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Perspective On: A Cosmetics & Personal Care Products Lab

Embattled like much of the United States economy, and having endured several years of anemic demand from consumers caught in the throes of a prolonged recession and high levels of unemployment, the $58.3 billion a year cosmetics and personal care industry in the US is eager for a rebound.

by Bernard B. Tulsi

Cosmetic Labs Eye Naturals and Especially Anti-Aging Products for Future Growth

Embattled like much of the United States economy, and having endured several years of anemic demand from consumers caught in the throes of a prolonged recession and high levels of unemployment, the $58.3 billion a year cosmetics and personal care industry in the US is eager for a rebound—which analysts foresee materializing only around 2014.

The industry has seen a steady stream of consolidation and today has three major players—Loreal, Procter & Gamble and Unilever. Arun Nandagiri, who is currently principal at Bria Research Labs after 15 years as director of R&D for hair care at Unilever, says that companies are not only consolidating but they are merging product lines and dumping products that lag in performance. As a result, he says, “There is an excess capacity of chemists who lost jobs due to these acquisitions. We are seeing a lot of good talent go to waste.”

In its Beauty Industry 2010 Review and 2011 Outlook report, Demeter Group, a San Francisco-based investment bank that focuses on the food, beverage and beauty industry sectors, noted that consumers have kept a tight lid on their spending on cosmetic and personal care products. This is especially true for the “under 30” demographic—typically a major consumer category for these products; this group has been hardest hit by the weak labor market. Overall, amid widespread belt tightening, many consumers have traded down from luxury brands to lower-cost alternatives, including mass market and private label products, a sector that now actually seems like one of the few bright spots in the industry.

Another bright spot is the cosmetics and personal care laboratory sector, especially the independent contract segment. Mark Goins, director of business development with Q Laboratories, a midsize outfit based in Cincinnati, Ohio, that specializes in microbiology and analytical chemistry, says that recessionary downturns have hardly affected Q Laboratories’ operations.

Economics is a big part of the reason cosmetic companies outsource to contract labs, according to Goins. Companies want to keep their costs low but their quality and standards high enough to pass Food and Drug Administration (FDA) and other regulatory and quality hurdles. “In this tough economy, the larger cosmetic companies try to shed the overhead and other costs linked to their inhouse laboratories by outsourcing more work to contract labs.”

There are also practical and technical reasons for outsourcing laboratory work. Goins explains that customer relationships are mostly long term and that contract labs become highly familiar with customers’ products, preservatives and operational systems, making it easier for them to participate in such in-house staples as research and development (R&D) and safety testing before and after products enter the market. Furthermore, preservative efficacy testing entails inoculating and testing products against bacterial and fungal (yeast and mold) contaminants to ensure potency. “The large cosmetic companies don’t want to have live bacteria in their facilities. In addition, they also want to have data from credible independent labs for the FDA.”

Yash Kamath, who is now an independent consultant focusing on safer cosmetics after serving as director of research at TRI Princeton, agrees that cosmetic companies need to work with independent laboratories because of regulatory stringencies. He says, “I work occasionally with the internal teams of cosmetic companies and bring new knowledge into their organizations. Many companies go to universities and outside consultants to bring new light to the problems that they are trying to solve or new products they are trying to develop.”

He offers one caveat, however: “Companies sometimes avoid hiring people on a long-term basis because they feel they could get things done outside for relatively lower cost. This may or may not still be the case, and many companies are very careful when developing new products or intellectual property, because they don’t want the new knowledge they generate to go outside their organizations.”

Nandagiri, whose Bria Labs now specializes in hair relaxers and hair colors, notes that although mega companies have their own testing, they don’t have the capacity to do so on a timely basis. “Furthermore, they come to labs like ours for unbiased opinions. We can compare their products, using double-blind testing, with those of competitors and give them an independent opinion.” He explains that companies sometimes can’t do this kind of testing in-house because of a lack of intellectual capability, and they don’t necessarily want to or can’t staff up because of their limited usage of certain capabilities, the fact that specialized staff are not available, and high costs. “Under such circumstances, independent labs represent a much better alternative for them,” he says.

Q Laboratories’ worldwide client roster includes 13 Fortune 500 companies, and its services include testing for contaminants, shelflife analyses, verification of raw material and active ingredient claims, and quality control. Goins says that a notable portion of the lab’s work is with raw material companies during their ingredient development stage. Ingredients are rigorously tested to establish their efficacy, safety and potential shelf life. Raw material producers need such data to prove the viability of their ingredients in a cosmetic formulation and, for new ingredients, to demonstrate how their application could lead to product improvements.

Developers of raw materials use systematic and detailed laboratory investigations to develop, discover, prepare and test new cosmetic ingredients. Part of their responsibility entails evaluating and providing data on any safety and toxicity issues attributable to their ingredients, and to supply guidance for their proper handling—typically in a material safety data document, which is available both to the industry and to consumers.

According to Desiree Mattox, owner and lead chemist of contract manufacturer Envié Bath and Body, a Certificate of Analysis (C of A) also accompanies raw materials. The certificate lists key attributes of the ingredient, including its molecular weight, pH, color, odor, texture, viscosity, boiling and melting points, and microbial content. Suppliers also maintain records of key analyses— MS-GC, HPLC and IR, among others, according to Mattox.

In general, R&D and QA/QC are the purview of in-house labs, says Janet Blaschke, CEO of International Cosmetics and Regulatory Specialists, which provides major multinational companies as well as small and midsize cosmetics and personal care companies with advice and assistance to comply with regulations in different countries. “If a U.S. company wants to take a product into France, for example, we help them perform all the procedures necessary to ensure that the product has appropriate ingredients, meets legislative requirements and is properly registered—we also help foreign companies bring products into the US market,” she says. Her company also represents clients at the FDA, and conducts audits at new cosmetics facilities to help bring them into compliance.

Janet Blaschke, CEO of International Cosmetics and Regulatory Specialists.

Blaschke says that tests outside of the R&D and QA/QC sphere are generally farmed out to contract labs. Repeated patch testing to show safety for use on the skin, in vitro eye testing, chemical testing and organoleptic evaluations are done at in-house facilities, while chemical tests, claims substantiation and eye irritation tests, among others, are done at contract labs.

During development work in the laboratory, the challenge is to create a stable product that delivers the desired performance. Once a product candidate is considered viable, there is a scale-up process that includes the creation of a pilot batch in a production setting that incorporates stability testing at elevated temperatures and controlled humidity, according to Blaschke.

This is followed by microbial challenge or preservative effectiveness testing to determine how well a product can stand up to microbial insult. If it is evaluated positively at this stage, it moves on to production.

Then quality assurance is performed, as well as organoleptic testing; i.e., the touch and feel of product. Additional testing at this stage includes viscosity analysis, pH, and further analysis of the pivotal ingredients, according to Blaschke. Despite the extensive use of scientific instrumentation and advanced analytical tools, Blaschke acknowledges that the development of cosmetic and personal care products is “half science and half art,” noting that there is considerable reliance on additional expertise regarding fragrance, texture and feel on the skin, among other specialties.

One such specialty is color, according to Nick Morante, principal at Cosmetic Consultants, which specializes in color cosmetics. “I consider myself a service laboratory to companies that don’t have their own internal R&D people—they go through me to get a custom formulation,” says Morante, who has 35 years of experience in cosmetic formulation and product development and worked at Estée Lauder until the company went public. He says that his clients typically don’t have the capital to go to contract cosmetic manufacturers such as Kolmar Laboratories or Intercos America. Instead they buy formulas that are already developed and may need slight alternations based on their requirements. He says that large companies may also choose this route if they are under a time crunch for a product launch that cannot be done internally. Morante is one of a small and select set of experts who specialize in color cosmetics.

Nick Morante, principal at Cosmetic Consultants.

In general, Blaschke says, cosmetic formulators are typically chemists, whose most common skill sets include chemistry and microbiology. Industry-specific education is not common, although a few universities have recently introduced master’s degrees in cosmetic science. In fact, color specialist Nick Morante currently teaches a graduate class at Fairleigh Dickinson University, which offers a master’s degree in cosmetics science.

Commenting on how the cosmetic lab sector is organized, Q Laboratories’ Goins says, “Some of our competitors only do microbiology testing and some only do analytical testing. Our competitors are very specific about the products they work with, whereas we take a broader approach. Certain labs will set up near a large corporation and do 90 percent of their work for that large company. We have no customer that provides more than 3 to 5 percent of our volume.”

Goins says that facilities like Q Laboratories are regulated by the FDA. “We get audited and register with the FDA for product testing.” The FDA is responsible for regulating personal care products. Cosmetic companies are legally bound to prove safety and ensure that their products are not misbranded nor adulterated with foreign matter or improper ingredients. In situations where this happens, the FDA has the authority to inform the public and initiate a recall of the product, says Blaschke.

Norm Estrin, president of Estrin Consulting Group, Inc., in Potomac, Maryland, a recognized authority in the medical device and cosmetic industries, says that there is a fine line separating over-the-counter (OTC) drugs and cosmetics in labeling claims in the U.S. “Cosmetics claims are regulated by the FDA, and this is especially important for foreign firms trying to export to the U.S.— they need to do this at Customs because their claims are sometimes drug claims.”

Estrin says that the Food and Drug Cosmetic Act defines cosmetics by intended uses such as cleansing, beautifying and altering appearance, all of which are cosmetic claims. “Puffery claims,” exaggerations and poetic language, like “energizes your hair,” cannot be regulated by the FDA because they are not quantitative, he says, adding, “You can get away with those.”

Cosmetic producers are also allowed to use language with claims like “covers up fine lines,” he says; however, they can’t say “renews the skin” because this implies that the product affects the structure of the skin, which is a drug claim and implies effects on the function of the body. He notes that some foreign companies may not understand American idiom and have been known to use language in their claims that is not acceptable.

Estrin says that review times are increasing, and the cost is increasing because the FDA now charges for this process. He says that the cost may decrease innovation; nonetheless, he acknowledges that “in the cosmetics industry where new products and new claims keep coming out, it is important to substantiate those claims and the safety of products.”

In the future, Q Laboratories’ Goins foresees more standardization of regulation and harmonization between companies “because this is such a global marketplace and overseas companies want to market to the United States and vice versa.”

Blaschke says that there will be increased technical capability in the industry because instrumentation is becoming less expensive and more available to midsize companies. She also foresees “increased emphasis on international products, and the movement of products into a more global marketplace, which will make regulations much more important.”

Blaschke says that there will be increased technical capability in the industry because instrumentation is becoming less expensive and more available to midsize companies. She also foresees “increased emphasis on international products, and the movement of products into a more global marketplace, which will make regulations much more important.”