Cancer Fund, a founding member of the coalition, has openly criticized major cosmetic companies for providing inadequate responses to these concerns. A statement at the Cosmetics, Toiletry and Fragrance Assn.’s website disputed that products are dangerous. “The cosmetic industry is committed to providing the highest quality, safest personal care products possible,” the statement said.

Campaigns in the U.S. and regulatory developments in Europe appear to be having some impact. In April 2004, The Wall Street Journal reported that Procter & Gamble Co. said it would reformulate its Max Factor and Cover Girl nail polishes, and Estee Lauder said it would redo its Clinique and MAC lines to eliminate DBP in the U.S. Avon also pledged to remove DBP from its nail polishes, according to Breast Cancer Action, a leader in shareholder activism.

Natural Glow Now More Important to Mainstream Cosmetic Industry
The mainstream cosmetics and toiletries market in the U.S. was $30 billion in 2002 but grew just 2.1%, the lowest rate since 1993, Kline & Company reported. Five categories accounted for 40% of total industry sales: facial treatments, personal cleansing products, fragrances for women, shampoos and hand and body lotions.

Although 1,000 companies manufacture and market over 20,000 cosmetic and toiletry brands sold in the U.S., 10 companies account for 63% of all industry sales. Estee Lauder, Limited Brands and Johnson & Johnson dominate the skincare market. L’Oreal, Estee Lauder and Revlon are leaders in makeup, while Procter & Gamble, L’Oreal and Unilever have the largest segments in hair care. Mass merchandizers have the lion’s share of the cosmetic and toiletries market (29%) and also had the fastest growth, along with direct sales channels and salons. By 2007, Kline & Company predicted mainstream cosmetic and toiletry sales would reach $34 billion. Fastest-growing categories would include lip balms, specialty hair care products and skin care products.

Euromonitor International reported total U.S. sales of cosmetics and toiletries at $45.4 billion last year. But mainstream sales are stagnating. A July 2004 report titled Cosmetics and Toiletries in the USA found domestic sales increased by a paltry 0.7%, due in part to economic recession. Premium cosmetics topped the list with $13.1 billion in sales, followed by haircare and color cosmetics with $9.5 and $8 billion in sales, respectively. Other categories included skin care ($6.9 billion), fragrances ($5.9 billion), oral hygiene ($4.3 billion), bath and shower products ($4.3 billion), men’s grooming ($3.8 billion), sun care ($1.1 billion), depilatories ($860 million) and baby care ($640 million).

Mainstream companies are more attracted than ever to the wellness trend. “Cosmetics and toiletries in the U.S. are increasingly being connected to ideas of health and wellness, as well as leveraging U.S. consumers’ preference for products derived from nature rather than based on synthetic chemicals,” Euromonitor reported. For example, Estee Lauder has positioned its Origins and Aveda brands as natural, with Origins targeting wellness-oriented consumers and Aveda embracing environmental and social sustainability. Aveda is one of Estee Lauder’s top-selling brands, its annual sales having almost doubled since 2002, according to an August 2004 article in Fast Company magazine. Estee Lauder’s annual report lists haircare sales—and Aveda is by far the dominant brand—at $250 million with 9% growth in 2004.

A.C. Nielsen identified six personal care product trends globally, among them health and safety concerns, an aging population, consumer desire for convenience and innovation, more ‘metrosexual’ urban men striving to be well-groomed, and broader product distribution.

One of the strongest growth segments is cosmeceuticals—personal care products that contain bioactive ingredients. Though not necessarily all-natural, cosmeceutical skincare, haircare and makeup products in the U.S. accounted for $12.4 billion in sales, Packaged Facts estimated.

Kline & Company pegged the market for specialty active ingredients providing therapeutic benefits to skin and hair at over $300 million wholesale. In the U.S. alone, anti-aging skin care products are valued at more than $1.3 billion in retail sales, and the segment is growing at double-digit rates. A separate report by Kline titled The U.S. Professional Skin Care Market 2004 concluded that professional skin care products have grown 12.3% annually, on average, since 1998 to $675 million.

NPC Distribution Expands as Companies Embrace Many Channels
Natural personal care products are now available to consumers through wide range of outlets. “It’s called a multichannel approach,” said consultant Darrin Duber-Smith, president of Green Marketing (Nederland, Colo.). Duber-Smith credited the Internet for that shift. “Everyone can compare values and prices on line. The Internet has basically liberated the manufacturer.”

For example, core brands associated with natural retail are present in mainstream outlets. NPC brands that have bridged that divide include Tom’s of Maine and Burt’s Bees, which can be found in Wal-Mart, chain pharmacies and other mass market outlets. To further drive demand, Tom’s recently began airing TV commercials created by branding consultancy Siegel & Siegel. Ads feature the message “Naturally, it works.”

“The timing is ideal for natural marketers to establish their beachheads in mass... consumers are more receptive than ever before, and natural marketers should attack mass before the home team issues its own natural or semi-natural equivalents, closing the door,” Packaged Facts suggested in an August 2003 article.

Natural brands are also crossing into department stores, boutiques and spas. Although the company has steered clear of the mass market, and the majority of its sales remain in natural retail, Gabriel Cosmetics Inc. added several high-end department stores to its accounts in 2004, President and CEO Gabriel DeSantino told NBJ. DeSantino reported 10- 15% growth for the company overall in 2004 but 20% for ZuZu Luxe, the company’s 100% vegan cosmetics brand. Introduced by Gabriel three years ago, ZuZu Luxe has been “growing in leaps and bounds” as new accounts check in, said DeSantino.

Linda Upton, vice president of marketing and education for Borlind of Germany Inc., noted greater interest in upscale natural cosmetics by boutique stores and salons than in previous years. This is “good because we’re seeing a lot of independently owned health food stores having difficulty competing” with the natural retail chains, she said. Borlind’s U.S. sales rose 10-15% in the U.S. in 2004, according to Upton, indicating that long-established organic and natural brands are still enjoying healthy growth. While many new faces are entering the NPC market, it is the brands based in medical research that will have staying power and consumer trust, Upton believes, adding that Borlind products are clinically tested in double-blind trials.

Companies in the natural retail channel also face crossover competition on their own turf. John Masters Organics, an upscale hair care company that started wholesaling in the salon channel 10 years ago, crossed over into Whole Foods Market in 2002 and expanded into skin care three years ago. All essential oils and plant extracts used in the line are certified organic, and what can’t be certified is as natural as possible, said a company spokesman. Voted best new organic non-food product line in Europe by the Soil Assn. of the U.K. in 2004, the company doubled its growth last year and expects to do so again in 2005.

‘Boutique’ brands like Boscia and Body Bistro have also succeeded in expanding distribution, penetrating the high-end department store market with natural prestige skincare products, in addition to specialty chains like Bath & Body Works and Sephora. Nordstrom’s now has a special section within cosmetics departments in selected stores devoted exclusively to wellness-oriented wares like Dr. Perricone, for example.

U.S. Conventional Health Beauty
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Companies Combine Direct TV With Internet & Other Outlets
More NPC companies are turning to directto- consumer channels like the Internet, infomercials and TV shopping. In October 2004, became the first online retailer to be awarded USDA organic certification, allowing it to display the National Organic Program (NOP) label on supplements as well as certain personal care products containing organic agricultural/botanical ingredients. Personal care items are among the most popular categories of certified organic products at the e-tail site. Studies have shown that people may acquire more toxins through skin absorption and inhalation than through foods, reported in an Oct. 14, 2004 article on Mother

After successfully launching a line of natural professional products, as well as a retail line, Lamas Botanicals is making plans for direct TV promotions. Bare Escentuals, which offers Bare Minerals—marketed as a natural alternative to conventional foundations, free of preservatives, talc, oil and chemicals—is a successful direct TV cosmetic brand familiar to QVC viewers. However, it also sells through some two dozen company-owned retail boutiques and the Sephora chain, in addition to other retailers, spas and salons.

Another brand that has grown rapidly through multiple channels since its inception is Jurlique International, an organic personal care company out of Australia. Jurlique was initially sold through health food stores but now supplies all kinds of retail outlets worldwide. It has more than 20 concept stores in Australia and another 20 such stores overseas, plus extensive distribution in spas, department stores, pharmacies and health food stores. Formed in 1985 by German naturopath and chemist Dr Jurgen Klein and his botanist wife Ulrike, Jurlique had revenues topping $100 millon, Australia’s Business Sunday reported in March 2004. “There is no year in the last 18 years since Jurlique existed in Australia that we haven’t grown at least 30, 50, 70 or 100 percent per annum,” Dr. Klein told Business Sunday. “We believe we can grow about five times over the next three years.” Jurlique cultivates its own organic raw materials in herb farms, which produce 95% of the herbs and plants used in its skincare range.

Brands positioned as authentically organic and pure are also establishing a presence on the Internet, often directly appealing to consumers seeking to avoid chemical-containing products marketed by big corporations. These businesses are often small and family owned and include U.S.-based Solum & Herbe, which says it uses 100% USDA certified ingredients wherever possible; Starflower Essentials, which states its products are organic and food grade; and Japan-based AntiAnti Life Cosmetics, which refers to its portfolio as “supernatural cosmetics.” Other brands with an Internet presence and marketed for purity include the ethically-oriented Living Nature of New Zealand, Eminence Organic, Olos Natura and Primavera Aromatherapy.

Mainstream companies in turn are addressing the growing threat—and opportunity— posed by natural personal care. Formulators report that more major cosmetic companies are moving closer to embracing the natural movement and requesting botanically active natural ingredients. Some firms are even advertising non-natural “green-washed” items in alternative lifestyle magazines.

Cosmetic giant Estee Lauder has adopted marketing approaches oriented towards the socially conscious consumer, calling for protection of roadless areas in national forests, professing a desire to “preserve wildlife habitat and provide tranquil and pristine recreational spaces,” according to Phil Barbato, VP of environmental affairs and safety for Estee Lauder. Aveda, owned by Estee Lauder, is an ideologically positioned brand, promoting its environmental responsibility through campaigns to save the rainforest. Origins, another prestige line from Estee Lauder, has adopted an ethical positioning and holistic well being as its theme. Origins sells not only through department stores but also in company-owned stores.

Aimed squarely at consumers who can’t afford products made from costly essential oils, The Healing Garden brought aromatherapythemed toiletries and fragrances to the mass market in 1997. Owned by $1.95 billion Coty Inc., Healing Garden offers lavender, jasmine and gingerlily-scented products to drugstores, grocery and discount chains. In 1999 Drug Store News reported that The Healing Garden generated more than $21 million in its second marketing year, and the brand has presumably grown since then.

Also in the mass market are naturally positioned brands like Herbal Essences by Clairol, which was acquired by Procter & Gamble from Bristol Meyers-Squibb in 2001 for $4.95 billion. Herbal Essences’ Fruit Fusion shampoo for normal hair features pomegranate, lychee and persimmon and lists “100% organic fruit extracts and essences of coconut and palm oils” on its product information label. However, Herbal Essences also contain ingredients like sodium laureth sulfate and propylene glycol, which NPC advocates would reject.

P&G has five $1-billion brands in its Beauty Care Business, including Head & Shoulders, Pantene, Olay, Wella and Always. In 2004, division sales rose, and Health Care and Beauty Care “are faster-growing, higher-margin businesses,” wrote P&G’s chairman in the company’s annual report. “We expect both to be disproportionate engines of growth in the first decade of the 21st century.”

Dedicated Retail Chains Get Greener
Dedicated retail beauty chains also play a role in NPC distribution. A relative underperformer for the last few years, The Body Shop accounted for £700 million in worldwide sales in its last fiscal year ended February 2004. The Americas accounted for 421 of 2,039 stores in the Americas by mid- 2004. For the six months ended August 2004, store sales were flat at £60.9 million, but total retail sales rose 8% thanks to a £10.2 million contribution from The Body Shop at Home, the company’s network marketing arm. In the U.S. alone, comparable-store sales rose 4% as Canada declined. Body Shop expects network marketing to be a prime growth vehicle for the next several years. September 2004 saw the launch of an e-commerce site in the U.S., providing a third channel for sales. The Body Shop reinforced its strong heritage of environmental and social responsibility in 2004, part of the firm’s ethical brand positioning which takes precedence over natural attributes.

Bath & Body Works turned in revenues of $1.93 billion in 2003, up from $1.78 billion the year prior. Comparable-store sales rose 8%, although 41 stores closed in 2003. The 1,600- store chain, which is owned by Limited Brands Inc. (Victoria’s Secret, Express and The Limited), has undergone a makeover from ‘American heartland’ to a “modern apothecary of beauty and well-being” under the tagline Beauty for Body and Soul. Although few products are positioned as natural or organic per se, the brand makes liberal use of botanicals. The Pure Simplicity skin care line introduced in 2003, for example, lists milk thistle, green tea, lemongrass and burdock root among its ingredients. Botanical Nutrients for haircare feature wheat germ, aloe and green tea; and True Blue Spa products are based on shea butter. As part of a strategy to bring in brand partners, the chain has added products from Burt’s Bees, Murad and others.

The Sephora retail chain was founded in France in 1969 and acquired by Moet Hennessy Louis Vuitton, a global luxury products group, in 1997. The store’s ‘open sell’ environment was exported to the U.S. in 1999, where Sephora now has over 95 outlets and features more than 250 fragrance, cosmetic and personal care brands, in addition to Sephora’s own label. Sales at each store likely range from $2-7 million, putting $500 million in U.S. sales within reach. Although Sephora carries Boscia, Murad, Dr. Perricone, Weleda, Dr. Hauschka and Dr. Brandt, which fall in the natural and cosmeceutical realms, the majority of its brands are not positioned on a natural or organic platform. However, should Sephora decide to cater to consumers’ growing taste for healthier products, it could become a significant outlet for NPC sales. Although the company has reportedly faced profitability issues in the U.S., comparable store sales increased by 21% in 2000, 23% in 2001 and 25% in 2002—a year when many retailers struggled to show any growth at all, according to Operations and Fulfillment online.

Most Spas Sell Skin Products
Stressful times are driving consumers to seek escape at spas, fueling demand for premium brand spa products. There are an estimated 12,000 spas in the United States, a 25% increase from 2002, according to the International Spa Assn.’s 2004 Spa Industry Study and Consumer Trends Report. Day spas remain the largest category with some 8,700 locations in the U.S., a 20% increase. Revenues for the U.S. spa industry totaled $11.2 billion in 2003, up from $10.7 billion in 2001, putting spas on a par with motion picture box office sales. The number of U.S. spa visits in 2003 was 136 million, and 43% of their clientele was new to them, according to responding spas.

Skin care products are by far the most common retail products offered by spas, with almost all (97%) retailing spas offering them. Key products offered by more than two-thirds of retailing spas include nail care products (77%), cosmetics (69%) and hair care products (67%). Nutritional products (or supplements) were sold by 34% of spas.

According to Duber-Smith, women aren’t the only ones pampering themselves at spas. “Sixty-eight percent of those who go to a spa go there to relieve stress—and men have more stress than anybody,” he noted, adding, “25% of spa users today are men.” ISPA confirmed that around one quarter of spa-goers are men. According to a May 2004 article in Global Cosmetic Industry magazine, 41% of those who purchase spa products are men; sales of men’s facial moisturizers alone increased by 19% in 2003.

Network Marketing Remains a Leader in NPC Sales
Avon is the biggest direct seller of beauty and related products, with $6.8 billion in annual revenues. Avon product lines include Avon Naturals and Avon Wellness. The U.S., which accounts for 90% of North American sales of $2.5 billion, grew 9% in beauty sales in 2003, driven by skin care and personal care. Growth was 20% in China, where the company has a presence in 5,500 beauty boutiques, for sales of $157 million. In Russia, sales reached $241 million on 70% growth. The Avon brand was enhanced in 2003 by the growth of its health and wellness business and its new brand, Mark, for young women, according to the company’s 2003 annual report.

Nu Skin Enterprises, a maker of premium personal care products and supplements (the latter under the Pharmanex brand), reported Nu Skin personal care revenues grew 26% in the first quarter 2004, 28% in the second and 9% in the third compared to prior year periods, thanks primarily to sales in Mainland China but also to the launch of several new products. Personal care sales for the trailing four quarters tallied $544 million.

Audrey Sommerfeld, vice-president of global product marketing at Herbalife, said the company’s Outer Nutrition line remains strong with the introduction of new aloe and vitamin C-based products, accounting for 9% of net sales in 2003 and double-digit growth in 2004. (Herbalife’s global sales are estimated at around $1.2 billion.) Consumers are focused mostly on problem-solution products and antiaging products, as well as daily protection from sun, she said. Trends are positive in direct sales overall, Sommerfeld noted: “The perception is that network marketing companies tend to grow during recessions, but we’re seeing more and more people looking to make a positive lifestyle and work change... Younger people are becoming more involved in direct selling, realizing the opportunity to be an entrepreneur and build their own business on their terms.”

Two MLM personal care companies founded on natural and organic values came into view during research for this issue. Organic & Natural Enterprise (ONE) Group is the creator of Miessence products, which meet U.S., Australian, British and Japanese organic certification standards. Originally supported with a grant from the Australian agriculture department, ONE’s distributor websites are proliferating in the U.S. A Minnesota start-up, Daisy Blue Naturals, was founded in 2001 by Jena Thompson, who set out to develop a natural soap for her baby. The NPC company grew to sales of $1 million in 2003 with 350 distributors. By Fall 2004 the company had around 600 sales consultants in 38 states, according to the company website.

Consolidation Comes to the Natural Personal Care Channel
After several years with virtually no acquisition activity in the NPC sector, companies have been attracting attention from private equity investors. In the natural retail channel, the first move came in October 2003, when AEA Investors acquired an 80% stake in Burt’s Bees in a deal valued at $179 million, according to Triangle Business Journal. Burt’s Bees was expected to generate close to $60 million in sales by the end of 2003, up 26% over 2002, and to grow to an ambitious $500 million within the next five years, the journal reported. AEA is known for buying smaller companies to build and resell. Whereas specialty stores once accounted for 60% of Burt’s Bees sales, its distribution mix is likely subject to change.

A notable acquisition was made in June 2004 when Hain-Celestial Group’s purchased Jason Natural Products (see p.14). (Jason had already absorbed Orjene.) Analysts speculated that Hain might be looking to roll up other companies in the category.

In December 2004, Harvest Partners Inc. (New York), a private equity investment firm specializing in management buyouts and growth financings, acquired NPC pioneer Levlad Inc. and its subsidiary Arbonne International Inc. through a holding company called Natural Products Group LLC (NPG). The two companies had combined net sales of around $200 million in 2004, reportedly up around 50% from the year prior. Terms were not disclosed, but according to the Daily Deal, Harvest Partners invested more than $50 million of equity from its $558 million Harvest Partners IV LP and paid Levlad’s family founder-owners close to six times EBITDA for the companies.

Levlad (Chatsworth, Calif.), a pioneer in the NPC category, is best known for the Nature’s Gate and Nature's Gate Organics brands. It has the top market position in the natural hair care market, according to Harvest Partners. Arbonne (Irvine, Calif.) sells branded Swiss formulated botanical personal care products through a direct-sales network. Together, the companies have approximately 650 employees. Harvest Partners brought in Robert Henry—former chief executive of network marketing supplement company Mannatech Inc. and former officer at Avon Products Inc.— as chief executive of Arbonne. “The personal care products industry is a very large, growing market in which we have seen major shifts towards natural and organic products,” said Ira Kleinman, senior managing director of Harvest. “The acquisition of Levlad and Arbonne provides us with a diverse platform that will allow us to capitalize on both dynamics.”

North Castle Partners, a private equity investor specializing in the healthy living and aging sectors, counts Avalon, HDS Cosmetics and Red Door Spa among its personal care holdings. “The natural personal care industry is probably where the natural & organic food industry was five to ten years ago in terms of its development, the awareness and interest in these products among mainstream consumers,” said Ellen Marram, managing director at North Castle.

Both Avalon Organics and Alba Botanica, another Avalon brand, experienced healthy growth in strong double-digit rates during the past year for sales of $30-40 million wholesale for the company. To bolster growth, North Castle has strengthened Avalon’s management team, bringing in people with “deep roots in the natural products industry,” according to Marram. Gil Pritchard, Avalon’s new chief executive officer, has served on Avalon’s board and was CEO at both Barbara’s Bakery and nSpired Natural Foods. Asked to identify the likely exit strategy after a typical five-year investment in these companies, Marram responded that while selling or taking the company public are both viable options, “the likely exit will be that a larger strategic buyer will be interested in acquiring them, because of their brand strength and reputation.”

Smaller natural channel mergers in 2004 included the acquisition of Sun Dog by Dr. Bronner’s Magic Soaps. Sun Dog will launch a line of lotions and balms in early spring that will be certified organic, President David Bronner told NBJ. In December, Suncoast Naturals Inc. announced that its OptiLiving Inc. subsidiary had agreed to sell the Caribbean Pacific line of all-natural suncare and skincare products to Mosaic Nutriceuticals. The cash, debt and stock transaction was valued at $800,000.

Outside the natural retail channel, in 2004, private equity firm Berkshire Partners LLC acquired a majority stake in MD Beauty (Bare Escentuals, bareMinerals and MD Formulations) from JH Partners LLC. While terms were not released, the deal was valued at $225 million and about nine times its trailing 12-month EBITDA, according to the Daily Deal in May 2004. The company was estimated to generate around $100 million in annual sales, up from less than $1 million in 1990, the Deal said.

CPH Investment Corp., controlled by Australian media tycoon Kerry Packer, reportedly invested $25 million for a 25% stake in Jurlique, a global organic personal care company headquartered in Australia. Publicly traded Triarc Companies Inc., operater of the Arby’s fast food chain and former owner of Snapple, acquired a 25% stake and a 14% voting share in the Australian company for $25 million in July 2004, according to Crain’s New York Business.

So far, the interest of conventional HBC corporations in acquiring NPC brands has not been readily apparent. So far only one naturally positioned brand has been acquired by a mainstream cosmetic company—Estee Lauder’s 1997 purchase of Aveda for $350 million. However, like food corporations a few years ago, conventional HBC manufacturers do appear to be developing an interest in natural brands to compensate for stagnating sales in conventional products and to take advantage of consumer demand for healthier products. Thus, the groundwork may be getting laid for deals like those seen in food industry a few years ago, when General Mills, Nestle and Kraft acquired organic food and bar companies to stake a serious claim in the nutrition industry.

With four of the largest independent NPC brands now acquired in whole or in part— Levlad, Burt’s Bees, Jason Natural and Avalon— which potential candidates remain? According to NBJ’s ranking of top NPC firms, Aubrey Organics and Tom’s of Maine are the largest remaining independents, with Kiss My Face, Dr. Bronner’s, Zia Natural Skincare, Earth Science, Giovanni and a few others getting close to acquisition range in terms of sales.

Seeking Standards For Natural & Organic Personal Care
In the United States, the Organic Consumers Assn. (OCA), which claims over 50,000 members, launched a media campaign resulting in numerous publications running articles on the potential hazards of ingredients in personal care products. The OCA’s Coming Clean Campaign criticized companies making what they considered inflated organic claims based on hydrosol (floral waters) content. OCA also faulted companies that labeled products as natural or organic despite the inclusion of synthetic ingredients. OCA activists held protests at last year’s Natural Products Expo East, displaying signs reading “100% Organic Fraud” to raise awareness.

“There is a threat in the marketplace right now, and that is a backlash over whether natural really exists,” said Duber-Smith. “But what the consumer wants and thinks is important, and the consumer believes in natural. Consumers are demanding safer, more naturally derived products—that’s the bottom line. It’s up to us in the industry to come up with it.”

The term natural has been diluted by “green washing” of mainstream products, which may promote a botanical ingredient when in fact the product is primarily composed of synthetics. Even many products sold in natural food stores contain some chemicals, such as preservatives, however.

To address that problem, Duber-Smith has formed a new organization, the International Assn. for Natural Product Producers (IANPP). Charter members include leading NPC industry companies, including Aubrey Organics and Naturade. The association aims to come up with a definition and certification for products that claim to be natural. “My vision is to have a seal, like a Good Housekeeping seal, that the IANPP members can put on their product. Maybe you have a 100% seal, or a 90% seal,” said Duber-Smith.

Duber-Smith further recommended that companies add parentheses after each ingredient. “If it sounds like polysorbate 20, which is a natural ingredient, list the sourcing, i.e., derived from sugar cane,” he suggested. Using labeling to clarify confusion among consumers amounts to “Marketing 101,” he maintained. The organic personal care industry is also moving toward standardizing a definition. Recently, the Organic Trade Assn. enlisted help from NSF International (accredited by the American National Standards Institute) to devise organic standards that would be acceptable to both industry and federal regulators. The OTA anticipated standards would be finalized in 2005.

One member of OTA’s personal care task force expressed concern that the standards were not shaping up to reflect either the spirit of the organic philosophy—or consumer expectations. “We don’t like what we’re seeing so far,” said Diana Kaye, co-founder of Terressentials (Middletown, Md.), who also has a seat on the NSF committee. As an Internet and bricks and mortar retailer, “Terressentials hears from thousands of consumers worldwide,” Kaye pointed out. “They don’t want any questions about what their organic products have in them. They’re desperately looking to trust,” but the industry is “losing consumer trust here.”

The most heated debate is around oleochemicals and preservatives, said Kaye. “All the big companies want to have detergents in organic products. But when you’re taking about detergents, you’re talking about production in an industrial facility” using extreme heat and synthetic processing ingredients like copper chromate and sulfuric acid, even if the original raw material is organic. Industrial processing also contributes to environmental pollution, and companies advocating detergents and emollients are talking primarily about deriving them from organic coconut oil, which doesn’t support the U.S. farmer, she added. Products made this way should be regulated and have their own designation but should not be labeled organic, Kaye concluded.

Another issue is distribution. Retailers and distributors tend to favor products with a long shelf life, whereas organic personal care products must be handled a little differently, Kaye explained. Although opponents argue otherwise, organic personal care items like oils have a shelf life of up to 18 months, and even products with water last about a year, so are within the capacity of distributors and retailers to manage, she said.

Many of Terressentials’ personal care ingredients are 100% certified organic by USDA food standards (clays, for example, cannot be certified). Pure Earth Hair Wash is listed in the top 10 healthiest shampoos in the Environmental Working Group’s Skin Deep personal care safety assessment—along with Tom’s of Maine, NuHair, Burt’s Bees and Pure Baby. The challenge for handcrafted, organic products is a hefty 25-30% price premium, but this didn’t stop Terressentials from achieving growth ahead of the organic industry overall in 2004. However, the absence of organic standards inevitably puts a damper on sales, since retailers can choose from less expensive products currently using the term ‘organic’ on packaging, Kaye said.

As the industry awaits proposed standards, new groups are also springing up to assist in marketing and promoting NPC products. Botanical Elements Trade Assn. (BETA) is a new trade association to promote businesses selling aromatherapy, natural candles, herbal body care, hand-made soaps and other products using botanical ingredients. BETA has partnered with the Sierra Club to collect and dispose of hazardous materials (such as cell phones containing mercury, cadmium and nickel) to help raise public awareness of chemical hazards.

Personal health is only one aspect of ethical marketing. The trend toward appealing to LOHAS consumer is increasing in the NPC sector. Rock River Soap Company, for instance, has released a new Conserve line, with a portion of profits donated to preserving Wisconsin’s natural resources. The company also sells a dog shampoo that benefits a nokill animal shelter. Similarly, Aveda has teamed up with Green Mountain Energy Company to promote clean electricity from wind power.

What’s Hot
Beauty from Within:
The notion of inner and outer beauty, combining topical products with dietary supplements for healthy skin has been slow to take hold. “This concept is not new; it was brought out in the personal care industry 20 years ago,” noted Anna Gripp of DSM Nutritional Products. Today, the trend is being fueled by big players like Avon, Procter & Gamble’s Olay brand vitamins in the U.S., and L’Oreal in partnership with Nestle in Europe. Newer skincare supplement entries are showing up in cosmetic aisles, in some cases co-packaged along with skin care creams. Formulators and raw material suppliers confirmed that most major companies are now working on developing beauty-from-within product lines. “The trend is there, and you’ll see more and more of that as time goes on,” Gripp predicted.

Some companies are expanding the concept beyond supplements into a broader category of ‘skingestibles’. SkinCola with purified water, activated oxygen, zinc and vitamins was launched in 2003. The oxygen content has been shown to repel free radicals and helps to prevent tissue breakdown, according to the business founders. NPC company Ecco Bella markets Health by Chocolate bars infused with cranberry seed oil (providing omega 3 fatty acids), blueberry extract, lutein, lycopene and fiber—described as a “decadent way to improve your skin or your mood.”

Cosmeceuticals & Nutracosmetics: Today’s consumers are seeking skincare and bodycare products with bioactive ingredients to produce therapeutic effects. When companies like Unilever and Avon introduced creams with alpha hydroxy acids a few years ago, sales got a boost. Today’s trendy ingredients include peptides prized for their non-allergic properties and other non-irritating ingredients to soothe skin, green tea extract and grapeseed extract (both with polyphenols, an antioxidant), coQ10 (an enzyme that works as an antioxidant to protect cells from free radicals, preventing wrinkles), and kinetin (a plant growth factor). Mainstream as well as natural product companies are using these types of ingredients. For instance, CoQ10 can be found in products by Nivea, Almy, Neutrogena and Lubriderm.

Euromonitor reported, “American consumers place great faith in science and technology and have therefore eagerly embraced cosmeceutical ingredients, and expectations are for manufacturers to continue to provide ever newer and better cosmeceutical solutions to the problem of aging.” Some companies are now moving from face care into body care antiaging products as well.

The ‘cosmeceutical industry’ is expected to generate up to $56 billion in revenues in 2007, up from $43 billion in 2002, according to a draft global market report presented at “Cosmeceuticals: New Strategies & Developments” conference in New York. Cosmeceuticals is the fastest-growing category in personal care, expanding 77% in cosmeceutical brand sales in 2003—far more than the 6% growth in traditional skin care products, according to the NPD Group.

Another emerging and even less-defined term is ‘nutracosmetics’ or personal care products with nutraceutical ingredients such as herbs and other bioactive ingredients to ease joint or muscle pain, reduce inflammation, enhance memory, provide body-slimming effects, moisturize, and improve circulation in diabetic skin. Manufacturers in both mainstream and NPC companies are teaming with formulators and raw material suppliers to develop nutracosmetics bolstered by scientific clinical trials to demonstrate efficacy.

Men’s Grooming: Sales of men’s grooming products rose 37.3% from 1998 to 2003 in the U.S., according to Euromonitor. First launched as mainstream brands such as Nivea for Men and Nutragena for Men, the trend has been fueled by the popular TV makeover show, “Queer Eye for the Straight Guy,” which coined the term ‘metrosexual.’ Some are now appealing to younger men through virile images, packaging and names such as Axe. (a deodorant body spray marketed with a pitch that says it is ‘scientifically formulated’ to make men more attractive to women). The popularity of men’s magazines like Maxim is also providing a venue for products in this popular demographic. In 2003 alone, men’s grooming products rose 7.6% in the U.S., the strongest of any sector. The trend has filtered down to natural retail. Borlind introduced a men’s line in May 2004, and Upton reported a “very big increase in male customers,” not just for the men’s line but for other Borlind products like its facial masque and foaming gel.

Products for Teens and Tweens: America’s 30 million teens account for up to 20% of total cosmetic and toiletry sales, Euromonitor estimated. Another 22 million tweens (8-12 year old girls) are also fueling growth in products targeting younger consumers, from acne products to hair colorants.

Ethnic-oriented Products: African-Americans account for 13% of the U.S. population but spend 25% more of their disposable income on personal care products than the population in general, according to Essence magazine. America’s 37 million Hispanics constitute 13% of the population overall, up from 21.9 million a decade ago. Hispanics are the largest and fastest-growing ethnic segment here, Euromonitor reported, Hispanic women are younger and buy more beauty products than U.S. women overall. “You’re seeing more development of natural products for hair relaxers and depilatories to help African American men shave,” Montuori noted. “That is a market that shouldn’t be ignored.”

Mineral-based makeup: The success of Bare Escentuals in marketing mineral-based makeup has fueled additional entries into the category. In March, direct sales giant Shaklee Corp. launched New Minerelles, positioned as a mineral-based natural makeup line thought to protect skin against environmental factors.

Botox Alternatives: Few drugmakers besides Allergan (Botox) and Johnson & Johnson (Retin-A) have gotten into prescription skin products. But the spoils are big. Botox reportedly generated sales of $564 million in 2003. Natural alternatives being marketed as Botox alternatives include Ameliox (Croda Inc.), a peptide complex for reducing fine lines and wrinkles. A study found skin treated with Ameliox showed a 27% decrease in depth of crow’s feet, a 24% decrease in brow lines and nearly 20% improvement in skin firmness. Laboratoires Sero-biologiques, a division of the Cognis Group, recently announced that it has ‘biotransformed’ peptides from hibiscus seeds to develop a natural alternative to botulinum toxin injections, reportedly without side effects. The substance has been found in clinicals to inhibit contraction of muscle cells contractions and reduce the appearance of wrinkles by 26%.

Genetic-based Cosmetics: Arch Personal Care Products, a division of Arch Chemicals, reportedly is working with GeneLink, a manufacturer of DNA collection kits, to create genetically guided skincare formulations by unlocking the human genome. In the future, Arch predicted, consumers will submit DNA swab tests at cosmetic counters in order to receive custom-designed cosmetics tailored to their genetic profiles. Another company, Lab21 Inc., founded in 2001 by former Estee Lauder executives, develops custom skin care products using questionnaires and a proprietary DNA test.

The Global Picture
Natural personal care product sales are booming globally as well as in the U.S. Shiseido Co. Ltd. of Japan has announced plans to open 5,000 sales outlets in China, which would boost sales in the market fivefold to 100 billion yen ($890 million) by 2008, reported. China is projected to account for 10% of Shiseido’s sales by 2008. Shiseido has also announced an innovative joint venture with soft-drink giant Coca-Cola to launch Aroma Works, a cosmetics and beverage brand targeting dieters. Products include Body Stylish Mist and Body Style Water, each featuring a grapefruit aroma.

Overall, personal care grew 3% worldwide, according to an A.C. Nielsen report covering 56 countries. On a global basis, the fastest growth (7%) in 2003 occurred in face cleansing and moisturizing products, followed by body cleansing/moisturizing and sun care with 5% growth each. North America and Europe accounted for the largest portion of the global market, but smaller developing markets in Latin America and other areas outpaced growth of developed countries.

As consumer awareness of chemicals in conventional personal care products reaches new heights, demand for natural alternatives will grow. New science, expanded distribution and hefty marketing muscle of large companies and private equity investors will further fuel the market, assuring that natural personal care thrives in the foreseeable future, transitioning from a niche market into the global mainstream.

PBM Products Launches Soy-Based Pediatric Drink for Children With Milk Allergies or Sensitivity

GORDONSVILLE, Va., Dec 1, 2004 /PRNewswire via COMTEX/ -- PBM Products, Inc., makers of Bright Beginnings(TM) infant formula with DHA (docosahexaenoic acid), recently launched the first soy-based pediatric nutritional drink for children one to ten years of age. The company introduced the Bright Beginnings Soy Pediatric Drink to healthcare professionals at the American Dietetic Association and American Academy of Pediatrics meetings during the first two weeks of October.

The only soy-based pediatric product of its kind, Bright Beginnings Soy Pediatric Drink is a ready-to-drink supplement specially formulated to meet the nutritional needs of children who may be allergic to cow's milk protein or lactose-intolerant. The United States Department of Agriculture (USDA) Food and Nutrition Service (FNS) has determined that the beverage is eligible for use in the Special Supplemental Nutrition Program for Women, Infants and Children (WIC).

Bright Beginnings Soy Pediatric Drink offers the following benefits:

* The drink provides 100% of NAS-NRC RDAs for protein, vitamins, and
* The drink can be used as a supplement or as a source of complete
nutrition when recommended by a physician.
* The drink contains no animal sources and can be used by vegetarians.
* The drink is kosher and free of gluten, lactose, and cow's milk

"PBM Products is pleased to offer the first soy-based pediatric nutritional drink that can be served right out of the can," said company president and CEO Paul B. Manning. "Parents no longer have to rely on special concoctions for children who are sensitive to lactose or allergic to cow's milk protein."

The beverage is offered in great-tasting vanilla flavor and is currently being sold in cases of 24 x 8 oz. cans.

PBM Products is privately owned and based in Gordonsville, Virginia. The company distributes infant formula, infant foods, pediatric and adult nutritionals, diabetic products, and infant feeding systems. PBM's family of companies consists of PBM Nutritionals, PBM Pharmaceuticals, PBM Foods, PBM International, and PBM Plastics.

For more information, please contact Tom Ryan, Vice President Professional Services, at (800) 959-2066 ext. 445 /, or Joe Shields, Director of Public Relations, at (800) 959-2066 ext. 131 /

New Clinical Study Shows Walnuts Protective for People with Type 2 Diabetes

SACRAMENTO, Calif., Dec 1, 2004 /PRNewswire via COMTEX/ -- A new study done in Australia shows that, for patients with type 2 diabetes, a whole foods diet including walnuts can reduce LDL "bad" cholesterol by 10%. Findings of this new study are published in the December 2004 issue of Diabetes Care, a journal of the American Diabetes Association (ADA), under the title, "Including Walnuts in a Low Fat/Modified Fat Diet Improves HDL Cholesterol-to-Total Cholesterol Ratios in Patients With Type 2 Diabetes."

According to the ADA:

* More than 65% of people with diabetes die from heart disease or
* There are 18.2 million people in the United States, or 6.3% of the
population, who have diabetes. While an estimated 13 million have
been diagnosed, unfortunately, 5.2 million people (or nearly one-
third) are unaware that they have the disease.
* Most Americans who are diagnosed with diabetes have type 2 diabetes.

The World Health Organization reports that at least 171 million people worldwide have diabetes and this figure is likely to more than double by 2030 to reach 366 million.

Linda Tapsell, Ph.D., APD, director of the National Centre of Excellence in Functional Foods, located at the University of Wollongong, Australia, and primary investigator for this study says, "This is one of the first studies to look at the effect of polyunsaturated fatty acids on diabetes management. Walnuts are an easy and convenient way of getting polyunsaturated omega-3 fatty acids into the diet. And they're particularly important for people with diabetes because they're a simple snack food, which is an integral component of managing the diet in diabetes."

University of Wollongong Press Release:

The good oil in walnuts helps Diabetes patients

People developing Type 2 Diabetes know they need more than an apple a day to keep the doctor away. But a handful of walnuts might help.

Walnuts are rich in polyunsaturated fats, Omega oils and vitamins.

Researchers at the University of Wollongong's Smart Foods Centre today released the results of a study that shows how to harness the nutritional value of walnuts, especially the "good" oils, to help people manage their diet better in the early stages of Type 2 Diabetes Mellitus.

The research showed that including walnuts in the diet improves the relative amounts of "good" cholesterol in this group of patients.

The research findings are in the December issue of the international journal Diabetes Care, published in the United States.

That's good news for Australia's 1.2 million people suffering from Diabetes, and the further two million estimated to have pre-Diabetes and be at risk of developing the disease.

National Centre of Excellence for Functional Foods and former Smart Foods Centre Director Professor Linda Tapsell said the research had demonstrated how a diet including 8-10 walnuts a day delivered the right kinds of fats and fatty acids that might help the body address one of the problems associated with early stage Type 2 Diabetes -- insulin resistance -- which hinders the absorption of glucose from the bloodstream into human cells.

"We understood the relationship between insulin resistance and fatty acids, and when we looked at the composition of walnuts we thought that they could be useful in delivering the right kinds of fatty acids. We knew walnuts contained substantial amounts of these fats, so our challenge was to prove that the theoretical benefits were real," Professor Tapsell said.

The team of dietitians from the Smart Foods Centre and the Illawarra Diabetes Service developed individualised diets for around 60 people with Type 2 Diabetes for the six-month study. The diets were based on the core food groups of cereals and breads, fruit and vegetables, lean meat, fish, low-fat dairy products, oils, avocadoes, peanut butter and nuts. Each diet in the treatment group included 30g of walnuts (equivalent to around 8-10 nuts) per day.

The diets were carefully modelled to balance all the other dietary factors such as carbohydrates, proteins, calories and fats from the other foods to ensure the benefit was correctly attributed to the walnuts.

"The walnuts took the guesswork out of getting the right fats into the diet. We knew walnuts would deliver," Professor Tapsell said. "Thus, people with type 2 diabetes could ask their doctor or dietitian about the benefits of including walnuts in their dietary management."

Professor Tapsell said the study had been important because it confirmed the theoretical benefits of a certain food. "Food companies need this kind of research because it assists them in making legitimate claims about the benefits of certain foods. This particular research finding is also useful for doctors and dietitians when they provide advice to people on how to get good fatty acids into their diets," she said.

Ecofish Announces First-Ever Nationally Distributed Organic Shrimp

Sustainable Product Arrives in U.S.A. Stores Just in Time for Holiday Menus

(Portsmouth, N.H…December 1, 2004) EcoFish, the nation’s leading supplier of seafood exclusively from environmentally sustainable fisheries, is launching today the country’s first nationally distributed Organic Shrimp. The organic shrimp will be available through hundreds of natural foods and gourmet retailers nationwide. A complete list of retailers is available by calling 603-430-0101 or through

EcoFish’s new organic shrimp are packed in a colorful half-pound stand-up pouch, which can be found in the frozen section at fine gourmet and natural foods stores nationwide. The shrimp are quick-frozen within minutes of being harvested, locking in peak freshness and flavor. They are medium-sized, frozen raw, and prepared “easy-peel,” with a slit cut down the back, assuring ease of use.

EcoFish will be donating a portion of the sale of every bag of shrimp to help support sea turtle restoration projects around the world. Sea turtle populations have plummeted in recent years, due in large part to entanglement in commercial fishing gear. By buying EcoFish organic shrimp, consumers will support sustainable shrimp farms and help rebuild turtle populations, and make a real difference.

EcoFish friends Ocean Boy Farms in central Florida raise these shrimp organically from their own hatchery and without additives, which means fresh, clean, healthy shrimp with every bite. The shrimp are certified by Quality Certification Services (QCS) under the United States Department of Agriculture (USDA) organic standard for livestock as antibiotic-free, hormone-free, preservative-free, and 100% organic. QCS is a USDA-accredited domestic and international organic certifier, based in Gainesville Florida.

Most farmed shrimp available around the world today come from farms that have serious problems with pollution, habitat destruction and chemical use, and most wild shrimp have their own environmental baggage as well, primarily concerning excessive by-catch, which includes turtles. By-catch is incidental catch or capture of untargeted species.

Henry Lovejoy, president and founder of EcoFish, says, “EcoFish has pioneered the concept of environmental sustainability in the seafood industry. We are proud to provide a first-in-its-category sustainable and delicious shrimp option to the rapidly expanding consumer demographic that seeks high quality foods that don’t harm the environment. Consumers can now vote with their wallets and support a shrimp farm that is setting the standard for a sustainable future in aquaculture.”

Ocean Boy Farms operates a dynamic, state-of-the-art, vertically integrated aquaculture operation, designed around environmental sustainability. The shrimp are farmed and raised far from the ocean in a closed re-circulating system, without the use of chemicals, utilizing deep 20-million-year-old aquifers that feed the ponds. In this way, the farm avoids the traditional environmental issues usually associated with shrimp farming. In addition, they raise their own organic tilapia to feed the shrimp.

Stutts Armstrong, vice president of sales & marketing at Ocean Boy Farm, states, “We are very excited about our newly formed partnership with EcoFish. EcoFish’s high standards of quality and genuine concern for the environment and sustainability make them a perfect partner for Ocean Boy Farms.”

About EcoFish
Founded in 1999, and based in Portsmouth, N.H., EcoFish is the world’s first distributor of seafood exclusively from environmentally sustainable fisheries. EcoFish was established with the conviction that increasingly man’s ability to remove fish from the ocean far outstrips the ocean’s ability to replenish itself. Today, EcoFish brand seafood can be found in over 1,200 gourmet and natural food stores and over 125 fine restaurants nationwide. All selections are recommended and approved by an independent Seafood Advisory Board, comprised of some of the world’s leading marine conservation scientists. Working with conservation and fishing communities, EcoFish seeks a sustainable solution for the oceans, consumers, and the seafood industry, believing that ultimately the consumer is the force for change in marine conservation. Visit for more information.

Henry Lovejoy, president

Advanced Plant Pharmaceuticals Acquires 99 Percent of Mazal Plant Pharmaceuticals Inc.

NEW YORK, Dec 01, 2004 (PRIMEZONE via COMTEX) -- David Lieberman, CEO of Advanced Plant Pharmaceuticals, Inc., (APPI) confirmed today the closing of an asset sale agreement entered with Mazal Plant Pharmaceuticals Inc., a private Delaware corporation ("Mazal") whereby in exchange for of 7,000,000 shares of common stock of Mazal, APPI transferred intellectual property to Mazal relating to three whole plant pharmaceutical drugs. Mazal presently has 7,050,100 shares of common stock issued and outstanding. Mazal is focused on the FDA development, testing, manufacturing and selling of plant pharmaceutical drugs.

APPI focuses on the research and development of whole plant-based products. APPI has developed three potential whole plant pharmaceutical drugs formulas:

-- MAHDL, designed to lower cholesterol and improve HDL/LDL
levels, is targeted to over 50 Million potential customers
in the U.S. and Canada;
-- Leuknil, a plant-based pharmaceutical composition designed
to treat leukemia; and,
-- a plant-based composition designed to treat Alzheimer's

APPI has also developed a method for producing these compositions into a drug form. Mazal's initial plans are to apply for an Investigational New Drug from the FDA and to pursue Phase 2 for the cholesterol drug.

Under the terms of the agreement, APPI has transferred its intellectual property rights (with exception of rights previously assigned to other entities) to Mazal, including all patents, trademarks and service marks, labels and copyrights, and all registrations and applications worldwide related to the three pharmaceuticals, as well as all technical processes, formulas, recipes and/or other such information-related to development, testing, manufacturing, packaging and selling of the same.

In exchange, APPI will receive, on a quarterly basis, a royalty on all sales subject to the terms of the agreement. The Company also acquired 7,000,000 shares of common stock of Mazal.

APPI continues to pursue sales of its nutritional product Lo-Chol, targeted for the nutritional cholesterol market and Sinusol, a OTC homeopathic drug for treating sinus and allergy ailments.

Mazal expects to announce the management team and its website in the near future.

Forward-Looking Statements:

This release contains forward-looking statements within the meaning and pursuant to the Safe Harbor provisions of the Securities Litigation Reform Act of 1995 and involve risks and uncertainties that may individually or mutually impact the matters herein described, including but not limited to product development and acceptance, manufacturing, competition, regulatory and/or other factors, which are outside the control of the Company.

Small Study Shows SAMe May Improve Treatment of Depression

Adding supplement to antidepressant medication can help patients with continuing symptoms

Massachusetts General Hospital (MGH) researchers have found that adding the nutritional supplement SAMe to a standard antidepressant may be helpful to patients who have not responded to single-drug treatment for clinical depression. The pilot study, appearing in the December Journal of Clinical Psychopharmacology, found that treatment with both SAMe and an antidepressant improved symptoms in half the study participants and produced complete relief of symptoms in 43 percent of participants.

"One of the most common problems in treating depression is the number of people who are left with symptoms after initial treatment with a first-line antidepressant," says Jonathan Alpert, MD, associate director of the MGH Depression and Clinical Research Program, who led the study. "Some previous trials have suggested that SAMe might have effects comparable to some antidepressants, but there has not been sufficient research on oral SAMe preparations or comparisons with available antidepressants."

A substance that is found in every human cell, SAMe (S-Adenosy-L-Methionine) is a commonly used dietary supplement. Although some reports had suggested it might be useful in treating depression, few rigorous research trials have been carried out. The current study was designed to investigate whether adding SAMe to antidepressant treatment could improve the results for patients for whom a single medication had not relieved symptoms.

The study enrolled 30 participants who had continued to have significant depression after more than a month of treatment with drugs like Prozac, Paxil or Effexor. During the six-week study, participants received SAMe along with their antidepressant, starting at 400 mg of SAMe two times a day and increasing to 800 mg twice a day after two weeks. Patients were free to stay at or return to the 400 mg dose level if they chose to, in consultation with their physician.

At the end of the study period, analysis with several standard tools for measuring symptoms of depression showed that 50 percent of participants had significant improvement in their symptoms and 43 percent had complete remission of their depression. Although two participants dropped out because of treatment side effects, there were no reports of serious adverse events.

"This is the first study to look at the safety and efficacy of combining SAMe with antidepressant treatment after antidepressants had proven insufficient on their own," says Alpert. "Patients and physicians have been using these combinations without good supporting data, and these results are an initial step toward compiling the necessary scientific evidence."

The MGH team notes that the current study has many limitations – including its small size, the lack of a control group and the fact that participants knew they were taking an active dose of SAMe. The researchers have just begun a National Institutes of Health (NIH)-sponsored, double-blinded, placebo controlled trial of SAMe in combination with antidepressant treatment. A second NIH-funded study will compare SAMe with standard antidepressants and with placebo as a single-drug therapy. More information on these new studies is available toll-free at 877 55-BLUES (877 552-5837).


The current study was sponsored by Pharmavite LLC, which manufactures the Nature Made line of vitamins and nutritional supplements. The study's co-authors are senior author Maurizio Fava, MD, George Papakostas, MD, David Mischoulon, MD, PhD, John Worthington, MD, Timothy Petersen, PhD, Yasmin Mahal, Alana Burns, and Andrew Nierenberg, MD, all of the MGH Depression and Clinical Research Program; and Teodoro Bottiglieri, PhD, of Baylor University.

Massachusetts General Hospital, established in 1811, is the original and largest teaching hospital of Harvard Medical School. The MGH conducts the largest hospital-based research program in the United States, with an annual research budget of more than $400 million and major research centers in AIDS, cardiovascular research, cancer, cutaneous biology, medical imaging, neurodegenerative disorders, transplantation biology and photomedicine. In 1994, MGH and Brigham and Women's Hospital joined to form Partners HealthCare System, an integrated health care delivery system comprising the two academic medical centers, specialty and community hospitals, a network of physician groups, and nonacute and home health services.

Soft Gel Technologies, Inc.® Awarded U.S. Patent for Soft Gelatin Formulation of Injuv® Low Molecular Weight Hyaluronic Acid

LOS ANGELES, CA, December 1, 2004—Soft Gel Technologies, Inc.® (SGTI®) was awarded U.S. Patent #6,806,259 for their Injuv® soft gelatin capsule formulation preparation to provide the primary benefit of internally softening the human skin. Injuv® is a low molecular weight hyaluronic acid (HA) cosmeceutical extracted from rooster combs. It uses a sophisticated enzyme-cleaving process that reduces hyaluronic acid into lower molecular weight polymers which are capable of absorption through oral administration, but does not alter its chemical composition in any way. The most important biological function of hyaluronic acid is its ability to retain fluids in the tissues throughout the entire body. Hyaluronic acid is found in the synovial fluid, the cartilage, the skin, and the vitreous humor of the eye. It is also essential for the structure of the extracellular matrix, which forms a network to maintain fluid balance, particularly in the skin. Hyaluronic acid is responsible for keeping the skin moist and supple. When taken orally, Injuv® provides internal moisture for the body with proven bioavailability.

This patent follows previous patents awarded to SGTI® for GlucoTrim®, CoQsol®, and Isomer E™. Soft Gel Technologies, Inc.® is the exclusive source for Injuv® in soft gelatin capsules. Injuv® is a registered trademark of SGTI®.

SGTI® President, Ron Udell, remarked, “This additional patent strengthens SGTI®’s position as a leading source for unique, clinically-proven, effective nutraceuticals.” SGTI® is committed to providing the natural products industry with proven ingredients and expanding and protecting its intellectual property. Mr. Udell added, “We have just completed a clinical trial with an Injuv® formulation, and the results on improving skin appearance and texture were considered significant by the researchers. ”

About Soft Gel Technologies, Inc.®
Soft Gel Technologies, Inc.® is a leading contract manufacturer providing specialty soft gelatin encapsulation to the nutraceutical industry. SGTI®’s leading product is a patented highly bio-available CoQ10 soft gel marketed as CoQsol®. Other key products include GlucoTrim®, a banaba leaf extract for blood glucose management and Injuv®, a low molecular weight hyaluronic acid for cosmeceutical and joint health applications. Soft Gel Technologies, Inc.® is a privately held company based in Los Angeles, CA.

For more information, visit


Kenn Israel
Director of Marketing
(323) 726-0700

Symrise Teams With SweetGredients to Use Gaio(R) Tagatose in New Flavor Systems

BELTSVILLE, Md., Nov. 30 /PRNewswire-FirstCall/ -- Spherix Incorporated (Nasdaq: SPEX - News) today announced that Symrise, one of the world's top producers of flavors and fragrances, has teamed with SweetGredients, a joint venture of Arla Foods (Spherix's licensee for tagatose) and Nordzucker, to use Gaio® tagatose (Spherix's revolutionary new sweetener) in developing a new generation of flavors. The agreement was announced by Ray Hughes, President, Symrise Flavor Division, North America, and Mads Vigh, General Manager, SweetGredients, Germany.

Mr. Hughes said, "Our newest strategic partnership allows us to provide unique, customized solutions to key customers, based on specific flavor and tagatose blends. Substantial advantages can be achieved in yogurts, light and low glycemic confectionery products, and diet drinks. That's because tagatose is much more than a low calorie sweetener. When used in combination with Symrise flavors, it actually serves as a flavor potentiator, boosting the flavor profile, imparting mouthfeel, and providing a desirable fresh impact."

Mr. Hughes added that the partnership allows for the combined expertise of Symrise and SweetGredients to assist food and beverage manufacturers in addressing the need for healthier foods and beverages to combat obesity and other health issues.

Dr. Matthias Guentert, Vice President of Innovation at Symrise, underscored the taste benefits that have been achieved by using Gaio® tagatose in flavor blends. Dr. Guentert reported that, compared to other low- calorie and to no-calorie sweeteners, Gaio® tagatose tastes like sugar.

The agreement between the two companies provides for Symrise to act as SweetGredients' exclusive flavor industry partner in the U.S. Symrise will develop unique flavors and flavor blends that will take advantage of the full range of benefits made possible with Gaio® tagatose.

Mr. Richard Levin, Spherix's Acting CEO and President, indicated that the formation of the Symrise/SweetGredients partnership to develop a new generation of flavors containing tagatose is great news and in line with Spherix's and Arla's recent positive developments in the non-food and food areas. He said that Spherix views this teamwork as a definite step towards the future success of tagatose as it will offer food and beverage manufacturers new opportunities.

Certain statements contained herein are "forward looking" statements as defined in the Private Securities Litigation Reform Act of 1995. Because such statements include risks and uncertainties, actual results may differ materially from those expressed or implied. Factors that could cause actual results to differ materially from those expressed or implied include, but are not limited to, those discussed in filings by the Company with the Securities and Exchange Commission, including the filing on Form 8-K made on March 3, 1999.

Under its motto, "A World of Solutions," Spherix's mission is to create value and increase shareholder wealth through innovations that benefit our clients and the human condition. Spherix offers innovations in information technology, knowledge management, and biotechnology.

Sustainable Competitive Advantage and Product Differentiation

In previous articles, I have endeavored to cover various aspects of the personal care market in some detail. Readers should never forget the importance of embracing the “big picture” and manipulating the strategic marketing principles that comprise the foundation of what makes a product truly successful. One of the most enduring maxims in modern marketing is the fact that, in order to maintain a desirable level of differentiation with regard to competitive or substitute offerings, a product must enjoy one or more major sustainable competitive advantages. As any student of marketing science knows, this can be achieved by thoroughly analyzing and applying the elements of the “marketing mix” or “Four P’s” of marketing (product, price, place, and promotion) as they relate to meeting the needs of the target market and offering certain advantages over other alternatives.

Regardless of where you are in the supply chain-- supplier, manufacturer, intermediary, or retailer—contemporary marketing science dictates that you must develop your product in response to a recognized “need” by the user, and that you must not simply make a product and then find a market for it. Not only that, but everyone in the supply chain must develop a thorough understanding of the end user’s behavioral, attitudinal, and demographic characteristics so that the right products can be delivered to meet the best opportunities. Importantly, the role of the supplier, personal care or otherwise, has changed recently to reflect the fact that manufacturers and marketers are looking for more turnkey solutions, including end-user product ideas and rigorous testing for efficacy, safety and stability so that suppliers can prove that their ingredients are relevant.

Proper application of marketing’s “Four P’s” apply to everyone making and selling goods and services. Future articles will cover each of these “P’s” in greater detail, and I have attempted to very briefly summarize the importance of each here:

Product: Marketers are actively engaged in developing products that their customers truly need. They pay careful attention to the features and benefits of the product as it is being developed and ensure that it is adequately differentiated from alternative offerings so that they can present a “value proposition” or at the very least a good reason to purchase the product in the first place. Suppliers must apply the same principles when marketing ingredients, as manufacturer/marketers must do for their end-user brands.

Price: Marketers can further differentiate products through application of a variety of pricing strategies, and it is true that many natural personal care players are not able to achieve the volume levels necessary to be the low cost leader. Yet, there are dozens of other ways to position a product strategically via pricing, and companies must pay careful attention to the target market and the competitive environment, as well as a variety of external factors including the regulatory, economic, technological, and social inputs when choosing the strategy that best fits their product.

Place: Distribution channels are also an important way to achieve sustainable competitive advantage. Some products are available only in specific channels while other products are available in multiple channels. Where the marketer chooses to offer the product often dictates what happens with the other elements of the marketing mix and can provide further differentiation.

Promotion: Marketing communications (MARCOM) strategies, mediums, and particular vehicles serve to convey these advantages and points of differentiation to the target in the form of words, images and other symbols. The preferred result of this process is a distinguishable brand identity and image, which must be established, enhanced and defended at all costs.

The market is in a constant state of flux, and organizations throughout the supply chain must endeavor to continually manage the marketing mix to anticipate and meet the changing needs of the marketplace. Any plan that is developed must be implemented properly, controlled to ensure adherence, and subsequently evaluated to identify what is effective and what is not. This is no easy task, but maintaining a thorough understanding of this dynamic process so as to achieve sustainable competitive advantages through differentiation will increase your chances of long-term success.

Darrin C. Duber-Smith, MS, MBA, is president of Green Marketing, a Colorado-based strategic planning firm offering marketing planning, marketing plan implementation, and other consulting services to natural products companies in all stages of growth. He has 15 years of specialized expertise in the natural products industry and is also Visiting Assistant Professor of Marketing at the Metropolitan State College School of Business in Denver, CO, as well as executive director of the International Association of Natural Product Producers. He can be reached at