Contract Manufacturing and Private Label

It makes perfect sense. Just as Nike owns no sneaker factories, there are many well-know brands in the cosmetics, fragrance and personal care business being produced in plants not their own.

Historically, outsourcing manufacturing was something brand marketers did when first getting started, when in a bind for capacity, or when launching a new product. In most instances, if the product were successful, manufacturing would be brought in house. But in a world of specialists, where the latest technologies are both necessary and expensive, and efficiencies of scale are often essential, contract manufacturing is growing as a normal, long term way to produce products for the cosmetics, fragrance and personal care markets.

Lady Burd Exclusive Cosmetics manufactures a variety of color cosmetics and personal care items as private label lines or contract manufacturing projects. Recent introductions include the Bronzer at left and lipsticks on right.

Contract Manufacturing vs. Private Label
The line between contract manufacturing and private label manufacturing is a fine one. Contract manufacturers generally have a selection of basic formulas that customers can choose from, adding or subtracting ingredients to create a custom item, or they will make a client’s formula or develop something original. Private label suppliers have a catalog of finished products that a customer can order from, having the goods then decorated and labeled for their use.

Private label lines are now the choice of many retail channels—from television shopping networks, private spas and salons, to designer brands, as well as big box outlets and drug store chains. Contract manufacturing is the method for marketers—from large national and international brands to entrepreneurial lines—to have goods produced while they concentrate on what they do best—marketing.

Most companies Cosmetic Packaging & Design spoke to offer both kinds of services and a lot in between. Most are willing to create a totally unique product to a customer’s specification and many also have research and development staff to work with a client to come up with a custom formula.

Shhhhhhhhhhh!
Maybe that’s why it’s called “private” label? The outsourcing of beauty products is a confidential business as brand marketers guard formulas and image and contract manufactures protect their client’s privacy. There is also a fear that consumers will be horrified to find out that their favorite lipstick or night cream isn’t actually made by the name on the package. There are still some major contract manufactures that declined to be interviewed for this story—or at least didn’t return repeated phone calls. But most companies were ready to talk about what they do, even while not name-dropping any famous brands.

Market is Good to Excellent
The private label business is “Absolutely fabulous,” stated Roberta Burd, chief executive officer at Lady Burd Exclusive Cosmetics. Burd noted that the business is coming from a number of new as well as traditional sectors including creative lines featured on television shopping shows, retailers wanting to add house brands, and niche lines from makeup artists and designers. “Some are totally new, others are more established and are looking for a new partner. We expect the business to grow 100% this year,” said Burd, “and have built the infrastructure to be able to handle it—across the board.”

From a contract manufacturer perspective, business is excellent, according to Russ Fontaine, general manager for Harrison Specialty Company, Canton, MA. “It (contract manufacturing) is a way for a brand to have new products without the burden of new plants, equipment or staff.”

Agreeing that television shopping networks are generating growth, Michael Assante, president, Private Label Cosmetics Company (PLC), Fairlawn, NJ, explained, “There’s always a need for a new face as most celebrity lines last five to ten years.”

There is steady growth across the board, according to David Del Pizzo, vice president of sales for Medicia Corp., a full-service contract manufacturer based in Dayton, NJ. Having been in contract manufacturing since the late 1970s, Del Pizzo noted, “For awhile, contract manufacturing was getting smaller and smaller, but recently it’s growing, as giants like P&G are moving production outside and retailers such as Victoria’s Secret and Bath & Body Works are so successful without any manufacturing.”

“Business overall is extremely strong,” said Ann Sisbarro, vice president of sales for Accra Pac Group Inc. (APG), based in Elkhart, IN. “As more major marketers don’t want to invest in facilities to produce new products and so contract them out.” Some marketers are also contracting out “harvest” brands, products that are still selling but no longer growing, Sisbarro noted.

How the Market is Changing
The market is changing as it grows. “Two years ago, there weren’t a lot of startups but now there are lots of new brands getting into the marketplace,” said Sandra Scott, president of Cosmetica Labs, Toronto, Canada. “The new growth is moving evenly through all types of retail as well as direct marketing,” she noted. “There are lots of entrepreneurs trying to get into the business. Cosmetica qualifies new customers carefully before accepting their projects.”

“Outsourcing is growing for marketing companies,” stated Paul Germaine, vice president of sales for CCL Custom Manufacturing, said to be the largest contract manufacturer of consumer products worldwide. “It (contract manufacturing) has always been good for new product launches until the marketer sees how the product will sell, but now a lot of permanent lines are being done outside too and a lot of marketers have said they intend to do more outsourcing,” Germaine explained.

Another change is that brand marketers used to be inclined to send production out in down times and bring it back in-house when the economy picked up, but now many are simply closing plants and relying on contract manufacturers and contract packagers to do production, according to Harrison’s Fontaine. “We have long term relationships with many of our clients to manufacture their products and can offer bi-coastal service, important because California accounts for 15% of the total hair care market.”

Regulatory issues are more and more of a concern to contract manufacturers across the country. Steven F. Csiszar, owner and president of West Coast Cosmetics, said that WWC based in Chatsworth, CA, continually updates its information database to stay on top of all the new rules governing the industry, from raw materials to labeling issues. And as the cosmetics industry becomes a truly global market, “WCC is working diligently to remain current on rules governing importation of cosmetics to each country that our clients distribute to,” said Csiszar.

Treatment/Natural Ingredients in Demand
With six chemists on staff, Lady Burd is continually developing new products. According to Burd, hot ingredients right now in skin care are vitamins and minerals, which are also in demand for cosmetic products such as a new Lady Burd shimmertint foundation, which also contains aloe for added benefits.

“Spa-type body scrubs and body butters are hot,” said Laurence H. Levine, director of sales and marketing at Corwood Labs. “Consumers are knowledgeable today and look for certain ingredients. Those that are into “natural” care, know what to look for and Corwood has formulations with key ingredients,” he added. Dental care is also a growth category for Corwood.

Natural and organic continue to be buzzwords, agreed Duncan Coopland, vice president of sales and marketing for Body Blue Inc., based in Mississauga, Ontario, Canada. “We’re asked to help make natural products. In the United States, to be certified “organic,” 70% or more of the ingredients must come from a source that is organic certified with appropriate documentation,” Coopland explained. He added “The greatest challenge is to find a natural preservative. Body Blue has developed a patent-pending all natural preservative system for use in natural products.”

Herbal Clear, a PG free deodorant marketed by Herbal Care Systems Inc., is manufactured by Body Blue.

Customers (marketers) are looking for creative ingredients to impart an element of difference, according to Cosmetica’s Scott. She said, “Generally, they want light textures and lightweight formulas, often water-based. Glitter and sparkle are continuing trends and many are looking to add an SPF feature.”

For anti-aging and acne treatment type products, Matrxyl is an alternative to vitamin C that is currently in demand at Cosmetica, according to Scott. For body care, lotions, creams and scrubs, products that look, smell and feel like candy are popular. Silicone is another popular ingredient for the slip it gives to products. “It’s non-occlusive, prevents moisture loss and it gives products a unique feel. It’s popular in foundations and lip products, ” Scott said.

New raw materials and products are a constant at Paramount Cosmetics, a contract manufacturer of private label cosmetics and skin care products for over 40 years, according to Judy Cangialosi, product manager. Now based in Clifton, NJ, Paramount has added a luxurious collection of 3-in-1 shades to its in-house line. It can be applied to the eyes, lips and cheeks.

Paramount’s Lip Gloss with Maxi-Lips answers the demand for pouty lips in the latest fashion shades and its Foundation Additive is a translucent golden shimmery base, which can be worn alone or added directly into a foundation to highlight the face.

Most new products are now being made with an SPF, according to PLC’s Assante, and “Treatment is accented too now, as are products for men,” he said.

Corwood Laboratories’ recently expanded facilities now include 140,000 sq. ft. of office, operating and warehouse space.

Serious Skin Care Moves into Commercial
As the Baby Boomer generation edges toward 60, it’s to be expected that the demand for anti-aging skin care would increase. But the desire to take good care of one’s skin is not confined to one generation. From sun protection, to sensitive skin care and acne treatment, to products that promise to reverse signs of aging and/or help prevent them, more products with a dermatologic origin are being found in commercial markets.

Skin care lines from medical doctors such as Dr. Nicholas Perricone and Dr. Brandt are in the news and available without trips to the dermatologist.

For a contract manufacturer and private label company like Milbar Laboratories, the increase in demand for skin care backed up by “serious science” has been a boon for business. Headquartered in East Haven, CT, Milbar is a division of Dermatologic Cosmetic Laboratories with 22-years of expertise in skin care. “Milbar has done clinical studies for anti-aging, acne and sensitive skin issues,” said Gus Bezas, company senior vice president of sales and marketing. And electronic retail—QVC, the Home Shopping Network and infomercials— are “where the action is,” said Bezas. “It’s spectacular.”

Suppliers Are a Varied Lot
From huge operations that claim to be able to do everything from concept to distribution, to small specialty producers that focus on a narrow niche, contract manufacturers and private label suppliers are a diverse group. In alphabetical order, the following capsules provide information of a sampling of providers of outsourcing services in beauty.

• Accra Pac Group Inc. (APG), Elkhart, IN, is the second largest aerosol filler in the U.S., according to Sisbarro. The company also produces liquids, creams and lotions, 98% of which are compounded and filled at APG.

• Body Blue Inc., based in Mississauga, Ontario, Canada, is a contract manufacturer and a private label manufacturer that provides services ranging from research and development of product formulas through product manufacture and filling through pack-out in a “seamless to customer stream,” said Coopland.
Body Blue, an OTC certified facility, works in three major product categories: sticks, liquids, and creams and gels. “Body Blue wants to be recognized as a provider of turnkey projects. We focus on manufacturing from start to finish and adding real value,” stressed Coopland. “We handle R&D, engineering, quality assurance, materials management, labels and freight. We can even do FDA registration and export documentation for our clients.”

• CCL Custom Manufacturing, with headquarters in Rosemont, IL, is the largest contract manufacturer of consumer products worldwide, making personal care products including hair care and skin care products, according to Germaine. Through its facilities in the U.S., Canada, the U.K., and Germany, it provides manufacturing, packaging and support services to the world’s leading marketers of brand name personal care, OTC pharmaceutical, specialty food, household, automotive and industrial products. “Basically, our clients supply the specifications and we blend and fill the product into a CCL container or otherwise. We fill into bottles, tubes and aerosol cans.”

• Corwood Laboratories, Hauppauge, NY, is a custom contract manufacturer of a range of liquids, lotions, gels and creams for bath, hair care, personal products and skin care. The company recently finished a 93,000 sq. ft. expansion, bringing its facilities to 140,000 sq. ft. of office, operating and warehouse space, according to Laurence H. Levine, director of sales and marketing. “We’ve tripled our filling capacity and doubled our compounding capacity,” Levine said. “And have also expanded sales with a Midwest team now based in Chicago.”

Corwood’s prolific R&D lab produces a continuous stream of new products. Levine said, “Whatever a customer wants, we make. Whether it’s from a basic formula that is then customized or a totally new formula.” Corwood is staffed to handle turnkey projects, but usually focuses on formulating and filling into packaging provided by the customer.

“It’s an exciting business,” stressed Levine. “We don’t market any of our own products and maintain a very confidential customer base for whom we make thousands of products every year.”

• Cosmetica Labs, one of the few contract manufacturers in the HBA market that also manufactures packaging components, has recently added box manufacturing to its menu. “We can now make a finished box, a shipper and a box master (corrugated spacer),” said Scott. “It was a problem because most projects need the three different kinds of boxes and if all three aren’t ready at the right time, the project can lose its place in the manufacturing schedule. Brands don’t want to make boxes because the investment in the necessary equipment is disproportionate to other costs for a mid-range brand.” The logistics are also very tough, so Cosmetica brought them in- house and now makes what the marketer needs for each run,” Scott said.

• Glamour Look, a custom manufacturer of color cosmetics, bath, body and skin care, has been making and filling beauty products for over 30 years. Located in Toronto, Canada, the company offers its own formulas or will custom manufacture to the customers’ specification.

“We have large and small clients and have capacity for large volumes as well as small runs,” said Marlene Oilgisser, director of sales.

Glamour Look has a GMP (good manufacturing practices) license in order to be able to handle ingredients such as SPF chemicals. Its facility includes 75,000 sq. ft. of operations as well as another 20,000 sq. ft. dedicated to warehousing. With a staff of 300 to 400, working at least six days a week, Glamour Look generally turns around orders in four to six weeks. “But a lot of our business is for the mass market and we react quickly,” said Oilgisser.

• Harrison Specialty Company, Canton, MA, provides finished hair care and actuator products (except dyes) for a range of marketers including professional lines as well as niche brands such as that of New York City stylist John Sahag.

After 28 years in business, “We have a repertoire of formulations,” said Fontaine. “Each client adds or changes the basic formulas to customize them. Sahag, for instance, includes olive oil in his products, while another uses honey as a base.”

Harrison can provide complete turnkey services from blending and filling to all assembly, packaging and distribution or will send bulk onto another filler. Fontaine added, “About 75% of our business is turnkey, even handling distribution, because that allows the customer to focus on its strength which is marketing and coming up with the next great idea. “We work with packaging suppliers for our clients and even act as a warehouse for some to store and ship as needed,” he said.

Harrison is expanding into skin care products, which are expected to grow to be half the business over the next two years.

Lady Burd offers Color Release lip color in sleek applicators.

• Lady Burd Cosmetics, Farmingdale, NY, has been supplying private label lines of cosmetics and skin care for 44 years and is still “very enthusiastic about our work,” stressed Burd, who is a hands-on chief executive, working directly with customers. “We’re makeup maniacs and get very excited about creating new lines,” she stressed.

A contract manufacturer as well as private label house, Lady Burd will develop formulas for the exclusive use of a customer. “The contract manufacturing side has been growing tremendously,” said Burd. “We will do something unusual, and minimums are as low as 1000 for custom color projects.”

Burd had advice for anyone seeking a contract manufacturer or private label partner. “It’s very important to see the manufacturer’s facility. Always ask for a factory tour. Anyone who’s a legitimate manufacturer will welcome the chance to show you their plant.”

• Medicia Corp., founded in 1976 by Joe Paterno and acquired by BLI Holdings in 1997, manufactures and fills creams, lotions, shampoos, splashes, perfumes, gels and non-aerosol hair sprays. It is FDA approved for OTC products and also has an explosion-proof vessel for manufacturing alcohol-based products.

“You may not know our name, but you know our customers,” is Medicia’s tagline line that aptly represents a supplier of finished goods to many of the most well-known brands in beauty, according to Del Pizzo.

• Milbar Laboratories, East Haven, CT, is a contract manufacturer and private label partner that offers services from start to finish, according to Bezas. The company concentrates on gels, creams, lotions and solutions in lots from 3,000 to 100,000 or more. “We are a high-tech formulator of skin care products,” Bezas said. “We can develop the formula, help a client source its packaging, mix and fill the package, as well as help the customer with marketing, distribution and fulfillment.

Milbar works with major national brands as well as entrepreneurial startups and both are important. “The small customer is important because they often turn into big success stories,” stated Bezas. “And there is often more creativity in product direction/concept with the small startup.”

• Paramount Cosmetics offers private label lines as well as contract manufacturing services to a clientele that includes independent salons and spas, high-end department stores, national shopping networks and distributor’s chains across the U.S. The company relocated its headquarters and factory to Clifton, NJ, in 2001. The new facility has over 100,000 sq. ft. of manufacturing and storage space. Cangialosi said, “With increased personnel, an expanded laboratory, a larger research and development department, additional state-of-the-art manufacturing equipment and production lines and increased inventory space—Paramount has accomplished double digit growth in the past three years.”

OTC certified, the company specializes in custom formulating, maintaining a full on-site laboratory for research and development for the following: creams, lotions, toners, masques, scrubs, facial and body cleansers, makeup removers, body gels, serums, eye treatments, and sun screen products, all available in retail and bulk sizes. Its cosmetic line includes: liquid foundation, crème makeup, pressed and loose powders, concealor, lipsticks, lip gloss, cake blush, crème blush, eye shadow, mascara, liquid eyeliner, eye and lip pencils, and nail polish.

Cangialosi added that “At present, skin care and cosmetics are fairly equal operations, hair care is a growth area. Paramount now has an extensive library of shampoos, conditioners and hair gel formulas.”

• Precious Cosmetics, based in Saddle Brook, NJ, has been supplying color cosmetics and skin care products for eight years, according to Sam Mikhail, owner and founder. A small supplier, Mikhail said that the company’s strength is quick turn-around times. “We can deliver with projects averaging 20,000 units with two to three weeks notice. And we still fill quantities as small as 5,000,” he added.

• Private Label Cosmetics Company (PLC), Fairlawn, NJ, is a contract manufacturer and private label supplier for major marketers, according to Assante. An OTC certified facility, PLC has been in business for 60 years, covers 250,000 sq. ft. and employs 300 in its operations, producing color cosmetics and treatment products.

• Shamrock Technologies, based in Dayton, NJ, specializes in micronization and particle size reduction, according to David Hsieh, plant manager. Backed by 55-years of experience as a supplier of micronized waxes and specialized chemicals, Shamrock also offers bulk manufacturing of wet or dry products, such as pressed powder, lotions and creams. “We can make the formula and then will ship the bulk to a filler,” Hsieh said.

• Verla International Ltd., New Windsor, NY, has been providing turnkey services to national and international customers since 1980, when the present owners purchased the company from Syntex Corp. It is the largest filler of nail enamel in the world with a capacity of over one million bottles per day, according to April Vignone, president of Trendsetters International, Verla’s division for research and development. Vignone explained that success in its nail enamel business led Verla to expand into color cosmetics, creams, lotions, fragrance and bath and body care in 1996.

Catering to specialty chains, mass drug and department stores, as well as direct sales, professional beauty, television, online retailers and boutiques, Vignone noted that Verla has grown through word of mouth with no official sales staff.

Trendsetters International, a division dedicated to the development of promotions and new lines, was established in 1996 to further serve clients in creating formulas, shades, packaging concepts, component designs and trend and color forecasting. Vigone noted, “It’s a place where packaging development, marketing, and/or creative staff can come in and create new and innovative items from start to finish.”

“Customers can have a complete line developed without the responsibility of having an expensive infrastructure,” explained Vignone. “Once Trendsetters is done, the manufacturing operation takes over. Components are ordered, formula manufactured, product is packaged and within a short period of time, a new line is being shipped.” Verla even receives orders directly from its customers’ accounts and drop ships to thousands of stores on a daily basis.

• West Coast Cosmetics (WCC), founded in 1992 by Csiszar, manufactures color cosmetics for a wide range of marketers. Originally, WCC served start-up companies with both development and production, according to Csiszar. “Many of the start-ups have grown to become major national brands,” Csiszar noted. WCC continues to work with new start-ups as well those that have matured to big names, which now represent 70% of its business.

WCC formulates all types of lip, eye, and face color cosmetics as well as skin care products. It is OTC drug certified and holds an alcohol use license as well as cosmetics manufacturers certifications from California’s Dept. of Health Services.