Raw material prices in cosmetics development: Why they determine your unit price
Raw material prices in cosmetics—here is an illustration of the madness that prevails in this area and why it drives up costs for our customers.
Once we at Cosmacon have successfully developed a formula and it has been approved by the customer, the crucial question is:
“How much does the product cost per unit?”
And this is precisely where the challenges surrounding raw material prices begin.
From the lab to the calculation – why raw material prices are key
Once a formulation has been finalized, we usually calculate graduated prices, for example:
- 1,000 units
- 5,000 units
- 10,000 units
- 20,000 units
- 50,000 units
The unit price depends largely on the current prices of active ingredients. And this is where it gets complex: many raw material suppliers only have very short validity periods for their prices – sometimes 30 days, sometimes even shorter. This means that
we have to request new raw material prices for each calculation.
And that’s for every relevant container size.
The container size dilemma
In practice, many suppliers only offer one container size, for example:
- 25 kg
- 200 kg
- 1,000 kg
However, for a clean calculation, we need transparent raw material prices, ideally from 1 kg to 1,000 kg, which correspond to realistic production quantities.
What happens instead?
Some only send a price for 25 kg.
Some want to know the annual requirement first.
Some don’t respond for days.
With some, we have to follow up once or twice a week.
To be honest, this is difficult to understand in a fast-paced project environment. Raw material suppliers actively offer their products, but reliable raw material prices are often not immediately available in the system?
Time is money – and raw material prices are process costs
Every new price inquiry means:
- Email correspondence
- Follow-up
- Clarification of delivery times
- Comparison with container sizes
- Re-entry of raw material prices into our ERP system.
When raw material prices are only valid for a short period of time, this creates a considerable amount of extra work for us.
This is because every change has to be re-entered into the system, including new calculations for each tier.
These hidden process costs are rarely noticed, but they do exist.
Different prices for the same raw material?
Another interesting point is that we repeatedly receive better raw material prices than our contract manufacturers or customers.
This raises questions:
- Do contract manufacturers have to recalculate every time?
- Are there different margin models?
- Is there a lack of transparent pricing?
A clear, uniform approach to raw material prices would be desirable for an efficient value chain.
What would an ideal process look like?
From our point of view, the following model would make sense:
– Raw material prices within 24 hours for all available container sizes,
– Clear graduated prices from 1–1,000 kg,
– A price that remains valid until a new offer is made,
– Automatic notification of price changes,
– Information on delivery times and current stock availability,
– Uniform raw material prices without individual negotiation for each customer.
Why should the customer have to make a new inquiry every time?
In other industries, digital price lists and automatic updates have long been standard. Especially in the cosmetics sector, where time-to-market is crucial, raw material prices should not become a bottleneck.
Raw material prices are strategic competitive factors.
Fast, transparent, and stable raw material prices enable:
- Faster unit price calculation
- Shorter decision-making processes for customers
- Predictable margins
- Reliable quotation preparation.
- Efficient scaling from 1,000 to xyz,000 units.
Ultimately, raw material prices are not just numbers, but a strategic lever for the speed of innovation.
Reorders – and the madness with raw material prices starts all over again.
It becomes particularly absurd when our customer successfully reorders after four months. That should actually be a reason to celebrate: the product works, the market accepts it, and quantities are increasing.
Instead, however, the entire process surrounding raw material prices begins again.
Because many quotations are only valid for a short period of time, we – or our contract manufacturer – have to request all raw material prices again.
Every item. Every supplier. Every container size.
And that’s even though exactly the same recipe is to be produced.
As a result, raw material prices may have changed, often upwards. For our customers, this suddenly means higher unit prices. And then we are left standing there and have to explain why an identical product is more expensive a few months later.
How can this be explained plausibly?
Is no one happy about repeat orders anymore?
It becomes even more difficult when price increases can hardly be justified. Rising energy prices? Raw material shortages? Exchange rates? Yes, these things can happen. But why not try to achieve stable raw material prices at the same time through process optimization, better planning, or more efficient structures?
If a raw material manufacturer changes its prices daily and makes them almost impossible to calculate, then this is no longer a partnership model.
Partnership means predictability. Stability. Transparency.
Especially in an industry where brands need to build trust, raw material prices should not be a source of uncertainty, but rather provide a reliable basis for long-term growth.
Conclusion on raw material prices
Calculating the unit price of a cosmetic product is not an Excel game, but a complex process that depends heavily on current raw material prices.
The more transparent, faster, and more stable these are, the more efficiently the entire value chain functions—from the raw material supplier to development to the finished product on the shelf.
Perhaps it is time to rethink raw material prices in the digital age.
Feel free to ask us if we can help you navigate the price jungle of cosmetic raw materials.
Or take a look at our partner Cosactive GmbH – this is how an innovative and smart raw material supplier operates!