Article by: Perry Romanowski

This question was raised on the cosmetic science forum and I thought it was so good that it warranted a full treatment here on the blog. Many of our followers here on Chemists Corner are people who are interested in creating formulas and possibly producing their own line of products. Almost every good cosmetic chemist that I’ve known has said they wanted to start their own line.

But should they?

Reality of the Cosmetic Industry

Before answering this question, it is important to face facts about the cosmetics and personal care industry. Big companies have significant advantages over small and start-up companies.

More money

Big companies have more money than small ones. They can outspend you in every way from R&D to performance testing to safety testing to advertising and marketing. They can use the money to get their products in stores and get price breaks on packaging and raw materials. More money naturally leads to other advantages.

Less expensive products

Big companies can make less expensive products. Even if a small company copies the formula exactly from a big company they will not be able to produce the product as inexpensively as a big company. In fact, the product costs to a small company will be 2 or 3 times higher than a big company. This means that big companies can charge less for products that perform every bit as well as the ones you can create.

More scientists

The additional money available to big companies means they can hire more cosmetic chemists and create better formulas. A small cosmetic company just can not create a formula that will be as optimized and tested for superior performance.

More advertising

More money also means more advertising. Big cosmetic companies will buy TV commercials, magazine ads, and radio spots. They will host events for bloggers & beauty editors and they will have an advertising agency working to promote their brand. A small cosmetic company will not be able to outspend the big guys in advertising.

More distribution

Finally, the additional money and size of a big cosmetic company means that they will be able to get their products on more store shelves and in more locations than a small company. There is just no competition when it comes to mass market and drug stores.

Are big cosmetic companies unbeatable?

With all of these advantages, you might start get the feeling that Big cosmetic companies are unbeatable. You might also think that starting your own cosmetic line is a waste of time.

Well, that isn’t necessarily true. Think of companies like Burts Bees and Aveda who started small and built huge brands. It can happen because small companies have a few notable advantages over big companies.

Small markets

An advantage small companies have is that big companies want to make big money. If a brand is not going to sell at least $100 million with the potential to reach $1 billion, the big cosmetic company won’t even investigate the idea. When I was working in corporate America we discontinued many products that were bringing in over $2 million a year in sales because it just wasn’t enough money. While $2 million in sales is nothing to a big company, to a small company that is huge! Small companies can dominate small markets because big companies aren’t competing. And if you are a small company you can make a great living in a small market.

Niche markets

One problem with big cosmetic companies is that they try to make products which will appeal to as many people as possible. This means that they are going to ignore niche consumers who have needs that are different from most everyone else. Just as a small company can dominate a small market, a small company can dominate a small consumer niche.

Experimental products

Big companies need successful products. They need to justify to their management why they are launching a specific sku and also need to show data supporting the launch. This means that the products they launch are going to be very similiar to other successful products in the past. This is why there has been only incremental change in the cosmetic industry in the last 20 or 30 years. New, innovative products are risky and most of them fail. Big companies don’t like to fail so they try not to.

Small cosmetic companies are in a better position to try new innovations and off-the-wall products. Products like dry shampoos and no foaming shampoos would not be launched by big companies but small companies can do it. This is a big advantage.

Faster development

It takes a big cosmetic company at least a year and a half to develop an idea into a product and get it on the store shelf. Small companies can do this much more quickly. If they have a good idea, they can have a completed product available for sale in 6 months or less. A big cosmetic company can’t.

Online distribution

Right now the Internet has created an even playing field for small companies to compete with big companies. Big companies are good at traditional distribution but they are not good at online sales. A small company can compete and even beat the big guys on things like Search Engine Optimization, Social Networking, and online distribution. Big companies can not afford to put too many resources towards this area of distribution because they have to maintain their presence in big box stores and drugstores. This area is wide open for small cosmetic companies.

Should you start your own cosmetic line?

Ultimately the answer to this question is a personal one and there is no guarantee of success if you do start a cosmetic company. It’s likely that you won’t develop the next Burts Bees or Aveda. However, it is not difficult nor excessively expensive to create your own line of products. It’s also not hard to make products that perform every bit as well as the ones created by the big guys. And it’s not hard to build your brand to a point where it makes enough money for you to pay all your bills and make a decent income.

So, if you have an idea for a cosmetic brand don’t let the fact that the big cosmetic companies have significant advantages over you. Learn what’s involved in launching a product, decide if you have the energy & passion, then go ahead and try.

You just might be successful.

33 comments

  1. jaz

    Hi! I also wanted to know where I could found d chemists to build my cosmetics brand? Someone to help formulate my makeup specifically foundation. I just need to know where I could find someone. Or is there a better and more cost efficient way to create the makeup I want?

  2. Reshana

    Hello Perry,

    I am currently in the market for a cosmetic chemist. Do you have any idea where I can find someone who can do R&D and help me improve mt formula?

    Reshana.

    1. Perry Romanowski

      What kind of formulas are you looking to make?

  3. MK

    Hi, Perry:

    Thank you for such a great article!!! I have a question thats not being answered in this article. What if Im not starting a line from scratch, but taking an existing line and represent them in the US? Will this appeal to any big cosmetic company if I want to build and sell it one day? or this will be a deal breaker?

    I meant we are doing everything from changing the package, to build an US website, to market it and distribute it all on our own, literally put all our eggs in one basket and doing everything like we were creating our own line except the manufacturer owns the brand, and we are the official US sole distributor. Because this brand has already been selling oversea, thats why there’s an advantage than starting completely on our own.

    Right now, I can’t help but wonder what can happens in 5-7 years from now? What can be some good exist strategies that you recommend? Ive seen companies in the similar situation like ours actually sell the distribution back to the manufacturer, but my manufacturer doesn’t seem to be interested, at least thats what it seems now because they do not speak English and don’t understand the US market at all.

    Please let em know your thoughts…Id greatly appreciated.

    1. Perry Romanowski

      Hello MK – I think if you build up a small, international brand to a significant level in the US you could interest a big US cosmetic company. But the reality is that you’ll need to be a $100 million a year brand before a big guy would even consider you. You may get interest from smaller companies if you can grow it to $10 million but less than that, you’re exit strategy would be to sell the business to someone who wants to get into the cosmetic industry.

      1. Katherine Monsalve

        Hi! I’m in the process of launching my own cosmetic line, and I need as much feed back as possible. Also, I’m seeking a chemist do you know anybody? I want my products to be as natural as possible.

        Thank you.

        Katherine Monsalve

  4. Pingback:The Truth About The Business of Beauty | Realize Beauty

  5. YveCar Momperousse

    This article is very helpful and so true. When one looks at the number of brands that cater to the curly girl, natural girl and African American women, there is no doubt smaller brands can leverage their competitive advantage.

    Check out http://www.kreyolessence.com for our innovative product, Haitian Black Castor Oil and other exotic products from Haiti.

  6. Ayman mostafa

    my dream is making the biggest cosmetics company in Egypt although ihave very small company now,but i try to make unique product &i hope to help me to make this dream.big thanks for Perry, Duncan.

    .

    1. JP

      Hi! Ayman. How are you? I am a Toronto, Canada based biochemist with a OEM cosmetics manufacturer. I can provide you with a line of cosmetics products to start off at smaller investments. Please! Feel free to contact me for further inquires.

      Best,
      JP

      1. Anjum Anwar

        Please shoot me an email. I want to start a cosmetic company and want more information about your product.

          1. Katherine monslave

            Hi! I’m seeking a great chemist .. Any ideas, for my cosmetic line..

            Thank you

        1. Angel

          Hi Anjum, i am a seller of cosmetic products here in the Philippines, we are engaged in line of professional cosmetic products that are manufactured from Taiwan which is proven to be effective and could start off with a smaller investment. Please feel free to hear from you soon.

  7. Kevin

    The most valuable things in my life are the things that I happen to stumble upon. This site is one of those things that I believe will make a difference for me. Thank you

  8. kenny

    I gain from the article but i wish to let you know that there is no business in this world who will not start small no matter the buoyancy resource the owner might have, what i considered important most is the knowledge. I start a small cosmetics company some years ago and the starting was too poor but now we have not made large but people are really comfortable with our product.
    What i think matters most is the love for it.

  9. NNe

    hi, how do u know and find companies that can do the actual manufacturing process. Thanks

    1. Perry

      Do a search on this website for “Buyers Guide”. This will list companies that can do manufacturing.

  10. Maria

    Hi Perry,
    Now that I have some products that I made from my kitchen, will it be illegal to give it to friends and families for their personal use? I’ll put a label but the company name will be fictitious since I’m not registered as a company yet. I just want to see how people react to my products before I do all the legal requirements.
    Thanks for your time and comment.

    1. Perry

      As long as you are not selling them and they aren’t going to sue you, it should be alright for a test.

  11. Tara

    @Eliza: that “commercial” was the best, lol!

    1. Cynthia

      Are you still interested in making your own skin care products? if so, contact me.

  12. Duncan

    Yes, the big boys can outspend on marketing and placement, but thats about the limit of their advantage. Size doesn’t mean reactive, so whilst they are thinking about stuff, a good skilled small company can run rings round them making their mark
    Make something unique, that garners a loyal following, and even if it goes global, the giants of the cosmetics industry will still be doing focus groups and trying to understand what they’re seeing 2-3 years down the line.
    As for size vs costs. Well you think smart. If you can become the go-to place for new technology, you’ll be getting good rates for reasonable volume as the supplier will be selling their new product and making some money, whilst the “World Leaders” are still considering their options.

    1. Eliza

      Duncan, you’re giving me an idea 😉
      Thank you so much for the inspiration!

  13. Dandollars2

    Hi Eliza.
    Am Daniel, Ur fellow chemist 4rm Nigeria. Plz I would like to establish a close relationship wit U. We might gain 4rm each other in 1 way or the oder. Write to my E-mail ( stanly2e@yahoo.com ) so dat I can get Urs. I wil be waitin 4 Ur reply.
    Bye. . .

    1. Eliza

      You can contact me through the forum (private message) 🙂

  14. Eliza

    You are indeed awesome, Perry, thank you for making my humble question into a whole article! It is sooooo relevant for me (cosmetic chemist working hard to release my own line of cosmetics) and at (hard) times I feel discouraged or frustrated by the (im)possibilities.

    But it’s articles like these that kick me in the butt 😉 to just go out there and follow my dream 🙂 I might just make it!

    (and when I do I won’t forget you and this wonderful place!)

  15. Dandollars2

    The story of my dream company cannot be complete without U perry. U are my hero. May God bless U.
    Thanks 4 all Ur free Knowledge.
    I appreciate.

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