I often hear skincare and acne product marketers ask questions like “What are the advantages to
private labeling” and “Why not go to a lab directly and develop my own products”, “Where can I find
a good skincare chemist”, etc. These are indeed very reasonable questions, and in this blog post I will
attempt to provide some insight into why you should strongly consider private labeling / white labeling
as opposed to getting into the product development business. I feel like I can provide some good insight
into this discussion because our company, Kantian, specializes in product development, and I have
personally overseen the development of several products in my current role with the organization.
Here are the main concepts that you should consider when making this important business decision:
1. Research & Development Expenses
If you are attempting to create any sort of innovative or proprietary product, you will certainly
need to invest in R&D in order to accomplish that. You will need to start by researching prior
art – has anything been done similar to what you are trying to accomplish? Are there any
patents out there held by other companies that I could be infringing upon? Etc. Then comes
the “science side” of the research portion, which may include some broad chemical analysis of
potential ingredients (and the possible interactions between them) and considerations related
to the specific application process that you are thinking about implementing (in other words,
could the desired protocol effect the outcome in any way, etc). Ideally a good skincare chemist
can accomplish most of this, however I will warn that “not all are created equal” when it comes
to a comprehensive understanding of all these factors. Next comes the actual development
of the product – which is where things can get really expensive and time consuming. This
is especially true if you haven’t done a good job during the research period. Most labs will
start by having their formulators send you a few samples, and then you optimize from there.
However optimization requires more than just sample sending – it requires the use of pilot runs
to produce small batches of product (in actual bottles/dispensers that you must purchase) that
you can use to get actual feedback from potential users on how that particular formulation is
performing. So now after several renditions of formulations, and several pilot runs, the bills
really start to become significant. What’s worse, is that you will be seeing more bills like this as
you move on to the main event – which is actually producing and (hopefully) selling this product.
2. Manufacturing Risk
As you will notice when you do your pilot manufacturing runs during the initial R&D period, it
is not at all cost effective to produce small batches of product. Therefore you are left to make
some tough business decisions: Do I take a large risk on producing lots of product? Or do I
take a smaller risk, and therefore pay prices that have me in break-evenish territory (or losing
money)? A lot of skincare and acne product marketers will make the decision to produce large
quantities of product, above and beyond what is comfortable. This is what I call manufacturing
risk (although you may hear other terms to describe this concept), and you can find yourself
feeling quite overwhelmed by the time you get here as we can never be 100% sure that our
intended marketing efforts will be successful within a given amount of time. If the products
expire before you can sell them, then you can end up with a significant loss.
3. Packaging Risk
Again, you may hear other terms used to describe this concept, but you’ll get the idea that
I’m trying to get across. The same way that you are forced to make touch business decisions
(and often incur more risk than you were hoping for) regarding the manufacturing of product,
you are forced to make the same tough business decisions as they relate to packaging. For
example: When you order small quantities such as 100-2500 tubes for that pilot run, you will
find that your cost-per-tube is often astronomical. When you start ordering 10,000 and 25,000
tubes, the cost-per-tube goes down drastically to where you need it to be in order to make the
numbers work. So what will you do? Take the risk on purchasing more packaging than you are
comfortable with? Or break even/lose money for a period of time?
4. Regulatory Expenses
If your skincare or acne product is an OTC drug in the U.S., you will need to pay for stability,
compatibility, and FDA validations (also RIPT’s are strongly recommended). The combined costs
of these regulatory expenses can also become quite significant. If you change the formula, you
have to do these all over again, and pay again. This process and the related costs will vary from
country to country, and you should consult a regulatory expert in your area to discuss all related
considerations having to do with your project.
5. Patent Related Expenses
Lastly, if you truly want to protect your intellectual property, you will want to apply for a patent
covering the invention. This is a super specified area of knowledge, and you will need the
expertise of not only the skincare chemist or formulator who created the product, but also a
patent attorney. The more geographical areas of the world that you wish to cover, the more
patent expenses you have. Between legal expenses and payments that need to be made to
the various patent offices worldwide, the financial strain can certainly escalate quickly. So, if
you have a manufacturing partner who is willing to private label a patented (or patent pending)
product to you, and is offering to protect you under that patent, you are getting a pretty sweet
deal in most cases.
All of that said, there are companies who specialize in this process (shameless plug: Kantian is one of
them), so it’s worth exploring potential partnerships whereby you can simply private label the products
and focus on what you do best – Marketing. Our company made a business decision a long time ago to
focus on our core strengths as an organization and as people (namely R&D), and to develop the right
partnerships with other organizations that are capable of “all the other stuff”. I think it is amazing that
we live in a day and age where organizations with different specialties can come together, and in a sense
form a kind of conglomerate having far stretching resources that would formerly only be achievable by
a very large company. I think the old saying: “The whole is greater than the sum of the parts” applies
here.
Thanks for taking the time to read my very first blog post on this subject. Hopefully I will be able to
provide more insight on some related topics in the future. Until next time – Good luck and enjoy the
journey!
Written by: Jon Klein, Director of Marketing & Business Development, Kantian Inc.
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