Over 35 years of international experience in the beauty & food industry.

Senior executive for L’Oreal Canada for 12 years. General Manager of Spincontrol North America ( efficacy testing of cosmetic products and ingredients ).

Consulting experience for suppliers, manufacturers and retailers the cosmetic industry.

Economic development expertise between Europe and Canada.

Long standing member of CCTFA, CHFA and SCC. TFO Canada associate for the past 10 years.

bertrand.walle@tfocanada.ca 1.514.630.3838

Essential oils

Pure oils

Natural extracts

Natural coloring agents

Beauty market trends

Product categories

Driving factors

Buyers

Regulations

Certifications

Recommendations for market entry

34.4 million people.

68% concentrated in 6 major cities ( more than 1 million people ).

$8.4 billion beauty care spending at retail.

$244.00 spending per capita in beauty care.

$800 million revenues generated.

Source: 2010 statistics from Cosmetic Magazine / Statistics Canada / CCTFA

Sales

Skin Care (25.4%)

Hair Care (19.3%)

Make up (18%)

Oral Care (11.2%)

Fragrances (9%)

Other (17.1%)

Source : Coty Trends Report 2011

Aromatherapy

Spas

Beauty salons

Health food stores

Internet

Direct marketing

Gift

Large volume stores

Duty free

Packaging (40%)

Manufacturing (25%)

Ingredients (20%)

Indirect Cost (15%)

25% to 30% average COGs (cosmetic product )

Market size for ingredients for

cosmetics is approximately $400 million.

Comprises of 2 specific categories:

* commodity market ( fillers, surfactants,

etc );

* value added ( active ingredients,

both synthetic & natural oils,

extracts, pigments, etc ).

According to US research based on 82,000 ingredients used in the cosmetic industry, one in eight is an industrial chemical substance which may cause a health concern.

This concern fuels the continuing trend of utilizing natural ingredients whenever possible in the manufacturing of cosmetic products.

This in addition to consumer trends towards “safe” products/ ingredients.

Source: David Suzuki Foundation May 2012

Estimated at $120 million for cosmetics.

01020304050607080

Essential andpure oils

NaturalExtracts

ColoringAgents

Source: Unofficial industry estimates 2012

Mil

lio

ns

($)

Approximately $33 million of natural ingredients.

Represents locally produced ingredients such as pine oil, hemp seed oil, sub-arctic seaweed,

labrador tea, cranberry, plankton, fish extracts, etc.

Source: Statistics Canada

ESSENTIAL OILS

Quantity Value ('000 tonnes) ('000 Cdn$) 1998 1.5 35,478 1999 1.6 36,627 2000 2.8 41,641 2001 2.9 38,567 2002 4.2 48,883 2003 4.3 46,062 2004 4.6 33,034 2005 4.7 32,214 2006 3.4 31,648 2007 3.6 31,598 2008 5.2 52,952 2009 4.6 48,314 2010 4.8 55,525 2011 5.0 62,410 Source: Statistics Canada

Primary target markets:

* flavor & fragrances

* food

* cosmetics

* nutritional supplements

* herbal remedies

* pharmaceuticals

* nutraceuticals

There is a confusion of terms used by companies

and understood by consumers to express that

a product or ingredient is “natural”. Green

Organic

Natural

Not synonymous when used in communications.

Chemical

Combination

There is a general assumption amongst consumers that “natural” products are better or healthier than similar ones using synthetic ingredients.

Often these “natural” ingredients are no different in chemical composition than their synthetic counterparts.

In fact, a synthetic substance which mimics a natural one can sometimes provide a purer, more stable ingredient which gives the product a longer usable life.

Health Canada considers both natural and synthetic ingredients to be equally suitable for use in cosmetics.

Marketed in Canada as: * the essential oil itself; * as an ingredient in the production of a product.

Most popular essential oils in Canada: Pine, lemon, orange, lavender, eucalyptus, tea tree, jojoba, grapefruit) Main origin of imported essential oils: * Europe (rosemary, thyme, lemon, lemon grass, lavender, camomile, bergamot) * USA (aloe vera, jojoba, grapefruit, orange) * Asia…primarily India (patchouli, palmarosa, cinnamon cassia, clove) * Africa (geranium, ylang ylang) * Australia (tea tree) * South America…primarily Brazil (rosewood, cardamom, eucalyptus )

Marketed in Canada primarily as an ingredient

Also marketed as a pure oil for products used

in massages.

Main origin of imported pure oils:

* Europe (olive, seabuckthorn, mink, grapeseed, apricot, hazel nut)

* USA (almond, jojoba seed, lecithin, pumpkin seed, safflower,

soyabean)

* Asia (evening primrose, palm, coconut, chaulmoogra, rice bran

* Africa (olive, cocoa, argan, karite, shea, avacado, macadamia)

* South America (coconut, jojoba, rosehip, passionflower)

Marketing in Canada as an ingredient.

Also marketed as an active ingredient primarily for skin care.

Comes from all over the world: * Botanical * Floral * Fruits * Vegetables * Minerals * Sea

Marketed in Canada as an ingredient.

Most natural coloring agents are bought through

well-established producers (Lessonia. Naturex,

Diana, DDW; the color House (USA), etc).

Overall caution to use natural coloring agents

by the industry due to their instability and inconsistency.

Niche application for natural colored cosmetics ( Nacara,

100% Pure ( fruit pigmented color cosmetics , etc).

ENVIRONMENT

• Commitment to sustainability from:

* government ( policies & regulations )

* industry ( marketing edge )

* consumers ( wellness )

CONSUMER

• Organic/ natural/ green

• More educated purchasers

• Baby-Boomers seeking healthier alternatives

• Youth market consciousness of “natural”

• Men’s expanding cosmetic interest especially in “natural” products

• Ethnic diversity & consumer interest

INDUSTRY

• Consumer driven market

( needs / desires )

• Marketing edge ( Fair Trade / organic )

• Corporate social responsibility

( good manufacturing practices / sustainability / protect

biodiversity)

Universal recognition of all natural ingredients for the cosmetic industry.

Estimated Canadian growth at 20% per year.

Market predicted to be 2-3 times larger by 2016

$240 million to $360 million business by 2016

Some are mandatory…some are optional.

Some need to be done once… some need to be done continuously depending on volume.

Some need to be registered by the exporter…some by the importer.

INCI ( International Nomenclature of Cosmetic Ingredients )

NSN ( New Substance Notification )

DSL ( Domestic Substance List )

NDSL ( Non-Domestic Substance List )

ICL ( In –Commerce List )

EAR (Environmental Assessment Regulations )

Consumer and Packaging Labelling Act

Custom Tariffs Act

INCI ( International Nomenclature of Cosmetic Ingedients )

A system of designating names for waxes, oils, pigments, chemicals and other ingredients of soaps, cosmetics and other products based on scientific names.

To be accepted in Canada, an ingredient must have an INCI name based on their chemical structure and composition.

The name can only be assigned by the INCI Committee

Applications are handled for a fee.

Brought into line with international standards. Will contribute to health protection. Lessen trade barriers. Increase trade opportunities. Ingredients clearly visible to consumers. In an obvious location. Can not be placed on the underside/bottom of a container. Regulation information takes precedence over voluntary

information. Enables Canadian consumers to make more informed decisions. Easier to identify ingredients to which consumers may have

sensitivities. Enables physicians to refer to one common name for the purpose

of treatment and incidence reporting. International recognition of INCI for travellers.

NSN ( New Substance Notification Regulations )

Amount of information required is directly related to the amount of unlisted ingredients to be introduced into Canada.

Government evaluators then determine whether the substance poses as an unreasonable risk to the environment and/or to human health.

Subsequence notifications are required as the annual amount of the imported or manufactures substance increases.

Once the highest level notification has been submitted, the assessment period has expired and the government receives a subsequent notice from the notifier, then the substance will be eligible for addition to the DSL or the NDSL.

DSL ( Domestic Substance List )

US equivalent is the TSCA ( Toxic Substance Control Act ).

Regulates the introduction of new or previously registered substances.

Present DSL has an inventory of approximately 23,000 substances.

Apply to substances in a quantity of 100kg or more in a calendar year used for manufacturing purposes or manufactured in or imported into Canada.

Under the Canadian Environment Protection Act a substance is not permitted to be used or imported if it is toxic or capable of becoming toxic ( on environment, biodiversity, human life and/or human health )

NDSL ( Non-Domestic Substance List )

Published and maintained by Environment Canada.

Substances that are not on the DSL but are listed on the NDSL are subject to lesser information requirements.

There exists more than 58,000 entries on the NDSL.

CAS ( Chemical Abstract Services )

A division of then American Chemical Society.

Possesses a authoritative collection of disclosed chemical substance information.

Contains more than 67 million organic and inorganic substances.

Contains approximately 63 million sequences.

Provides a reliable link between various nomenclature terms used to describe substances.

Serves as an international resource for substances used by scientists, industry and regulatory bodies.

Data is current and updated daily.

CAS registry number is unique and specific to only one substance.

Registration applications for a fee are made directly with CAS.

ICL ( In-Commerce List )

Health Canada holds this list of approximately 9000 substances found in pharmaceuticals, veterinary drugs, biologics and general therapies, cosmetics, medical devices and food additives.

Current list has several deficiencies ( duplicate entries, missing entries and ambiguous entries containing generic names, common names and trade names ).

Nomination of substances is ongoing.

EAR ( Environmental Assessment Regulations )

Will require cosmetic companies and distributors to seek approval from the Environmental Assessment Unit of Health Canada before new ingredients can be used in products, including cosmetics, regulated under the Food and Drug Act.

New ingredients will be those defined as not being present on the DSL, NDSL or ICL.

Until such time as the EAR takes effect, importers and domestic manufacturers of new ingredients in Food and Drug-regulated products, including cosmetics are required to comply with the pre-imported/pre-manufacture approval requirements of the New Substance Notification ( NSN ) regulations of the Environmental Protection Act.

Crucial that notifiers determine whether a substance to be imported into or manufactured in Canada is listed on the DSL or the NDSL.

If a product or an ingredient appears on a “hot list” it will not be granted entry into Canada by Health Canada who has access to ingredient registeries ( INCI, DSL, NDSL CAS and eventually ICL )

Health Canada takes a risk-based approach with regards to regulating cosmetic products and ingredients (considers adverse health effects plus exposure levels in addition to the cumulative exposure ).

Canadian government is currently developing EAR (Environmental Assessment Regulations ).

Must contain the following information: Nature of the product, contents and manufacturer. Label is to be conspicuous Lettering designed according to prescribed minimum

size letters and numerals. In English and in French. Name & head office address of importer Name or description of the contents. INCI list of ingredients. Color, style name and number Product of…( country name ) UPC/ PLC (and other bar codes as required by retailer)

GENERAL Labels on imports must conform to Canadian

standards. Exporters should consult with and have the buyer

approve drafts of labels prior to printing. If information is missing from label, entry will not

be permitted ( corrections are expensive ). Imports bearing a description in a foreign language must have a separate label in English and in French which complies with labelling regulations.

Pictures and illustrations on the label must correspond to the contents of the package.

Must contain the following information: Nature of the product, contents and manufacturer. Label is to be conspicuous Lettering designed according to prescribed minimum size

letters and numerals. In English and in French. Name & head office address of importer Name or description of the contents. INCI list of ingredients. Color, style name and number Product of…( country name ) UPC/ PLC ( and other bar codes as required by retailer )

Trade Facilitating Office of Canada (TFO) www.tfocanada.ca

Canada Border Services Agency www.cbsa-asfc.gc.ca

Canadian Cosmetic, Toiletry, and Fragrance Association (CCTFA) www.cctfa.ca

Health Canada www.hc-sc.gc.ca

Canadian Association of Importers and Exporters (I.E. Canada) www.ieCanada.com

Industry Canada www.strategis.ic.gc.ca

Scented Products Education and Information Association of Canada www.scentedproducts.ca

Canadian Food Inspection Agency (CFIA) www.inspection.gc.ca

Allied Beauty Association Show (ABA) www.abacanada.com

Canadian Health Food Association (CHFA)

www.chfa.ca

Esthetique Spa International

www.spa-show.com

Cosmetics Magazine www.cosmeticsmag.com

Spa Canada www.partnerspublishing.com

ORGANIC

NPA ( Natural Products Association )

NSF (

NaTrue

Ecocert

NOP ( National Organic Program )

USDA ( United States Department of Agriculture )

FAIR TRADE

Source: CBI – Adapted from A. Jones 2007

Wholesaler

* imports from producer

* sells primarily to distributors

Distributor

* imports from producer or buys from wholesaler

* sells to other distributors, custom formulators or

manufacturers

Custom Formulator *utilized for production

Manufacturer * utilizes for production

Custom formulator & manufacturer options:

* Small distributors that carry specialized ingredients;

* Small distributors that carry base ingredients;

* Large distributors that carry hundreds of

ingredients;

* Large chemical companies

providing base concentrates

made of natural ingredients

and only require finishing enhancement.

Europe

* Established producers & distributors

USA * Established producers & distributors

Asia

* Uniqueness of product and price

Africa * Uniqueness of product

South America * Uniqueness of Amazon products

Vegetable oils : worldwide mapping

* : Organic available

Origin : Europe

-Apricot Kernel Oil*

-Sweet Almond Oil*

-Corn Oil

-Hazelnut Oil

-Peach kernel Oil

-Grapeseed Oil

-Soybean Oil

-Sunflower Oil*

-Wheat Germ Oil

-Olive Oil

-Sea Buckthorn Oil

Origin : South America

-Borrago Oil

-Rose hip Oil

-Jojoba Oil*

-Passionflower Oil

-Sesame Oil

Origin : Asia

-Coconut Oil*

-Palm Oil

-Evening Primerose Oil

-Rice Bran Oil

-Chaulmoogra Oil

Origin : Australia

-Safflower Oil

Origin : Turkey

-Cottonseed Oil

Origin : Finland

-Mink Oil

Origin : Africa

-Avocado Oil*

-Macadamia Oil*

-Moringa Oil

-Shea Butter

-Argan Oil*

Origin : Madagascar

-Calophyllum Oil

Distributors average markup of 30% ( 15% to 50% ) 5% to 15% Discounts ( large volume/ volume rebates ) For specific pricing of essential oils and pure

oils refer to www.newdirectionsaromatics.ca

Costs

* Acceptable rates from Colombia to Canada

* High internal costs in Colombia

* Moderate optional costs in Canada

Options to Canada & in Canada

* Boat or Air from Colombia

* Rail or Truck in Canada

All imports must be packaged in a container that:

Prevents the product from becoming infested or from spreading a pest.

While awaiting shipment, dunnage, pallets, crating or other packaging materials must be stored in a fashion that will prevent infestation.

Must contain the following information:

Brand name

Product number

Net amount in container ( weight, measure or number )

Expiry date

Name & address of the importer

UPC/PLU or other bar code identical to the one on the individual products.

Lot number

INCI name….mandatory

Find a buyer

Assign a coordinator

Response times

Lead times

Price assurance

Samples

Quality assurance

Certification for organic & fair trade claims

Availability

Packaging

Website

Tradeshows

Essential Oils & Pure Oils Essential oils presently in high

demand: pine oil, lemon, orange,

lavender, eucalyptus, tea tree,

jojoba, grapefruit).

Pure oils presently in high demand: jojoba oil, almond sweet virgin oil, coconut oil, seabuckthorn oil, palm oil, macadamia oil,

meadowform oil, camelia seed oil, argan oil, rosehip oil, evening

primrose, pomegranate oil, avocado oil, apricot oil, hemp seed oil,

black current seed oil, barage oil, neem oil and carrot oil.

Natural Extracts

High demand for unique, exotic extracts from

the Amazon which carries a mystic image.

Active ingredient claim(s) needs to be backed up by studies of actual benefits.

Natural coloring agents

Stability

Consistency

High demand for “blue”

High demand for acceptable “red”

Specific opportunity: Some cosmetic products require insoluble pigments that will not run when they get wet (products such as eye liner, eye shadow, blush, and lipstick).

A major opportunity for Colombia: DURABLE DEVELOPMENT A recent trend for Natural Ingredients used in Canada.

ENVIRONMENT PROTECTION Canadian Companies prefer to work companies that

protect the environment (botanical particularly) and

manage their Bio Diversity.