US cosmetic & toiletry chemicals demand driven by age-defying benefits.

Demand for cosmetic and toiletry chemicals will increase 5.2 percent per year to $5.6 billion in 2006, driven by a stream of new and more advanced chemical ingredients offering appearance-enhancing and age-defying benefits for an aging populace. Growth will also reflect increasing consumer demand

for plant-derived ingredients and specialty additives providing protection from sun, heat, pollution and other environmental stressors. These and other trends are presented in Cosmetic & Toiletry Chemicals, a new study from The Freedonia Group, Inc., a Cleveland-based industrial market research firm.

Demand for active ingredients is forecast to advance 7.4 percent annually to $409 million in 2006, propelled by strong demand in age-defying and other cosmeceutical skin care products. The incorporation of active ingredients, such as plant acids and enzymes, into toiletries and cosmetics has become a driving force behind growth in an otherwise mature industry. These chemicals are sold primarily on the basis of performance rather than price, with demand driven by their substantial marketing value, despite lingering controversy over their efficacy. However, the high cost of many active ingredients and the low loadings used in some formulations, where only minimal amounts of these chemicals are incorporated for marketing purposes, will limit further gains.

Sunscreens are also expected to experience strong growth, with gains of 8.1 percent per year to $62 million in 2006. Advances will be spurred by the anticipated implementation in December 2002 of new Food and Drug Administration regulations regarding labeling requirements for ultraviolet A protection levels. In addition, the growing trend toward incorporation of sunscreens in skin care products containing hydroxy acids will stimulate gains.

Organic ingredients are expected to be an increasingly strong marketing force in cosmetics and toiletries, boosting demand for botanical extracts across the spectrum of functional ingredients. The fastest gains, approaching double-digit growth, are forecast for small-volume herbal extracts crossing over from the nutraceutical industry and bringing with them an established reputation of safety and health benefits. However, the high cost of many botanical extracts and issues of quality control and standardization will restrain further gains. While biotechnology holds the potential to increase the availability of quality plant source materials, future labeling policies regarding genetically modified materials may impact product preferences.

Cosmetic & Toiletry Chemicals (published 04/2002, 320 pages) is available for $3,700 from The Freedonia Group, Inc., 767 Beta Drive, Cleveland, OH 44143-2326. For further details, please contact Corinne Gangloff by phone 440.684.9600, fax 440.646.0484 or e-mail pr@freedoniagroup.com. Information may also be obtained through www.freedoniagroup.com.

US COSMETIC & TOILETRY CHEMICALS DEMAND

(million dollars)

                                                       % Annual
                                                        Growth

Item                            1996   2001   2006   01/96   06/01

Cosmetic & Toiletry Chemicals   3335   4330   5580     5.4     5.2
  Active Ingredients             195    286    409     8.0     7.4
  Other Specialty Additives      528    699    936     5.8     6.0
  Flavors & Fragrances           629    885   1165     7.1     5.7
  Emollients & Moisturizers      675    880   1155     5.4     5.6
  Cleansers & Foamers            736    880   1050     3.6     3.6
  Processing Aids                572    700    865     4.1     4.3

[c] 2002 by The Freedonia Group, Inc.