Outsourcing the in thing and flourishing

contract manufacturer and packing company

The global contract packaging market is averaging a compound annual growth rate of 15.33%, confirming the increasing trend for manufacturers to outsource their packaging to optimise costs and free themselves to concentrate on their core business.

According to Reportlinker.com, contract packaging can reduce manufacturer operational costs by up to 9%, and remove the often-onerous responsibility of keeping abreast of and adapting to rapidly-evolving consumer goods legislation. PPM spoke to Sonja Steyn, Operations Director of Prime Products, who was decidedly upbeat about current trends and optimistic for future prospects.

The promising face of personal care brands

Annique Prime Product Manufacturing

Annique is a well-established skin and body care product manufacturer working with indigenous ingredients such as marula, rooibos and hoodia. It has found a trusted partner in Prime Products, which mirrors its quality offering in the eye-catching packages that carry its preparations to retail shelves worldwide.

Growth is infectious and the South African personal care contract packaging market looks set to follow its international counterparts, according to Sonja Steyn, Operations Director of Prime Products. ‘Revenue was expected to expand at a CAGR of 7%, reaching $5.5-million dollars in 2030, due mainly to increased disposable income and spending on personal care. These figures may need to be revised given the Ukraine crisis and ongoing Covid-19 lockdowns in certain countries, but overall, the picture remains bright.

Factors influencing the growth of the local market, Sonja continues, include government regulations on imports and fragmentation of the sector that sees several companies offer a similar service. However, on the flip side, there’s the potential carried by greater urbanisation, increased disposable income, sustainability and customisation.

‘Skincare preparations are currently 42% of the global market and the most profitable category, followed by haircare at 22%,’ she elaborates. ‘The manufacturing market share is currently divided among liquids, creams and lotions, with an average growth rate of 6%.

‘Market trends suggest a shift in the focus of manufacturers towards producing innovative products. South Africa’s cosmetic products market could benefit significantly over the next 35 years due to the rapid ageing of the population. It is said that the population of over 60-year-olds older will double from 7.7% to 15.4%. This may generate strong demand for anti-ageing products, opening avenues for innovation in the cosmetic industry.’

Digital disclosure driving demand

The changing consumer trends associated with the availability of abundant information on personal care products, increased digital disclosure and personalised shopping experiences are driving the demand, Sonja adds. Online shopping was a booming market before Covid, but this has gathered momentum. The rise in demand for skincare and make-up, especially from millennials, is another important industry driver.

And, although the pandemic disrupted the entire supply chain, reducing demand for skincare and make-up significantly as people spent on essentials, it delivered a marked upside.

‘Increased awareness of the harmful effects of chemical products spurred a growing demand for organic and natural personal care products and this isn’t likely to abate,’ Sonja maintains. ‘Furthermore, the pandemic pushed demand for personal hygiene products, which will continue to be a positive factor.’

The constant need for speed in delivery to market will keep the contract packaging market buoyant. ‘Even brand owners with their own facilities use contract manufacturing to supplement their production, reducing manufacturing and delivery times and boosting customer service.

‘Cost containment is a major factor and not having to hire labour, or maintain and repair equipment a big consideration. Brand houses are having to spend extensively on marketing, branding and advertising, so having a contractor providing equipment, engineering, research and development and quality teams is a godsend.

Government sanctions association of like minds

In March, the Department of Trade, Industry and Competition (the DTIC) lent its support to the formation of an association of cosmetics and personal care third-party manufacturers. This followed a workshop with industry participants in 2017 to explore the difficulties facing the sector.

Originally published in PACKING & PRINT MEDIA, JUNE 2022

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