Do you want to know how lipsticks are made and the production cost? If YES, here is how much it cost to make a lipstick and the profit margin in the business.
However, cosmetics are always marked up so high because conglomerates aren’t just in the ‘sell you great makeup’ business. Most of the companies in the business are in the lifestyle and brand business, and because cosmetics are so cheap to make, they use the opportunity to make 90 percent profit on the makeup they sell you in order to subsidize the rest of their business.
Most fashion companies use lipstick to pay for everything from really expensive brand campaigns, to unprofitable designer clothes, to the profits for the retailer that sells the makeup. Meanwhile, the cost of creating a full cosmetic product line can be substantial. There are several factors that join the equation when a cosmetic product line is being designed for the global market.
How Much It Cost to Make a Lipstick and the Profit Margin
According to reports, a $35 luxury lipstick only costs about $2.50 to make. That’s a huge difference, and it’s true across board. Most luxury cosmetic brands actually mark up their product 10 to 11 times. To properly understand this cost, the breakdown of the production costs associated with a single tube of lipstick include:
Ingredients, on average, cost as little as $1; components (tubes, brushes, etc.) require just $0.70; assembly costs $0.38; and shipping runs just $0.10 a pop.
- Manufacturing costs: And like everything else, this costs can vary greatly too. The biggest factor is how much of it will you manufacture at a time. Note that the more the products, the cheaper the per-unit costs will be. Most contract manufacturers will not work with you unless you are producing at least 5–10,000 units per production run.
- Ingredient costs: This cost also depends on the pricing power of your manufacturer, how much product you’re making and the scarcity of your ingredients, it can be a wide range.
- Packaging: This cost can vary greatly, based on packaging type and source
- Formulation costs: Just like any consulting engagement, there are cheaper options (that may not do a great job for you) or more expensive options (that can help you with much more than formulation)
- FDA testing: According to reports, this is probably a fairly well defined cost, since everyone has to go through the same process. It would be safe to assume at least $35,000 – $50,000 per product
- Shipping costs: Although this isn’t a main factor in your overall costs, but significant enough you’ll have to efficiently account for it. How much does it costs to ship your packaging to the manufacturer, how much will it costs to ship your product from the manufacturer back to you/your distributor for final sale?
- Time costs: You should assume at least 1 year to take your idea from formula testing to production. That is if you’re on top it and you’re working with great partners.
Table of Content
How Lipsticks are Made or Manufactured
Note that the major ingredients used in manufacturing lipsticks are wax, oil, alcohol, and pigment. The wax most likely involves some combination of three types—beeswax, candelilla wax, or the more expensive camauba. According to experts, the wax enables the mixture to be formed into the easily recognized shape of the cosmetic.
Oils such as mineral, caster, lanolin, or vegetable are added to the wax. Fragrance and pigment are also added, as are preservatives and antioxidants, which prevent lipstick from becoming rancid. Since there is no industry standard to the lipstick size and container shape, there are no standard types of, or proportions for, ingredients used.
Aside the base ingredients (wax, oil, and antioxidants) supplemental material amounts vary greatly. Note that the ingredients themselves range from complex organic compounds to entirely natural ingredients, the proportions of which determine the characteristics of the lipstick.
Nonetheless, the manufacturing process for lipsticks is easier to assimilate when viewed or categorized into three separate steps: melting and mixing the lipstick; pouring the mixture into the tube; and packaging the product for sale.
1. Melting and Mixing
The first step is the melting and mixing of the raw ingredients, although separately because of the different types of ingredients used. One mixture contains the solvents, a second contains the oils, and a third contains the fats and waxy materials. These ingredients are then heated in separate stainless steel or ceramic containers.
After heating, the solvent solution and liquid oils are then mixed with the colour pigments. The resulting mixture is then passed through a roller mill, grinding the pigment to avoid a “grainy” feel to the lipstick. Note that this process adds air into the oil and pigment mixture, so mechanical working of the mixture is required. The mixture is stirred for several hours; at this point some producers use vacuum equipment to withdraw the air.
Once the pigment mass is ground and mixed, it is added to the hot wax mass until a uniform colour and consistency is achieved. From there the fluid lipstick can then be strained and moulded, or it may be poured into pans and stored for future moulding.
Note that if the fluid lipstick is to be used immediately, the melt is maintained at a temperature, with agitation, so that trapped air escapes. But if the lipstick mass is stored, before it is used it must be reheated, checked for colour consistency, and adjusted to specifications, then maintained at the melt temperature (with agitation) until it can be poured.
It’s very important to note that lipsticks are always made in batches because of the different colour pigments that can be used. The size of the batch, and the number of tubes of lipstick produced at one time, will rest on the popularity of the particular shade being produced.
Also, this will dictate the manufacturing technique (automated or manual) that is used. Note that lipstick may be produced in highly automated processes, at rates of up to 2,400 tubes an hour, or in essentially manual operations, at rates around 150 tubes per hour.
After the lipstick mass is mixed and free of air, it is now ready to be poured into the tube. Note that a variety of machine setups are used, depending on the equipment that the manufacturer has, but high volume batches are generally run through a melter that agitates the lipstick mass and maintains it as a liquid.
But for smaller, manually run batches, the mass is maintained at the desired mix temperature, with agitation, in a melter controlled by an operator. At this point, the melted mass is poured into a mould, which consists of the bottom portion of the metal or plastic tube and a shaping portion that fits snugly with the tube.
Lipstick is poured “up-side down” so that the bottom of the tube is at the top of the mould. Any excess is scraped from the mould. Once the lipstick is cooled (automated moulds are kept cold; manually produced moulds are transferred to a refrigeration unit) and separated from the mould, and the bottom of the tube is sealed.
It is now time for the lipstick to pass through a flaming cabinet (or is flamed by hand) to seal pinholes and improve the finish. After that the lipstick is visually inspected for air holes, mould separation lines, or blemishes, and is reworked if necessary.
For very cognizant reasons, rework of the lipstick must be limited, demonstrating the value of the early steps in removing air from the lipstick mass. Most lipsticks are reworked by hand with a spatula. This can be done in-line, or the tube can be removed from the manufacturing process and reworked.
3. Labelling and Packaging
Once the lipstick is retracted and the tube is capped, the lipstick is ready for labelling and packaging. Have it in mind that labels identify the batch and are applied as part of the automated operation. Although there is a great deal of emphasis on quality and appearance of the finished lipstick product, less emphasis is placed on the appearance of lip balms.
Lip balms are always produced in an automated process (except for experimental or test batches). The heated liquid is poured into the tube in the retracted position; the tube is then capped by machine—a far less laborious process.
The last thing when making lipsticks is the packaging of the lipstick tube. Note there are a good number of packaging options available, starting from bulk packs to individual packs, and including packaging as a component in a makeup kit or special promotional offering.
Also note that lip balms are packaged in bulk, generally with minimum protection to prevent shipping damage. Packaging for lipsticks varies, depending on what will happen at the point of sale in the retail outlet. At this point, packaging may or may not be highly automated, and the package used depends on the end use of the product rather than on the manufacturing process.
Lipstick is the least expensive and most popular cosmetic in the world today. When it comes to lipsticks, most women agree: you get what you pay. But that is not always the case. In fact, it couldn’t be further from the truth. They are very cheap to make and just need a few cheap ingredients to produce, even the most luxurious of lipsticks.