The Cosmetic Business Owner’s Guide to Local Sourcing and Production
In a post-pandemic world, more and more businesses opt for local sourcing and production to create new cosmetics.
While there are many benefits to supplying your ingredients and products domestically, it also comes at a cost.
How can you find the right approach for your small home-to-lab beauty business?
Our easy-to-follow guide below outlines the biggest pros and cons of local sourcing and production for cosmetics brands.
Plus, we explain the current economic and political climate that is influencing brands’ decision to bring manufacturing home.
Just keep reading!
The Rise Of Reshoring In The USA
The latest data from Medius (via PRNewswire) shows that US manufacturers report a tougher business climate now compared to the pandemic.
Thanks to increasingly complex global supply chains, 69% of manufacturers surveyed have begun to reshore their production processes. 27% attribute this shift to price increases overseas, while 22% are motivated by technological advances like AI.
Manufacturing at home has also become more attractive thanks to new initiatives by the Biden administration.
Werner and colleagues note that public procurement rules were adjusted via executive order to give preference to US companies. Plus, the administration has made the requirements to earn the “Made in America” label stricter.
Personal care and beauty brands are among the businesses that have made the move closer to home in the past decade. One such case study provided by the Department of Commerce is Edgewell Personal Care Company.
Motivated by saving on delivery costs and the desire to create synergies, the company decided to close one large overseas plant and expand its production facilities in the US instead.
With 90% of its client base in the US, the move facilitated faster and less expensive shipping and also made it easier to benefit from economies of scale.
Cosmetics Brands Are Making The Switch To Locally Sourced Ingredients
Researchers from the University of Lisbon note a long-standing trade-off between product performance and ingredient sustainability in the cosmetic industry.
However, in 2024, that is increasingly no longer the case – particularly when it comes to the origin of ingredients.
With the rise of biotech innovations, new upcycling possibilities, and the ever-growing impact of AI, creating high-quality, locally sourced cosmetics is more possible than ever.
The move toward local sourcing is influenced by a number of different factors, including:
New ingredient harvesting and synthetic lab innovations
Reshoring and an overall emphasis on domestic manufacturing
Higher ethical expectations from consumers
A greater overall emphasis on sustainability in the beauty industry
One such cosmetics brand that is making the locally sourced switch is Lush.
Nuvo reports that the bath and beauty brand is increasingly sourcing its ingredients locally, including choosing honey from small family-run bee-keeping businesses and opting for local kelp suppliers over international alternatives.
The Pros and Cons Of Local Production And Sourcing
While sourcing ingredients and manufacturing closer to home is a success for companies like Lush and Edgewell, you must carefully weigh the pros and cons to decide what is best for your small beauty business.
The ‘Made In’ Effect And Building A Brand Story
Local sourcing can act as a key selling point for your products.
This is thanks to the ‘made in’ effect: the competitive advantage companies enjoy when they sell goods produced in certain countries instead of others.
Cosmetics produced in the US benefit from this effect. Data cited in Consumer Reports shows that 78% of Americans prefer to buy an American product over an identical one made abroad.
Plus, over 60% of those surveyed claimed they would pay at least 10% more for the American-made version.
Qualifying for the ‘made in USA’ claim can build trust, drive new sales, and allow your beauty brand to charge more relative to a cosmetic of comparable quality made in another country.
The ‘Sourced-In’ Effect
A similar ‘sourced-in’ effect applies to locally sourced ingredients. GCMagazine lists The Grapeseed Company as an example – a small skin care brand that uses locally sourced organic byproducts of wine to create its products.
Sourcing from wineries in the local area, the brand understood that wine manufacturers often pay for the disposal of the pomace left over after wine production.
Upcycling in this case is not only effective from a traceability and sustainability point of view, but it’s also an effective way to bargain for more cost-efficient ingredients.
Plus, locally sourcing in this way creates a compelling brand story that helps establish your brand identity and sell more products to potential customers.
At Genie Supply, we are proud to produce all of our cosmetic products right here in Bedford, Indiana, USA. Learn more about our approach to innovative upcycled ingredients on our website here.
Improved Sustainability And Ethical Practices
Did you know that a 2023 NIQ survey found that 62% of beauty consumers claim sustainability is more important than two years prior?
Making more sustainable moves is becoming an expectation for cosmetic brands – and sourcing closer to home is one effective way to show your commitment to helping the environment.
Manufacturing domestically and choosing local ingredients can significantly reduce your brand’s carbon footprint as it cuts the total transport miles for your beauty products.
Plus, it’s easier to trace the entire production process for locally sourced goods from beginning to finish.
This transparency is important to ensure your cosmetics are produced using ethical practices, including fair labor treatment and sustainable use of resources.
Sourcing locally can also facilitate cleaner beauty, as local ingredients typically do not require treatment with extra preservatives or harsh pesticides.
At Genie Supply, clean, ethical, and sustainable practices run at the heart of our US-based cosmetic manufacturing business. Learn more about our philosophy on our website here.
Reduced Lead Times And More Efficient Delivery
Choosing suppliers from abroad can lead to hold-ups as you wait for ingredients from all over the world to ship to the manufacturing plant.
These delays make it difficult to respond to trends quickly in this ever-evolving beauty market that rewards first movers.
Sourcing your ingredients and producing your products domestically helps reduce these lead times and results in a more efficient production process overall.
Choosing international suppliers will also result in longer shipping times. According to a Eurofound 2019 report, delivery time was the second most common motivation for reshoring, falling just behind global reorganization.
Plus, research by Rocca and colleagues showed fuel consumption costs account for at least 30% of cosmetic businesses' total transport operating costs.
Longer delivery times also impact the end consumer. In the age of same-day delivery, consumers are more impatient than ever when it comes to receiving their products.
A 2022 Ipsos-Octopia survey found that 85% of online shoppers would not repurchase from an e-commerce store following a poor delivery experience, and 36% consider the cost of delivery as a key factor influencing their purchase decision.
Manufacturing your cosmetics domestically results in faster and more affordable delivery as your finished goods have a much shorter distance to travel to your warehouse (or directly to the end consumer through dropshipping).
Less Vulnerable To International Supply Shocks
Unforeseen circumstances are an ever-present looming threat in business, and the impact can be especially devastating if you source your products abroad.
Economic, political, and even climate-related shocks can cause delays or bring your production process abroad to a halt - even if conditions are much more favorable domestically and demand for your cosmetic products is booming at home.
This leaves a lot of potential sales on the table.
Sourcing domestically is considered less risky as it typically involves sharing the same economic realities as your largest customer base.
Forbes attributes much of the recent effort to reshore as a response to lessons learned from international supply chain disruptions and product shortages during the global pandemic era.
The same risk of international supply shocks applies to sourcing ingredients, too.
Vogue Business notes that Unilever experienced shortages of certain cosmetic ingredients including sunflower oil due to Russia’s invasion of Ukraine.
The megacorp was forced to reformulate products with alternative vegetable oils like rapeseed.
While large businesses like Unilever can easily eat those production delays and reformulation costs, it’s difficult for smaller brands to compete when a key ingredient is impacted by unexpected supply shocks abroad.
Local Sourcing Is More Expensive
The biggest downside of local sourcing and production is that it is almost always more expensive than alternative options abroad.
Operation and labor costs are much higher in the US relative to most developing countries, and this cost differential will significantly increase the amount of money required to manufacture your beauty products domestically.
This extra cost of production can be partially offset by consumers' higher willingness to pay for local goods, and also through cheaper delivery costs closer to home.
Local Production Limits Your Options
Restricting your supplier search to US-based manufacturers limits your options which can be especially detrimental for brands that sell niche beauty products.
There could be a much better match for your exact manufacturing requirements abroad, and it’s worth exploring all of your options before you make a location decision.
Opting for locally sourced ingredients also requires careful planning as you scale up your business. Local ingredients are often limited in stock and this acts as a bottleneck as demand for your products increases over time.
As outlined by GCMagazine, businesses are tempted to switch to larger, less expensive ingredient suppliers from abroad with scale.
However, this move can be damaging for brands that market locally sourced ingredients as a key selling point.
It reads as inauthentic to your brand and can undo a lot of the work that grew your business among sustainability-minded and ethically-conscious consumers in the first place.
In sum, the pros and cons of local sourcing and production include:
Pros:
Benefiting from the ‘made in’ effect and building a brand story
Improved sustainability and ethical practices
Reduced lead times and more efficient delivery
Less vulnerable to international supply shocks
Cons:
Local sourcing is more expensive
Local production limits your options
Are you ready to source your cosmetics right here in the USA? Whether you’re interested in preformulated products or making your own beauty line from scratch, Genie Supply is here to help! Get in touch via email: customerservice@geniesupply.com or call: (812) 329-1105 for more details.
