Importance of Biotechnology Research in Beauty and Cosmetic Industries

What significance does biotechnology research have for the beauty and cosmetics industry?

Thailand’s beauty industry has seen a continuous growth over the past several years. According to the Department of International Trade of the Ministry of Commerce, in 2018 the beauty industry market value worth accounted up to 2.8 billion. Thailand is now the 17th largest beauty market share in the world, and ranked at 1st for dominating beauty market share in ASEAN region.  However, despite its continued growth, it still has internal problems that are not yet addressed, and in the long term the beauty industry of Thailand still has a room to grow.

Problems in Thai Beauty Industry

Thailand cosmetic industry problems mentioned in the above statement are divided into 2 parts:

  1. Dependence on imports of raw materials for cosmetics through an intermediary.
  2. Product distribution channels.

Dependence on the Import of Cosmetic Raw Materials Through Intermediaries

In Thailand, cosmetic products are formulated using active ingredients from foreign countries as foreign brands are gaining popularity in the market and it is possible to compete with huge cosmetic brands in the market. However, in order to win niche customer, the brand owner has to rely on the ingredients from abroad through intermediaries to create product value.

Cosmetic production consists of the following structures:

  1. Base or texture
  2. Active Ingredients
  3. Colorants
  4. Perfume
  5. Preservatives

At present, there are also manufacturers of raw materials in Thailand, which only cover a small number of demanded products compared to the volume demand for cosmetic raw materials and the number of manufacturers of cosmetics presented in the market. In the cosmetic industry, Thailand still has to rely on imports through intermediary companies.

Based on our experience as a cosmetic manufacturer, both the substance and the active ingredient are the main cost factor for a cosmetic products. At the same time, we still rely on import of foreign raw materials primarily through intermediaries. Traders presented in the market allow a broad range of cosmetic manufacturers to import their raw materials, hence many cosmetic brand owners use same raw materials to develop their products. As the same ingredients are shared among different manufacturers, any product developed in the market will be available with same raw materials or ingredients which causes additional competition and lack of variety of product. This sameness in the cosmetic product shortens the life cycle of the product and creates price competition in the market, which is very vulnerable and can disappear in a short time.

Distribution Channel Problems

The current structure of cosmetics distribution channels in Thailand is divided into three main channels:

  1. Traditional Trade
  2. Modern Trade
  3. Online Channels (E-commerce)

Each channel has the following problems and challenges for Thai cosmetic brands:

Traditional Trade Channels

  • Brands need to rely on resellers to generate revenue and have low bargaining power.
  • Brands cannot maintain a database of resellers.
  • Brands 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 cycle.
  • No database to analyze purchase behavior of the customers.

Modern Trade

  • High capital investment required for entrance fee to Modern Trade stores.
  • Exploitation through high trade margins with no guarantee of sales.
  • Brand cannot maintane the customer database.
  • Brand does not have access to customer databases to analyze purchase behavior of the customers.

Online Channels (E-Commerce)

Every online or e-commerce channel has the following problems and challenges for the Thai cosmetic brands:

  • The brand has lack of knowledge and understanding in e-commerce platform technology.
  • It is difficult and expensive to developing own e-commerce platform.
  • The current e-commerce platform system has a lack of the online dealer management systems.
  • E-commerce systems cannot currently serve as the primary revenue channel for medium and large brands.

Development of Active Ingredients

The development of the active ingredient through bio-technology research plays an important role in the development of cosmetics in Thailand. Thailand, located in the Tropical Area with high biodiversity, which gives great advantages to the country in the field of agro-industry and processing of agricultural products. The processing also causes leftovers, which is not being utilized and left in bulk. These leftovers can be used in the cosmetic products through various extraction methods and research methods to extract the active ingredients, which can create an additional market value of millions of Thai baht.

At present, Quality Plus and the Institute of Agriculture, Kasetsart University has signed an MOU for a strategic partnership to collaborate in research and development as well as commercial operations. One of our objectives is to develop extracts from agricultural products and create new value from agro-industrial processes waste into high-value raw materials for the Thai cosmetics industry and the world market.


Why Is It Necessary to Create Competitive Advantages for the Cosmetic Brand Through Research?

ทำไมต้องสร้างขีดความสามารถในการแข่งขัน (Competitive Advantages) ให้กับแบรนด์เครื่องสำอางด้วยงานวิจัย ?

Thailand has a high growth rate in the industry, but it is unsustainable because the brands are created through a lot of publicity, advertising and promotion through famous people, while the products itself have lack of innovations or quality. The lack of continuous marketing causes customers to lose interest, thus the product is able to be in the market only for a short period of time, as a result, resulting the product life cycle shortens quickly over the period of time.

Product development with the support of scientific research is one of the factors that contribute to the promotion of cosmetic brands with reliable test results and the result on the quality of the product.

The general composition of the product is consists of:

  1. Texture (Base)
  2. Active ingredients
  3. Colorants
  4. Perfume
  5. Preservatives

If we analyze the product formula from structure side, we find that the active ingredients in cosmetic are influential elements of the products in 3 main areas as follows:

  1. Influence in terms of product or brand story, which we see in many global brands in the market that often create a selling points through stories about the extracts or ingredients used in product. For example: rare extracts, in-depth research, high-value extracts, etc.
  2. Influence by the product efficacy and selection of main extracts from plants or animals, which will affect the use of a product. For whitening result there is an Anti-tyrosinase extract is required, or if you want to get results about pimples and inflammation reduction, then need to use the extract with an ability to inhibit bacteria and help reduce the symptoms of acne, etc.
  3. The impact of the cost of main ingredients or a substance that has a greater ability to use in the market. But an important substance that gives clear results, used in a smaller volume and would cost a high price, which is the cost of the substance and also called the basic cost of the product formula.

Therefore, how to create a competitive advantage for brands?

  •  Develop in-depth research.
  • The acquisition of active ingredients or substances of the brand.
  •  Register intellectual property. Being able to develop and create a patent or petty patent, this can build capabilities in high-level competition.

How Do We Evaluate Our Research Results at a Sustainable Level?

ประเมินอย่างไรว่าผลงานวิจัยของเรา อยู่ในระดับการสร้างขีดความสามารถในการแข่งขันได้อย่างยั่งยืน

We can use the evaluation criteria from the VRIN Framework as listed below:

  1. Value creations in extract research that have been developed and contributes to provide value into a competitive advantage.
  2. 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 is, how many are there?
  3. Difficulty of imitation. Research can be easily imitated. How much does it cost to develop results and attributes that are equal or greater?
  4. Can other substances be used for ingredients? Is there a substitute or alternative ingredient that can be replaced easily? When comparing in terms of cost, results, security, portfolio, are we at a higher level?

Of all 4 evaluation criteria, only 2-3 capabilities can be created in the short term to create some competitive advantage, but based on evaluation criteria, all issues are seen as creating 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 of the cosmetics industry, we can make a difference and protect our research with the patent as our intellectual property, which can be summarized as the following key points:

  • Natural extracts obtained through the research that cannot be patented or protected by a petty patent.
  • Normal process extraction through research that cannot be patented or protected by a petty patent.
  • To patent the research, it should be developed to get new substances such as extract, 2 or more research of the ingredients that promote better results, more stability or better feeling after use etc.
  • To patent the research in new processes and to become own intellectual property, we have to prove that it is a new process invented by us and not the same as one of the processed already existed in the market.
  • Cosmetic formulas which commercially available in the market or cosmetics factory is not yet patented or protected by a petty patent to protect the intellectual property.
  • For cosmetic formulas that have been researched and developed and have produced good results, including its unique features. Can be proteted by a petty patent for protection of the work or to create evidence about the ownership.
  • Trademark protection is another alternative for brands that want to develop sustainability.

Cosmetic brands with intellectual property protection can bring the portfolio to take advantage of following:

  1. Establish credibility and proving legal rights for protection.
  2. It is a powerful marketing tool when it comes to marketing, for both domestic and overseas markets.
  3. When it comes to national and global competition, the patent and petty patent are important for participants to be accepted by the evaluator.
  4. Prevent replication, which can be illegal.