Outsourcing Beauty: Signed, Sealed and Delivered

WHETHER due to changing tastes, an increased stronghold of social media influences or some other cultural norm permeating their mindset, today’s consumers are increasingly fascinated by new products. An emphasis on “new” products is one of the main impetuses for growth in contract and turnkey manufacturing services, say experts.

As today’s consumers expect “new” constantly, product life cycles and the refresh rate required are much shorter—a vicious circle with more competition in the beauty world and new brands entering all the time, taking up market share. As a result, brands must be in a position to offer the products that are in demand and respond quickly to change.

This constant stream of new offerings places financial, time and process management burdens on today’s beauty brands. In addition to this phenomenon, explosive growth in the skin care market has blurred lines between cosmetics and pharmaceuticals, often requiring additional regulatory expertise and testing that brands may or may not have the capability to complete. For these reasons, as well as the sheer number of benefits that contract manufacturing brings, contract manufacturers are currently experiencing increased popularity.

Definitions

The term “contract manufacturing” can cause a lot of confusion even for seasoned industry veterans. It’s because the definition varies from company to company. While some contract manufacturing companies can offer services that span from initial product conceptualization all the way through distribution, others focus their expertise on a smaller range of services provided to their customers. Some may work with a number of different beauty segments; others specialize.

Much like the contract manufacturer label, the term “turnkey” cannot be defined any one way. The term turnkey seems to take on different forms, depending on the company. For example, boutique, professional and international brands working with contract manufactures take care of their design and distribution. Aside from contract manufacturers, there are also development companies that guide the entire product development and packaging process to produce a “turnkey” product.

Benefits

Small, mid-sized and large global brands are enjoying the benefits of contract manufacturing, but oftentimes for different reasons.

For small brands, partnering with a contract manufacturer enables capabilities and potential they wouldn’t have otherwise. Small brands tend to run a lean organization and resources are limited to dedicate to new product development and supply chain management, and some even may not have any manufacturing capabilities. As such, they can benefit from partnership with a contract manufacturer who can do all the sourcing and manufacturing and allow them to focus on the big picture.

The beauty industry has seen a ramp-up of small start-up companies entering the marketplace. As the manufacturing runs of small brands are typically shorter, contract manufacturers offer flexibility on shade ranges and product mixes. In addition, partnering with a contract manufacturer can also offer cost savings and tried-and-true solutions. Many contract manufacturers are equipped to offer stock formulas and/or packages that, although suitable for any sized brand, may be especially appealing to small brands for economic reasons.

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