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.