The Cost Of Creating A Beauty Product
There are dozens of factors that go into the cost of producing beauty, personal care, or cosmetic products that most people aren’t aware of. Here’s the inside scoop on beauty product development on what really goes into the price.
Marketing
First and foremost, the brand position and target market are the number one influence of price. It is not solely based on the cost of ingredients and packaging, as one might assume; it is also where they would like to be sold and the image they would like to portray. This is called branding and marketing. Does a brand want its perception to be affordable, luxury, or clinical? Will they be sold at a drugstore, big-box store, Sephora, Ulta, a physician’s office, or spa? All of this reflects the price!
Another piece of marketing is how much it cost to market the product. There is an endless number of tactics from magazines, influencer partnerships, social media ads to paying a spokesperson, commercials for TV/podcasts, etc.
Ingredients
Plant-based ingredients cost more than synthetic ingredients, and synthetic ingredients can be produced at mass for a less expensive cost. Plant ingredients often require more labor and processing to extract, harvest, or be rare, so the price is higher for the raw ingredient. Keep in mind; one is not better than the other; they are just different.
The percentage of the ingredients in the formula depends as well. An example of this would be a brand using a “marketing level,” which is an incredibly low percentage (under .5%), so it can be claimed in the marketing campaign. It’s quite different than a brand that uses a higher percentage of active ingredients.
Here’s an example, say there a brand creates a “Green Tea Moisturizer,” and on the ingredient list it says Camellia Sinensis Leaf Extract (Green Tea Leaf Extract), so it appears that it contains green tea. However, a brand very well could develop this product with a marketing level versus an efficacious level to save money but still market it.
Research & Development
If a brand has propriety technology or patent, all of that costs a significant amount of money to develop and test, usually over a number of years.
Scale Of Production
The more products you order at a time to be manufactured, the less expensive your product will be. A small-batch brand ordering 500 units will cost significantly more than a brand ordering 5,000 or 10,000 units at a time. Why? The use of the manufacturer’s labor and machinery still cost the same whether you are running 500 or 50,000, but that company will be making more money from producing 50,000, so the brand receives a discount.
Packaging
Glass costs more than plastic. Custom molded packaging cost more than stock packaging. Surprisingly, post-consumer recycled tubes cost more than new plastic. Those gorgeous black Miron glass bottles cost an arm and leg! Airless pumps are typically stock bottles but cost a lot due to the internal mechanisms.
Did your jar product come with a mini spatula, a disc liner, or a seal? What about those tiny stickers to keep your box shut or shrink-wrap? They are often on the top and bottom, which means two are used. All of those are additional costs!
Here’s something you may not have thought of. Packaging often is produced overseas, and that means freight costs to get to the filling manufacturer. Shipping on a boat costs less than shipping on a plane!
Box
Sometimes, no box is used at all to save on cost.
There are many different qualities of paper used in boxes and vary in price.
One or two colors printed on a box cost less than a box that has multiple colors.
Boxes with metallic foil cost a lot more as well (and are not recyclable, by the way, since it’s a mixed material of metal and paper!)
If the product has a little information booklet insert, it has to be designed, printed, and inserted in the box, which comes with a cost.
In addition to the box and packaging your product comes in, when it’s shipped, it’s placed in a larger shipping box that often will have separators to keep the products from becoming damaged in transit. Those boxes and dividers cost money too! Then not to forget the actual shipping to the warehouse fulfillment center or retail stores.
Testing:
Safety Testing: This includes stability and preservative testings to ensure the product is safe, won’t grow mold, degrade, or separate.
Claims Testing: This type of testing is optional for the brand if they want to make claims like non-comedogenic, hypoallergenic, ophthalmologist tested, etc.
Clinical Testing: This type of testing is usually a third party that conducts the test with a group of people that use the products for a certain amount of time and document their results with surveys, before and after photos.
Sunscreen Testing: In addition to the above tests, if a brand is producing sunscreen, it must pass sunscreen safety testing to ensure the product is safe and efficacious.
Salaries
Another thing to remember is it takes a village to get a product to market, from product developers, packaging engineers, cosmetic chemists to marketers, retail salespeople, packaging graphic designers, etc.
Keep in mind it’s typically 12-24 months to develop a product from start to finish, so that means all these salaries are paid for that entire timeframe.
Taxes, Fees & Licensing
Profit taxes
Business license
Sellers permit
Registering a trademark for the name of the product
Import/Export tax
There are a variety of seals a brand may want to be a part of. For example, if a brand wants to apply for the Leaping Bunny Progam (a cruelty-free organization), they apply for free, but if the brand wants to license the seal for use on their packaging, there is a fee involved.
International Sales
Each country has its own set of rules and regulations regarding beauty/cosmetic products being sold in their country. Other countries require multiple languages on the packaging. For example, if you have an American brand and it only has English on its packaging and then wants to be sold in Canada, putting French on the packaging is required. That is pretty much an ENTIRE redesign of the packaging as well as producing it.
Some ingredients are banned altogether, and some at specific percentages. (For example, The Ordinary AHA 30% + BHA 2% Peeling Solution is not available in Canada because of the percentages of acids.) EACH ingredient must be evaluated by a regulatory agent in that country (it’s also a cost to hire an agency.) Sunscreen is a whole other situation since it is considered a drug ingredient; it’s an entirely another set of rules and regulations. So, if you have ever wondered why a brand isn’t available in other countries, this is why. It’s not a simple as shipping it and selling it. It’s an extremely costly and lengthy process to do so.
