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Formulations – To buy or not to buy?

March 26, 2012

Being a business that sells formulations you could be forgiven for thinking that we will always try to sell you some but that isn’t the case.  There are many ways to get started and run a cosmetics brand/ business and different strokes suit different folks.

So, what options are open to you, the cosmetic ideas guru and where should you go to get them?

1) Contract manufacturers stock formula.

Rather like stock photos that you can buy online contract manufacturers will have their own range of in-house formulations that customers can use. The manufacturer will factor ‘formulation rent’ into their manufacturing costings and these are usually ongoing.

The good:  You don’t have to invest in the money or time to develop your formulation so the time-to-market can be shortened.  Also it will be up to your manufacturer to manage material supply variations, manage the quality of the bulk and ensure that the formulation is essentially ‘safe’ for the intended use. You also get the benefit of the manufacturers development and QA team to work with and support you as your brand develops.

The bad:  You have little to no control over what goes into your formulation and have minimal creative freedom.  When ingredients need to be changed due to supply or price problems it is unlikely that you will have much say in what they are changed to unless you are a major client.  It is most probable that the formulation will not be fully disclosed to you (although full ingredients lists should be) and as such you may not understand how and why your product does what you say it does.  Usually when you leave the manufacturer your formulation stays with them leaving you to reverse engineer ‘your’ product in order to carry on manufacturing. Finally gathering information about your formulations for export purposes may be really tricky as you don’t ‘own’ it.

However, being ‘all over’ your chemistry is not essential for a cosmetic brand as long as it is safe and performs as expected therefore the ‘bad’ parts about ‘renting’ a formula may not even matter to you.

A Good Option For: Lifestyle, fashion, fun, everyday essentials (no-frills type) or ‘me too’ positioning.

Not so good for:  Innovating science brands, philosophical positioning, general scientific or early adopter brands.

2) Tailored contract manufacturers formulation. 

Every manufacturer sets the bar differently here – not all manufacturers will ‘invent’ something for all brands so shop around until you find one to suit you!  Basically this involves the contract manufacturer formulating something more specific for you. It usually involves tweaking one of their existing lines or at least working their ‘stocked’ materials a different way and can work out very well.

The Good:  Usually there is only a nominal fee for this if you sign up with a manufacturing contract so again it is quite attractive from a cash flow perspective. You get to learn a little more about the development process and can influence material choice, feel and performance somewhat which is great.

The Bad: Even though you will feel like it is ‘your’ formulation it is not. It is still the work of the manufacturer and if you leave them, unless you’ve had something drawn into your contract you get no formulation.  Another potential downfall is that manufacturers generally like to work with their own stock of raw materials so if you want a range based on rainbow flower extract and they don’t stock it, you either have to think again or you have to purchase and store it yourself.   Finally it can be difficult to get all of the information you need for export if you don’t own the formulations as manufactures will be reluctant to hand that out and may request that you operate via a third-party consultant which can also add to your costs.

So, more creative freedom and choice but still no cigar?  Does that matter?

Good choice for brands:  That can bring volume or an established brand to the manufacturer and ‘drive’ them  rather than being a passenger. Brands that know what they want and have some experience of what is practical.

All types of brands can work this way successfully.

3) Working with a formulator.

There are quite a few independent formulators and consulting companies out there and the trick is to get one that you get along with and can do what you want it’s all about personality and experience!  Formulators charges vary but can be anywhere from around $1000 per formulation up to $20,000 for a listed product with full support.  Make sure you talk through the contract before starting work to find out if there are any ongoing royalties, manufacturing tie-in deals or on-going support payments.  Also find out how much testing your formulator does on the product before releasing it for sale – stability testing, efficacy testing (SPF, irritation< PET  etc).  Much of this will depend on the price you pay and what is requested upfront.

The Good:  If you find a formulator that ‘gets’ you and your brand AND can deliver then the sky is the limit. You can end up with some real innovative products and best of all as you are working privately your ideas won’t be shared with other clients giving you the chance to be first to market.  Usually you will learn lots about how the formulation is built, what makes it work and how it is to be manufactured which is an investment in its self.  In addition you can set your budget (within reason) and the formulator can work towards your price-per-kg cost.  Onwards from that your formulations are a valuable asset to your company and build equity for when (if) you wish to sell out and move on.  Owning your formulations and knowing exactly what goes where also empowers you to talk more deeply and openly to clients and stockists about how and why they work and it makes it easier for you to put paperwork together for export purposes.

The Bad:  The expense has to be the number one problem here as it can be a lot to find at the start of a project and even after paying for a formula it doesn’t always work out in terms of market sales, price or performance.  It can also be difficult to work with a formulator if you are new to the industry as the language used may be unfamiliar and challenging for you. Also it is important that you take responsibility for briefing the formulator fully in terms of how much you are likely to manufacture in the early stages to avoid them using ingredients that nobody stocks and that have large order quantities.  A good formulator will consider this but you do need to be engaged in the process.  Along those lines are the manufacturing considerations – your formulator has to understand how the product will scale-up as it is no good having a beautiful sample created in a lab that you can’t get made anywhere – make sure you get a feel for the formulators practical knowledge and experience.

So, creative freedom comes with strings – more involvement for you and more cash outlay!

Good For: Brands that need (or want) to know their science,  are market leaders because they are innovative, have a very specific brand platform and brands that are looking for new ideas outside of their ‘bubble’.

4) Do it yourself. 

Brand owners come from all walks of life, indeed when I think about it I have NEVER worked with a brand owner that has done a chemistry degree and many haven’t come from a skin/ hair care background either so don’t let your lack of qualifications stop you – passion is key to getting you off the mark.

However, passion will only get you so far and after that you will need to learn some basics.  Cosmetic manufacture is like cooking but not the type of cooking that we do at home on a Saturday evening for our families. This is grand scale gourmet cooking in a Michelin stared restaurant!  It needs to be great.

The Good:  If you are up for it making your own formulations can be very rewarding and educating. There is nothing better than knowledge that you have earned yourself by playing in the lab and so I do salute those that do it. However, just as 99% (ish) of chefs won’t make the celebrity chef status neither will all wannabe cosmetic chemists so don’t cry if it doesn’t work out.  Great for your sense of achievement, for building an in-depth knowledge of your product and its manufacture and for understanding how it all works and also heaps of fun. Oh, and it goes without saying that you get to own it at the end, warts and all.

The Bad:  Oh my goodness where to start.  Welcome to my world of pain, a world where you spend hundreds of dollars on ingredients that you then have to throw away – when formula’s go bad!  To hands that crack because you have tried out dozens of shampoos and body wash formulations that week, to endless hours of fiddling when you could have been playing with the kids, jogging or working on your marketing plan and to the pain of waiting for samples that never arrive.  I love this bit in spite of all of that but it can be painful both on your wallet and in terms of time and many customers of mine overlook that as they are not yet paying themselves for their time……. Stability, efficacy, price, efficiency, ingredient philosophy, marketability and time-frame – it’s all down to you.

So, formulating yourself is a great idea if you are up for it but just because you don’t have to pay anyone else don’t go thinking that it’s free.

Well, there are a few options for you to think about. I often tell start-up brands to concentrate on their branding and marketing first (build a platform) before investing in formulations as whatever you may like to think it is the brand that sells FIRST, the formulation just keeps them coming back for as long as the brand holds their attention.  However, engaging in the formulating process is a very valuable thing for any brand to do and I’d encourage you all to give that side a go at least one in your brands life either through a contract manufacturer or an independent formulator.

The world is your oyster (but alas, oysters are expensive 🙂 )

One Comment leave one →
  1. Louise Thompson permalink
    July 11, 2012 2:18 am

    Hi, I am an independent formulator and i think its easier to do yourself if you know how. i found a formulator shop that sells small quanities. i buy most of my preservavtives here

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