When introducing a new personal care product, it can be difficult to decide how to handle manufacturing. In-house production is expensive, while private labeling forces you to tack your brand onto someone else’s formulation. Luckily, there is an alternative to these routes—contract manufacturing.

Contract manufacturing is an ideal method for bringing personal care products—such as skin and hair care products—to market, and, for over five decades, Arizona Natural Resources has served the cosmetics and personal care industries by providing the service to numerous clients. Our clientele ranges from small spas to Fortune 500 companies, and all of them benefit from the consistency, reliability, and exacting quality standards we provide as an industry-leading contract manufacturer.

Contract Manufacturing vs. Private Labeling

What Is Contract Manufacturing?

Contract manufacturing is a type of business partnership in which a seasoned manufacturer handles production for a contracting company. In this sort of agreement, the buyer retains full control over the product’s formulation, marketing, and distribution while outsourcing the time, labor, and equipment requirements of the production process to the contract manufacturer.

The Benefits

There are many reasons to choose contract manufacturing over in-house production, including:

  • Higher cost-effectiveness. By pursuing contract manufacturing, you forgo the responsibility of purchasing costly equipment and training employees to use it properly. As manufacturing partners generally already have state-of-the-art technology and premium materials available, you typically get substantially better value than if you were to develop your own smaller-scale operation.
  • Faster production. Contract manufacturing partners often specialize in specific manufacturing fields, and their facilities are optimized for bulk production of the industry’s products. This combination of insider knowledge and high-capacity facilities allows for optimal lead times that would be unachievable for newer operations.
  • Better quality control. Another benefit of outsourcing to specialized manufacturing professionals is that you guarantee expert oversight throughout the production process. From receiving advice on custom formulations to multi-faceted quality inspections, the extra care your product gets from a contract manufacturer ensures consistent, high quality results for every order.
  • Lower opportunity costs. If you’re exploring contract manufacturing, you likely aren’t an expert in your planned product. Contract manufacturing frees you up to focus on the parts of your business that you are an expert in, without having to worry how that time spent will affect product quality. Marketing, customer service, and quality assurance all improve drastically when given extra attention, and contract manufacturing makes that possible for your team.

Private Label vs. Contract Manufacturing: What’s the Difference?

Many prospective partners confuse private label manufacturing with contract manufacturing. While the two methods do share some similarities, there are critical differences in the typical terms of such agreements.

When you enter into a contract manufacturing relationship, you give the manufacturer your formula & specifications but retain all ownership over the product.   If the contract manufacture develops the formula for you the contract manufacture retains the rights to the formula or provides options for purchasing the formula.

In a private label manufacturing relationship, you agree to brand and market the manufacturer’s product as your own. One example of this type of arrangement is big box stores that contract with suppliers to label and distribute products under a store brand. Private label products allow companies to diversify their revenue streams without having to invest in their own manufacturing operations.

As expected, buyers sacrifice a great deal of control in a private label relationship. Even though the buyer’s name is on the label, the manufacturer retains all control over product formulation. For smaller businesses, the inherent risk of a product not living up to a brand’s standards for quality is not always feasible.

Choosing Between The Two

Once you’ve determined that in-house manufacturing is impractical for your new personal care product, the next logical step is to decide between partnering with a private label manufacturer or a contract manufacturer. Deciding which of the two types of business partnerships is ideal for your project relies heavily on the relationship you’d like to have with your supplier. For example:

  • If you want to maintain control over product specifics like ingredients, formulation, labeling, and marketing, contract manufacturing is the best option.
  • If you don’t have specific product requirements in mind or only require products for a limited run, private label manufacturing may suit your needs.

While both business arrangements result in your logo appearing on the store shelves, as a contracting company, you maintain more control in a contract manufacturing agreement than in a private label agreement. While, in general, these characteristic puts contract manufacturing in a better light, there are few situations—particularly for smaller companies—in which private labeling is a better option than contract manufacturing. For example, if a company is looking to expand into a new niche, minimizing the amount of initial investment or level of industry-specific knowledge required for the product launch is ideal. However, this strategy is best contained to a limited launch as the brand will eventually need more independence if it seeks to expand its offerings permanently.

How Did It Start & Who Uses Contract Manufacturing?

Contract manufacturing is a newer concept than you might expect. Supply Chain Dive attributes the start of the trend to Space Craft, a company that constructed high-tech space equipment for NASA. When interest in space exploration dwindled, founder Olin King recognized a new opportunity. Rather than shutting down Space Craft, he pivoted his focus and sold his niche expertise to large electronics companies. Drawing on established relationships with manufacturers and his own manufacturing capabilities, King successfully grew Space Craft from a specialized government contracting company to a massive electronics supplier that sold for $6 billion in 2001.

Space Craft, later known as SCI Systems, birthed the popular contract manufacturing model that has since flourished and found application in a wide range of industries. Contract manufacturing is most beneficial in ones that require substantial start-up costs—whether measured monetarily or in opportunity cost—such as the personal care products industry.

Haircare and skincare products rely on specialized chemicals and manufacturing techniques to adhere to rigorous quality and safety standards. These demands are often overwhelming to a fledgling production operation, but contract manufacturing levels the playing field, giving even small brands access to cutting-edge ingredients and processes.

Other industries with similar constraints include:

  • Electronics. The first contract manufacturer specialized in electronics, and the relevance of contract manufacturing to the industry has only grown. Some of the largest electronics manufacturers do not invest in any of their own marketing or distribution operations, instead relying solely on contract manufacturing partnerships.
  • Robotics. Robots are growing in popularity for both consumer and industrial users, driving the need for contract manufacturers who can reliably provide highly complex robotics parts.
  • Automotive. Many car companies do little more than design and assemble their models. As manufacturing all of their own components would be costly, they outsource the more complex assemblies to specialized manufacturers.
  • Food and beverage. While most of the outsourcing in this industry involves private label agreements, contract manufacturing is also used to develop better production lines for food and beverage products.
  • Pharmaceuticals. Similar to the personal care industry, in the pharmaceutical industry, every product must be manufactured to exact specifications. Outsourcing the manufacture of raw chemicals to expert manufacturers allows pharmaceutical companies to focus on crafting safe, effective medications without having to produce their own source materials.

Manufacturing Solutions for Personal Care Products From Arizona Natural Resources

Contract manufacturers offer contracting companies unparalleled expertise, significant cost-savings, and superior customer service, all while allowing them to remain control of their product’s design. At Arizona Natural Resources, we pride ourselves on fulfilling all of these needs and more for customers in the personal care products industries.

To discuss your next manufacturing project with an experienced representative and request a quote, contact us today.


benefits of contract manufacturing infographic