The believe that “green” products have higher standards

 

The suppliers of raw materials for the natural
and organic personal care product and cosmetics market provide plants oils, vitamins, a range of herbs and many other products, cost for
which takes almost half from the end product price. For example, one of
the biggest organic brands Dr. Hauschka is
using only organic mango butter for its products. As said on the official brand
website “sourcing this valuable raw material in organic quality comes at
a price: Dr. Hauschka pays 10 times the world market price for conventional
mango butter, i.e. between €120 and €150 per kilogram” (Dr.Hauschka Skin Care
products, 2017).

Cost competitiveness
remains important for the marketers, while manufacturers capitalize on the
natural products trend. Consumers believe that “green” products have higher
standards of quality, what enables cosmetics manufacturers to claim high prices
for natural materials, thereby injecting value into the market.

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A supplier group is
assumed to be very powerful for following reasons. Raw materials producers do
not depend heavily on care products industry due to also food industry
existence, moreover in accordance to Euromonitor International,  Germany is Europe’s
largest market for organic packaged foods and beverages (Euromonitor International,
2011).
Switching cost of raw material vendors is high because
of the strict regulatory compliance required while sourcing raw materials. As
stated in Harvard Business Review article, “when switching costs are high, industry
participants find it hard to play suppliers off against one another” (Porter, 2008). Suppliers offer
products, that are differentiated by quality. There is no substitute existing
on the market for NOC brands, because their ideology is strongly connected to ingredients. In the Graphic 10 in Appendix the value chain of natural ingredients for cosmetics
industry is described, information is collected from CBI The
Ministry of Foreign Affairs report 2017 (CBI Ministry of
Foreign Affairs, 2017). 

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