Sign in

Private Label Lessons From the Recession

Lisa Doyle
  • In light of new consumer attitudes following the recession, more consumers are seeking better price points and added value options in their products.
  • Private label suppliers are beginning to delve deeper into consumer research, offering trends and feedback on events and influences on beauty to truly become partners with their customers.

As the slow climb out of the economic downturn that’s characterized the past few years begins, it’s with cautious optimism that consumers—and brands, as a result—are spending as abundantly on beauty as before. Those who were impacted the most by the recession are likely to continue to scale back financially, but those impacted the least are reducing their spend, as well. In fact, according to a 2011 report from Mintel, 64% of U.S. women surveyed in the $100,000–150,000 income bracket plan to continue buying private label color cosmetics, and, interestingly enough, just under 50% of their counterparts in the $50,000–74,000 and $75,000–99,000 brackets also report planning to do so. Why? According to more than half of those surveyed, it’s because private label products offer the best value for the money.

The result is business has boomed for private labels providing affordable beauty options. Not only that, private label suppliers have also partnered with brands to develop effective marketing strategies, attractive packaging and many of the same ingredients found in the more expensive brands that consumers are used to buying. By providing beauty products comparable to many national and global brands, along with top-notch customer service and turnkey solutions to their customers, private label suppliers are looking to grow market share through budget-friendly options.

Formulating to a Price Point

One key advantage of a private label supplier is the flexibility in its offerings. Many of them can tailor a product specifically to a customer’s needs, depending on how much money the customer wants to put into it—and get out of it.

“I have a customer I make a shampoo for that’s selling it for $45 at retail, and he does fantastically with it; and we also make a similar shampoo that sells for $4.95,” says Paul Lieber, CEO and founder of Royal Labs Natural Cosmetics, a private label manufacturer based in South Carolina. “It’s not like you can buy a cheaper or lower-quality version of the ingredients; the difference is you put less of the raw materials in the formula, so that the level of them in the formula goes down. Therefore, the product in the grocery store is cheaper because the quantity of raw materials is maybe 40% less than in the spa product, just so we can meet the price point.”

Ei Inc., a contract manufacturer based in North Carolina, also caters to both luxury and more affordable specialty skin care lines. “Obviously, the higher the price point, the more flexibility our formulators have in using the latest, state-of-the-art ingredients, which often times are more expensive,” says Roger Martin, senior vice president of sales and marketing for Ei. “This being said, we frequently ‘formulate to a price point’ and work within our given budget to create the best, most efficacious and aesthetically pleasing skin care product. This is where the experience and creativity of the formulators at Ei really shine.”

Extra Value

Affordable beauty doesn’t have to be synonymous with less efficacious or lower quality—in fact, it’s quite the contrary with many private label offerings. Many consumers are looking to get more bang from their bucks by purchasing beauty products that multitask, and private label companies that can meet this need are capitalizing on the trend. According to Brenda Gallagher, director of sales for New York-based Your Name Professional Products, “[Brands] are being conservative on the number of SKUs, reacting to their consumers’ interest in hybrid formulations—those that can do more than one thing—for example, a lipstick that is also a sunscreen. So the owners are being more conservative with their SKU collection, but the upscale formulations are stronger than ever in [garnering] interest from consumers. Consumers are educated and know what they need, and we aim to provide it in as few products as possible.”

Adding value can also mean offering private label products made with the organic ingredients that many of today’s consumers want. “Everything we do has a natural slant to it,” says Lieber. “What we sell is affordable luxury. Our organic line targets those who want all organic—mothers, expectant mothers, the younger generation. Organic is definitely growing at a faster pace, and we are an organic facility.”

And today’s sharp private label supplier should provide the proof to back up the claims made about the efficacy of its products. “We can both source and procure packaging and raw materials, then formulate around specific molecules or custom blends, develop methods to assay active ingredients and perform ICH stability programs that establish expiry dating,” explains Martin. “We do it all, which makes it very, very easy for the customer.”

Service-oriented Solutions

For a savvy private label supplier, it’s not just about providing added value in the products—it’s also extending into marketing and the business of the brand as a whole that can make a new customer into a client for life.

“We strategically align ourselves with our clients and take away headaches by doing all of the work for them,” says Lieber. “We are not just a filler or someone who formulates a product and puts it in a bottle. We devise selling strategies and help them build their brands.”

When a private label supplier can lend expertise in brand positioning, it can make a huge difference for the customer. Diamond Wipes International, with target customers that include regional and national drug and mass retailers, serves clientele looking for ways to create products that stand out among the competitors sold on their own shelves. “Increasingly, retailers are interested in value-added products that can be marketed with a unique point of differentiation for the loyal shoppers with premium pricing structure,” explains Tom Hill, senior vice president of sales and marketing for the California-based contract manufacturer of makeup removal and facial cleansing wet wipes. Retailers want to create products that go beyond evoking a comparison to national brands. “In this new landscape,” says Hill, “the private label supplier is taking on the role of an innovator, working closely with the retailer to develop unique selling points for the products.”

Martin concurs. “The team at Ei is a very experienced and senior group, so it often works with customers to assist them in product positioning, ingredient stories and claims, and finding the niche of a given ingredient panel so the customers can exploit their positions. We have partnered with some of the best names in skin care, and we take that responsibility very seriously. At Ei, we understand we are in the brand protection business above all else.”

Likewise, at New York state-based Lady Burd Cosmetics, providing custom-tailored service throughout the product’s life cycle has led to strong partnerships. “Most companies have order takers. We assign each account a personal sales representative that best understands its needs,” says Allan Burd, vice president of Lady Burd.

Your Name provides help beyond marketing, offering market research into its customers’ target consumers. “Our customers know that we have the intelligence to give them the hottest, latest trends in the color and skin care world,” explains Gallagher. “We monitor the fashion scene, give them a full report and translate it in our color launches so that everything we do is on trend and translates to the consumer. Every move we make is relevant—not only to our customers but to their customers. If they are reading about it in a magazine, we want to make sure we have a response to it that they can bring to their clientele.”

While no company can be completely recession-proof, the private label suppliers that understand their customers (and their customers’ customers) and provide them with all-encompassing solutions for a reasonable price will continue to be key to the growth of the overall beauty industry. Concludes Martin, “If you deliver high quality and consistent service at a competitive price, the customers will bring you their most important opportunities.”

Lisa Doyle was formerly the associate editor of GCI magazine and is a freelance writer in the Chicago area. Her work has appeared in Skin Inc. magazine, Salon Today, America’s Best, Renew and Modern Salon.

Related Content



Private Label Perks Up in Canada

According to the 2012 BrandSpark Canadian Shopper Study, which surveyed 53,000 Canadian consumers, 90% purchased private label products in 2011, with the private label beauty market penetration remaining constant at 26%. Additionally, more than two-thirds of consumers believe manufacturers of name brand products often make the private label products as well.

“Even though overall brand loyalty increased to 49% from 45% the previous year, ultimately Canadian shoppers are looking for a deal when they peruse the shopping aisles and will often compromise by purchasing private label store brands if it will save them money,” says Robert Levy, president of BrandSpark International.

Next image >