Private Label, Please

Avaya Personal Care brand of spa quality lotions and salon quality shampoos and conditioners, from Cosmetics & Cleaners International, provides added value.

Private label products offer economic advantages to both end-users and brands.

Twenty-six percent of women don’t know if the cosmetics on their vanity are private label or not, according to a consumer survey performed by market-research agency Mintel Group.

This will likely come as no surprise to those in the cosmetics industry. The term is used liberally to describe everything from outsourced custom contract manufacturing services and formulations to products purchased as-is and shared by a number of clients. Within the industry, private label can mean several different things and each company works according to different definitions.

According to Frank Penna, executive vice president of San-Mar Laboratories: “There is a difference between contract packaging and private label manufacturing.” He explains, “In contract packaging, traditionally the client provides all the information, including the formula, packaging and pack out requirements and then looks to bid that out against a number of contract manufacturers. Private label, on the other hand, is a more strategic relationship where the manufacturer can provide intellectual property, formula development, quality and regulatory guidance, with the purpose of having a strategic advantage in the marketplace with claim support and clinical proof. In this model, packaging can be supplied either by the client or by the manufacturer in a turnkey model.”

Penna says, “Presently, there is a trend toward outsourcing.Large companies have realized the economic benefits in outsourcing with fixed costs and clean balance sheets.”

Amy Skellet, sales and marketing coordinator, Kolmar Labs Group, says Kolmar’s specialty is providing custom formulations for mass and prestige brands—mostly color cosmetics, especially for lip and eye.

Cosmetics & Cleaners International offers what it terms a “customizable service” in the private label industry, offering turnkey options as well as contract packaging. The company is “capable of doing as much or as little as the customer demands,” says Harry Boutros, Jr., president.

Private label companies also sell completed products ready for branding. “Private label companies manufacture products that are then sold to other companies and used under their brand. Anyone who wants to start their own business can be a purchaser of private label. This includes make-up artists, spas, doctors, salons and internet marketers, in addition to retail outlets,” says Allan Burd, president, Lady Burd Cosmetics.

Lady Burd Cosmetics offers an entire line of products ranging from skin care to color cosmetics, a library of formulations and color, and the capability to create custom formulations. In addition, the company launches and offers four new products a year to stay ahead in a fashion-forward industry.

The idea of turnkey product is important to many private label suppliers. Cosmetic Solutions focuses on being a one-stop shop from concept to creation, explains Warren Becker, chief marketing and technology officer. “As both a private label and contract manufacturer, we offer a wide range of services. Traditionally, with private label we are a turnkey supplier and handle, in most cases, every aspect involved with delivering a shelf-ready product,” Becker adds.

Services differ between private label companies, dependent upon the needs of their customers. CoValence, for example, focuses its energies on product development, providing services such as formulation creation, regulatory help and white papers outlining how to sell products. Melinda Wochner, COO and VP of marketing, defines the term private label as referring to “a product that has the efficacy of a custom-developed formula that is shared amongst national and international brands.”

She adds that “CoValence has found that the term private label is defined differently between markets as well as between companies in the same market.”

Market Information

Mintel Group’s recently released study examining the Private Label Beauty market in the U.S., limited its definition of private label to “exclusive products whose manufacture is commissioned directly by a retail chain or its representative. This includes merchandise developed under retail direct licensing agreements,” states the research firm.

Study findings revealed that 80% of the beauty market is controlled by national brands, such as L’Oréal, Procter & Gamble and Revlon. “These companies’ products are backed by massive advertising budgets and ongoing promotions. Most retailers do not invest in private brands to this degree,” states the report.

With all but one exception, the report found that all national brands experienced growth in 2010-2011. Private label brands performed well in eye makeup and in lip cosmetics under $10. Ten percent of surveyed women purchased private label lip products, making it the most popular private label category. Overall, the demographic most likely to purchase private label color cosmetics were young women between the ages of 18-24.

According to the report, Avon and Mary Kay are industry leaders in the private label market. It also found that beauty specialty stores such as Sephora are active—and successful—at developing private label color cosmetics. Finally, “mass retailers were the most popular channel for buying private label color cosmetics among all age groups, income levels and cosmetic categories.”

Why Private Label Works

Private label works on two levels: the end-user and the company purchasing private label.

For end users, an obvious advantage is its often lower price compared to nationally branded alternatives. According to Mintel’s study, however, it is not always the biggest purchasing driver.

In categories such as private label liquid and mineral foundation, as well as pressed and loose finishing powder, findings reveal that the strongest audience in these product categories were among women whose households earned less than $25K. “This proves that, in these categories, private label products are mainly purchased by women who cannot afford higher end brands. If given a choice, these shoppers might buy national brands,” states the study.

However, these findings do not remain the same across all categories. In the eye and lip product categories, Mintel’s findings revealed that “women tended to be more experimental,” suggesting that the “type of product—not always price—is the deciding factor when purchasing private label in these categories.”

Becker of Cosmetic Solutions sees target audience as a main consideration when determining product, packaging and price of a private label line. “Packaging and presentation are key; however, it really depends on your target market. If you are going after a low cost conscious consumer than yes, price can play a critical factor in a purchase decision,” he says.

Despite its emphasis on price, private label manufacturers take considerable care to offer the highest quality product as well. This is why manufacturers’ services are not only limited to generic products. As Burd explains: “Generic brands compete with better known brands on price, however private label is not always [about] generic branding. Some very well known brands use private label manufacturers. At Lady Burd cosmetics, we have high quality products that are equal to or better than many of the larger brand names.”

“Private label products have to deliver efficacy,” agrees Wochner. “One of the misconceptions is that private label means ineffective, but that is definitely not the case at CoValence. Private label products have to speak to all product trends, in addition to starting their own revolutionary trend.”

In order to provide technology advantages, San-Mar works with universities and biotech companies to provide market advantages and clinicals to support claims.

Finally, just as it can be economically advantageous to end-users, the private label game is also profitable for owners of private label brands.

Some private label manufacturers say price is a main advantage for choosing their services as opposed to managing the entire product development and packaging process themselves. Private label “allows the individual consumer to develop their brand in a cost effective way,” states Cheryl Marcus, director of product development for Grafton Cosmetics. The company offers an exclusive product line with an assortment of packaging and thousands of shades.

There are also large profits to be made. “It is not only prestigious to have your own brand but also economically important,” says Marcus. “Private label markup can be anywhere from 500 percent to 800 percent. While in supermarkets private label is best known to be a price saver, private label in cosmetics is the best way to ensure high profits while creating an impressive product line for your company.”


No matter how it’s defined, there are some very clear trends emerging regarding the look and formulation of private label products.

As in other parts of the industry, our society’s growing environmental consciousness has found its way into private label. “The trend toward using natural-derived ingredients will only get stronger,” says Tom Raffy, president of GAR Labs, Inc., a private label manufacturer offering product development, sampling, manufacturing and packaging.

Becker has also seen trends regarding formulation. “From our side, a lot of the trends that we have seen have been in formulation and product efficacy, especially with regards to raw materials: stem cells, peptides and natural, plant-based actives to name a few.

Also related to formulations, people want products with a function, says Boutros. For example, “they no longer want just a nice smelling moisturizer cream. They want it to revitalize, nourish the skin, or help diminish appearance of blemishes.”

Speaking to this trend, Cosmetics & Cleaners International offers the Avaya Personal Care brand of spa quality lotions and salon quality shampoos and conditioners.Each product features an added function, such as revitalizing with essential vitamins or ingredients that tighten the skin.

There have also been some interesting packaging-related trends. Boutros has seen two extremes in terms of packaging: “inexpensive packaging to keep cost down or deluxe packaging to emphasize quality,” he says.

CoValence has seen a trend toward creative packaging copy. “We have seen that creative product names are one of the decorated trends that have impacted our private label sales. Yes, the products definitely deliver, but the product names are what stops the people in their tracks and piques their interest,” says Wochner.

In terms of color, many brands are choosing transparency. “The most-used decorative trend is custom, clear self adherent labels and full wrap shrink labels,” says Raffy.

According to Lady Burd Cosmetics, the desire for transparency also includes increased use of clear tubes. As an example, the company recently introduced its Lip Luster product to its fall lineup. Featuring a squeezable clear tube that allows the color-rich formula to show through, the shea-butter enriched product is available in 16 new shades.