Keeping Product Supply Consistent with Consumer Demand
ACCM BENCHMARK STUDY FOUND THAT 9 OUT OF EVERY 10 CONVERSATIONS ABOUT BEAUTY PRODUCTS HAPPEN ONLINE.1 IN FACT, MORE THAN A THIRD OF CUSTOMERS LEARN ABOUT NEW BRANDS ON PLACES LIKE TWITTER AND INSTAGRAM. IT’S A NOTABLE REFERENCE POINT FOR AN INDUSTRY THAT USED TO RELY ON A “LOOK, FEEL, SMELL” APPROACH.
It also speaks to how much disrupting forces have changed the way the beauty industry operates. Today’s customers are more empowered than they’ve ever been. We are aware of the ingredients we put into our bodies. We are able to trace our ancestry with mail-in kits. We are able to connect with the brands directly and follow their every move.
These agents of change can represent new market opportunities, but present challenges for keeping product supply in check. Consumer goods companies have recognized the need to adjust manufacturing operations to compete in a new world.
For CPGs to maintain existing brands, integrate additional SKUs, and expand market opportunity, they must enforce agility into their operations. Big companies are no longer relying only on internal 24/7 manufacturing workflows. Instead, they are integrating outsourcing models that can adapt and scale as the market dictates.
The Economics of Personal Care
In the 1990’s — when fanny packs were in vogue and the radio was still the podcast of choice, most big-branded personal care lines were manufactured in-house. Each CPG had a network of factories capable of handling mass production of well-known products. Confidence in outsourced manufacturing was positive, but generally used for temporary demand surge or as a way to handle more mature, declining product lines.
During this period and into the next decade, the industry saw a wealth of mergers and acquisitions. Loyalty towards brand name products was high. Then, during the global economic downturn of 2008, things changed.
Higher priced brands plummeted. Consumers switched to private label equivalents. CPGs began consolidating plants to cut costs, accelerating the pace of production through contract manufacturers. Then, as the economy recovered and online retailers surged, contract manufacturers grew again by accommodating large CPGs and the upstarts they acquired.
The Outsourcing Model
One of the most critical needs of any product manufacturer is capacity. The entire slate of capabilities of a plant — manufacturing, filling, packaging, quality assurance — needs to be available when product is in demand. At the same time, it’s costly to keep operations ‘on retainer’ while waiting for the market to fluctuate.
Contract manufacturers are able to provide capacity to CPGs whenever it is needed. They have similar factory setups as their customers and have integrated an array of best practices seen by the world’s biggest brands. They can offer solutions to challenges both large and small.
Through this ability to produce and scale, contract manufacturers like Accupac can help companies stay nimble and respond more quickly to new ideas and formulations.
Contract manufacturers make about 1 out of every 7 personal care and cosmetic products worldwide.2 In 2018 it was a $17.1 billion industry. CMs are poised to help the industry adapt to change, and provide opportunities for new companies to break through.
Here are challenges an outsourced workflow can help with:
Before Y2K, the world’s biggest brands were aligned with Cindy Crawford and Naomi Campbell. Today, skin care is sold through likes, follows, trendability, and online stars like @jamescharles and @Zoella. These social players dominate the conversation around what products to use. Their millions of followers account for a collective audience that is deeply loyal to their opinions.
These customers — millennials among the lion’s share of them — are feeling more connected to the brands they trust. Hashtags have the power to bring change to outdated ingredients, and customer service is as easy as a DM.
of consumers depend on influencer recommendations3
CPGs are in turn seeking brands that speak to customers in a more personal way: products that are trendworthy, represent a new generation, and are socially responsible. They need to be able to add SKUs to their product lines without disrupting the existing operations of their other brands.
The Me Generation
We are more in tune with our physiology today than any other point in history. We know more about our heritage, our demographics, and our well being. We can send out for DNA results in a week and research chemical compounds on our phones. So we seek out products that conform to our ethnic, dietary, or social specifications.
These opinions that we form are far reaching. Our connection with social networks makes it easy to voice our opinions, unite behind a cause, and influence the corporate values of the brands we trust.
This often leads to reformulations of existing products. One only has to look back to the removal of parabens, or the boycott on palm oil as examples of how self conscious consumers have affected change. With the scalable workforce CMs have in place, companies are better prepared to test, verify, and deploy updated lines in order to compete for consumer mood.
An Expanding Worldwide Market
Our global economic footprint is changing every day. International brands are breaking through new markets and expanding product supply with regional varieties. The result of all of this is a global personal care product market estimated to be valued at $716.6 billion by 2025.4
Companies know that their products are finding success in new markets and are opening up new channels of distribution. This means more demand for product, but also demand for operations that can handle multinational validation requirements.
Contract manufacturers who have success in helping CPGs adapt to a global distribution model will place emphasis on proper quality control units and chemists who understand governmental regulations around the world. They also employ customer service teams who are adept at spearheading production through the hurdles needed to meet deliverables. They can often reduce headaches down the road by providing solutions to challenges before they affect operations. They can also cut start up costs for establishing product supply in new countries.
The point to all of this outlook is to reinforce the idea that in order to remain relevant, CPGs need a source supply that’s ready to support business change. In-house operations can be slow to adapt, but contract manufacturers have the capacity and knowledge to combat supply chain disruptions.
We might not know what the personal care landscape will look like in five years, and that’s exciting. We do know that the value of personal care will continue to grow and facilitate change from all angles. That’s why brands who integrate hybrid manufacturing workflows today are already preparing for what’s to come tomorrow.
Accupac develops and manufactures a wide range of consumer, over-the-counter, and personal care products. Our facilities are FDA and ISO certified, designed to integrate seamlessly into your manufacturing workflow. We formulate the same quality product you’d have in-house. We are committed to being a world-class leader in sustainable contract manufacturing and continuously optimize all aspects of our business through 5S lean management initiatives.
- iAdvise, The New Challenges of the Online Customer Experience; 2 Grand View Research, Personal Care Contract Manufacturing Market Size, Share & Trends Analysis Report By Service and Segment Forecasts, 2019
- Grand View Research, Personal Care Contract Manufacturing Market Size, Share & Trends Analysis Report By Service and Segment Forecasts, 2019 – 2025
- Digital Marketing Institute, 20 Influencer Marketing Statistics that Will Surprise You
- Grand View Research, Beauty and Personal Care Products Market Analysis Report by Product, by Distribution Channel, by Type, And Segment Forecasts, 2018 – 2025
This article was published on July 13, 2019