Private label consultancy pleads with companies to limit price increases as fear of price caps loom

26 May 2023 --- The International Private Label Consult’s (IPLC) latest research report, released ahead of PLMA in the Netherlands, states that the joint effects of inflation, Brexit and the Russian invasion of Ukraine bore a major cost burden on private label beauty buyers and retailers. PersonalCareInsights caught up with spa hair wrap brand Smart Microfiber Sweden at the show to discuss the importance of the price-quality ratio to meet current market expectations.

“Brexit, the [COVID-19] pandemic, the Russian invasion of Ukraine and the consequent inflation crisis mean that all private label manufacturers have been required to negotiate cost increases with buyers, many of whom had only experienced cost deflation in the previous decade,” the report states.

“The challenge will be for retailers and suppliers to maintain trust and transparency and to be able to demonstrate that they are collectively doing everything possible to mitigate cost increases for shoppers,” the consultancy explains. 

“If they don’t, then there is a real danger of widespread government interventions via price capping which will be messy and likely not have the desired result.” 

Giving retailers and suppliers a voice
Titled “The Evolving Balance of Power, How private label suppliers and buyers can win through collaboration,” the report reveals that roughly two years ago, some manufacturers foresaw the emerging inflation cycle and requested initial cost price increases. 

“Not surprisingly, the retail buyers deployed the inevitable delay tactics, but following the invasion of Ukraine, these inflationary pressures only heightened,” IPLC details. “Between spring and autumn 2022, retailers were forced to accept unprecedented cost increases and there was no other option if they wanted to maintain on-shelf availability.” 

IPLC carried out four phases of research between January and April 2023 to detail how suppliers were forced to question their ability to supply without appropriate cost increases and retailers tried to push back, to no avail.Smart Microfiber makes spa-quality hair bands and hair wraps which are their best sellers because of the price-to-quality ratio; however, it is only 5% of their business, demonstrating the importance of this balance in business. 

At this stage, buyers recognized that it wouldn’t be sustainable to continue supplying. “Some suppliers even had to resort to ceasing deliveries, which would previously have been considered a nuclear option. But very few reported any damage to their key relationships,” the IPLC states. 

The rate of inflation is expected to decline. However, there is no genuine confidence that costs will return to the same levels as before the crises because many of the causative factors are still at play.

Price-quality ratio demonstrated in practice
The personal care range of spa-quality hair wraps and hair bands by Smart Microfiber Sweden, featured at PLMA 2023, demonstrates current market expectations regarding the price-quality ratio.

“The hair wrap is our top seller. We sold over 3.5 million of these but not only because of the quality but it is also very cost-effective. We sell it worldwide in Asia, Australia, all over Europe and Canada. We operate for private labels but also under our brand Smart,” Daniel Roman, head of marketing at Smart Microfiber Sweden tells PersonalCareInsights.

The company specializes in microfiber production and decided to create a line of spa products based on its signature materials.                                                                        

“What we have here is one of the best mixes of fibers and waffle structure. We decided to do it top-notch but still cost-effective. And due to the fact that we sell so much and use fully automated production, it is on the same price level as lower priced, cheaper versions,” Roman explains. 

The textile is said to have a 385% moisture absorbency rate, dries hair fast and is long-lasting. Roman adds: “The buyers and retailers are very picky about sustainability. They want to see all the reports.”

In other PLMA 2023 highlights, plant-origin and organic sourcing were in focus at the trade show. Live at the event, Allison by Nopa Nordic, Nature & Stratégie, DS Tech and Cosmewax spoke with PersonalCareInsights about the role of traditional botanicals and seaweed in modern cosmetics, alongside developments in upcycling, sun care innovation, petroleum alternatives and new processing techniques.

By Inga de Jong

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