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Skin Care’s Big Impact

By: Karen A. Newman
Posted: June 9, 2008, from the June 2008 issue of GCI Magazine.

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Hard numbers are difficult to come by for the market value of outsourced beauty care, but it’s tough to argue with the impact that the global antiaging skin care boom has had on the beauty industry and on its contract manufacturers. According to Euromonitor, the global skin care market reached $65 billion in 2007, growing by 7% from 2006. Continued consumer interest came from a wide range of innovative antiaging products. In 2001, the global skin care business was valued at $31 billion, and the story was about the addition of actives such as AHAs and BHAs.

“Skin care went off the charts around 2000–2001. It kind of exploded,” says Gus Bezas, president, global strategic development, Milbar Labs. After that came the emergence of the physician brands. “Then,” he says, “the giants were trying to replicate the doctor brands.” Milbar is one leaf of a business trefoil that started 27 years ago with Dermatologic Cosmetic Laboratories. The company, located in East Haven, Connecticut, includes Milbar Labs, which develops a range of products that are selling in 14 channels of distribution, including nutritional stores and M Lab, a branded skin care line now sold at Harrods in London and online. Bezas believes it was the long history of Dermatologic Cosmetic Laboratories as a niche skin care specialist that brought the big firms its way. He says he started to see the spike five years ago when, as he says, “multibillion dollar global giants and others would come to us to outsource specific products with regard to skin care. For us, it’s become a trend.”

Bezas got his own start in the beauty industry at Estée Lauder at a time when the company was not doing any outsourcing. He later worked for cosmetics pencil manufacturer Faber Castell, where business is all about outsourcing. “Cosmetic companies just don’t make their own pencils, but skin care is different,” he says. Today, outsourcing skin care product manufacturing comes to them in one of two ways—from larger cosmetics companies with R&D that outsource certain types of projects and from those without R&D who outsource everything.

Outsourcing is certainly not a new concept, and has in fact been quite common in information technology for many years. But R&D for manufacturing is on the rise. According to a 2007 reader survey by the editors of R&D magazine, the number one reason for choosing to outsource R&D was the greater expertise of the external organization.