Small- and medium-volume production is no longer limited to emerging players. Major groups use this strategy to test or customise their range of services, while young brands are still constrained by their cash flow and the need to control their stock. In addition, this shift unfolds against an economic backdrop marked by caution, where agility and flexibility have become essential.
“There is an average decline of 15 to 20% in order volumes, directly reflecting the slowdown in consumer spending in 2023. Today, brands prefer to produce smaller quantities, but more often,” emphasises Sabrina Éthève-Colson, Director of Customer Strategy & Development at French cosmetics manufacturer Alpol Cosmétique, a partner of both French and global brands.
Although this practice is becoming widespread, it is still economically challenging for manufacturers to order and produce in small and medium quantity.
Adjusting the cost price
“The cost price in this case is often higher,” explains Jean-Marc Giroux, President of Cosmed, the leading network of French cosmetics companies boasting 1,030 members. “There are several reasons for it, including the fixed costs associated with cleaning production lines, which have to be absorbed across a smaller number of units; regulatory requirements, which remain the same regardless of the size of batches; and of course, raw material and packaging purchases historically get more favourable pricing conditions in larger volumes,” he adds.
To meet brands’ needs while remaining competitive, Brittany-based manufacturer Uspalla adjusted its private-label cost prices for volumes ranging from 250 to 2,000 units, with a decreasing price schedule starting from 2,100 units. “Brands should select partners who can adapt their purchases and costs to the actual size of production volumes,” highlights Marion Rebaud-Zariffa, President of the laboratory.
Raw material sourcing comes with plenty of challenges. “It is actually the main issue with tailor-made formulas, because they are not always available in small volumes, which means they are not easy to get,” she adds.
To overcome these challenges, Uspalla banks on laboratories pooling their capacities. “That is what we call raw material help-out. We communicate on platforms such as Cosmoplace. These are mutual aid groups gathering laboratory directors or packaging suppliers with 200 to 400 members,” she explains.
She can also send ingredient suppliers requests for free or charged samples. “Then, as a last resort, we substitute the raw material for another, which involves slightly reworking the formulation and regulatory file,” says Marion Rebaud-Zariffa.
The MOQs per raw material and the minimum purchase amount per order imposed by suppliers are also the main constraints cited by Aude Martin, R&D Project Manager Formulation at LMDC, a laboratory specialising in cosmetics, skincare, and makeup creation. The risk of expiry of raw materials makes it even more complex, she adds. If certain ingredients like pigments can be stored for up to two or three years, others only last a few months.
“Once we received a raw material with a shelf-life of only three months upon reception, so we had to anticipate production to avoid wasting it,” she explains.
There is a tricky balance to find between regulatory requirements, quality and cost control.
Purchase grouping
In response to these challenges, Cosmed created a purchasing group for small businesses to buy individually or in small quantities, while benefiting from prices equivalent to those negotiated by major groups through order pooling. This way, members can access advantageous conditions on raw materials and packaging, regardless of the volume purchased.
Cosmed also set up an exchange market so that companies who have purchased more than needed can offer other players in the network their own excess stock.
Manufacturer Alpol Cosmétique relies on both its supplier network and its own catalogue. “We know which suppliers can support small brands, so they do not end up with large quantities of unused ingredients. We also have an in-house catalogue of over 3,000 raw materials, including actives and textures, so we can offer alternatives already validated and stored,” says Sabrina Éthève-Colson.
Sofia Cosmétiques, the specialist of tailor-made offerings, uses the same approach, mainly in personal care.
“We try to use what we already have in-house. This way, we can streamline our raw materials, prevent waste, and it is in line with our CSR policy,” explains Alexia Dingas, the Sales Director.
This laboratory imposes a minimum order quantity of 5,000 units per SKU. “From an industrial perspective, producing 1,000 or 50,000 units requires virtually the same amount of work: compiling regulatory documentation, conducting tests, drafting contracts, etc. The level of commitment remains the same for the company. Therefore, small production runs involve a lot of efforts for little return, but they sometimes help identify promising brands to support over the long term,” she explains.
Often originating from new brands, these requests for small series require the right balance between high standards and realism.
“Working with these young brands also means managing a strong emotional dimension. You have to know how to gently correct them, which takes time and diplomacy. We choose to support brands that are clear-sighted and aware of market costs and constraints,” adds Sabrina Éthève-Colson.
As proof of the growing interest in these requests, Alpol Cosmétique recently recruited a business developer for developing its SME and mid-market portfolio, and for identifying young brands with strong potential on the European market.
