How much does it cost to launch a product? from formulation to packaging, marketing?

RahmaRahma Member
edited February 2014 in Formulating
Hi, 

Just curious to know how much different people think it costs to launch a product, this is if you are a someone wanting to launch a product and assign all the work from formulation and eventually selling the product.


Comments

  • PerryPerry Administrator, Professional Chemist
    I figure it would cost between $10,000 and $15,000 US.  This depends on what type of product you are launching and the type of package you want.  Probably the least amount would be $7000 (unless you have some sort of "free" resources)
  • mikebavingtonmikebavington Member
    edited February 2014
    Well, I spent $4000 over the course of 4 years to test and develop a near-complete formula. I then contacted a manufacturer and was told the minimum fill amount was 400 kg of product. I havent received the quote back from them, but I suspect my per unit cost will be between $0.80 - $1.20 for around 10,000 units. So, add another $8,000 - $12,000 for inventory to sell.

    But, I still have to get the manufacturer to compose a few samples and send them out for stability and microbial testing, which will cost around $1100. If you want to do patch testing, that would be a larger expense to add on.

    I also have to either set up an ecommerce site and contract fulfillment services to send out my orders. It will cost around $2.40 per order fulfillment, not including shipping costs. I dont count the fulfillment costs until I sell my product though.

    And then you have to include registering your brand and trademark - $1500; setting up a corporation or LLC etc.

    Dont forget advertising or sales costs, regulatory costs, lawyers etc.

    I put the total cost at about $25,000 for your first product launch, if you want to be thorough about it.
  • BobzchemistBobzchemist Member, PCF student
    Going the private label route can be significantly cheaper, depending on the volume. It all depends on what you're trying to sell and why.
    Robert Zonis, Sr. Formulation Chemist, Beaumont Products "All opinions and comments expressed are my own, have no relation to Beaumont Products, are fully copyrighted, and may not be used without written permission."
  • I am based in the UK, I have been asking around and prices vary significantly! one company has quoted £1400 for formulation and including 
    • Development fee
    • Stability testing
    • Micro Challenge testing
    • Product information packageS
    • Safety assessment / INCI
  • However, the catch is, wait for it...the own the formulation unless they manufacture the product and if I want another company to do it, I have to pay £ 2,500 for owning the formulation. MOG is 10,000

    Another company has quoted £1,800 and I won the formulas outright. I am looking to develop products for the ethnic hair care market anyone with better ideas please get in touch! 
  • BobzchemistBobzchemist Member, PCF student
    In the UK,I'm pretty sure the EU regulations have effectively made it unlikely to be able to make and sell small quantities at a profit. £1,800 sounds like a good deal.
    Robert Zonis, Sr. Formulation Chemist, Beaumont Products "All opinions and comments expressed are my own, have no relation to Beaumont Products, are fully copyrighted, and may not be used without written permission."
  • Thank you guys for your thoughts,

    Yes, Bob I agree, I would rather work with an independent consultant to formulate the products and then get them made by big manufacturers. Anyone interested!

    I am looking for someone with experience in this market, to be fair there is not my R&D in the Ethnic hair care market in the UK
  • mikebavingtonmikebavington Member
    edited February 2014
    1400 pounds to compose the formula and do all the testing is VERY GOOD. 2500 pounds to buy the formula is also extremly reasonable, considering  you would be paying so little for compostion and testing in the beginning.  As long as the manufacturer signs a non-compete clause and keeps the formula for your orders only, I would be happy with such an arrangement, at least in the beginning of your business venture.. 

    The MOQ of 10,000 units is standard because when they order tubes/packaging for you, their order requirement is usually 10,000 packaging units.

    The other company that quoted you for 1800 pounds - with you owning the formula outright - is making  you a fantastic offer. I think you are getting good offers from these manufacturers.

    If you can live with packaging that is more generic and already used for multiple products in the marketplace, you can have the MOQ dropped to 5,000 or below by some manufacturers. If they order common packaging in volume, they will have some extra packaging units in stock and you can negotiate on the MOQ as a result.

    Remember though, it is not the ingredient cost or packaging cost that mostly determines the per unit manufacturing cost you will pay. It is the facilities, equipment, labour and profit costs that you have to cover when considering price quotes from manufacturers. The ingredient costs in any particular product are negligible. For my formula, I suspect the manufacturer can obtain the ingredients I need for less than 10 cents per unit. I will end up paying between $0.80 - $1.20 because of all the other costs I mentioned above.
  • Mike,
    Yes the offers are great, the formulation and testing costs are really low however, it is the manufacturing costs that eye watering! 

    Anyways, I will keep you posted with what happens.
  • BTW, one of the companies is estimating £20-30,000 costs for one product from beginning to end, this excludes the marketing and branding of course. That's why I am rather perplexed as to why the initial costs for formulation and testing are so low only to increase significantly.
  • My costs will total $25,000, but I include marketing and legal, incorporation fees etc. And my estimate is in Canadian dollars, not pounds. So, I think that final quote of 20k - 30k pounds is too high.

    Remember though, one important skill that all business people need to rely on is negotiation. You have to try and get something for less. Usually, someone will quote you 10% - 20% higher than they are willing to accept.
     
    When somenoe says 20k - 30k as a range, that is a sign to you that there is plenty of room to negotiate on price. The fact that they cant even tell you within 10k (on a total price that wont
    surpass 30k) indicates tremendous margin inclusion on their part and tremendous room for negotiaton.

    I know they will mention that the ingredient variables will cause the fluctuation in the quote, but as I said, the difference in cost of using 1 or 2 expensive ingredients within a formula versus using 100% run-of-the-mill, inexpensive ingredients is negligible when you are approaching 10,000 units. And considering most formulas are north of 70% water, the volume of actual ingredients used is relatively small.

    I come from a discount store background where I ran a dollar store for 5 years, so I learned to negotiate everything. I once had a sales woman approach me and told me she wanted to get rid of her chocolate bars before she returned to Hungary. She offered them to me for $0.50 cent per unit, 2000 units in total, 100 grams of chocolate per unit. I offered her $0.15 cents per unit and we eventually agreed on $0.25.  I am detailing this incident to show you that most people will come down in price from their inital quote. Everybody negotiates and you should too, or you will end up paying too much.
  • Mike thank you for the advice, I am in the early stages and will let you know how it goes...I think it would be easier to find someone flexible with the MOQ.
  • BobzchemistBobzchemist Member, PCF student
    You need to talk to @Duncan. Are you on LinkedIn?
    Robert Zonis, Sr. Formulation Chemist, Beaumont Products "All opinions and comments expressed are my own, have no relation to Beaumont Products, are fully copyrighted, and may not be used without written permission."
  • DavidWDavidW Member, PCF student
    Wow, I don't charge nearly enough I guess.  @mikebavington If you need help in manufacturing/bottling get in touch with me.  4 years and $25,000 ??  We should have met 3 3/4 years ago and your product would have been on the shelf 4 months later.
  • Ok. I will be in touch with you shortly.
  • Well I am happy something might come out of this question! Mike and David, hope you get to work with each other and wish you guys all the best...
  • I can weigh in on micro costs:

    Part of development of any formulation is ensuring microbiological stability.  That is done with preservative challenge tests like USP <51>, CTFA M-3, etc.  Each of those costs around $400-$750 depending on the lab you use.  If you use traditional preservatives at manufacturer-recommended concentrations I estimate a 90% chance you'll pass the test on the first attempt.  If you use a more trendy preservative package (natural, etc) then it will probably take a couple or a few rounds of testing (with minor reformulations in between) to get it to pass.

    Once you're manufacturing, you'll want to do micro on each batch to the tune of about $50 a batch.


    For testing help visit us at Cosmetic Test Labs
  • BobzchemistBobzchemist Member, PCF student
    I think it would be useful to go over the options for making/selling cosmetics to consumers.

    Listed from least amount of effort to most:

    1) Buying generic products wholesale and selling them retail.
    2) Buying a private label product and putting your name on it
    3) Having a contract manufacturer make a stock/library product and fill it into a stock container
    4) Having a contract manufacturer make a custom product and fill it into a stock container
    5) Having a contract manufacturer make a custom product and fill it into a custom container
    6) Doing some or all of it (R&D, testing, manufacturing, filling, packaging) yourself

    Have I missed anything?
    Robert Zonis, Sr. Formulation Chemist, Beaumont Products "All opinions and comments expressed are my own, have no relation to Beaumont Products, are fully copyrighted, and may not be used without written permission."
  • PerryPerry Administrator, Professional Chemist
    7.  Hiring a cosmetic chemist consultant to create the formula.  Have someone else produce it.

  • Perry I like that idea! 
  • RahmaRahma Member
    edited February 2014
    Bob, 

    I think for me the whole point is to come up with something better than what is already available hence the need to develop/formulate new improved product. Apparently in the UK according to Mintel, Afro-Caribbean women spend 6 times on hair products than their counterpart and yet ethnic hair care products account for a average of only 1.7% of launches between 2007-2012. Innovation is lacking I think...
  • Unknown Member, PCF student

    Hi Everyone,

    Just came across this blog entry. Very good to give the reality of starting a cosmetic brand,
    My company is a packaging manufacturer and distributor. We produce stock shaped bottles for the cosmetic and beverage industries. If you are every looking for a good company to work with on your next project, please contact us. We have low minimum orders and focus in environmentally friendly plastics.
    Our website is www.triviumindustries.com and can be reached at sales@triviumindustries.com
    Thank you

    -David

  • LisetLiset Member
    edited November 2014
    Hi Rahma,

    If you are still looking for a chemist consultant for developing formulation for the hair care, please contact me.

    I started my own cosmetic brand Havana Curls and I am offering also consultant services

    www.drluderitz.com

    Thank you
  • LisetLiset Member
    edited November 2014
    Hi Rahma,

    If you are still looking for a chemist consultant for developing formulation for the hair care, please contact me. I started my own cosmetic brand Havana Curls and I also offering consultant services

    www.drluderitz.com

    Thank you
  • MarkBroussardMarkBroussard Member, Professional Chemist
    Rahma:

    (1)  Are you a chemist?
    (2)  Do you have any experience in product development and/or manufacturing of hair care products?

    If not, hire a chemist to help you develop your formula and as pointed out, stick to traditional preservation systems, packaging, etc.  If you look around, you can find some small manufacturers who will make initial runs of as low as 200 units to give you some stock to approach retailers. The per unit cost will be high, but you won't be sitting on 10,000 units of product that you don't have any customers for.  You can then transition to larger scale contract manufacturers as your market requirements dictate. 

    Or, do you plan on retailing yourself through the Internet and/or approaching salons that cater to clients that fit your target market profile?

    The approach you take all depends on your business/marketing model and whether or not you have a technical background.
    Chemist/Microbiologist formulating in the Organic & Naturals & Clean Beauty arena under ECOCert/Natural Products Assn/Whole Foods/National Organic Program/Clean At Sephora/Credo Clean guidelines focused skincare & haircare products. 

    See website for details www.desertinbloomcosmeticslab.com
  • BelassiBelassi Member, PCF student
    For me, the cost is not a lot. I am constantly exploring the market and experimenting with new products, so for me, formulation is not a "cost" as such, in terms of time.
    Let's take an example. I want to develop a new shampoo. First I identify the target market and I examine the market survey figures to determine the $$ size of the market and % of total shampoo market.
    Having identified the properties I want to put into the new shampoo, I design a preliminary formula, experiment with it for a while and then make a couple of Kg and test it on the product testers. So far my costs are < $50.
    Once I identify and refine the LOI and procedure, I'll make a batch of say 5Kg, get 100 labels professionally printed, and test it on the Sunday market stall to see what public reaction is like. So, products can be developed and market-tested at quite low cost.
    Cosmetic Brand Creation. Concept to name to IMPI search to logo and brand registration. In-house graphic design inc. Pantone specs. Cosmetic label and box design & graphics.
  • Hey people!

    I posted this ages ago! Since then, I have found a company based in the UK, thanks to this forum!
  • Thank you so much for this thread! We are doing formulation work as a not-for-profit and I always have some clients that haggle over $1200 production of formulas and prototypes to which they have full ownership! Nice to have this perspective.
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