So, you have a great idea for a new product, but you aren’t really sure what’s next? There are a few steps between a wonderful idea and uploading products to your website or being stocked at your favourite retailer. One of the first (and arguably most important) is obtaining a formulation that can then be physically made, filled, and stocked.
Getting a formulation developed can be a confusing process. There are other steps that should be completed first (such as drafting a product brief), there are essentially six paths to formulation, all with their own pros and cons.
- Formulate the product yourself
- Recruit an in-house formulator for your brand
- Use a contract manufacturer, often referred to as ‘private labelling’
- ‘Rent’ an ‘off the shelf’ formula from a manufacturer, often referred to as ‘white labelling’
- Hire an individual formulator or chemist
- Use an independent professional organisation such as skinterest
1. Formulate the product yourself
Formulating yourself is a great option if you have the necessary skills, patience, tools, and experience and can be a great way to take full control of the Intellectual Property (IP). The biggest upside is the flow of communication is entirely unrestricted.
There is no legal reason why anyone cannot begin formulating themselves, in that you don’t need a licence like a builder or to be registered like a doctor with appropriate qualifications. Having said that, just as we’re all capable cooks in our own kitchens, we need to recognise that most of us aren’t professional chefs and probably aren’t qualified to be making food en masse for the general public.
Self-formulators must also be mindful of the risks in terms of regulatory compliance, consumer safety and product stability. Obviously, trained cosmetics chemists will also be far more efficient at achieving a favourable outcome and have knowledge that will streamline the transition into manufacturing and production.
A self-formulator is also unlikely to have access to the resources and equipment required to produce cosmetic and personal care products efficiently, depending on the nature of the products. A range of oils can easily be produced with a department store set of scales, a bowl and some hand stirring, however things can get increasingly complicated quickly. A balm can be straightforward, although you will need to add a hotplate to that shopping list, a thick cleanser should be mixed with a laboratory mixer, a highly refined emulsion will require a high-end quality homogeniser, colour cosmetics will require precision scales and more refined dispersion equipment. Add to this the supporting equipment for product quality testing including viscometers, pH metres, digital microscopes, SG cups/pycnometers, temperature-controlled ovens and the short-term costs are becoming very high. Not to mention the possible need to acquire space to store all this new equipment.
Long-term costs can be tricky to estimate, certainly by owning the IP there is the opportunity to shop manufacturers and get the best price, however, the formula could be cost inefficient, off target entirely and potentially more likely to fail testing and add to the long-term costs.
As an aside, courses are available to facilitate ‘formulating for yourself’, these courses can be useful in becoming a ‘cosmetic formulator’. It is important to note that these courses are not substitutes for a ‘cosmetic chemist’ and the combination of knowledge acquired studying a science degree teaching the scientific method, underlying chemistry, and associated industry experience of a professional formulator. The team at skinterest have undertaken these courses at various times, in each case they were already well-established in the industry and had science degrees, this is not an attempt to boast, but an opportunity to mention that while these courses can be great, there are deficiencies.
Skinterest works with some self-formulators, some more experienced than others, whom we provide the support they need, performing technical reviews, stability testing and general troubleshooting to ad-hoc development issues or research on special projects.
2. Recruit an in-house formulator for your brand
Hiring your own in-house, dedicated cosmetic formulator or chemist within your organisation to create your products is a very good option in many, but not all circumstances.
This is not usually the best option for a startup unless they have the funds to support, but can be great for a more established brand looking to take control over their development, amp up their product development pipeline, or have enough related technical work to keep them busy. The flow of communication between brand owner and the formulator should be very clear with minimal restriction.
Once you have hired a suitably qualified and experienced cosmetic chemist (which alone can be a minefield), most of the downsides to formulating for yourself are overcome without losing any of the positives (primarily IP ownership) with exception of the inevitable ongoing costs in paying their salary.
We also haven’t yet delved into the time and cost in building out systems that are key to effective formulation development, for example, supplier networks, material databases, ingredient list generators, logs and registers, equipment calibration and procedures.
As with formulating for yourself, the newly hired formulator will need access to suitable space to work in, with work benches, storage, beakers, sink and dishwashers in addition to many of those aforementioned tools, including mixers, homogenisers, hotplates and scales as a minimum. Add to this the other tools required for effective development and the short-term costs can be incredibly high.
The recruiting process is always a challenge and finding the right person can be difficult. A candidate can have the experience on paper, but potentially be not as great in reality or without the support of a knowledgeable manager they had in a previous role.
Skinterest can consult on hiring and help guide the decision-making process. We won’t be able to gauge cultural fit but can help to ensure their technical skills and competencies and understand a candidate’s strengths and knowledge gaps. After the hiring process is complete, skinterest can remain a resource to help support your new in-house formulator and serve as an acting department manager or mentor.
3. Use a contract manufacturer or ‘private labelling’
Using a contract manufacturer can be a good option for startup and established brands alike, particularly where IP ownership is not of concern. This does vary with the manufacturer, occasionally agreements can be put in place for the transfer of ownership to take place following a repayment period.
There are multinational brands manufacturing products in the millions of units per year who don’t currently own their own IP. Unfortunately, the manufacturer won’t sell it as there is just too much money to be made in manufacturing a market-leading product that the manufacturers own. In those circumstances, you can be confident that if the brand did own the IP, they would be saving a lot of money by shopping their formulations. There is also a commercial loss of value in a brand that doesn’t own its product IP.
Using a contact manufacturer means that your formulations are likely to be developed by an experienced chemist, or someone being supervised by an experienced chemist. The formulations created should be in line with your brief, and unique, sometimes referred to as ‘private label’, however there is likely to be significant cross-over with other formulations that have been developed taking on aspects of being ‘white label’.
Despite having (hopefully) an experienced chemist working on your formulation, one major downside of this option is the lack of direct communication with the chemist themselves. Often, all communication will be passed through a sales manager or liaison, simultaneously slowing the movement of information, and creating a chance that information will be lost or confused. Some of this can be overcome with good quality briefing documentation and well executed feedback. Preferably the sales manager/liaison are themselves a formulator, but that is rarely the case.
The formulation might be created free of charge, or for a small fee that may be refunded following an order, so the short-term cost should be minimal. Things like stability testing and PET are most often additional costs that aren’t obvious. These either don’t get performed or will be charged separately at a future time point, and should be agreed to in early discussions.
Despite the low short-term costs, the associated development costs can be expected to be amortised into the unit cost, increasing the long-term cost of the product.
Often the formulation developed is leveraging existing formulations which aren’t particularly unique and the major reason why the IP is not for sale. The formulation has the potential to be somewhat cost-effective when leveraging existing materials the manufacturer purchases, but there is no way to know if the same formulation could be cheaper elsewhere.
Perhaps the biggest downside to this approach is being locked into a single manufacturer due to the control they have in owning the IP. This means that if the service becomes less than ideal, or the costs increase, there is no real flexibility.
One option to rectify these challenges is to have your private label formulation reverse engineered by a third party. This is often undertaken by skinterest however once a product is on the market, replicating it exactly and in a manner that won’t get the attention of existing customers is both difficult and time consuming, in fact this can be more expensive than having created the formula/IP from the outset, negating all the positives working with a contract manufacturer had otherwise provided.
4. Rent an ‘off the shelf’ formulation or ‘white labelling’
ManyRenting an existing formulation (borrowing the existing IP from a contact manufacturer), also referred to as ‘white labelling’ can be a great option for startup brands.
In these cases, the IP is never for sale and the formulation is not particularly unique. The biggest benefits are negligible short-term costs and speed to market, as all of the development, performance and stability testing is already taken care of. Bar some potential additional work for minor changes to differentiate (for example the addition of extracts, fragrance, and colours). Assuming the formulation is already in the market, much of the teething issues associated with new formulations and scale-up should have been already addressed.
This can be a good option for formulations that are more expensive to develop, the prime example being sunscreen (also other pharmaceutical products and why consumers are asked if they’re happy with a ‘generic’ brand when at the chemist). As an example, an established brand in the cosmetic space who created their own formulations/IP might not have expertise in sunscreen development. They are also likely not keen to spend 6 months attempting to formulate a new sunscreen and the associated costs that go with that. On top of thousands of dollars on SPF testing and stability testing that adds another 12 months to the timeline, when they can place an order on a contract manufacturer tomorrow for free* and hit the market in 4 months.
White label is also firmly in the realm of supermarket own brands, although these are sometimes also referred to as ‘private labels’. It depends on how different the formulations are, particularly where a formulation developed originally for supermarket X is later also being sold to supermarket Y.
A white label product should be relatively cost-effective as the manufacturer should have considerable buying power, but this assumes they make a lot of the product regularly, which may not actually be the case. Despite the negligible short-term cost, we can be certain the cost of development incurred by the manufacturer will be amortised into the unit cost and recovered. While this may not be outlandish, over time and with increasing volumes, it can become more expensive.
In addition to formulating, skinterest can assist with the many challenges to be navigated when bringing sunscreen to market as well as recommend supporting testing and other services.
5. Hire an individual formulator or chemist
Using an independent formulator is often an easy way to simultaneously acquire a custom formulation whilst ensuring the IP is owned by the brand with the least amount of fuss. You can talk directly with the formulator who will be experimenting and developing your formulation and get a good understanding of their knowledge, experience and capability and stay informed of any potential issues that may arise. An independent formulator should have a well-equipped laboratory and be comfortable for clients to view the facilities and see it for themselves.
The short-term costs are high, as the formulation development and related testing costs will be invoiced directly to the brand.
The long-term costs will be lower when the brand owns their own IP, as once they are in possession of the formulation, they can source quotes from multiple manufacturers to achieve the desired balance between cost, service and quality. Brands also have the flexibility to change manufacturers, in the unlikely event there are issues with a manufacturers service or quality.
Some formulating consultants also dabble in cosmetic manufacturing, which can be advantageous for startups looking to produce small runs.
6. skinterest, your independent formulating partner
Skinterest goes well beyond the capability of independent formulating consultants and that of any contract manufacturer, we take cosmetic formulation/chemistry to the next level.
skinterest is a team of cosmetic scientists who bring ideas to life via bespoke product formulations. The team operates in a well-resourced laboratory, using industry-leading tools and equipment (some of which is the only in Australia) and conducting research into all things related to product quality, maximising our competency and capability well beyond others.
Our team has worked in contract manufacturing, and for brands in positions of filling and production, compounding and manufacturing, warehousing and logistics, quality control and quality assurance, microbiology, regulatory, ingredient suppliers, new product development and research and development. This wide range of experience provides us a unique understanding of the cosmetics and personal care industry and its nuances.
We’re passionate about cosmetics and personal care and related industries, consumer safety, and the environment. We’re consumers of the products we help create with our clients, and an advocate for brands and contract manufacturers alike. We want to help promote the advancement of Australian manufacturing and help our clients source like-minded goods and services providers who are also ethically aligned.
With skinterest, formulations are the IP of our clients in all situations. This means clients can source quotes from multiple manufacturers to achieve the right balance between cost, service and quality, but also have the flexibility to change manufacturers in the unlikely event there are issues. Owning the IP adds to the commercial value of our clients’ brands, as they are an asset that can be sold along with the brand.
As with formulating consultants, short term costs can be high, however we have an intense focus on controlling formulation costs. We do this through reverse costing client targets to understand material costs necessary to achieve the target. We also factor in other manufacturer costs, including packaging, labour, overheads plus the manufacturers margin. The return on investment (ROI) associated with owning IP will be high, particularly where annual volumes are upwards of 5,000 units per year.
A summary of the 6 ways to create a formulation
*Short-term costs may be low on paper, formulating for oneself without necessary experience isn’t overly efficient and time may be better spent on tasks that produce more benefit
Do you need help deciding which is the best formulation option for you? Book an obligation free phone consult to discuss your needs.
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