Cosmetics Industry: Top Priorities, Investments and Compliance Challenges


The cosmetic industry is poised to see 7% annual growth over the next five years and is expected to reach a market value of more than $800 billion by 2023. As the industry grows and welcomes new entrants, it is more important than ever for cosmetic stakeholders to comply with the latest regulations regarding ingredients of concern, such as allergens, parabens, and residual toxins.

Earlier this year, the Cosmetic Compliance Team surveyed 600+ industry leaders to uncover where cosmetic compliance is in 2019. This report classifies the most pressing issues of cosmetic brands and solution providers, as well as a variety of other industry players. Continue reading to uncover the industry’s leading compliance challenges, priorities, investments, and much more.

If you enjoy reading this post, be sure to join us this September 30th – October 2nd in New York City for the Cosmetic Compliance Summit! This bi-annual industry meeting serves as an opportunity for the cosmetics community to come together and learn about compliance best practices, hear case studies from an array of players across the value chain, and understand the current and future impact of new regulations.

Top Challenges

When survey respondents were asked to share their largest company-wide compliance challenges, the top voted inhibitor across the board was international regulations. Cosmetic companies have to continuously stay up to date on new and rapidly changing international regulations. Failure to comply with new regulations can result in fines ranging from $25,000 to upwards of $250,000. For smaller independent brands, fines like these can easily put them out of business. Unsurprisingly, when both cosmetic brands and solution providers were asked about the top challenge they face in their role, more than 50% of both parties selected international regulations.

Additional company-wide challenges currently faced by cosmetic brands include claims substantiation (49%), as well as testing and ingredient requirements (40%). Respondents from solution providers also described similar challenges on a company-wide level, specifically related to claims substantiation (37%) and safety assessments (36%).

Natural and Organic Products:Claims substantiation is a growing industry challenge due to the increasing popularity of “natural” and “organic” cosmetic products. Presently, there is no formal definition for “natural” products in cosmetics, which has increased the potential risk factor for regulatory climate to write truthful claims supported by adequate scientific evidence with no formal definition for “natural” cosmetic products.

Around 40% of both parties also face substantial challenges in their roles related to testing and ingredient requirements. This statistic can be attributed to the two new reform bills regarding testing and ingredient requirements that have come to light in recent years. The first bill, known as the bipartisan Personal Care Products Safety Act, sponsored by Sens. Dianne Feinstein (D-CA) and Susan Collins (R-ME), would give the FDA more oversight over the industry in general. It would require the FDA to test at least five ingredients a year for safety; companies would have to submit their ingredient lists to the FDA; and companies would be required to report adverse events to the FDA, among other things. Sen. Orrin Hatch (R-UT) has also proposed a cosmetics safety bill, known as the FDA Cosmetic Safety and Modernization Act.  The Personal Care Products Council, the professional group that represents cosmetics manufacturers, issued a statement last November offering its support for reform and praised both of them. The major difference between the two bills is that the Feinstein bill requires companies to pay testing fees, while the Hatch bill would fund it with congressional appropriations.

Investment Priorities: Testing; Labeling & Packaging; Compliance

When respondents were asked to share their largest investment priorities for the next 18 months, the majority of cosmetic brands (65%) and solution providers (45%) both revealed testing is their top priority. Testing is a growing priority given the recent passage of California’s Cruelty-Free Cosmetics Act. California passed the bill on August 31st, 2018, banning the sale of any beauty products (makeup, skin-care, body-care, and hair-care) tested on animals. The newly passed bill means beauty brands that haven’t yet adopted cruelty-free practices will have until January 1, 2020, to change the way in which they test products or they will be barred from California.

In addition, cosmetic brands are prioritizing investments in labeling/packaging and external labs. On top of testing, solution providers are also focusing on investments in regulatory services (44%) and labeling/packaging (40%). As regulations continue to transform, labeling and packaging is proving to be a growing investment category due to the market growth “natural” and “organic” cosmetic products.

Regarding compliance investment levels, approximately half of both sides shared they have a budget of less than $50,000 for the next 18 months. This figure suggests that a fair number of our survey respondents represent independent brands, which are hitting the market in a massive way. Independent brands are more capable of using software solutions to help keep them compliant, while larger organizations traditionally have a harder time integrating compliance service solutions. Interestingly, the second largest majority of both cosmetic brands and solution providers expressed their investment levels ranged from $51,000 to $100,000.

Global Export Activity & Corresponding Challenges

The majority of cosmetic brands revealed their export activities are currently in North America (42%), the European Union (41%), and Asia (38%). These trends are very similar to those of solution providers, which revealed they are focusing on exporting to the European Union.

When asked about the region that presents the leading challenge for compliance, respondents from cosmetic brands unmasked a two-way tie (36%) between the European Union and Asia. Solution providers also revealed the European Union presented the biggest challenge for compliance, which is understandable given 50% of providers are focused on exporting to the European Union.

A number of respondents also went on to disclose they view China as their largest hurdle in exporting. International regulations, coupled with the challenge of testing and ingredient requirements, are currently major hurdles for organizations who work in China.

China has been steadily doubling in cosmetics growth; however, China’s strict animal testing regulations are a major inhibitor for both the U.S. and the Chinese. To take it a step even further, we asked both groups to disclose their largest challenge in regards to exporting and importing. Cosmetic brands revealed a close tie here between import procedures and prohibitive lists. 38% of solution providers exclaimed that import procedures are the largest barrier pertaining to exporting and importing. It can be deducted that a fair number of solution providers experience trouble with import procedures in the European Union.