NUTRICOSMETICS

Decoding the Convergence of Beauty and Healthcare

A Presentation at:

April 16, 2008

www.KlineGroup.com
© 2008 Kline & Company
Contents

Nutricosmetics Defined

Evolution of Nutricosmetics

Market Dynamics

Ingredient Trends

Product Examples

Kline Outlook and Insights

© 2008 Kline & Company

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Contents

Nutricosmetics Defined

Evolution of Nutricosmetics

Market Dynamics

Ingredient Trends

Product Examples

Kline Outlook and Insights

© 2008 Kline & Company

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What are Nutricosmetics?

ƒ Ingestible products that are

formulated and marketed
specifically for beauty
purposes

ƒ Typical forms: pill, tablet,

liquid, food

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Nutricosmetics is the intersection between personal care and nutrition

Personal care

Cosmeceuticals
Nutricosmetics

Nutrition Pharmaceuticals

Nutraceuticals

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Nutricosmetics should not be confused with the other hybrids:

ƒ Cosmeceuticals
− Intersection between cosmetics and healthcare
− Topical cosmetic products that claim to have medicinal or drug-
like/pharmaceutical benefits

ƒ Nutraceuticals
− Intersection between healthcare and nutrition
− A food or beverage that provides medical or health benefits,
including the prevention and/or treatment of a disease in a fashion
similar to pharmaceutical agents
− Also called “Functional Foods”

© 2008 Kline & Company

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Contents

Nutricosmetics Defined

Evolution of Nutricosmetics

Market Dynamics

Ingredient Trends

Product Examples

Kline Outlook and Insights

© 2008 Kline & Company

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Cosmeceuticals is considered to be the first wave of fusion products

Cosmeceuticals Nutraceuticals Nutricosmetics

ƒ Intersection between cosmetics and pharmaceuticals

ƒ Concept created in 1961 by Raymond Reed, a founding member of the U.S.
Society of Cosmetic Chemists
ƒ Term cosmeceutical coined in 1980 by Dr. Albert Kligman
ƒ Products that have drug-like benefits and perform some transformative
change to humans
ƒ Examples: anti-aging products, skin whiteners/brighteners, acne aids,
whitening toothpastes, tooth-whitening systems, anti-cellulite, antiperspirants
ƒ Kline values the global cosmeceutical market at $55 billion in 2007

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Examples of cosmeceuticals today

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Nutraceuticals followed decades later

Cosmeceuticals Nutraceuticals Nutricosmetics

ƒ Term coined in 1989 by Dr. Stephen

DeFelice, founder and chairman of the
Foundation for Innovation in Medicine
ƒ Was major focus of food and pharma
companies in 1990s
ƒ Examples: cholesterol-lowering,
diabetes management, tartar control,
digestive aid, energizing

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Examples of nutraceuticals today

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Nutricosmetics is the last official “wave”

Cosmeceuticals Nutraceuticals Nutricosmetics

ƒ Emerged as a segment of
nutraceuticals
ƒ First gained popularity in Japan
and Europe
ƒ Now trickling into U.S.
ƒ Dominated by beauty firms
− Few pharma and food
entrants

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Contents

Nutricosmetics Defined

Evolution of Nutricosmetics

Market Dynamics

Ingredient Trends

Product Examples

Kline Outlook and Insights

© 2008 Kline & Company

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 The global skin care market reached nearly $80 billion at the retail
level in 2007

100
CAGR:
CAGR:+6.2%
+6.2%

75
$ Billion retail

50

25

0
2003 2004 2005 2006 2007

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Asia is the largest region for skin care

Asia, 39%

All other, 2%
Latin America, 8%

Europe, 32% North America, 19%

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Kline values the nutricosmetics market at $1.5 billion, with Europe as
the largest region

Europe, 55%

United States, 3%

Japan, 41%

Total: $1.5 Billion

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 Nutricosmetics is tiny in comparison to other personal care markets

125

100
$ Billion retail

75

50

25

0
Europe U.S. Japan

Total personal care Skin care Nutricosmetics

© 2008 Kline & Company

But is growing significantly faster

Nutricosmetics

Skin care

Personal care

0 5 10
Change, %, 2007

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A variety of factors are driving sales of nutricosmetics

Aging population Shift toward less invasive procedures

Environmental factors GROWTH IN Increasing consumer awareness

NUTRICOSMETICS

Societal factors (multi-tasking) Rise of the Spa Culture

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Nutricosmetics generally address three specific areas:

Skin Hair Nails

ƒ Repair and prevention ƒ Retention and growth ƒ Strengthening

ƒ Sun protection ƒ Restoration
ƒ Firmness ƒ Nourishment
ƒ Pigmentation ƒ Volumizing
ƒ Whitening
ƒ Slimming

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Europe facts

ƒ Largely concentrated in France, Italy,

Germany, the UK, and Spain
ƒ Driving by anti-aging concerns
ƒ Fairly developed and growing nicely
in pharmacy channel
− Pharmacist is trusted
intermediary
ƒ Legal framework exists under both
food and medicinal law, but decisions
as to which applies to nutricosmetics
varies by country
ƒ Tend to be rather expensive (€20.00-
€40.00 is the norm)

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Key players in Europe include

L’Oréal + Nestlé Ferrosan A/S Oneobiol

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Japan facts

ƒ Most mature market for nutricosmetics

ƒ First country to take them mainstream
ƒ Widely accepted among Japanese
consumers
ƒ Vast range of innovative and frequently
updated products
ƒ Tendency towards holistic treatments
ƒ Japanese constantly in search of
innovative and novel products
ƒ Generally focus on skin care, or to support
“total beauty” with no specific claim
ƒ Much less expensive that European
brands (¥100-¥300)

© 2008 Kline & Company

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Key players in Japan include

Shiseido Lion Kracie (formerly

Kanebo Products)

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U.S. facts

ƒ Nutricosmetics still in infancy

ƒ Unique set of challenges
ƒ Americans more skeptical of the “beauty-
from-within” concept
ƒ Cultural emphasis on scientific
investigation
ƒ Americans want instant results, which
nutricosmetics don’t provide
ƒ No channels make a great fit
ƒ Olay and Avon both exited
nutricosmetics business

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Key players in the U.S. include

N.V. Perricone Murad Borba

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Contents

Nutricosmetics Defined

Evolution of Nutricosmetics

Market Dynamics

Ingredient Trends

Product Examples

Kline Outlook and Insights

© 2008 Kline & Company

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Nutricosmetic ingredients . . .

ƒ Are safe, ingestible

ƒ Are often derived from food

ƒ Generally offer at least one the following

functions:
− Antioxidant
− Anti-inflammatory
− Slimming agent

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Artichoke leaf (Cynara scolymus)

ƒ What: Long, deeply serrated basal leaves of

the artichoke plant that have a high
concentration of biologically active compounds

ƒ Contains: Active compounds (flavonoids,

caffeoylquinic acids), polyphenols, chlorogenic
acid, cynarin, luteolin, scolymoside,
cynaroside

ƒ Function: Antioxidant, cardio protectant,

detoxifying agent

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Collagen

ƒ What: A fibrous protein that makes up

connective tissue

ƒ Contains: Protein

ƒ Function: Provides strength and

resilience to skin

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Coffee bean (coffia arabica)

ƒ What: An xanthine alkaloid obtained from

coffee beans (also called guarine, mateine,
and theine when found in different items)

ƒ Contains: Caffeine (xanthine alkaloid)

ƒ Function: Slimming agent. Caffeine acts as a

metabolic stimulant and ergogenic acide;
generates feelings of alertness and wellbeing

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Tumeric (Curcuma longa)

ƒ What: Modified stem of a South Asian herb

ƒ Contains: Transcription factor modifier that

possesses curcumin and
tetrahydrocurcuminoids

ƒ Function: Photo-protectant (sunblock and

skin lightener), antioxidant, anti-inflammatory,
cardio-protectant, prevents wrinkles and signs
of aging, reduces internal inflammation

© 2008 Kline & Company

Grapes (Vitis vinifera)

ƒ What: Fibrous component of the fruit

ƒ Contains: Oligomeric proanthocyanidins

(OPCs) are made of 2-3 monomer units called
flavanols

ƒ Function: Antioxidant, cardio protectant,

detoxifying agent

© 2008 Kline & Company

Contents

Nutricosmetics Defined

Evolution of Nutricosmetics

Market Dynamics

Ingredient Trends

Product Examples

Kline Outlook and Insights

© 2008 Kline & Company

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Shiseido Collagen Update

Brand: Shiseido Collagen Update

Company: Shiseido
Geography: Japan
Key benefit: Eases stress; provides a
youthful appearance
Form: Liquid
Description: For those who feel stressed,
lack sleep and wants to be
young looking
Key Low molecular mass fish
Ingredients: collagen, Chinese herbal
extract, Korean ginseng,
Japanese tochu leaf extract,
hyaluronic acid, ceramide,
royal jelly, vitamin C
Packaging: Glass bottle, 50 ml

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Fuwarinka – “Fragrance from within”

Brand: Fuwarinka
Company: Kracie (formerly Kanebo
Products)
Geography: Japan
Form: Candies
Description: Fragrances your body with
soft candy (rose and lemon
varieties)
Key Contains hyaluronic acid,
Ingredients: vitamin C, hikatsu extract

Packaging: Plastic pouch containing

candies 32g each
Price: JPY 207 per package

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Jintan no Kaoru Bitoku – “Fragrance from within”

Brand: Jintan no Kaoru Bitoku

Company: Morishita Jintan
Geography: Japan
Key benefit: Fragrance
Form: Capsules
Description: Two-layer capsule dissolves
during digestion to emit a rose
fragrance
Key Edible oil and fats, gelatin,
Ingredients: flavoring, sorbitol, emulsifier,
glycerin, thickener (pectin),
food coloring
Packaging: Clear blister pack
Price: JPY 399

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Asahi Gyugyutto Shimikomu Collagen Water

Brand: Asahi Gyugyutto Shimikomu

Collagen Water
Company: Asahi
Geography: Japan
Key benefit: Skin supplement
Form: Beverage
Description: Skin care supplement drink
contains approximately 2,000
mg of collagen, which
exceeds the amount broken
down by the body each day
Key Collagen, niacin
Ingredients:

Packaging: Plastic bottle 900 ml

Price: JPY 300

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Imedeen Time Perfection – “Age minimizer”

Brand: Imedeen
Company: Ferrosan A/S
Geography: More than 70 countries, primarily
in Europe
Key benefit: Reduces fine lines and wrinkles
Form: Capsules
Description: Claims to improve skin elasticity,
hydration, and texture

Key Ingredients: Proteins; polysaccharides isolated

from a deep-sea fish; complex
based on natural lycopene, grape
seed extract, and vitamin C
Price: £38.50
for 60 tablets (one month supply)

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Shiseido Pure White – “For People Who Want Pure Whiteness”

Brand: Shiseido Pure White

Company: Shiseido
Geography: Japan
Form: Liquid
Description: “For people who want pure
whiteness”

Key Vitamins B12, B6, C, E

Ingredients:
Packaging: 30 ml glass bottle

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Fracora Collagen Bar

Brand: Fracora
Company: Kyowa Group
Geography: Japan
Form: Solid bar (also comes in
liquid)
Description: Supplement including
collagen

Key Fish collagen, silk peptides,

Ingredients: star fruit leaf extract

Packaging: Foil wrapper

Price: JPY 180

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Hanami Green Tea Collagen

Brand: Hanami Green Tea Collagen

Company: Hanami
Geography: Japan
Form: Powder
Description: “For Health and Beauty”

Key 70% collagen (animal

Ingredients: sourced) and 30% organic
green tea
Packaging: Plastic box containing foil
wrapped tea pouches, 1.5 g
each
Price: JPY 1050 for 30 doses

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Doctor.Gi – “Total Beauty Support”

Brand: Doctor.Gi
Company: Atlas
Geography: Japan
Form: Liquid
Description: “Total beauty support” Vitamin
B6 creates energy from
protein to maintain healthy
skin and eyes
Key Hyaluronic acid, vitamin C,
Ingredients: collagen, coenzyme Q10,
hikatsu extract
Packaging: Glass bottle of 30 ml

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“Belly Reducing Midnight Yogurt”

Brand: Midnight Yogurt

Company: Nippon Luna
Geography: Japan
Form: Yogurt
Description: For “good sleep and beauty
support”; sold only at night
at convenient stores
Key Collagen (750 mg) and
Ingredients: theanine (50 mg)

Packaging: Plastic carton with foil lid

Price: JPY 105

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Collagen Marshmallow

Brand: Ex Marshmallow
Company: Cranes Child
Geography: Japan
Form: Marshmallow!
Description: Marshmallow with collagen

Key Black sesame polyphenol +

Ingredients: Collagen 4500mg

Packaging: Box containing individually

wrapped marshmallows
Price: JPY 500

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Kyupurun – for “soft and supple skin”

Brand: Kyupurun
Company: Lion
Geography: Japan
Form: Liquid
Description: “A beauty drink for soft and
supple skin” (grape flavor)

Key Collagen peptide, hyaluronic

Ingredients: acid, glucosamine, vitamins
C, B2, and B6, elastin,
flavangenol
Packaging: Glass bottle
Price: JPY 260

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Medish – “for oral health”

Brand: Medish
Company: Lion
Geography: Japan
Form: Tablets
Description: Supports the maintenance of
a healthy oral environment

Key Multifunctional protein

Ingredients: “lactoferrin”; xylitol

Packaging: Plastic bottle

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Innēov – “Hair energizer”

Brand: Innēov Hair Mass

Company: L’Oréal + Nestlé
Geography: Europe
Form: Tablets
Description: Said to be the first nutritional
supplement designed to
“energize” hair
Key Taurine, zinc and catechins
Ingredients:

Packaging: Box containing bubble pack

tablets
Price: EUR 30.00

© 2008 Kline & Company

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Contents

Nutricosmetics Defined

Evolution of Nutricosmetics

Market Dynamics

Ingredient Trends

Product Examples

Kline Outlook and Insights

© 2008 Kline & Company

49
 Kline projects that the nutricosmetics market will reach $2.5 billion
by 2012

3
CAGR:
CAGR:+11.2%
+11.2%
$ Billion retail

0
2007 2012

© 2008 Kline & Company

The nutricosmetics market has developed as three independent silos
and must be tackled differently

ƒ Differing cultures
ƒ Different legislation
ƒ Different commercial climates

Europe Japan U.S.

Most common form: Tablets Liquids Tablets
Prices: High Low Medium
Channels: Pharmacies Mass mainstream Specialty
Brands: Unique to Europe Unique to Japan Unique to U.S.
Key benefits: Skin, hair Beauty support, skin Skin
Product claims: Specific Vague Between specific and
vague

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It will be very difficult for the U.S. market to reach the same level of
penetration as Japan and Europe

ƒ Top brands, Olay and Avon, have already

attempted and exited after minimal success

ƒ Could be a nice add on for professional skin

care brands, but is predicted to remain a
niche opportunity

ƒ American consumers are less patient, and

generally less health conscience than their
European and Japanese counterparts

ƒ Lacks good channel fit

− Pharmacies do not have same influence
in U.S. as they do in Europe

© 2008 Kline & Company

Validation is key (at least in Europe and U.S.)

ƒ Clearly documented and independent

scientific research findings should be
publicized
− Feature on product literature and/or
packaging

ƒ “Before” and “after” photos could also

help as well

ƒ Helps to win consumer confidence

ƒ Awards

ƒ Testimonials (especially by celebrities)

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Innovation is critical for success

ƒ True novelty
− E.g., Imedeen Time Perfection
contains a powerful antioxidant

ƒ Active ingredients
− E.g., Lacto-lycopene in Innēov
Fermeté

ƒ Delivery systems
− E.g., Lipocap employed in Imedeen
Tan Optimizer offers optimum
encapsulation and protection of the
active ingredients

© 2008 Kline & Company

Simplicity is important

ƒ Products that do not require an extra step

− Changing consumer habits too much of a hurdle
− Fit in with existing behavior

ƒ Water Æ Beauty water

ƒ Typical supplements Æ multivitamin that

includes beauty benefits

© 2008 Kline & Company

Nutricosmetics offer an opportunity for food, beverage, and
supplement manufacturers (more so than cosmetic firms)

ƒ Many consumers don’t want to buy

ingestible products from cosmetics
brands, especially in the U.S.
ƒ Companies that have established
credibility in nutritional products
could be successful
ƒ Danone’s Essensis could be a good
example
ƒ Danone experienced tremendous
success with Activa, which was
backed with clinical trial validation

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Other firms will try to tackle the market

ƒ L’Oréal and CocaCola have partnered to

launch a health-and-beauty beverage in
2008

ƒ Currently called Lumaé

ƒ Trademarked as a tea-based ready-to-

drink beverage by Coca-Cola's
Beverage Partners Worldwide division

ƒ Expected to address skin care needs

© 2008 Kline & Company

 CHALLENGES OPPORTUNITIES

ƒ Small market ƒ High growth

ƒ Geographic silos ƒ Untapped geographies
ƒ Consumer skepticism ƒ Food and pharma companies
ƒ Results take too long ƒ Innovation

© 2008 Kline & Company

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Phone: +1-973-435-3412
E-mail: Carrie_Mellage@KlineGroup.com

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