What is the future of full-service in make-up?
For the past 10 years of so, full-service has developed under the influence of formulation companies seeking to broaden their services. Packaging companies have followed suit and now offer an ever more comprehensive and sophisticated offer.
The challenges of full-service
Many brands have abandoned their industrial sector and the supplier chain has grown and multiplied. But with the accelerating pace of the market, brands have had to optimize the development of their new products, reduce time to market and therefore streamline the chain of intermediaries. In the past, Coty had to consult different suppliers for the content and the container. Today, it simply calls upon the services of a single supplier, specialised in cosmetics. Whether he stands on the formula or of the packaging side.
The concentration in the various trades in supplier chain, took place gradually, through organic growth and acquisitions, to gain momentum in the past four to five years.
Nowadays, being a supplier, looks more sometimes like doing licensing or private labelling.
People at Geka told us that being a specialist in mascara brushes and packaging forced the company to integrate formula and filling expertise in its manufacturing process. “To produce appropriate and efficient brushes, integrating filling and formulation to our historic know-how eventually became natural,” explained Amaury de Menthière CEO of Geka.
LF Beauty for example, acquired its expertise through the integration of various specialised suppliers to become the industrial group that it is today. It provides the primary and secondary packaging as well as the design, the formulation and the POS. “With the full-service and operations in Asia, the United States and Europe we can focus our production according to a brand’s “Made in” preference,” detailed François Camilli, Senior Vice President of LF Beauty.
The level of service
The level of full-service is different from one provider to another. One provider will simply integrate filling to his packaging supply, while the other will offer the complete design to a brand, including digital and promotional communication (POS advertising).
“Hence HCT packaging integrates in its business, a design and marketing studio and develops solutions for communication (social media and press). HCT offers trends and seasons analyses to brands that wish to have a comprehensive solution for their product launch,” said Robert Tognetti, Chief Operating Officer at HCT.
Bioplan, which specialises in beauty samples, told us that “its services included the designing, development, manufacturing or sourcing of components. The filling and assembly of the different components. Bioplan coordinates the different partners involved (suppliers of juice, of packs and secondary packagings). This frees customers from these coordination tasks and reduces the time to market,” commented Ludovic Anceau, CEO of Bioplan Beauty (Iléos Group).
Geka, primarily a mascara specialist, has opened its expertise to filling, formulation, including own fibre production and secondary and promotional packaging. The company also integrated marketing services in its offer. “Today we can deliver turnkey solutions to brands. We have a complete market overview and an ever more unique competence,” explained Amaury de Menthière. “We also developed an in vitro and in vivo mascara testing method, VCLS (Volume, Curling, Lengthening, Separation), that can adapt to all our developments. Through consumer research, we know how to guide brands towards the most appropriate product according to their brief.”
“LF Beauty, somehow stands as the development, sourcing and production agency of its customers, even as distribution agent especially in Asia” commented François Camilli. “We can rely on an integrated teams in design, R&D and formulation, to complement our manufacturing and filling units, and we also rely on some local experts and partners.”
What is the impact on margins and the diversity of supply
With the concentration of players, one wonders if suppliers were able to maintain their margins in the product creating process.
Actually, a strengthening of the skills does not necessarily mean lower prices. With the growing number of services associated with the same product, brands have a turnkey product. Only the product management is simplified for the customer.
For international brands with large unit volumes, it is sometimes necessary to cut back a little on margins to win markets. However, suppliers rely more on the mastery of the trade and the quality of service than on prices to satisfy brand owners.
As for the diversity of the supplier offer it remains important, because there is enough room for large and medium size companies. Although business acquisitions and concentrations have occurred, there are still a lot of independent companies and some work in partnerships to deliver a product. With the number of product launches, structural changes in the distribution and continuous opening of markets, everyone has a role to play.
The lessons of full-service and its future
Everyone agrees that the difficulty of the market requires having a mastery of all the product’s components and its regulation. To be successful in full-service, you must rely on multi-talented teams. We therefore had to consolidate trades and learn to work together. “An expert and efficient team is the key factor for success in this demanding market,” acknowledged Robert Tognetti of HCT.
Add to these constraints, cultural differences between countries of production and market requirements, and you get an industry, which has learned the lessons of globalization and succeeded on a slippery slope.
Indeed, the future of full-service looks rather bright. Although this activity only represents less than 40% of the overall activity of suppliers, development strategies continue to strengthen to meet the pressing market demand.
“Full-service is highly suitable for innovative products that clients cannot integrate in their processes and this is a guarantee of continued growth in skills in the supplier chain,” concluded Ludovic Anceau of Bioplan.