Help! My Contract Manufacturer Has My Formula
In the personal care and beauty industry, formula ownership is often a method that forces customer loyalty. Often contract manufacturers have a lab, stock formulas, etc. they can offer. While some of these formulas can be decent, we’ve seen the smaller customers sometimes deal with extended lead times and poor communication. If you fall into this category, here are the options for you.
1. Buy the Formula from the Contract Manufacturer
While this seems obvious, you need to be careful. We’ve seen many customers come to us with the formula they paid for from their contract manufacturer and they’re wrong. Sometimes the formula is missing ingredients or has incorrect percentages. On the subtle side, it won’t include the manufacturer and part number of the ingredients. Ingredients made from 2 different suppliers can be of different strengths, colors, etc. If you go this route, make sure you ask for a copy of a previously run batch record with the Bill of Materials (BOM) and check for the above information.
2. Reverse Engineer your Formula
This can be done without too much difficulty and there are a few different routes.
Formula is reversed and owned by the lab (Cheapest Option)
Formula is reversed and customer buys and owns the formulation
Formula is reversed and ownership is transferred to the customer by amortizing payment on a cost per unit basis until the formula cost is paid.
A word of caution when looking to reverse your formula and switch to a new contract manufacturer: Be sure to have a few month of finished product inventory before making this commitment. Typically, you’ll have a few revisions of the reversed formula. These products represent your brand and you’ll want to make sure your existing customers buy into things like texture and fragrance. We’ve seen this drag on and delay
Tips & Considerations:
Fragrance – There are several “notes” to a fragrance (top, middle, and base) such that the smell changes in time. An experienced perfumer understands this well and can get the fragrance experience close, however there can be a few differences in the reversed fragrance. If you believe fragrance is carrying your brand, you’ll want to have a good roll out strategy to make sure the new formula won’t shy customers away.
Texture – Over time a product sitting on the shelf will have subtle changes in its look and feel. A good formulator understands some of these changes, but it can be misleading. It’s helpful to understand this and ask your formulator if you think something is not quite right. A good example is “pearling”. This is where the appearance looks like a pearl. This typically appears after a while of a product sitting on the shelf. A reversed formula right out of the lab may not have this look from your baseline, but it will occur over time. In this instance, if “pearling” is important to you, we can force the appearance with a pearling agent that makes this appearance right out of the gate.
If you are serious about reversing your formula, you’ll want to make sure you have the right tools for your selected formulation lab to give you the best value and performance. Here are a few things to consider:
MSRP Disclosure – Labs can use very expensive ingredients for performance and marketing, but also cheaper ingredients that can perform just as well in some cases. You want to let your formulator know what the product will be sold for. This way the finished formula will not break the bank when run at volume.
Sample – This is obvious, but you’ll want to provide a sample with the ingredients list and an MSDS if possible. Reverse engineering is kind of like solving a murder mystery and all clues are helpful to find the key.
Variance – If there is something you don’t like about the formula, you’ll want to disclose this up front. Now is the time to fix it. It is also very helpful to share what tolerances you can put up with and ones you just can’t deviate from. Things like smell, texture, feeling on skin, etc. you’ll want to bring up.
There are many considerations when looking to break your current contract manufacturer or own your formulas. It’s best to setup a meeting with the team you are looking to work with and break down exactly what you are looking for and define what it may cost you.
Talara Marketing has an excellent team with extensive experience in the industry including reversing formulas and strategizing for the next move with your brand in terms of scalability. Feel free to reach out to our team even to ask some fundamental questions. Our goal is to help our customers and smaller brands grow, providing many of the back-end resources to your brand so you can focus on selling your product.