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    Features

    Cosmetic Subcontracting: Italy Is More Than Ever at the Cutting Edge!

    Jean-Yves Bourgeois analyzes the Italian cosmetic subcontracting industry -- and its major players.

    Cosmetic Subcontracting: Italy Is More Than Ever at the Cutting Edge!
    Dario Ferrari, Owner and CEO, Intercos
    Cosmetic Subcontracting: Italy Is More Than Ever at the Cutting Edge!
    Renato Ancorotti, founder and president, Ancorotti Cosmetics; and the new president of Cosmetica Italia
    Cosmetic Subcontracting: Italy Is More Than Ever at the Cutting Edge!
    Matteo Moretti, CEO, Lumson; president, Polo Tecnologico della
    Cosmetic Subcontracting: Italy Is More Than Ever at the Cutting Edge!
    Vittoria Cicchetti, CEO, Regi Laboratories
    Cosmetic Subcontracting: Italy Is More Than Ever at the Cutting Edge!
    Jean-Yves Bourgeois
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    Jean-Yves Bourgeois, European correspondent, Beauty Packaging12.12.18

    One can show no less than admiration when analyzing this Italian cosmetic subcontracting industry. A few dozen companies spread over a hundred kilometers around Milan, have become in a few years the key players of a real industrial revolution, which has not finished stirring up the global Beauty sector. A common point with all these entrepreneurs: They work hard, never counting their hours! It is a real industrial saga where competition and mutual help are closely linked—the "Italian way." Keeping in mind that the balance of power is evolving rapidly under the influence of equity participations from investment funds that have understood the interest of taking stakes in the Beauty subcontracting sector. 

    Everyone agrees, the man who was the first to see the writing on the wall, the man to whom the entire profession (or almost!) owes something (many of them having even learned the “tricks of the trade” from him), is undoubtedly Dario Ferrari, the owner and CEO of Intercos.

    A true figure of the Italian subcontracting industry and who is recognized as such. A word, “subcontracting,” that he does not like and for a good reason, because Intercos is certainly not a “subcontractor” and if it used to be, that was a long time ago, because today, Intercos is much more than that.

    There is no denying that Dario Ferrari saw well before others that this market was going to need industry players capable of producing innovative formulas and anticipating consumer needs. He understood that this booming market would enable him, through creativity, marketing and hard work, to impose his footprint and become an almost inevitable player in the field. He also clearly understood that this market was going to be more than ever a global market, and that his company would have to be present everywhere to offer local and adapted production capabilities. He also understood that his trade was going to become a full-fledged industry and that it would call for financial and productive resources, to become, precisely, an unavoidable player. Others followed suit and many of them successfully—because this niche still had room for everyone.

    Crema, aptly named!

    Of course, all these companies are not based in Crema, a small town 60 miles south of Milan, but many have developed and thrived there. The most well-known of them: Ancorotti Cosmetics, with Renato Ancorotti at the helm. Also a born entrepreneur who, after having successfully created and developed a first company, Gamma Croma, started from scratch in 2010 to reach the € 100 million mark this year.

    Other “flagship” companies include B.Kolor, a company with a higher-end positioning, intelligently managed by Maria Teresa Sancini and Mario de Luigi who have also invested heavily over the past five years, and also Regi Laboratories headed by Vittoria Cicchetti, who started from square one in 1994 and whose rise these last 10 years remains impressive with the opening of a plant in India and one in the United States, in New Jersey. Two family owned and independent companies whose paths remain a model.

    Another heavyweight player in this Italian subcontracting cosmetic industry is Chromavis, which belongs to the French Group Fareva and whose ambitions are commensurate with the huge investments which have just been earmarked for the construction (scheduled early 2020), in the same area, of a new factory (more than € 50 million!).

    This is in fact the common prevailing point today of this Italian cosmetic subcontracting industry—investments! Two other major players, Gotha Cosmetics Group and Omnicos, recently injected between € 10 and 15 million, also in a new factory. Not to mention Tecnocosmesi, another leading company in the area, whose U.S. factory commissioned two years ago, is ramping up a little more every day. It’s impossible to name them all, but other companies also deserve to be praised, such as Mascara Plus, Italcosmetici, Art Cosmetics, Red of View, iTiT Cosmetics, Confalioneri Matite, Pharmacos, Necos, Gi Picco’s, Step... Not to mention packaging manufacturers, such as Brivaplast, Pibiplast, Baralan, Cosmei, Inca, Lumson—or accessory makers such as Pennelli Faro, Nastritex...

    A fully restructuring market of 16 billion Euros!

    The new president of Cosmetica Italia, Renato Ancorotti, recently stressed in an interview, the economic weight in Italy of the cosmetics industry: “The Italian cosmetics sector achieved a total turnover of 11 billion euros (+4.3%), and even 15.7 billion euros if we take into account the whole industry from ingredients to finished products including equipment and packaging. “These figures obviously make investors’ mouths water all the more since no industry in the world offers such growth rates each year.

    The restructuring of the capital of several companies is another major trend of this Italian subcontracting sector. For the time being, this redistribution of shares does not always translate into a loss of control of their company by founders, some of them only willing to give up 30%, or sometimes slightly more, but one thing is sure, this is a growing trend in the sector.

    How far will it go? In any case, reasons for this are simple.

    Brand owners have changed tremendously in the last five years. Demand has increased in both volume and quality. The “entrance ticket” for newcomers is getting higher and higher. Manufacturers operating in the sector are left with no choice but to “grow” and equip themselves, which explains the huge investments made in recent months both in Italy and abroad.

    After strong demand coming from small and medium brands, it is now the bigger brands’ turn to be more and more demanding. The pragmatism of the majors in the beauty sector is starting to prevail over previous ideals which consisted in continuing to favor a complete in-house production to the detriment of the full-service offer proposed by subcontractors. It is true that they do not have that many options.

    The level of quality, innovation and speed to market offered by Italian subcontractors is today unparalleled and the pressure imposed by new brands, which are capable of launching a product in a few days is no longer manageable. You have to be able to do better and faster!

    This is a golden opportunity for Italian subcontractors (and for all others, of course!) but with as a natural consequence, a concentration and an accessibility to this market which has become more complicated for potential new entrants, not to mention “small” current subcontractors who may have trouble following suit.

    Full Service, the new ‘Grail’!

    The end of former states of mind (if any), “Full Service” has become the new “Grail.” Manufacturers of formulas offer packaging and/or accessories, and packaging manufacturers try as best they can to pull out of this bad situation to lose as little leeway as possible and preserve their margins by relying on other peers instead of confronting them.

    As for brands, whoever they are, they could not ask for more! A great upheaval, which has not finished generating winners but also losers. Everyone has his own method, but what prevails in the area of Milan is of course solidarity. An undeniable strength of these Italian SMEs who know at the right time to join forces instead of confront one another.

    As a result, medium-sized packaging manufacturers manage to play their cards well, not to say very well, and are also investing to improve their capacity, proving that “small” remains “beautiful.” Brivaplast, Cosmei, Lumson, Pibiplast and others are some of them.

    Asia, a real dragon or a paper dragon?

    In any case, the Italian industry does not think the issue should be put in these terms. Paper or not, Asia is not only a competitor, but it is also, and above all, a fantastic hunting ground.

    Far from getting ready for the possibly devastating tidal wave coming from China, Taiwan or Korea, Italians go where they are not expected. They can and they know how to confront others with their weapons: innovation and quality.

    The first of them, to have “dared” crossing the Rubicon by going on the spot, is again the same man, Dario Ferrari of Intercos. He will be the first to set up a factory in China, he will also be the first to start a factory in South Korea, all this against a backdrop of fierce competition with Asian majors in the sector represented by, for example, the Koreans Cosmax, Kolmar, Cosmecca. This does not stop, on the contrary, his other Italian peers to follow suit by taking advantage of local international fairs (because they do not hesitate to be present everywhere!) to showcase their know-how and attract orders.

    A future full of colors!

    At first glance therefore, there is no concern about the short- and medium-term future of this Italian industry. Yet, the question remains concerning the succession of these companies. Because personalities heading them are “strong characters,” to say the least! This is obviously the main issue of the next 20 years and part of the answer lies in this new redistribution of companies’ shares, which is taking place in Italy. Will this be enough to preserve the strength of this Italian industry? It is hard to say... •

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