Craft Beauty Lab’s Christina Mahar On The Cost And Speed Pressures Facing Beauty Manufacturers Today

When beauty industry experts stress the importance of differentiation for emerging brands, they’re generally referring to consumer propositions and marketing strategies—and those are important, but a robust supply chain may be one of the most underrated differentiators for emerging brands.

Christina Mahar, who’s been on both the manufacturing and brand side of the beauty business equation, knows full well that supply chain partners are essential for a brand to bring to market quality products produced in a timely manner to score sales—or do the opposite and founder. At Craft Beauty Lab, the Tucson, Ariz.-based manufacturer she started in 2018 that has over 20 brand clients with products at the likes of Ulta Beauty, CVS, Whole Foods and Amazon, her goal is to provide a strong link in the supply chain for brands to withstand the demands of the beauty industry today.

“The beauty industry is brutal,” she says. “It is not enough to have a good product, it is not enough to have one more clean product, it’s not enough to have a cool name. You’re going to have to put in some serious time and money and effort.”

She adds, “You really want to feel like your manufacturer is on your team trying to help you succeed, not somebody you have a hard time getting ahold of. I’ve come across several situations where it’s almost like the brand is intimidated to talk to the manufacturer. They don’t feel like they can ask questions. If you’re with the right manufacturer, you can ask them the most basic question, you can ask them the most outrageous question. They might say no to you, but they’re going to tell you why and explain, and they’re going to try to at least have said yes.”

Beauty Independent wasn’t afraid to ask Mahar basic and possibly outrageous questions about what brands should think about when vetting copackers, costs bedeviling beauty manufacturing, private equity involvement in the sector, mold issues, regulatory requirements, the drive for transparency, and the future of clean beauty.

What led to Craft?

I originally started on the brand side of things way back in the day. When I was 19 years old and doing my undergraduate, I fell into this part-time job with this itty-bitty little company, Kuumba Made, making salves and fragrances. I ended up owning part of the company. One of the five wholesale accounts that we had was Bread & Circus in Massachusetts in Boston, which was the first Whole Foods, and our company grew with Whole Foods.

We did all of our manufacturing in-house. Over time, we ended up having distribution in Wild Oats and Whole Foods and going through all the challenges of growing a brand and growing manufacturing. I eventually ended up selling my shares in that company, and I went to work for a lab that was doing reverse engineering for generics for CVS and Walgreens. I didn’t have a chemistry degree, but that’s where I learned a lot. They wanted someone who knew more about natural.

When I left that company, I started another little brand, Sia, which is really fantastic locally in my community and has great formulas, but I quickly realized that my forte is not the sales and marketing side. I ended up having a very large house of brands approach me who knew me and knew about my formulas asking me if I would do their brand. They had distribution in Ulta and that was the birth of Craft.

Up until this last year it’s been almost a completely underground company because we haven’t been seeking new clients, but I recently expanded our formulation and our production floor lines, and so now it’s the first time that we’re seeking a limited number of additional clients. We’re a small manufacturer. Every one of my clients is somewhere sitting in the clean beauty range. Most of my clients work with me because I understand how to do natural products, and they are super effective.

What did you set out for Craft to be?

When I first started Craft, I was thinking I’m going to turn it into a big 200,000-square-foot facility and do tons of manufacturing, but what actually matters to us a lot more is being a relationship company. I’m not interested in being a $100 million company. I want to do good products for good brands with 20,000, 25,000 square feet. It’s not my nature to be focused on quantity over quality, and I don’t enjoy that part of running a facility. I don’t really want to have a thousand employees. We have a fantastic team here, and we’re still innovating and growing.

We have 20,000 square feet of manufacturing space, and my team is 16. We have four production lines. I would say realistically 10,000 units a day is pretty much what capacity is for us. It’s difficult, especially with regulations, now to do less than 1,000 units and be able to do a breakeven scenario. We have done projects for companies sold in CVS at 50,000 units. We can move that scale, but we’re not the manufacturer you’re looking for if you need a million units a month.

Craft Beauty Lab founder Christina Mahar

What does clean beauty mean to your clients?

One third of products on the market right now have some positioning statement about being clean beauty. There is no consistent definition of what that means, but 66% of 13- to 40-year-olds say that they are more likely to buy a product if there is some labeling to clean. When people come to us, we’re going to ask you 30, 40 questions because I need to understand what you mean by that because there is no industry definition.

For some people, it means sustainable and no plastics. For some people, it means I just don’t want it to have parabens in it. For some people, it means it needs to be waterless. What I always talk to the brands around is that it’s definitely not enough to just be like, I’m putting out a clean beauty brand whatever that means. When I talk with the clients, it’s really homing in on what clean beauty is and it isn’t to them. I always get really excited when they have a very specific point of view. I always start with why, and it really has to be a real why.

What do you think is the next wave of clean beauty?

I’m excited about advances I’m seeing in biodegradable ingredients. Some of these new cellulose glitters coming out are interesting and some beads and scrubs. What’ll happen a lot of times is a knee-jerk reaction in the industry where it’ll be like these plastic beads are bad, and everyone will put some other bead. It’s a different bead, but it’s not a better bead. I’m definitely seeing some interesting scrub things in development that would be really cool if they actually genuinely could break down after a typical use.

The real issue with any ingredient is you need a 2-year shelf life, it can’t break down in six months. Same with the packaging. It will be interesting to see if they can get to market where they really won’t break down at that 2- to 3-year mark, they will at the 3- to 5-year mark and really will start to degrade.

I’m seeing interesting new preservatives come out, but they need more testing. One of the biggest things that could happen that would be meaningful is genuinely waterless, concentrated formulas. It’s difficult on the marketing side though if your little 2-oz. super concentrated cleanser is sitting next to a 6-oz. cleanser, are they going to buy the 2-oz. cleanser? That can be difficult. If one company can do it really successfully, then you’ll see everyone jump on.

What’s going on with mold issues in the beauty industry?

What I think is going on is that a couple things. A lot of preservative systems, their pricing went up a ton. Probably not the brands, but formulators we’re trying to figure out formulas using a little bit less. Their stability testing was passing because we do stability testing, but it’s not an exact replica. It’s supposed to say how this should behave for a 2-year period, then you’re finding, oh, it really didn’t quite do that even though it passed.

That was one of the issues, and there’s a lot of new preservatives out right now. The challenge is identifying the right testing because they’re passing microbes at the 2-day mark, and they’re passing microbes at the 8-week mark after having been heated, things that would traditionally mean that they won’t mold down the road, and they’re molding down the road. I’ve also seen issues with contaminated ingredients, and I think that’s left over from the supply chain issues from 2020.

If you’re the formulator, you’re relying on the spec sheet that came with the preservative that you’re working with, but it’s possible that that’s not accurate either. It’s possible that it was never tested with this exact set of ingredients or this emulation system. So, I think it’s the proliferation of trying to find new preservatives that meet Skin Deep or Credo or whatever it is.

We’re increasing preservative percentages. We are doing longer testing if we’re having to do new formulas.

We’ve heard that the pressure on brands to get to market fast could be a factor in mold issues. Do you feel there’s a lot of pressure on brands to get to market faster today?

There’s pressure up and down the chain all the time. It is really, really difficult. A lot of times the brands don’t understand what they’re asking you for. They don’t understand the steps you’re cutting out when they call you September 1 and say, “I need this brand-new thing for Black Friday.” Are you willing to take the risk? At the end of the day, your name is on this product.

On the brand side, what’s really difficult is keeping up with what I’ll call fast beauty. It’s like fast fashion. What is the current thing you’re supposed to have in your product? And there’s the timelines of what it takes to do a brand-new product. Brands don’t understand the difference between formulation from scratch and modification of an existing formula that’s been tested.

When we talk about doing a brand-new formula that we’ve never done before, our best practice would be that we make it until you’re happy with it. We’re doing microbe testing, but then, when we have a final formula, we’re doing a scale batch, and we are testing it for 12 to 18 weeks before we’re even going to order ingredients and make you a product.

That 18 weeks is usually a deal-breaker for smaller brands. Big brands, they have an 18- to 24-month new product development process. When you’re cutting out some portion of that, that is where you can get yourself into trouble. We try to have a really upfront conversation around that. We’re going to make you sign that we’re not guaranteeing your formula if you’re going to have us do that, but mostly I’m always trying to direct clients to a tried-and-true base that we have done extensive testing on and then adding in specific key ingredients that work for you. We still need to do testing on that, but we don’t have to do 18 weeks of testing on that.

Beauty manufacturer Craft Beauty Lab has 20,000 square feet of manufacturing space and four production lines. Ten-thousand units a day is capacity for the beauty manufacturer and its opening order for brands is $5,000.

You talked about the cost of preservatives going up. What other cost pressures do you have?

Shipping is through the roof. When I say through the roof, I mean a lot of times it’s like 40% higher than it used to be three years ago, and 30% of the total cost of the stuff in your products might be the delivery cost to you. So, that’s really high.

Your formula often isn’t your biggest expense in an overall product, but, when you’re working with more natural ingredients, there really is a very big difference in price. A paraben could cost 1 cent to put in the product, but a more natural preservative system might be 12 cents. One cent to 12 cents is a big difference all the way up and down the chain.

Labor is going up like crazy. Five years ago when we started, we hired basic production floor workers at $2 above minimum wage. Our minimum wage is going up so fast, I mean it’s gone up 40% in the last five years. Trying to keep pace where we’re still hiring and giving people living wages, those costs have to go somewhere else.

If a brand is evaluating a manufacturer, what should they consider? What cost ranges do you think are realistic for them to expect?

You want to know before you start getting into big conversations or doing samples is whether the type of product that you’re wanting is in their wheelhouse, not yes they could do it, but that this is stuff they do all the time. That really matters, also understanding upfront what their minimums are and how they charge for them. There’s a minimum order quantity, and is there a minimum order dollar amount? Are there going to be additional fees for the samples? Are there going to be additional fees if I want customization?

The third one is the relationship. You really want to feel like your manufacturer is on your team trying to help you succeed, not somebody you have a hard time getting ahold of. I’ve come across several situations where it’s almost like the brand is intimidated to talk to the manufacturer. They don’t feel like they can ask questions. If you’re with the right manufacturer, you can ask them the most basic question, you can ask them the most outrageous question. They might say no to you, but they’re going to tell you why and explain, and they’re going to try to at least have said yes.

Then, thinking about what it really costs. A super basic baseline for my company is it’s going to be $5,000 for an opening order. Now, in terms of how easy or not that is to do, are you coming with a full formula? The biggest thing that I see happen is we have an initial conversation with a client, and they tell you that they have their formula, but what they actually have is their ingredient list, and those are two very different things. We can work with that, but it’s not the same thing as you bringing us your formula and all we have to do is do one little 32-oz. test scale and then we can produce your product. That makes a really difference in time as well as in what the costs are going to be for you.

The other one is, can we work off of a base we already have that’s established and just do some minor modifications for you or are we really talking about a fully custom from scratch formula? Again, time and money are going to be impacted by that.

What about MoCRA? What burden does it place on smaller brands?

If you do less than a million in sales, it basically doesn’t impact you unless you’re doing eye products specifically. It breaks down into four or five categories here. So, it’s facilities regulations, which, if they have a manufacturer, will not impact them. That’s going to be all on us.

If they don’t have a manufacturer and they’re doing over a million, and they’re not already GMP, I probably can’t overstate how much of a burden it would be. It’s probably not even worth doing over a million at that point because you’re going to need to be fully GMP-compliant with everything that entails and all the documentation practices, which is really a lot. I couldn’t run my company at a profit doing a million dollars a year simply because of meeting GMP regulations. So, if you’re manufacturing yourself still, that will be difficult.

If you’re simply a brand and you have someone else manufacturing, the product listings are going to be a learning curve. So, every product will need to be registered with the FDA. The way that the FDA interprets who’s the responsible party essentially is who’s listed on the back of a label. So, if your product says manufactured by Craft Beauty for RX Brands, I’m responsible. If your product just says RX Brands on it, then the brand is responsible for all the reporting and registration.

There’s going to be a ton of these pop-up places that will do it for you and try to probably charge you a ton of money, but, once you learn it, it’s simply logging in and saying, “This is my product, this is the ingredients.” A lot of us manufacturers will probably figure out ways to do that for our clients. We already have to do so much documenting, we might as well do that, too.

I’m going to say that serious events reporting, that’s a good thing. It’s kind of shocking that they haven’t had it be mandatory before. For the brand, it’s really just understanding what that means in terms of the difference between an event and a serious event. This is not someone who called you and said, “My face broke out, and it’s red.”

A serious event equals an overnight stay in the hospital or death or medical intervention. That’s what a serious event is and that will require reporting. Again, I would anticipate that a manufacturer would help any brand because the manufacturer would want to be reporting the safety substantiation side. The main thing to know for brands is not to freak out.

There’s been private equity involvement in beauty manufacturing. How is the sector changing?

We’re in a time in the whole country and the whole world really of very rapid change. There are going to be winners and losers all the way around. They’re turning into conglomerates, and there’s a reason for that because, if you’re running 10 facilities, you only need the same five people doing your quality control management or the same people handling all the insurance. So, there’s a lot of savings that happen with these groupings. It gets harder to be a little standalone manufacturer, but private equity is not going to get involved if there wasn’t serious money to be made.

They’re also betting that shipping is going to stay high, and we’re going to continue contracting in terms of our globalization efforts. There are some serious safety concerns around some of the products coming out of China. The prevailing thought is that USA manufacturing is going to continue to expand, but I do think that it’s very difficult, if a brand has been manufacturing overseas, to make the transition to US manufacturing. The US is no doubt it’s more expensive. I expect to see a lot more manufacturing coming out of Mexico. They’re getting pretty competitive to China, not on par at this point, but it’s less shipping.

Started in 2018, Craft Beauty Lab has over 20 brand clients with products at the likes of Ulta Beauty, CVS, Whole Foods and Amazon. It specializes in clean beauty.

What do you think about the drive for more transparency? Are there elements along the supply chain that you feel will become more exposed to consumers?

In terms of ingredients, we source 95% of our ingredients in the U.S. and always have. I will say it was a bit of an eye-opener though during COVID when you start seeing all these supply shortages, and you’re like, well why are there supply shortages? We deal 95% with people in the U.S., but, of course, they’re still getting things from China. Even when they’re making it here, it doesn’t mean they’re not getting some component from another country.

It happened with labels. We couldn’t get labels, and I’m like, how are we not able to get labels in? All three of our label companies are located here in the U.S., but all the laminate film that they get is not located in the U.S. anymore. It’s really hard to get cradle-to-grave tracking on something. Once I’ve gotten an ingredient from the vendor, I can tell you what vendor I got it from, but my clarity stops with that. I could not tell you what farm they got it from.

I think it’s still going to take 10 years until it’s totally possible where it’ll be like, look, this is the farm it came from and how these people are treated on the farm, and you can really have that kind of traceability in more than lip service. You see it somewhat right now, but a lot of it’s a marketing piece.

Over the last few years, there’s been a move for more formula ownership on the part of brands. What do you see cropping up in the terms of the relationship between brands and manufacturers that maybe today is not a big deal, but five years from today could be more common?

I think a model that would be really interesting would be that brands have part ownership in the manufacturing facility. It would be more like a timeshare or fractional ownership. The manufacturing facility itself still has the majority, so the brands aren’t responsible for running it, but then they have guaranteed room on their floors, which always ends up being important as well as the ability to be on the board that says, how’s this going to be run?

I think that could be a really cool model to see for these smaller brands because it’s not up until you get into hundreds of millions of dollars that these brands really have the ability to tell a facility how they want it done. It’s going to give you a guarantee that you get a vote in the policies and that you get a guarantee. Then, as an owner, as your brand grows, you’re sending more work to a manufacturing facility, it’s growing, so you’re actually also profiting off of that other side of the business, which is I think an interesting idea.

What do you think we’ll see in the beauty business in the next year?

A lot of smaller brands that have been hanging in there since COVID are going to hang up their hat. I do think I’m seeing that fatigue of just, it’s been years and years now, and it’s still just a struggle. So, that’s unfortunate, but it’s also an opportunity for newer brands.

I am anticipating that the MoCRA regulations are going to create some interesting price increases. So, I’m watching to see what that’s going to do insurance-wise for brands and for manufacturers. If you’re carrying liability, I mean it’s typically $1 million, but it really depends on where you’re distributing. If you’re in a national chain of any sort, $2 million in liability is pretty standard. There are some that carry $6 million, but that’s really if you’re a huge organization. So, I’m looking at that.

I do think one of the unexpected things is that there’s going to be a lot more demand on lab testing sites, so that’s all outside independent labs. You’re going to see them get really overloaded.