Tom Branna, Chief Content Officer04.01.24
Demand for contract manufacturing services remains strong as startups and established players jostle for position in the household and personal products industry. Large or small, they understand that hiring a third-party to handle production is the fastest way to get products to market and without the capital investment.
Going the contract manufacturing route may be a no-brainer, but that doesn’t keep players from scratching their heads on a variety of issues like cosmetic regulations, shipping costs, inflation and bloated supply chains.
“GAR Labs sales were only down 5% for 2023, which I thought was good in light of the industry overall was down as much as 10% due to too much inventory and higher interest rates,” said President Tom Raffy.
Despite the headwinds, several CMs told Happi that 2023 was a good year and 2024 will be even better.
“While 2023 presented its fair share of obstacles for the beauty industry, we experienced a notable demand for contract manufacturing services, specifically within our tech transfer department,” explained April Vignone, president, TrendSetters International, Innovative Product & Package Development Division, Verla International. “While many struggled with supply chain and economic issues, we strategically aligned our offerings to address market concerns and cater to evolving brand needs.”
Meanwhile, Tri-Pac witnessed a 38% growth in revenue compared to 2022 and expects similar growth in 2024, said Director Paras Shah.
“Demand for contract manufacturing seems at an all-time high especially with MoCRA compliance coming in, as customers are prioritizing regulatory compliance and quality and not just price parity,” he explained. “Supply chain issues are manageable and don’t necessarily result in loss of business, but only delay in revenue recognition, but that too is manageable especially with good ordering and management systems and tools. Supply chain will continue to remain volatile into Q3 2024, but we’ve already seen prices stabilize.”
Verla International placed a strong emphasis on value-driven partnerships with clients.
“We listened attentively to their concerns and collaborated closely to tailor our services to their specific requirements,” recalled Vignone. “Our commitment to quality and flexibility allowed us to adapt swiftly to inflationary pressures and supply chain disruptions, ensuring uninterrupted service to our clients. By mitigating these challenges, our customer-centric approach not only supported our clients’ immediate needs, but it also further solidified our position as a dependable partner, driving increased demand for our contract manufacturing services.”
Jeffrey Martin of Federal Package agreed.
“(It) was a good year for Federal Package. We started the year off slowly and we knew we would have some headwinds throughout the year, but we finished the year very strong as the chatter of economic recession trailed off,” recalled Martin, who is director of marketing. “So far, we’ve seen the strong demand that we had at the end of 2023 roll right into our first two months in 2024.”
He admitted that MoCRA and upcoming laws in the personal care space on the use of post-consumer recycled (PCR) plastic content in containers are creating a stir.
“But we’ve seen a lot of interest from growing indie brands looking to take the next step and scale up their products,” he added.
What’s Trending?
Unit sales of traditional household and personal products may have stalled, but that doesn’t mean consumers won’t seek the next big thing. For example, Federal Package reports a significant increase in interest in the antiperspirant/deodorant category.
“The growth of total-body deodorant was a huge driver in 2023,” said Martin. “We’ve also seen significant interest in deodorants in sizes beyond the typical full-size stick. Interest in our 0.35 oz and 0.5 oz sizes really took off last year. We’ve also seen a lot of interest in anti-chafe products in that size as well. It is the perfect size to keep in a gym bag or travel pouch.”
Accupac issued a 2024 trend report earlier this year that outlines five trends that matter most to consumers. They include a shift toward more effective products, a call for conscientious company practices and a focus on prioritizing enjoyment.
“Consumers seek specialized, personalized solutions for individualized results; they’re aiming for a happier, healthier look and feel,” explained Michelle Chavez, VP-innovation, Accupac. “As a partner CDMO, Accupac is focused on taking this consumer trend and applying it not only to the products we make but also to the relationships we build with our customers through customized and personalized customer service models. We are not simply manufacturing products; we are partnering with brands to build and grow together and offer the personalized service they need to innovate new, differentiated products and scale their specific brand.”
While hair care sales remained steady, high-end skin care was a growth engine for GAR Labs. Raffy opined the gains were due to consumers seeking more effective skin care products. To address trends, GAR increased the number of custom formulations.
“So far, customers are loving it,” added Raffy.
According to Martin, there’s been greater demand for UV protection in more products.
“Customers are not only looking to add SPF into traditional creams and lotions but also seeking it in places like lip balms,” he explained.
Federal Package has stock formulas available that meet that demand, as well as the capabilities to produce a product from scratch.
But no matter what the formula, consumers seek simple, effective ingredients, according to Martin.
“Beauty and personal care consumers are very savvy and are becoming much better informed about the products and ingredients they use every day,” he said. “Effective formulations with fewer ingredients and honest, transparent claims are becoming the new norm.”
With a surge in demand for tech transfer services, Verla International’s R&D department remains dedicated to crafting formulations for clean, organic and eco-conscious products. According to Vignone, this includes an emphasis on vibrant colors, captivating fragrances and effective skin care solutions, catering to the increasing need for convenience amid today’s hectic lifestyles.
Tri-Pac’s consumer healthcare business—think cough & cold and antiseptics—is thriving due to their “must-have” status. Similarly, hair maintenance and personal hygiene formulas are performing well.
According Shah, underperforming categories include prestige indie brands, cosmetics for men, and products/brands that are in categories where there is a dominant brand with a reputation for quality and consistency.
“Tri-Pac is investing heavily in AI in human resources and innovation functions,” said Shah. “HR personnel spend around 60% of their time answering questions that will now be answered more timely and more efficiently via AI-powered HR bots.”
Martin predicts artificial intelligence will be huge factor in beauty and personal care in the coming years. He noted AI is already used for virtual product trials at large retailers and skin care regimes tailored specifically for individual users.
“We’ve begun incorporating AI technology in different ways into our production lines with edge-learning technology that helps identify inconsistencies in products. This helps us to make our best even better,” he explained. “We are constantly looking for ways to leverage technology to address realities like overuse injuries, alleviate stress from our workforce and provide the highest quality product possible for our customers.”
Vignone agreed that emerging trends like AI will significantly impact business.
“We are exploring AI-driven solutions to enhance efficiency, optimize production processes and offer predictive analytics to better anticipate market demands,” she told Happi.
At GAR Labs, Raffy said there haven’t been any AI-developed new products.
“But we are open to the idea of having AI think of new ways to look at old products,” he added.
In January, Accupac opened its renovated Cobalt Lab in Lakewood, NJ. Chavez describes it as an innovation hub within the manufacturing facility to foster creativity and transform ideas into reality.
“With a top-talent team of highly-educated formulators, trend experts and product development specialists with over eight decades of experience between them, they can support the customer wherever they are in the product journey, identify industry trends, assess the competitive landscape and bring their product to life,” said Chavez.
The Lakewood R&D team supports brands across skin care, body care, oral care, hair care, fragrance, OTC and medical device categories while further facilitating the seamless integration of product development into the scale up capabilities of Accupac, providing customers a smooth transition from concept to commercialization, according to Chavez.
Accupac also invested in two new manufacturing tanks and two new packaging lines in its manufacturing facilities within the past year, increasing capacity and ensuring capabilities align with growing customer needs. Lastly, Accupac invested in creating new partnerships that support sustainability goals, including memberships across Paradigm for Parity, The United Nations Global Compact and the Roundtable on Sustainable Palm Oil (RSPO) to better serve employees and customers.
Last year, Federal Package significantly increased in-house testing and quality assurance capabilities, in square footage, equipment and personnel. The investment shortens testing times and give customers greater peace of mind, according to Martin. Furthermore, Federal Package built three state-of-the-art labs for microbiology, analytical and R&D formulating. The company also performs fully validated OTC product testing in-house.
“In light of MoCRA legislation, we are also gearing up to test allergens in-house,” explained Martin. “We want to provide our customers with the highest quality products possible, that’s why we gladly welcome legislation like MoCRA and adhere to strict Good Manufacturing Practices (GMP). We want to be a good partner and provide the necessary expertise and resources to help brands navigate market intricacies and trust us with their business.”
Verla International is expanding its capabilities to offer comprehensive end-to-end solutions. It includes investing in state-of-the-art equipment, expanding the portfolio to align with evolving consumer preferences and forging strategic partnerships to foster innovation and growth, explained Vignone.
“Our investment is driven by a commitment to staying at the forefront of industry trends and consistently exceeding customer expectations,” she added.
In 2023, Tri-Pac invested in a dedicated research and innovation center that houses four chemists focused on assisting customers with new formulations, new dispensing solutions and updating older formulations to meet upcoming standards and consumer preferences, explained Shah. Also last year, Tri-Pac upgraded its analytical labs and added an aerosol line. This year, the company is installing a bag-on-valve line, adding suppository manufacturing capabilities and breaking ground on a new facility in South Bend, IN for additional blending and manufacturing space.
“Investment is being driven to match growth and customer demand,” Shah added.
“Consumer trends continue to shape our strategies, with personalization emerging as a key driver of sales,” said Vignone. “We are actively investing in technologies and processes that enable greater customization, allowing us to meet the growing demand for personalized products and experiences.”
Martin said supply chain issues of the covid years has passed. He cited reports that project solid growth in prestige, masstige and even mass beauty during the next few years.
“We hope that momentum will continue. Watching all the early activity from brands in the independent, emerging beauty and personal care space gives us hope that we will see a good year,” he concluded.
While he expects 2024 to be a strong year with strong performance, Shah said companies must focus on building up their supply chains, quality systems, regulatory compliance and, most importantly, human capital.
Thanks to years of good reviews and an upgraded website, GAR Labs is attracting more new customers. As a result, Raffy expects 2024 sales to rise 10-15%.
“I’m keeping my fingers crossed that plays out,” he added.
Going the contract manufacturing route may be a no-brainer, but that doesn’t keep players from scratching their heads on a variety of issues like cosmetic regulations, shipping costs, inflation and bloated supply chains.
“GAR Labs sales were only down 5% for 2023, which I thought was good in light of the industry overall was down as much as 10% due to too much inventory and higher interest rates,” said President Tom Raffy.
Despite the headwinds, several CMs told Happi that 2023 was a good year and 2024 will be even better.
“While 2023 presented its fair share of obstacles for the beauty industry, we experienced a notable demand for contract manufacturing services, specifically within our tech transfer department,” explained April Vignone, president, TrendSetters International, Innovative Product & Package Development Division, Verla International. “While many struggled with supply chain and economic issues, we strategically aligned our offerings to address market concerns and cater to evolving brand needs.”
Meanwhile, Tri-Pac witnessed a 38% growth in revenue compared to 2022 and expects similar growth in 2024, said Director Paras Shah.
“Demand for contract manufacturing seems at an all-time high especially with MoCRA compliance coming in, as customers are prioritizing regulatory compliance and quality and not just price parity,” he explained. “Supply chain issues are manageable and don’t necessarily result in loss of business, but only delay in revenue recognition, but that too is manageable especially with good ordering and management systems and tools. Supply chain will continue to remain volatile into Q3 2024, but we’ve already seen prices stabilize.”
Verla International placed a strong emphasis on value-driven partnerships with clients.
“We listened attentively to their concerns and collaborated closely to tailor our services to their specific requirements,” recalled Vignone. “Our commitment to quality and flexibility allowed us to adapt swiftly to inflationary pressures and supply chain disruptions, ensuring uninterrupted service to our clients. By mitigating these challenges, our customer-centric approach not only supported our clients’ immediate needs, but it also further solidified our position as a dependable partner, driving increased demand for our contract manufacturing services.”
Jeffrey Martin of Federal Package agreed.
“(It) was a good year for Federal Package. We started the year off slowly and we knew we would have some headwinds throughout the year, but we finished the year very strong as the chatter of economic recession trailed off,” recalled Martin, who is director of marketing. “So far, we’ve seen the strong demand that we had at the end of 2023 roll right into our first two months in 2024.”
He admitted that MoCRA and upcoming laws in the personal care space on the use of post-consumer recycled (PCR) plastic content in containers are creating a stir.
“But we’ve seen a lot of interest from growing indie brands looking to take the next step and scale up their products,” he added.
What’s Trending?
Unit sales of traditional household and personal products may have stalled, but that doesn’t mean consumers won’t seek the next big thing. For example, Federal Package reports a significant increase in interest in the antiperspirant/deodorant category.
“The growth of total-body deodorant was a huge driver in 2023,” said Martin. “We’ve also seen significant interest in deodorants in sizes beyond the typical full-size stick. Interest in our 0.35 oz and 0.5 oz sizes really took off last year. We’ve also seen a lot of interest in anti-chafe products in that size as well. It is the perfect size to keep in a gym bag or travel pouch.”
Accupac issued a 2024 trend report earlier this year that outlines five trends that matter most to consumers. They include a shift toward more effective products, a call for conscientious company practices and a focus on prioritizing enjoyment.
“Consumers seek specialized, personalized solutions for individualized results; they’re aiming for a happier, healthier look and feel,” explained Michelle Chavez, VP-innovation, Accupac. “As a partner CDMO, Accupac is focused on taking this consumer trend and applying it not only to the products we make but also to the relationships we build with our customers through customized and personalized customer service models. We are not simply manufacturing products; we are partnering with brands to build and grow together and offer the personalized service they need to innovate new, differentiated products and scale their specific brand.”
While hair care sales remained steady, high-end skin care was a growth engine for GAR Labs. Raffy opined the gains were due to consumers seeking more effective skin care products. To address trends, GAR increased the number of custom formulations.
“So far, customers are loving it,” added Raffy.
According to Martin, there’s been greater demand for UV protection in more products.
“Customers are not only looking to add SPF into traditional creams and lotions but also seeking it in places like lip balms,” he explained.
Federal Package has stock formulas available that meet that demand, as well as the capabilities to produce a product from scratch.
But no matter what the formula, consumers seek simple, effective ingredients, according to Martin.
“Beauty and personal care consumers are very savvy and are becoming much better informed about the products and ingredients they use every day,” he said. “Effective formulations with fewer ingredients and honest, transparent claims are becoming the new norm.”
With a surge in demand for tech transfer services, Verla International’s R&D department remains dedicated to crafting formulations for clean, organic and eco-conscious products. According to Vignone, this includes an emphasis on vibrant colors, captivating fragrances and effective skin care solutions, catering to the increasing need for convenience amid today’s hectic lifestyles.
Tri-Pac’s consumer healthcare business—think cough & cold and antiseptics—is thriving due to their “must-have” status. Similarly, hair maintenance and personal hygiene formulas are performing well.
According Shah, underperforming categories include prestige indie brands, cosmetics for men, and products/brands that are in categories where there is a dominant brand with a reputation for quality and consistency.
AI Is A-Okay!
Artificial intelligence (AI) is more than a buzzword; it’s a buzzsaw that upsets every business and product category. Contract manufacturing is no exception, according to the executives who spoke with Happi.“Tri-Pac is investing heavily in AI in human resources and innovation functions,” said Shah. “HR personnel spend around 60% of their time answering questions that will now be answered more timely and more efficiently via AI-powered HR bots.”
Martin predicts artificial intelligence will be huge factor in beauty and personal care in the coming years. He noted AI is already used for virtual product trials at large retailers and skin care regimes tailored specifically for individual users.
“We’ve begun incorporating AI technology in different ways into our production lines with edge-learning technology that helps identify inconsistencies in products. This helps us to make our best even better,” he explained. “We are constantly looking for ways to leverage technology to address realities like overuse injuries, alleviate stress from our workforce and provide the highest quality product possible for our customers.”
Vignone agreed that emerging trends like AI will significantly impact business.
“We are exploring AI-driven solutions to enhance efficiency, optimize production processes and offer predictive analytics to better anticipate market demands,” she told Happi.
At GAR Labs, Raffy said there haven’t been any AI-developed new products.
“But we are open to the idea of having AI think of new ways to look at old products,” he added.
New Capabilities
Meanwhile, Raffy is expanding to keep up with demand. GAR Labs added metal tube filling along with pouch filling to its range of services. In a move to accommodate large seasonal orders, GAR has a 200,000 square feet footprint, featuring three warehouses.In January, Accupac opened its renovated Cobalt Lab in Lakewood, NJ. Chavez describes it as an innovation hub within the manufacturing facility to foster creativity and transform ideas into reality.
“With a top-talent team of highly-educated formulators, trend experts and product development specialists with over eight decades of experience between them, they can support the customer wherever they are in the product journey, identify industry trends, assess the competitive landscape and bring their product to life,” said Chavez.
The Lakewood R&D team supports brands across skin care, body care, oral care, hair care, fragrance, OTC and medical device categories while further facilitating the seamless integration of product development into the scale up capabilities of Accupac, providing customers a smooth transition from concept to commercialization, according to Chavez.
Accupac also invested in two new manufacturing tanks and two new packaging lines in its manufacturing facilities within the past year, increasing capacity and ensuring capabilities align with growing customer needs. Lastly, Accupac invested in creating new partnerships that support sustainability goals, including memberships across Paradigm for Parity, The United Nations Global Compact and the Roundtable on Sustainable Palm Oil (RSPO) to better serve employees and customers.
Last year, Federal Package significantly increased in-house testing and quality assurance capabilities, in square footage, equipment and personnel. The investment shortens testing times and give customers greater peace of mind, according to Martin. Furthermore, Federal Package built three state-of-the-art labs for microbiology, analytical and R&D formulating. The company also performs fully validated OTC product testing in-house.
“In light of MoCRA legislation, we are also gearing up to test allergens in-house,” explained Martin. “We want to provide our customers with the highest quality products possible, that’s why we gladly welcome legislation like MoCRA and adhere to strict Good Manufacturing Practices (GMP). We want to be a good partner and provide the necessary expertise and resources to help brands navigate market intricacies and trust us with their business.”
Verla International is expanding its capabilities to offer comprehensive end-to-end solutions. It includes investing in state-of-the-art equipment, expanding the portfolio to align with evolving consumer preferences and forging strategic partnerships to foster innovation and growth, explained Vignone.
“Our investment is driven by a commitment to staying at the forefront of industry trends and consistently exceeding customer expectations,” she added.
In 2023, Tri-Pac invested in a dedicated research and innovation center that houses four chemists focused on assisting customers with new formulations, new dispensing solutions and updating older formulations to meet upcoming standards and consumer preferences, explained Shah. Also last year, Tri-Pac upgraded its analytical labs and added an aerosol line. This year, the company is installing a bag-on-valve line, adding suppository manufacturing capabilities and breaking ground on a new facility in South Bend, IN for additional blending and manufacturing space.
“Investment is being driven to match growth and customer demand,” Shah added.
The Outlook
Most contract manufacturers are optimistic about 2024. According to Vignone, Verla International anticipates continued demand for contract manufacturing services, driven by its ability to offer cost-effective solutions and its agility in responding to market dynamics.“Consumer trends continue to shape our strategies, with personalization emerging as a key driver of sales,” said Vignone. “We are actively investing in technologies and processes that enable greater customization, allowing us to meet the growing demand for personalized products and experiences.”
Martin said supply chain issues of the covid years has passed. He cited reports that project solid growth in prestige, masstige and even mass beauty during the next few years.
“We hope that momentum will continue. Watching all the early activity from brands in the independent, emerging beauty and personal care space gives us hope that we will see a good year,” he concluded.
While he expects 2024 to be a strong year with strong performance, Shah said companies must focus on building up their supply chains, quality systems, regulatory compliance and, most importantly, human capital.
Thanks to years of good reviews and an upgraded website, GAR Labs is attracting more new customers. As a result, Raffy expects 2024 sales to rise 10-15%.
“I’m keeping my fingers crossed that plays out,” he added.