Rival Unilever in the past three years has bought
natural-products titan Seventh Generation and Schmidt's natural
deodorant and toothpaste. A little more than a year ago it launched
the new natural brand Love Beauty and Planet. Meanwhile, Mrs.
Meyer's, Method and Babyganics all have been acquired by SC
Johnson. Tom's of Maine, that other scrappy little personal-care
player, has been owned by Colgate-Palmolive Co. for 13 years.
Including all the acquisitions or natural-positioned line
extensions like P&G's Pampers Pure (made without chlorine
bleaching, fragrances, parabens or latex) and the similarly
scrubbed Tide Purclean, big players now occupy enough shelf and
head space that it's going to be hard for startups to compete, says
Dibadj, who sees signs that venture investors are getting more
cautious about the sector.
Even so, investment banks staked out a major presence at the
Natural Products Expo West in Anaheim, California, in March. At the
show, which is a major showcase for small brands, the bankers
displayed ads touting deals they'd done helping big CPG players buy
natural startups, says new products consultant Tom Vierhile.
"I'm not sure consumers really know who owns what in natural
products anymore," Vierhile says. "It's hard enough for us in the
industry to keep track."
Invisible companies behind the curtain
In a way, that's by design. Consumers don't know who owns what
because CPG players don't go out of their way to tell them. P&G
put samples of Burt's Bees toothpaste in bags at its investor day
in Cincinnati last November, but the fine print on the back of the
package identifies it as coming from Sunflower Distributing, a
little-known subsidiary. Unilever, which has slapped its corporate
logo on the back of packages for most of its brands in recent
years, hasn't done so with Seventh Generation. Nor does SC Johnson
put its corporate moniker or "A Family Company at Work for a Better
World" tagline on the back of Method or Mrs. Meyer's products.
SC Johnson Chairman and CEO Fisk Johnson says the industry is
giving consumers what they want, even if there's ultimately not
much real difference between the old traditional brands and newer
"natural" ones. SCJ has embraced sustainability and full disclosure
of ingredients for years, Johnson says. The company took
chlorofluorocarbons (CFCs) out of aerosols in the 1970s, a decade
before the Montreal Protocol began a global phaseout, he says, and
began "brown-listing" questionable ingredients around the same
Even many fruits—such as bananas and peaches—have
trace amounts of carcinogens, he says. And natural ingredients like
oregano oil are still powerful chemical compounds with adverse
health effects in large doses. So, are SCJ's "natural" brands, Mrs.
Meyer's, Method and Babyganics, really any more environmentally
friendly than other SCJ brands (like Scrubbing Bubbles, once mocked
in a Method ad)? "No. That's the short answer," Johnson says. "It's
important for us to be factual about what we say about those
products and our base business. But if people have a perception one
way or the other and want to choose one over another, we want to
provide the choice."
Honest soldiers on
Despite the natural land-grab by big players, it's not entirely
game over for startups. The Honest Co., co-founded by actress
Jessica Alba, remains independent—though not for lack of
trying to be acquired. It was on the market three years ago when
Unilever opted instead to buy similarly positioned multicategory
giant Seventh Generation.
Honest Co. was hurt in 2016 by publicity over its laundry
detergents and other products containing the controversial
ingredient sodium lauryl sulfate, despite claims to the contrary.
Seventh Generation had circulated research showing an unnamed
competitor's products contained the ingredient, says Dibadj, and
subsequent chemical analysis by The Wall Street Journal confirmed
it was Honest Co.'s products.
Ultimately Honest Co. settled a class-action false advertising
lawsuit in 2017 over the issue for $1.5 million and agreed to
reformulate products. Now the company is in turnaround mode, led by
CEO Nick Vlahos, formerly of Clorox.
"We're proud to be the No. 1 natural diaper brand and the No. 1
natural personal-care brand in terms of sales over the past year.
We're expanding our U.S. and international footprint through a
series of strategic new retail partnerships," Vlahos says. "We
believe we changed the CPG industry."
That change includes inducing almost every major rival to pile
on with competitive products or acquisitions, including big
retailers. Walmart in March created a remarkably precise facsimile
of Honest Co., including the Hollywood talent, with the launch of
the Hello Bello natural, plant-based diapers and other baby
products fronted by Kristen Bell and husband Dax Shepard. Hello
Bello begins life as a Walmart semi-exclusive, sold in stores and
online by the world's largest retailer but also direct-to-consumer
online by Hello Bello.
The fact that the same old big players have created a parallel
universe of natural products could breed cynicism. But the big
companies are also taking pains to run sustainability initiatives
beyond their green brands. P&G, for example, is developing new
plastic recycling technology, and new environmentally friendly
shampoos and home-care products with no water content. Burt's Bees
owner Clorox also campaigns to replace plastic water bottles by
selling reusable Brita filters.
Joey Bergstein, CEO of Seventh Generation, notes that Unilever
now has within it six subsidiaries that qualify as B Corporations,
including his Vermont neighbor and corporate sibling Ben &
Jerry's. These are for-profit corporations that also are deemed to
have a positive impact on society, workers, communities and the
environment among their legally defined goals.
For Unilever as a whole to become a B Corp would take changes to
its legally defined objectives beyond maximizing shareholder value,
changes that shareholders would likely resist. Former Unilever CEO
Paul Polman's frequent public embrace of environmental and
sustainability goals annoyed many bottom-line-focused investors,
some of whom derisively and privately called him "Captain
But Seventh Generation joining Unilever has spurred growth for
both, Bergstein says. He also believes Unilever's high-profile
advocacy of sustainability has kept consumer cynicism at bay. "When
Unilever approached us almost three years ago, we weren't for
sale," Bergstein says. "We were doing well. We were backed by
patient investors." But the two sides "realized our values were
really aligned," he says. Now Bergstein tells Seventh Generation
people about "our ability to infect the host and help move the
industry to a better place."
The contagion is definitely spreading. In addition to Unilever's
Love Beauty and Planet hair and skin-care products, it has moved
into home care with Love Home and Planet earlier this year, which
features recycled plastics, a self-imposed carbon tax and
"planet-friendly" ingredients. So how does that differ from Seventh
Generation? "Seventh Generation is best suited to consumers who are
seeking safe solutions, to avoid chemicals, to avoid the nasties,
or who are prone to allergies," says Sonika Malhotra, brand founder
and global brand director of Love Beauty and Planet/Love Home and
Planet. Her new brand "tackles a consumer who is much less willing
to make compromises" on things like fragrance or texture and uses
conventional brands now, but wants natural ingredients and a
greener environmental impact.
Even as Unilever and other big players try to occupy every
niche, Bergstein says the crush of new players at the recent
Natural Products Expo West show tells him there's plenty of room
for startups. Craig Dubitsky, CEO and founder of independent Hello
Products, who helped some private investors navigate the show,
agrees. Hello more than tripled sales and more than doubled
distribution to 41,000 from 19,000 stores last year, moving
recently into Dollar General, Ulta Beauty and Whole Foods while
building a direct-to-consumer subscription business.
Clearly that caught P&G's attention, encouraging the Burt's
Bees launch. But if P&G and other big companies aren't bragging
about owning these brands, Dubitsky believes that's because
consumers don't care about their heritage.
"People now will trust reviews from complete strangers on Amazon
or number of likes on an Instagram feed," he says, "more than
they'll trust that it came from a big company."