Personal Care Products Manufacturing
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Industry Overview
The US personal care products industry includes about 750 companies with combined annual revenue of $40 billion. Major companies include Procter & Gamble, Johnson & Johnson, and Estee Lauder. The industry is concentrated: the 50 largest firms account for nearly 70 percent of industry revenue.
This industry includes companies engaged primarily in preparing, blending, compounding, and packaging toilet preparations. Products produced include makeup, shampoo, creams and lotions, perfume, skin care products, sunscreen, mouthwash, and shaving products.
Competitive Landscape
Demand is driven by population growth and consumer preferences. The profitability of individual companies depends on product innovation, effective sales and marketing, and efficient operations. Large companies have scale advantages in purchasing, manufacturing, distribution, and marketing. Small companies can compete effectively by offering specialized products. The industry is capital-intensive: average annual revenue per worker is over $600,000.
Products, Operations & Technology
Major products include cosmetics, hair products, and creams and lotions. Cosmetics (makeup, deodorant, and nail products) are 33 percent of industry revenue; hair products, 25 percent; and creams and lotions, 21 percent. Other products include perfume (10 percent); mouthwashes (2 percent); and shaving preparations (2 percent).
Cosmetics, such as lipstick, follow current fashion trends and come in a wide variety of colors. Lipstick is made of dyes and pigments in a fragranced oil-wax base. Ingredients are melted separately, and then oils and solvents are ground together with desired color pigments. The manufacturing process includes three distinct steps: melting and mixing the lipstick, molding by pouring the mixture into the tube, and packaging the product for sale. Lipstick manufacturing can be highly automated, producing up to 2,400 tubes per hour, if it's a color or product in high demand; less popular colors are produced manually at 150 tubes per hour. Lipstick has strict quality control procedures, as it's the only ingested cosmetic product .
Hair products are initially created by cosmetic chemists in the laboratory, where they develop the product characteristics and performance attributes. Product characteristics are thickness, color, and fragrance. Performance attributes are cleaning capability and rinsibility. Shampoo is composed of water (80 percent); detergent called surfactants; foam boosters; thickeners; conditioning agents; preservatives; and other additives. The shampoo manufacturing process involves compounding (following all formula instructions to make large batches of 3,000 gallons or more); mixing; testing quality ; filling bottles; and packaging.
Cream and lotions, such as sunscreens, are made with both synthetic and natural ingredients; formulas must be approved by the FDA. Formulations for sunscreens are generally geared toward a specific SPF rating or the needs of a specific consumer group, such as children. Water is purified and then mixed with other ingredients, generally purchased externally, to match the specific formula. Sunscreen is then pumped from mixing tanks through stainless steel pipes into molded plastic containers. The process is highly automated.
Raw materials, readily available from numerous sources, are generally bought externally. Raw materials include both natural ingredients found in various plant and animal sources, and synthetic materials produced and formulated by raw material suppliers. Purchased raw materials include fragrance oils, detergents, active ingredients, additives, and basic chemicals. New ingredients are continually developed by raw material suppliers and, with advances in polymers, silicones, and surfactants, are becoming less irritating and expensive and more environmentally friendly.
Extensive consumer testing assesses demand for new products and ensures compliance with consumer safety regulations. Testing includes evaluating irritation potential for skin and eyes; toxicity (both ingested and inhaled); and reactions with chemicals and to light. Products with efficacy claims, such as antiperspirants, sunscreens, and anti-aging skin creams, are classified as drugs and must go through more extensive testing to get FDA approval.
Information systems support all business processes including product development, marketing, sales, order processing, production, distribution, and finance. Supply chain management systems help optimize inventory levels and reduce delivery times among manufacturers, suppliers, and retailers.