Speciality chemicals firm Croda International is working closely with a number of “indie” cosmetic firms to produce best selling shampoos, conditioners, lip glosses and other beauty products.
The Snaith-based FTSE 100 firm said its personal care division was the stand out performer in its first half results, producing “excellent” sales growth.
Previously, Croda has made ingredients for skin, hair and cosmetic products for multinational giants such as L’Oreal, Estee Lauder and Boots, but now it is turning its attention to the indie sector.
Croda’s chief executive Steve Foots said: “These small and medium sized customers are growing at pace.
“They are groups of people with one idea – be it a lip gloss or a shampoo. They’re in Manhattan, California, Korea, China and Japan. They move very quickly with a sophisticated product.”
One such customer is Eos, based in Manhattan, which makes flavoured lip balms, containing antioxidant-rich vitamin E, shea butter, and jojoba oil. These natural lip balms are hypoallergenic, dermatologist tested, and paraben and petrolatum free.
“They charge three times the price of other lip glosses. They come in big red or purple balls and you can buy them in Boots,” said Mr Foots.
“They are scientifically proven and are very good products. These companies outsource their research and development and we give them information on how to market their products.”
These indie companies tend to use social media and trusted bloggers to appeal to a younger generation that constantly use social media.
At the same time, Croda has kept its connections with the multinational giants.
“The multinationals are strongly positioned as well. We are seeing increased innovation and some of the bigger firms are acquiring these indie companies,” said Mr Foots.
“The big companies are innovating more, trying to become more agile to respond to the threat from small to medium sized firms.”
Croda is using its own innovations to attract clients. These include anti-wrinkle, anti-pollution products such as CityStem, which protects users from pollutants such as car fumes. CityStem is based on plant stem cells derived from plant cuttings.
Another new launch is Green Caviar, which is used to make sustainable skin moisturisers from green algae, and Solaveil, which offers solar protective skin, hair and lip products.
Mr Foots was speaking as the group announced a 1.7 per cent rise in first half pre-tax profit to £171m as the strength of the pound weighed on results. This was after an adverse 4.6 per cent impact from currency translation.
Croda said it has three strong businesses – Personal Care, Life Sciences and Performance Technologies.
The group reported “excellent” growth in Personal Care, where sales rose 9.3 per cent at constant currency.
It reported a “resilient” Life Sciences performance despite headwinds, with sales up 2.3 per cent at constant currency.
The Performance Technologies division saw ”impressive” profit growth with operating profit 15.2 per cent higher on sales up 1.7 per cent at constant currency. With its transition to higher value add products, the division is on target to achieve its medium term return on a sales target of 20 per cent.
Mr Foots said: “This is a strong first half performance. We are delivering our strategy of ‘Growing the Core’, driving top line organic growth at industry leading margins to achieve superior returns.”