- Importance of biotechnology research in the beauty and cosmetic industries
- Problems in Thai beauty industries
- Development of active ingredient with biotech research studies
- Create competitive advantages for a cosmetic brand with research studies
- Apply patent and petty patent for the research studies on extract and product formulation
IMPORTANCE OF BIOTECHNOLOGY RESEARCH IN BEAUTY AND COSMETIC INDUSTRIES
How is biotechnology research important to beauty and cosmetic industries?
Over the past several years, Thailand has experienced a continuous growth rate in the beauty industries. According to the Department of International Trade, Ministry of Commerce, the beauty industry market value worth accounted up to 2.8 billion in 2018. Currently, Thailand is ranked at 17th in the world for beauty market share and as of in ASEAN region, Thailand is ranked at 1st for dominating beauty market share. However, in the continued growth, it still has internal problems that are still overlooked in which in the long term the beauty industry of Thailand still has a space for development as well.
PROBLEMS IN THAI BEAUTY INDUSTRIES
Thailand cosmetic industry problems mentioned in the above statement are divided into 2 parts:
- Depending on imports of raw materials for cosmetics through an intermediary
- Product distribution channels
DEPENDENCE OF INTERMEDIARIES FOR THE IMPORT COSMETIC RAW MATERIALS
In Thailand, cosmetic products are formulated with active ingredients from oversea countries as foreign brands are getting its popularity in the market and it is possible to compete with huge cosmetic brands in the market. However, to grab niche customer the brand owner has to rely on the ingredients from oversea through intermediaries to create product value.
Cosmetic production composes of following structures:
- Base or texture
- Active Ingredients
At present, there are also manufacturers of raw materials in Thailand, only a small number compared to the volume demand for raw materials of cosmetics and the number of manufacturers of cosmetics. In the cosmetic industry, Thailand still has to rely on imports through a larger number of intermediary companies.
Based on our experience as a cosmetic manufacturer, the main cost factor for a cosmetic product is both the substance and the active ingredient. At the same time, we still rely on importing foreign substances primarily through intermediaries. As a result, the substance or active ingredient is being imported. Ingredient traders’ present imported ingredients to a wide range of cosmetic manufacturers and developed the product from ingredients which is passed on to many cosmetic brand owners. As ingredients are shared among the manufacturers, any product developed in the market will be available with same raw material or ingredient which causes competition and lack of variety of product. This sameness in the cosmetic product shortens Product Life Cycle and creates the price competition in the market which is very vulnerable to disappear in a short time as well.
DISTRIBUTION CHANNELS PROBLEM
Current distribution channels pattern of cosmetics in Thailand is divided into three main channels:
- Traditional Trade Channels
- Modern Trade and
- Online channel (E-commerce)
Each channel has problems and challenges for Thai cosmetics brands as follows:
TRADITIONAL TRADE CHANNELS
- Brands need to rely on resellers to generate revenue and have low bargaining power
- A brand cannot keep a database of reseller
- A brand cannot have a database of consumers or users of products
- The problem of selling the goods at a lower price by the dealership results in short product life cycles
- No database to analyze purchase behavior
- The high capital investment required for entrance fee for the Modern Trade stores
- Exploitation by the high trade margins without guaranteeing sales
- Brand can’t store the consumer database
- Brand doesn’t have access to consumer databases for analyzing purchase behaviour
ONLINE CHANNEL (E-COMMERCE)
Online channels (E-commerce) each channel has problems and challenges for the Thai cosmetics brand as follows:
- The brand also lack the knowledge and understanding in E-commerce Platform Technology
- The difficulty and cost of developing their own E-commerce Platform at a high cost
- The current E-commerce Platform system lacks the online dealer management system
- E-commerce systems are currently unable to serve as a major revenue channel for medium and large brands
DEVELOPMENT OF ACTIVE INGREDIENT
The development of the active ingredient with Bio-tech research plays an important role in the development of cosmetics in Thailand. Thailand, as located in the Tropical Area with high biodiversity, gives immense advantageous for the country in the field of agro-industry and agro-processing. In the process, it also causes leftovers from the process (By Product), which is not being utilized and left in bulk. These leftovers can be used in the cosmetic product by using different extraction methods and research studies to extract the active ingredients which can create million baht value in the market.
At present, Quality Plus Company and the Institute of Agriculture, Kasetsart University has signed MOU for the strategic partnership to collaborate in research & development, and commercial operations. One of our missions is to develop extracts from agricultural products and create new value from agro-industrial processes waste to high-value raw materials for the Thai cosmetics industry and the world market.
Why create competitive advantages for the cosmetic brand with research studies?
Thailand has high growth rates in the industry but it is unsustainable. Because the brand is created by a lot of publicity, advertising and promotion through famous people whereas, the product lacks innovation or quality. With the lack of continuous marketing, it makes consumers lose interest thus, the product is able to be in the market for the short period of time, as a result, the product life cycle shortens quickly over the period of time.
The development of a product with research studies support is one of the factors that help to promote the cosmetics brand with reliable test results and result on the quality of the product. When we analyze the composition of the product, it consists of:
- Texture (Base)
- Active ingredients
If analyzed from the structure of the product formula, it is found that the active ingredient in cosmetic, it is an influential element of product in 3 main areas as follows:
- Influence from the aspect of the product or brand story, that we see in many global brands in the market often create a selling point with stories of extracts of ingredients used in the product. For example, rare extracts, in-depth research, extract of high-value, etc.
- Influence from the product efficacy and selection of major extracts from plants or animals which will affect the use of a product. For whitening result, Anti-tyrosinase extract is required to use and if you want to get results in the field to reduce the symptoms of acne and reduce inflammation, then need to use the extract with an ability to inhibit bacteria and help reduce the symptoms... of acne, etc.
- Influence of the cost of major ingredients or substance that has a larger option to use in the market. But the important substance that gives clear results used in a lower volume of percentage, it would cost a high price, which is the cost of the substance and also called the main cost of the product formula.
Therefore, how to create a competitive advantage for brands?
- To develop research in depth
- To the acquisition of active ingredients or substances of the brand
- To be the intellectual property of the owner of the brand, if it can develop to create a patent or petty patent, which will help to build capabilities in high-level competition.
How do we assess our research results at a sustainable level?
We can use the evaluation criteria from the VRIN Framework as listed below:
- Value creations in extract research that have been developed and helps to provide value into a competitive advantage
- What is rare and rivals have that in the possession? The ingredient extracted through our research is what competitors have in hand or not. If there are many, how many?
- Difficulty in imitation. The research can be easily imitated. How much does it cost to develop results and attributes that are equal or greater?
- Is the extract or ingredient can be used other substitutes? Is there any substitute or alternative ingredient that has been replaced easily? When comparing in terms of cost, results, security, portfolio, are we in a superior level?
From all 4 evaluation criteria, only 2-3 questions capabilities may be created in the short term to create some competitive advantage, but based on evaluation criteria all questions are considered to create a strong competitive advantages and be sustainable in the market.
Apply patent and petty patent for the research studies on extract and product formulation
In the era of high competition in the cosmetics industry, we can make a difference and protect our research with the patent as our intellectual property that can be summarized as the following key points:
- Natural extracts from research can’t be patented and petty patent.
- Normal process extraction through research can’t be patent and petty patent.
- To patent or patent the research, it should be developed to get new substances such as extract 2 or more research to recommend the ingredients that promote better results, more stability or better feeling after use.
- To patent or patent for research in new processes and to be our own intellectual property. We have to prove that it is a new process invented by us and not the same as existing processes in the market.
- Cosmetic formula commercially available in the market or cosmetics factory is not patented or petty patent to protect the intellectual property.
- For cosmetic formulations that are researched and developed and produce good results including its unique features can be petty patent to protect the work or create evidence to verify ownership.
- Another alternative for brands that want to develop sustainable is the registered trademark protection.
Cosmetic brands with intellectual property protection can bring the portfolio to take advantage of following:
- Establish credibility and evidence of legitimate rights for protection
- It is a powerful marketing tool when it comes to marketing for both at home and abroad market
- When it comes to national and global competition, Patent and Petty Patent is important for participants to be accepted by the evaluator.
- Prevent replication, which can be illegal.