12.06.05
Over 2,000 cosmetic and toiletry products were introduced in the United States in 2004, according to Cosmetics and Toiletries USA 2004, a report conducted by Kline & Company. Although their company name won’t be found on the finished product, many of these goods were launched with the help of a contract supplier.
Within the beauty business, there are companies that act as contract fillers, contract packagers, contract manufacturers and private labelers.
As the phrase suggests, a contract filler takes the product and fills bottles, tubes and jars. A contract packager develops primary packaging for a brand marketer. Contract manufacturers and private labelers offer primary packages, formulations and filling services.
No matter what the company size, beauty marketers today rely heavily on outsourcing. “Companies large and small utilize the services of contract manufacturers. Contract manufacturers have the expertise and understand formula development, production, pack out and, most importantly, quality control,” stated Jennifer Pignata, sales and marketing for contract manufacturer Paramount Cosmetics, Clifton, NJ.
“I have everyone from the person who orders 500 tubes because their wife wants to start a cosmetics line, to large brand marketers,” remarked Christopher White, president of contract filler The Filling Station located in Walpole, MA.
Depending on size, brand marketers have different reasons to use a contract supplier.
The Process for Start-Ups: Joe’s Bright Idea
Joe wakes up one day with a brilliant idea. He just bought a new car. He loves the smell of new cars. He’d love to wear the scent around and he’s sure others would like to smell like new car too. Then it hits him: make and market a new car fragrance. Joe’s light bulb is on and blazing. He knows he can outsource the work, but where does he begin?
Step one is complete, according to Jean Marc Perez, president of Novapac Laboratories, a contract manufacturer in East Orange, NJ. Start-ups must begin with a vision. The process is far from over, however.
From there, a start-up needs to decide upon a formula, containers, color and artwork, stated White.
Crown Risdon’s stock TrimGlide lipstick packages |
All of the steps in the process so far — from formulation to packaging to filling — can be outsourced. Joe also needs to have a marketing plan. “Usually as a contract manufacturer, we focus on the packaging and formulation needs of our customers and they develop the marketing concepts,” said Rick Persons, vice president of operations for Alcan Packaging Beauty in New York, NY. Alcan Packaging Beauty specializes in packaging and can also provide a turnkey product.
Things to Consider When Launching a Product
Sounds simple, and that’s the goal of contract suppliers: to make the process as convenient as possible. But before Joe turns a profit, he’s got a few other things to consider. First comes finances. Joe may be certain that the whole male population would love to smell like new car, but considering the amount of new business ventures that will eventually fail, he must be smart with his money. Perez offered this advice: “Make sure what you are using is disposable income — it’s not what you are living on.”
There are also some legal considerations. Joe needs to make sure he’s not infringing on any patents for the packaging and its design elements. The mold and the color of the package, for instance, can be patented. He also needs to make sure the formulation he intends to use is not already registered with the Food & Drug Administration (FDA).
Cosmetic pencils from Swallowfield |
Here comes a benefit of outsourcing: many contract packagers and manufacturers will help someone like Joe avoid any legal wrangling. “We are very cautious about not duplicating designs from one marketer to the next. Our patent/trademark attorneys are very experienced in this field and guide us accordingly,” said Steve Pearlman, president of contract packager Crown Risdon, located in Watertown, CT.
Another legal consideration is making claims. If Joe wants to claim on his label that ingredients in his new fragrance can reduce the appearance of wrinkles, he has to prove it. Pignata of Paramount Cosmetics reminded that special testing in order to make claims can slow down speed to market.
Formulation testing is also important for safety reasons. “If the formulas are new and therefore unique, they need to be tested to insure that they will be well tolerated by consumers. Neutrality is legally documented in the case of very novel formulas,” said Persons.
Timing can be of the utmost importance to brand marketers and there are several other variables that affect speed to market, in addition to formulation testing. Packaging is a huge one. Fortunately, the most economical choice is also the fastest one. “Start-up companies would generally use stock packaging for cost reasons, but we can customize it through color and decoration. Stock packaging speeds up the time it takes to get to market,” said Charles Chang, president of Topline Products, a contract manufacturer in Wayne, NJ.
Workers prepare tubes for final production at The Filling Station in Walpole, MA. |
Others concurred. “Perhaps one of the biggest factors affecting lead times is the inability of marketing companies to make quick decisions. It is perhaps this feature which does the most to make a contract manufacturer’s life difficult in attempting to meet original critical path dates,” said Tony Wardell, group managing director for contract manufacturer Swallowfield in Somerset, England.
Finally, Joe must check references. It’s important to work with suppliers who are credible. And hopefully, if all these steps are followed and all these factors are considered, Joe will grow from a mom and pop to a large beauty company.
Advantages for Large Marketers
Fast forward 15 years. Joe hit on a gold mine. He’s now a several billion dollar beauty giant. His company has different needs now, but he still uses contract suppliers.
It’s easy to see why a small start-up would rely on outsourcing: they don’t have any manufacturing facilities. They can also stand on the shoulders of experts if they themselves have little experience in the beauty business. But why would large brand marketers — often with factories of their own and a broad understanding of the industry — use a contract manufacturer, packager or filler?
“One of three reasons. The first reason is that people want to do test runs, which are smaller runs that they can’t do with any affordability in-house. Number two is a lot of larger facilities have minimums. If you look at the cost analysis of a large brand marketer, they won’t start a line unless they are going to run 250,000. It doesn’t make any sense for them, so they’ll call us and ask if we can fill 100,000 or something like that. And of course, the third reason is that companies have overflows,” said White.
Sometimes contract manufacturers have capabilities that a brand marketer does not currently possess. Large brand marketers will also utilize the services of a contract manufacturer for new product launches when they do not have the appropriate equipment in-house. Often, this is short-term business for a contract manufacturer. “If the product is successful, it is not unusual for large brand marketers to eventually install their own manufacturing facilities for that product,” said Wardell.
A unit dose package from James Alexander. |
“Large brand marketers may use a contract packager in order to have packages that they might not be able to create internally. In our case it would be samples. Using a contract packager also gives them more variety, more diversity in terms of what they are able to do,” said Jim Gabilanes, vice president of sales and marketing for the South Plainfield, NJ-based company.
In addition to the previously stated reasons, for those marketer companies with a wide range of products in a line, contract packagers can offer consistency. “With a range of product offerings (lip stock, lip gloss, mascara and fragrance caps) we can provide a consistent design element throughout the line,” said Pearlman.
Some Good Advice
Joe has done well partnering with contract suppliers. He has been able to use them in all phases of his company’s growth. But like any industry, the outsourcing market is dynamic. It’s important for him to know what’s changing.
Chang of Topline Solutions noted a recent trend in outsourcing. “Cosmetic companies have been sourcing the packaging in the Orient and then having the formulations done in the United States. That trend is changing where everything — the filling, packaging and formulating — is being brought to the Orient.”
Chang cautioned against this recent trend, saying variables like micro contamination and formula consistency must be thought about. “People looking to use a contract manufacturer overseas must be concerned about quality,” he said. “Creating formulations and creating packaging are two different ball games.” Topline produces complete turnkey products in China, but owns its own factories in order to preserve quality.
Another piece of advice from contract suppliers is to practice good communication. If a brand marketer chooses to outsource to several companies, communication is especially key.
“Make sure you are in communication with contract manufacturers from day one,” said White. When a new product comes to market, like they often do, Joe must research it by asking his suppliers. Not communicating can cause big headaches down the line.
“Here’s a perfect example from our industry: A lot of the tube companies several years ago came out with a 2 and 3/16" tube so that you can have 8 or 10 oz. of shower gel. But no one went to the fillers and asked if it was a problem to fill. So customers were buying these very large tubes, and the fillers were saying that we can’t fill these large tubes, or if we do, it’s twice as expensive because we have to run our machines so slow. The communication wasn’t there and hence the idea stalled for a year or two until the machine companies caught up with demand,” said White.
