The case for North American—and particularly U.S.—manufacturing in the beauty industry continues to pick up speed as market conditions around the world evolve. For U.S. brands, having a supplier nearby means agility and flexibility in adjusting orders and launch dates, decreased lead times, convenience for checking on jobs in production, time zone similarities, like-minded business practices, advanced technology and more. A portion of manufacturing in the beauty industry is returning to North America from Asia, specifically China, due to reasons such as shipping and fuel costs, long lead times, rising wages and even a growing number of middle class consumers there who are straining manufacturing capacities for export goods.

In addition, the Made in USA mark has become an assurance of safety, quality and advanced manufacturing techniques for consumers around the world. When it comes to cosmetic formulations, especially, this presents an opportunity for U.S. manufacturers to increase global sales.

Katy George, an analyst at McKinsey & Company, a global management-consulting firm, recently coined a new term for determining the best region for manufacturing. Unlike “re-shoring,” which indicates a move toward bringing manufacturing back to a developed area once labor costs have risen in a developing country, “next-shoring” focuses on proximity to demand and proximity to innovation—two key factors that help companies decide where their product manufacturing will best be carried out. George and her co-authors say,  “Next-shoring isn’t about the shift of manufacturing from one place to another, but about adapting to, and preparing for the changing nature of manufacturing everywhere.”

What’s a Brand to Do?

Many beauty brands use suppliers in multiple global locations in order to be close to each market they serve. In the U.S., a number of beauty brands are increasingly choosing manufacturers that are within easy reach—tying in to proximity to domestic demand and to innovative packaging and practices.

With evidence that companies, in general, are bringing production to (or back to) the United States, the Economic Statistics Administration, part of the U.S. Department of Commerce, International Trade Administration, created the Assess Costs Everywhere Tool, which lists several factors including, but beyond, labor costs, such as travel and oversight, quality, IP issues, regulatory compliance, inventory, etc., which can serve as a guideline for companies trying to determine what geographical region best suits their manufacturing needs.

Manufacturing in the USA

For this article, our annual look at U.S./North American manufacturing in the beauty industry, we polled a number of packaging suppliers that produce cosmetic packaging domestically, either exclusively, or in addition to using factories in other global regions. Their answers as to why they choose this route vary, but most reflect the reasons mentioned above. Several agree that the flow of manufacturing is increasingly U.S. bound, and some say their domestic capabilities have indeed won them brand contracts, whether for features such as proximity, innovation, speed to market, flexibility, legacy quality or patriotism.

Speed to Market

Speed to market is one of the leading reasons U.S. brands have boosted manufacturing in the U.S./North America. With rapidly changing consumer demand and the necessity to control inventory and new launches, the ability to be nimble has become increasingly important.

At Kolmar Laboratories, Inc., Port Jervis, NY, Amy Skellett, marketing and communications manager, says: “In today’s market, speed to market is critical. Launch times are significantly compressed—consumers are hungry for new products at a rate never before seen in our industry. USA manufacturers have the ability to develop, manufacture and ship within a compressed time frame.” She says there are definite advantages that come with “Made in the USA” from the sourcing of raw materials and components that help to create shorter lead times to the more effective communication and timeliness of answers from Kolmar and its suppliers. She adds: “There is great value in working with our American partners.”

Skellett says U.S. manufacturing is in a comeback phase. “Years ago, driven largely by the perception of low cost, there was a shift towards overseas production,” she says. At Kolmar, however, the strategic focus has been to invest in new technologies, state-of-the art equipment and automation, “putting us in an excellent position to effectively compete in a global marketplace.” Skellett explains that brands that experienced firsthand the advantages and disadvantages of outsourcing overseas are now recognizing the full value in sourcing through the U.S.—high quality, innovative products, excellent customer service and supply chain reliability, all at competitive, full value prices. “The pendulum has swung back towards U.S. manufacturing,” says Skellett.”

Speed to market is also a leading criterion at HCP USA, Inc., where Damien Dossin, president, says: “We choose to manufacture domestically to support certain customers’ needs for very short reorder lead-times and speed to market.” He says as long as pricing is competitive, the range of products they can offer is almost limitless.

For example, Dossin says, “We helped Alima Pure launch their Natural Definition Mascara. The advantage to the brand was that we were able to coordinate our delivery with their development and launch timing, and our packaging was perfectly suited to their ingredients, which are 90% natural and naturally derived.

Flexibility boosts speed to market at Alpha Packaging, St. Louis, MO, where Marny Bielefeldt, director of marketing, says domestic manufacturing allows Alpha to expand more readily when customer demand requires it. “For example,” she says, “if we have a customer who moves their filling location to a new area or adds a filler across the country, we can respond quickly by moving machinery or molds to a new location. Because we have many identical machines located at multiple U.S. locations, it’s not unusual for us to move a blow set from one coast to the other to accommodate customers.”

Flexibility and speed to market are also key for customers of CoValence Labs, Chandler, AZ, where Melinda Wochner, chief marketing officer, says, “In general, and per the testimonies of our clients, our manufacturing flexibility is far better in the U.S. than in other countries, which makes working with CoValence Labs far more convenient and advantageous in order for brands to increase their speed to market.”

In Dallas, NC, at CTL Packaging USA, Anna Soden, director, sales and business development, says customers cite a number of reasons for choosing to manufacture in the U.S., from speed to market to patriotism.

She says, “We are seeing a strong desire for Made in the USA products. Companies want to support manufacturing and jobs in the USA more than ever. Domestic customers notice the difference in overall quality, ease of communication and speed to market with their products.”

According to Soden, many of CTL’s customers “find value in sourcing products like ours in the USA, especially as we offer decoration luxury, flexible MOQs and ease of logistics all in their backyard.”

For instance, when one of CTL’s customers, Eufora International, needed a new tube for its collection, Eufora’s package designer, Derek Hutcheson, principal, Hutch Design + Brands, says he was so happy to work with CTL, where all these services were available locally.

Hutcheson says, “What happens when form follows function and it just isn’t enough? From a package designer’s perspective this has been my lament for years when it comes to tube design and manufacturing.  Whether it’s dated technology, limited silkscreen capabilities, oppressive manufacturing ‘minimums’ or under-performing label applications, it all added up to an uneasy compromise.”   

Then, says Hutcheson, “Along comes a company called CTL and the creative strait jacket is taken off. As part of a larger packaging redesign initiative for my client Eufora International, I had specific design and graphic requirements that needed to be met. With CTL’s unique production capabilities, those needs were not only met, but were exceeded. From color-matching foils to wrap-around graphic positioning to full bleed four-color process printing, my particular tube design relied heavily on those unique production capabilities, and CTL delivered exceptionally well.”

Rooted in the U.S.

Similar to Kolmar, there are a number of packaging suppliers who started out in the U.S. many years ago and never felt the need to outsource or expand their facilities beyond its borders. However, these companies also ship internationally—and with the perceived value of a Made in USA product, sales for many are climbing.

Paul M. Lieber, CEO/founder, Royal Labs Natural Cosmetics Inc., Johns Island, SC, states: “We are a U.S. company manufacturing exclusively in the U.S. We can be cost competitive with any company in any country.”

Royal Labs recently completed a project with the Deep Steep brand. Lieber says the entire product was manufactured in the U.S., including the packaging. “We have good suppliers that can deliver on time with good quality,” he says, “with no challenges.”  What’s more, he adds, “This is our business, it’s not complicated, we are a contract manufacturer; we must be able to deliver quality goods at competitive pricing. I would much rather keep Americans employed while protecting our homeland economy.”

 Arkay Packaging was founded over 92 years ago in New York City, so Mitchell Kaneff, chairman/CEO, explains, “Our roots are in the United States and we have a strong culture that reinforces a belief in America: increasing jobs, creating jobs, and monitoring the kind of quality that a Made in the USA label has come to represent. Additionally, with our manufacturing plant in Virginia, we can guarantee our customers rapid turnovers and speed to market.” Arkay also ships internationally: 28% of the company’s goods are sent to Great Britain, Belgium, France, Germany, Japan, China, and Canada.

Kaneff says that Arkay continually invests in high-speed and cutting-edge technology “so that we can produce our high-quality goods quickly and efficiently. This strength—plus our strategically located plant and our lower overhead—gives us a competitive advantage over global competitors.”  

CoValence Labs was a U.S. start-up in 1989. Wochner says, “We manufacture with a ‘hands-on’ approach from our top executives, which is why we continue to manufacture in the U.S.” She says that while 100% of CoValence’s manufacturing is carried out in the U.S., the company’s client base is expanding globally with approximately 85% U.S. to 15% international.

While Wochner is unable to share specific products that were recently launched with the ‘Made in the USA’ moniker, she says, “I can share that the request for the ‘Made in the USA’ label is continuing to grow, and our International Regulations Department is ready to help our clients succeed in international markets.”

Royal Labs Cosmetics has also seen increased international business. Sanders Lieber, creative director, says, “We’ve seen a lot of interest from foreign companies [especially Asian ones] interested in manufacturing in the U.S. I think American beauty products have a reputation for quality and efficacy, which is in high demand globally. And the growing interest in natural and organic products seen here domestically is even larger overseas. The culture values living in balance with nature-eschewing chemicals. I think overall there is great opportunity for American brands to gain traction overseas.”

Hazen Paper Company is a family-owned and family-run specialty paper converter established in Massachusetts in 1925. A large portion of Hazen’s business is in North America, although the company ships all over the world. According to company president John Hazen, “There is no question that American brands appreciate the fact that we are located in the United States. But the attraction is less our address than the distinct benefits our company, our skilled workforce, integrated manufacturing operation and even our way of doing business provide.”

Already operating a large-format holographic design lab and studio, in 2007, John Hazen explored solutions in Asia to ramp up capacity. Instead, he returned to create a new, fully integrated manufacturing facility. With creative and production in-house, he says the company routinely delivers a holographic proof within 48 hours of art receipt, and complete production in weeks rather than months. “Control is critical,” says Hazen. “Customers know we’re fast and reliable, which ensures their product gets to market on schedule.”

The size of Hazen’s operation allows for additional efficiencies. “Often we will finish a holographic product at our facility in Indiana because of its proximity to customers and certain paper sources, eliminating three to four days of burning diesel on the road. Not only is it more affordable, it’s more responsible,” says Hazen. He adds: “Eco-aware clients also appreciate that Hazen has certification to supply converted paper and paperboards that are FSC, SFI and PEFC certified.”

Bielefeldt says Alpha Packaging was started more than 25 years ago by an American entrepreneur who felt strongly about the growth potential for U.S. manufacturing. “While we certainly serve global brand owners, most of the products that go into our bottles and jars are filled and sold in the United States,” she says. Because Alpha manufactures the same products at multiple U.S. locations, they can serve customers from the plant closest to their filling location, even if they have more than one filler. Approximately 90% of Alpha’s sales are in North America, and seven of its eight manufacturing plants are in North America (six in the U.S. and one in Canada).

Bottle Coatings, Inc., in Los Angeles, provides a patent-pending UV-protectant coating for glass bottles that contain UV sensitive contents, particularly UV-cured nail polish gels. Shivie Dhillon, president, says the company has many long-standing relationships in the U.S., and is also a member of the U.S. Manufacturing Alliance. “So,” he says, “we have invested considerable time and money into establishing our reputation and building trust within the American marketplace. Though we are cultivating business relationships across the globe, our present clients are U.S.-based, so running our operation in the United States is a natural fit for us.”

The Penthouse Group was established in 1952 in a “penthouse loft” in Manhattan, then moved to a new industrial park in Freeport, NY, in 1962.  Steven Ostrower, president, says the company is the last remaining manufacturer of powder puffs in all of North America. He explains, “Our automation, efficiency and technology have enabled us to remain competitive in this location.” Approximately 25% of The Penthouse Group’s total business is generated from powder puffs that are Made in the USA in its Freeport, NY, location.

Customers’ Choice

Many of the suppliers we spoke to for this article report that demand from beauty brands for American-made goods has gotten stronger even over the last year or so.

HCP USA’s Dossin says, “The demand has grown significantly, to the point that customers have made domestic manufacturing a requirement in order to be considered for certain programs.”

He notes that there are several reasons for this, ranging from offering speed to market for urgent launches, to JIT deliveries, technical knowhow for certain proprietary technologies, to helping customers manage categories which are particularly challenging to forecast.

“Customers would rather pay a little more for their packaging,” says Dossin, “than lose sales by being out of stock on very popular items.”

In addition, Dossin says buying domestically allows for smaller reorder MOQ’s since there is six weeks of shipping required in the lead-time. “In some instances, the complexity of tooling is better suited to domestic development,” he adds.

Remarking on recent favorable media coverage, Arkay’s Kaneff says, “Certainly news outlets seem to be touting a return to a Made in USA ethos, but regardless, I believe that inconsistent quality, communication, and timeline delays can plague overseas manufacturing for our clients.” He continues, “We’ve experienced customers returning to us—after manufacturing goods in China—to ‘fix’ a carton ineptly produced there. It’s not only quality that can suffer, but in China there is a burgeoning middle class, which is putting a strain on manufacturing and drawing the focus more internally, as opposed to exporting.  Of course, this further reinforces the positive aspects of Made in the USA.”

Purchasing goods made in the USA also fits with some companies’ sustainability efforts.

At Alpha, Bielefeldt, says they’ve seen the demand for American-made packaging strengthen over the last decade, and accelerate even faster in the past few years. Some of the reasons for this, she says, “include the very long time that it takes brand owners to resolve issues with overseas suppliers when problems do occur, as well as many brands’ desire to support U.S. manufacturing.” She says “Buying American” also plays into many companies’ sustainability strategies, as the amount of fossil fuel required to move product across the state or even across the country is substantially less than moving items from overseas.

The Penthouse Group’s Ostrower agrees that there’s been a stronger demand for American-made goods in the last year or so, saying, “The guaranteed quality and reliability of USA made goods continues to hold the greatest reputation in the world.”

He says, “Our customers are very confident in our ability to develop, manufacture and deliver critical components from our NY location.” He adds that many of the largest “powder manufacturing” sites are within a one-day transit time from their Freeport, NY location.  

The Penthouse Group recently produced a powder puff for Revlon for their Nearly Naked Pressed Powder. Ostrower says the advantage for Revlon is the proximity of The Penthouse Group’s development and manufacturing.

“We were able to make very quick, precise and efficient submissions within 24 hours to the Revlon development team in NYC and at the Oxford, NC global powder facility. Once development was complete, The Penthouse Group and Revlon were able to collaborate on a just in time delivery program that reduced delivery lead-times from our NY facility to Revlon in Oxford, NY to less than one week.  This enhanced the supply chain for both parties to maximum efficiency.”

While Diamond Wipes International, Inc.’s component suppliers are located both domestically and internationally, Moto Okawa, marketing manager, says, they manufacture all of their wet wipe products in the USA in their California and Ohio plants.

Okawa says, “Many of our brand partners have had a domestic procurement policy in place for many years, some from Day One. Our U.S. manufacturing business model has increasingly been viewed positively by a large number of our customers and potential clients, citing their desires for quality products made in the USA as well as a commitment to reduce environmental impacts in all stages of a supply chain.”

Earlier this year, Diamond Wipes invested and added a facial sheet mask conversion capability. Popular for many years in Asia, Okawa says these sheet mask products are conventionally produced in South Korea, Taiwan and China. “A few of our forward-looking brand customers were excited to partner with us to procure their sheet masks domestically,” says Okawa.

 
Dhillon, of Bottle Coatings, Inc. credits the efficiencies of U.S. made products for the rising interest. “The demand for American-made goods continues to increase because countries such as China are becoming less efficient and cost-effective,” says Dhillon. “We can offer much shorter lead times, and there are none of the communication issues that might arise with other regions of the world. Besides that, the price gap between American and third- or second-world manufacturers has shrunk considerably.”

In recent years, Kolmar has “definitely seen a dramatic increase in customer strategy and desire to manufacture within the U.S., says Skellett. “For some brands, the Made in the USA claim is an important part of their marketing strategy. By carrying this claim, they know their customers are going to receive the highest quality product.”  She adds: “We are seeing an increase and a resurgence of pride in the Made in the USA claim across many industries.”

 Skellett says service and reliability are driving business decisions even for brands whose strategy is not focused on the Made in the USA claim.  As one example, Kolmar was awarded a pressed powder project due to a long lead time from the customer’s Italian based supplier. She says the need for reliable service and competitive lead-times drove the decision, winning out over brand strategy.

Sealing the Deal

Beauty Packaging asked suppliers if their ability to manufacture in the U.S./North America has directly influenced any packaging projects they’ve received.

Hiram Santana, western territory sales manager, Olcott Plastics, says, unequivocally, yes, adding, “We don’t see a single outstanding factor, but instead multiple reasons for why this is happening.” Among them, Santana says the competitive edge that offshore manufacturers had for some years due to cost has disappeared. Labor costs have gone up abroad, and the rising price of oil has led to increases in shipping and distribution.

On top of that, says Santana, “In recent years the media has made Americans aware of some of the unethical and unsafe manufacturing practices in foreign supply chains. Consumers paid attention to these stories, and ultimately, brands responded by re-shoring some of their manufacturing. With cost parity between U.S. and foreign manufacturers, there was only an upside for those companies making this move.”

In Olcott’s business, manufacturing plastic jars and closures for health and beauty markets, Santana says they see several positive trends—among them, a definite desire to move toward sustainable business practices. He says, “This means that companies are looking at the way they do business and trying to make less of an impact on the environment. Local sourcing is part of that.”

Santana notes that security, quality and turnaround are at the top of the list for brands when it comes to buying American. “When we’ve asked our customers what they value about using an onshore manufacturer, their number one answer is a sense of security,” says Santana. Another valued benefit is fast turnaround, because there’s no 4-6 weeks of shipping time when you’re working with a U.S. manufacturer. Quality is another factor that leads companies to choose an American manufacturer. The health and beauty consumer is very sensitive to product quality, so it is important for companies to distinguish themselves with higher-quality goods. In our area, we deal with a variety of regulatory restrictions—for instance, on toxic chemicals in consumer goods—and U.S. manufacturing is simply more responsive to these concerns.”

At Arkay, customers can appreciate the quality as well as the quick turnaround time. Kaneff says the ability to respond rapidly is key, and with an American plant, “we can do this.”  Through procurements, purchasing and marketing, he says, “Everything can be communicated to the factory quicker and our turnaround time to our customers reflects this speed.”   

Dhillon says that while Bottle Coatings ships all over the world, “Our cosmetics customers are U.S. based and prefer the quality, the efficiency and the manufacturing protocols of an American company. As powder coating on glass has become a more recognizable technology within the cosmetics industry, many additional U.S. suppliers have jumped on board to support our efforts. So this has increased our efficiency even more and gives us a big advantage over, say, competitors from China, because we can offer shorter lead times and more flexible runs, while still keeping our costs very competitive.”

In the past two years, Okawa says Diamond Wipes’ ability to manufacture in the USA has played an important role in earning business from several of their customers who switched from importing their products from countries like South Korea or China, “where wet wipe concepts are extremely popular and so is their production.”

HCP USA’s Dossin says, “We certainly have won business thanks to our proximity to customers in the USA. As mentioned earlier—some project awards have been predicated on the manufacturing being done in the USA.”

Near and Far

Oftentimes it makes sense for large industry suppliers to manufacture specific products in various global regions depending on a number of criteria. Such is the case with HCT Group.

Erwan DePays, vice president, global POS Division, HCT Group, says, “HCT Group produces approximately 90% of our point of sale production in the U.S. This allows us to provide high quality finished retail display units with shorter delivery lead times and reduced shipping costs, which is incredibly beneficial to our customers.” DePays says the cost of manufacturing in China is not what it was 15 years ago, and particularly with POS, shipping large, heavy units represents a certain cost. Another advantage to producing domestically, he says, is the option to visit the manufacturing site. “This gives our clients greater confidence in the finished product.”

Shoring Things Up

From off-shoring to re-shoring to “next-shoring” the cycles and trends continue to evolve as beauty brands everywhere search for the best manufacturing sources they can find to meet their needs and those of their customers.