Choosing a Contract Manufacturer for Beauty, Makeup & Cosmetics

Things to look for when selecting a contract manufacturer for your beauty products

Private label vs. Contract manufacturing

For wannabe beauty entrepreneurs, approaching third party manufacturers is an important step when starting or growing your beauty business. When the time comes to approach manufacturers, there are typically two options to choose from; private label and contract manufacturing.

Private label

Private label refers to purchasing pre-existing, pre-made formulations that are ready to sell instantly. When purchasing private label goods, you are simply buying unbranded products that you can brand and sell as you wish.

This is a great option for new startups, as costs are low, there are low MOQs (minimum order quantities) and typically short lead times. However, you will have no control over the formulations and typically cannot request alterations.

Contract manufacturing

On the other hand, contract manufacturing allows you to work with a manufacturing company to create bespoke formulations that are unique to your brand.

However, bespoke formulations cost more money, require longer lead times and typically require larger minimum order quantities.

Questions to ask:

• What formulations do you have available for private label?
• What are the MOQs and lead time for private label goods?
• What are typical pricing ranges for contract manufacturing?
• What are the average MOQs and lead times for contract manufacturing?

Formula ownership 

The contract manufacturing route is popular for entrepreneurs who are looking at creating bespoke formulations. Because both parties will have some involvement in developing, refining and testing of the final product - from pilot to final manufacturing scale - formulation ownership can quickly be a complex issue.

At no point should assumptions be made about formulation ownership, and it is best to address this issue prior to commencing any work and ensure terms and conditions of formulation ownership are put into writing.

Questions to ask:

• How do I retain ownership of the formulation?
• Is there a price reduction for sharing formulation ownership?
• Can you ensure the necessary paperwork that outlines the formulation ownership?

Budget

When dealing with contract manufacturers, there are many variables that can impact the overall price of manufacture.

When determining the total price of a formulation, it is common to use a BOM (bill of materials); a total list of all costs; including ingredients and packaging.  So when it comes to setting your retail price, you can calculate the cost of goods sold (COGS), which includes the BOM, labour, shipping and any taxes.

Some of the factors that can impact the overall cost of a formulation include:

• Ingredient cost
• Minimum and maximum capacities
• Pilot and full-scale testing
• Final packaging costs
• Delivery

Asking a manufacturer to break down the costs of all variables will allow you to help determine what is necessary, and what is just nice to have within your budget constraints.

Questions to ask:

• What is the breakdown of costs?
• Does the budget include filling and packaging costs?
• Are there any R&D fees?
• What happens if the product doesn’t meet desired specifications?
• Does the cost include delivery of finished products?

Region and Global Reach of Production Facilities

It is likely that contract manufacturers that you approach will have additional manufacturing facilities, or the networks in place to facilitate manufacturing or distribution in different countries and continents.

Whilst this can be advantageous in the future, make sure to ask questions regarding potential issues with formulations and ingredients, and whether they use different equipment or processing methods.

If certification (discussed later) is important to you, then be sure to raise any questions and concerns up front.

Questions to ask:

• Can you manufacture my formulation in additional locations?
• Can you distribute finished products on my behalf?
• Can additional facilities produce products to the same specifications?

Minimum Order Quantity (MOQ)

'Minimum order quantity’ is the minimum number of units that must be purchased, per order.

The MOQ usually determines the minimum amount of product that a manufacturer needs to make for it to be worth their time and effort. The MOQ will usually correlate to the size of the facilities at their disposal, and will determine the minimum up-front cost required for production.

It is also a good idea to ask for a maximum order quantity too, to ensure that your manufacturer can accommodate any future orders you may require.

Questions to ask:

• What are minimum order quantities?
• Can I request samples? How much are they?
• What is the maximum order quantity?

Lead Time

Lead time refers to the time it will take between initiating an order and the completion date of the product. When it comes to cosmetic manufacturers, the lead time will depend on multiple factors, such as the following:

• Formulation development requirements
• Production capacity at manufacturer
• Raw material availability
• Order quantities
• Certifications - (see next section)
• Primary and secondary packaging and additional branding

Questions to ask:

• How long will it take from ordering to receiving goods?
• Are there likely to be any delays - from ingredients and/or packaging

Certifications

Many third parties will formulate specific certifications as required; FDA, GMP or COSMOS for example.

The reason for getting manufacturer certified products is for one of two reasons - ‘nice to have’ - such as certified organic - to create strong product benefit claims, or an absolute necessity - FDA and/or GMP - in order to legally sell products in your target market.

Do remember that certification can apply to both the method of manufacture AND ingredients, both of which can cause sharp price increases in your formulation.

Questions to ask:

• What are minimum order quantities?
• Can I request samples? How much are they?
• What is the maximum order quantity?

Formulation Capabilities

If you think about the typical range of beauty products on the market, you have a variety of formats - powders, liquids, gels, pellets, lotions, etc.

Each format requires a new set of skills and knowledge to be able to develop and manufacture each format to the desired standard.

As well as this, niche ingredients can also add complexity into the formulation process

Questions to ask:

• Can you manufacture [format type]?
• Can you manufacture with [ingredient name]?

Manufacturing Capabilities

Not all cosmetic and beauty manufacturers are the same. Like there are manufacturers that specialize in particular formats or ingredients, there are manufacturers that specialize in the equipment they have available.

For example, manufacturing with fine powders or volatile materials requires specialist equipment and strict formulation protocols. Make sure to check with your manufacturer about any issues they can foresee with your formulation ingredients or manufacturing method.

Questions to ask:

• What manufacturing equipment do you use?
• Is any specialist equipment required for production?
• What size vessels do you use, and what’s the maximum quantity you can produce?
• Are products filled, as well as manufactured?
• Who is in charge of overseeing production?

Breadth of Services

Manufacturing a formulation is just one part of the whole production process of any cosmetic or beauty products.

But you should consider additional services that contract manufacturers can offer; formulation development, raw material sourcing, pilot scale production, filling and packaging - primary and secondary.

Although these might not be services you require immediately, for future needs, it may make sense to outsource as many aspects of product development as possible, or get access to expert formulation chemists and process engineers.

Questions to ask:

• Can you offer primary and secondary packaging?
• Do you fill in the required packaging?
• Can you help develop future formulations?
• Do you have chemists and engineers that can help improve manufacturing?
• Can I speak to them to ask questions or for advice?

Summary

Finding a contract manufacturer is not an easy task and requires plenty of research and due diligence to find the perfect partner. Make the task easy for yourself by determining your exact requirements ahead of time and with a series of follow up questions to gauge the expertise and abilities of a contract manufacturer.

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