When $100,000 spend produces the same results as $500,000.
Two Los Angeles–based beauty brands share the same price range, distribution channels, and utilize the identical contract lab for production.
For both brands production turnaround is set at 30 days. A notably quick cycle, given the strict German regulations on labeling and ingredients.
Now, imagine this German distributor needs to purchase $100,000 worth of product every month.
Brand One’s Approach (Using a Los Angeles Contract Lab):
This brand via the distributor, must request a four-month supply in a single order. Timeline breakdown:
- 1 month: Production time once the order is placed.
- 2 months: Shipping from Los Angeles to a European port such as Antwerp or Constanta.
- 1 month: An additional buffer to safeguard against any delays.
Adding to the challenge, if President Trump’s proposal of a 25% tariff on European products takes effect in late spring, and Europe responds with similar tariffs, the German distributor would not only be paying $400,000 for four months’ supply but also an additional $100,000 in tariffs.
Brand Two’s Approach (Using an EU-Based Contract Lab):
This brand can leverage a contract lab located in the European Union, possibly in Romania or Poland, regions known for producing high-quality products at competitive prices (in fact, more L’Oréal is manufactured in these countries than in France).
Receiving the same high-quality ingredients and pricing as the U.S. lab:
- The distributor only needs to order a one-month supply at a time.
- There’s no extended shipping period or need for a buffer.
- Importantly, there are no additional tariff costs.
The Bottom Line:
Which option would the German distributor prefer: Buying $100,00 each month with the opportunity for growth or buying 4 months of inventory incurring import tariffs.
Clearly, sourcing from an EU-based lab offers:
- A more efficient and cost-effective solution.
- Manufacturing in the EU not only benefits Germany but also provides access to the entire European market.
- With one standardized set of labeling and formulation requirements across all member states, brands can seamlessly reach over 500 million consumers without the complications of meeting multiple national standards.
Which route would you choose if you were the distributor? As you can see, $100,000 is clearly better than $500,000.