Natura & Boticario Expand Bio-Inputs, Boost Research Investment

06 Aug, 2024

Natura & Boticario Expand Bio-Inputs, Boost Research Investment

The two largest Brazilian companies in the cosmetics segment are reinforcing their bets on bio-inputs for new product development. In July, Natura announced an unprecedented green debenture issuance linked to the goal of expanding the portfolio of tracked inputs from Amazonian flora. At the end of 2023, the Boticario group incorporated into its portfolio an oil developed by the company from quinoa through an exclusive method with no use of organic solvents or other oils added. The new input now integrates all products in the company’s Nativa SPA line.

A study by Mintell consultancy indicates that 57% of Brazilian consumers are concerned about the ingredients used in products and whether they have an ethical origin. The country’s large biodiversity attracts companies and research centers from Brazil and abroad. The authority in charge of monitoring the use of the country’s genetic heritage is currently preparing new rules for research and development by foreign companies.

In July, Natura completed the issuance of green debentures worth R$1.33 billion. The portfolio, currently comprising 44 assets—inputs made with Amazonian elements used in product manufacture—should reach 49 ingredients in 2027. If the company fails to reach the target, it should pay a fine in the form of additional compensation to bondholders. Carolina Domênico, Natura’s scientific manager, says the studies encompass aspects ranging from properties of chemical components present in plants and interactions with the organism to the viability of an industrial scale.

According to her, in some cases, the company asks its team of researchers to seek properties found in plants that may be suitable for creating cosmetic product lines, such as a hair moisturizer or a skin lightener. “If we want to work in the northwest of Pará, for example, we must understand the diversity of species there, the composition of these species, and which one we should invest in to study as a new cosmetic ingredient. That opens up opportunities and brings science focus on studying these species’ chemical properties,” Ms. Domênico told Valor.

She explains that the entire process is guided by registering the discoveries’ intellectual property. Brazilian legislation prevents the registration of certain aspects of production, such as the use of regenerative agriculture, but a company is allowed to patent steps such as an innovative method or the final product. This is the case with Natura’s tucumã-based products, which promise to help prevent collagen loss.

Boticario also carries out laboratory research to develop new proprietary raw materials at the manufacturing unit in São José dos Pinhais, in the metropolitan region of Curitiba, Paraná. The unit also has a greenhouse with around 60 species. The company invested R$11 million to build this center. The center was responsible for the development of quinoa bioester, an oil with no other plant-based oils or organic solvents added. Bioester started to be incorporated into the entire Nativa SPA body line after five years of studies. The company holds intellectual property for the product.

The company ordered special machinery for the São José dos Pinhais factory to process tonnes of grain and extract oil. The component was developed by the company at the request of founder Miguel Krigsner, after becoming familiar with the popularity of quinoa in food on a trip to Peru. In addition to bioester with the Andean grain, Boticario has products based on açaí, cupuaçu, and plums in its portfolio.

“We have been talking about bioeconomy for around five years but that has been a reality for Brazilian industry for over 50 years, with companies like Natura and more recently Boticario, which have been developing products from Brazilian biodiversity for a long time before the term bioeconomy was even coined,” said Fábio Brasiliano, director of sustainable development at the Brazilian Association of the Beauty, Personal Care, and Cosmetics Industry (ABIHPEC). Brazil accounts for around 20% of the world’s biodiversity, with more than 46,000 species cataloged after years of work by the Brazilian Agricultural Research Corporation (EMBRAPA). Key ingredients in the cosmetic industry in recent years include species such as açaí, andiroba, carnaúba, copaíba, murumuru, Brazilian cherry, and passion fruit.

Mr. Brasiliano points out that, despite the prominence of the Amazon region in the search for inputs, research includes all Brazilian biomes. According to him, the search for innovation in the industry and the level of 7,000 launches annually is one of the factors driving research for new ingredients and dialogue with public authorities to define regulatory models. The entire process must include records in the National Genetic Heritage Management System (SisGen) and Associated Traditional Knowledge (CTA), a platform created as part of the Biodiversity Framework in 2015. The legislation establishes the payment of royalties of 1% of the products’ net revenue developed from research, as a way of returning resources to the home country of native species used.

Since the new legislation came into effect, R$7 million has been invested in royalties, according to ABIHPEC. Another option for paying for genetic rights is to apply the amounts due to conservation projects—in this case, it is not possible to measure the volume of payments. Gustavo Dieamant, the company’s chief research and development officer, says Brazilian legislation is robust and should be seen as a global model to be followed.

“When it comes to biodiversity in other countries, it is also the role of the regulatory area to evaluate the species and the collection site to check the benefit-sharing and access legislation of other countries for impact assessment. The big challenge here is that the vast majority of countries do not have legislation as clear and advanced as the Brazilian Biodiversity Act,” he said. However, there is an obstacle regarding the registration requirements for foreign companies on the SisGen platform. The system requires that companies inform their Corporate taxpayer ID number (CNPJ), which can make it hard for multinational companies.

Among these companies is L’Oréal, which has a research and innovation center in Rio de Janeiro focused on developing Brazilian biodiversity and renewable ingredients. In early July, Valor revealed changes to the rules for the use of genetic material by foreign companies. The multinational L’Oréal informed, in a note, that, “aware of the challenges and limitations due to the complexities” of SisGen, it has been seeking solutions from authorities to adapt to the system. L’Oréal also says it is “among companies that most engaged” in discussions and working groups for the implementation of Brazil’s Federal Biodiversity Act.

Mr. Brasiliano points out that multinational companies can choose to wait for an update on the platform to allow entry without registering with the CNPJ or join a Brazilian company to make the operation formal. In this case, however, issues regarding intellectual property and industrial secrets are involved, which motivates some companies to wait for registration. Until then, according to him, companies can continue carrying out research in Brazil but are not exempt from entering information into the system and making the required transfers from previous years. If there is no forecast, multinational companies must set up financial provisions to address the coming cost, aware that they must share 1% of net revenue when it is time for regularization.