An Essential Role in Personal Care

Essential oil has been frequently talked about as a key component of China’s personal care market. By definition, an essential oil is “essential” in the sense that it contains the characteristic fragrance of the plant from which it is taken. As a concentrated hydrophobic liquid containing volatile aroma compounds, it is widely believed to provide therapeutic benefits and is often closely associated with aromatherapy.

The potential of essential oils and related products is increasingly regarded as great in China. Why? Firstly, this category taps into some of the major trends in today’s personal care market, including “green,” and “botanical,” as well as “holistic care” and “aromatherapy.” Secondly, consumer awareness of essential oils for personal care is increasing, primarily in first and second tier cities, thanks largely to enhanced education efforts by fashion media. Thirdly, it is relatively easy to source essential oil materials in China as it is one of the leading global suppliers of essential oils, surpassing France to be the third largest exporter in 2013. Last, but not least, there is great room to expand as the market is far from saturated and the domestic consumption of essential oils for skin care is well below expectations in China.

According to a report released by National Ministry of Commerce (Prospect Analysis on China Essential Oil Industry During 2010-2015), the essential-oil-related skin care category was estimated to account for only 1% of total skin care sales in 2011, but it is projected to expand rapidly with annual sales volume growth of 800-1000% during the forecast period.

Finding Growth
While the market for essential oil and related products is still in its early stage, the demand has been growing steadily for such products used for personal care in China. The bulk of demand, by far, for essential oils comes from beauty spas and salons, but retail sales of essential oils and related products are also picking up quickly, especially in online stores.

Currently, two major product forms dominate the category, single oil and oil blend. However, formularies featuring essential oil are on the rise, ranging from skin care, hair care and color cosmetics to household cleansers and air care. This is partly due to brands’ continuing efforts to differentiate themselves in today’s fiercely contested market. By capitalizing on essential oils, they are able to add more benefits to the products, including scents and therapeutic properties.

The most well-known essential oils used for personal care in China include those of rose, lavender and tea tree, as well as eucalyptus and chamomile, which are reasonably in line with today’s most-demanded benefits in the personal care market, such as anti-aging, brightening/lightening, anti-acne and soothing. And if we take a close look, the most common claims made by essential oil products sold online also involve removing acne marks/scars, bust enhancing and body slimming, which probably reflect the needs of younger shoppers who make up large proportion of online demographics.

Overall, the market for essential oils and related products is very fragmented in China, where there are few dominant brands. It is estimated that the top 10 brands only account for approximately 17% of the current market shares, and some are primarily sold online, according to industry insiders. Among well-known brands, a few are domestic, such as AFU, PrettyVally, Camenae and Herborist. Others are international, such as Jurlique, Oshadhi and L’Occitane.
While some brands are still dedicated to pure oils, others are increasingly expanding into essential oil-containing products that are widely regarded as an untapped growth area. For example, Camenae launched a series of essential oil lotions last year, which use its patented microencapsulation technology as well as homogenization and microemulsification technologies to incorporate essential oils into skin care formularies.

Jplus, another local beauty brand founded by Chinese TV host Li Jin, brought its essential oil product lines into the air care sector, by cooperating with a domestic car rental company on an essential-oil-containing car perfume. International brands are trying to catch up in the essential oil category. For example, Age Perfect Extraordinary Oil, which was introduced by L’Oréal Paris in late 2013, reportedly contains eight essential oils such as lavender, rose, rosemary, roman chamomile and orange peel. Meanwhile, Lancôme’s Absolue Precious Essence, which debuted early last year in China, is said to contain citrus essential oils. Most recently, Nu Skin began introducing a series of essential oils in China. Each one is reportedly based on its exclusive AgeLOC genetic technology.

Hurdles to Overcome
Many hurdles still need to be overcome, however, to further develop China’s essential oils market. Mounting concerns still exist over a number of issues, such as a chaotic supply chain and general lack of consumer knowledge.
More importantly, regulations and quality standards to ensure that essential oils, especially for personal care use, are unadulterated and from good sources, fall short in China. With the demands for high quality products growing and the supply dwindling in China, adulteration of essential oils and misidentification of sources is not uncommon, according to some interviewed by Happi China.

One example is AFU, a self-claimed, top-selling online brand specialized in essential oils. Despite the commercial success it achieved since its establishment in 2003, the brand has been found guilty of false advertising and mislabeling on its material sourcing and unsubstantiated effects, and fined by various local governments in China. Furthermore, difficulties also remain in formulating essential oils into traditional product forms like creams and lotions. Just as Dr. Wang Li from China’s West China Hospital pointed out, essential oils can penetrate through the skin as well as enhance the penetration of other ingredients in the formulation. Such effect of penetration enhancer means that the requirements for other ingredients in formularies are higher.

As such, “four major elements must be considered to ensure the success of essential-oil-containing formularies: skin penetration, skin absorption, compatibility with other ingredients, and formula stabilization. In short, there are good reasons to believe that the essential oil category has great potential in the personal care market, and will soar once major issues are solved. According to Mintel, with fragrance functionality becoming as important as smell, the future will also see brands linking fragrance to their functional benefits, such as mood-boosting or stress relieving, or even anti-aging, where essential oils, whether as final products or ingredients, can play a big role.