Whipsawed isn’t a strong enough word to describe President Trump’s economic agenda in general or his tariff policy, in particular. Markets, financial and consumer, hate uncertainty. And there’s plenty of uncertainty going around these days. Still, contract manufacturers remain bullish. Most posted gains in 2024 and are optimistic about 2025 and beyond. They all have favorite product segments and many are making investments into new capabilities and categories. 

AYO Labs, Jamaica, Queens, NY, recorded robust demand for shampoos, conditioners and serums last year.

“Customers appreciate our low minimum order quantity (MOQs) of just 250 units, we can get very creative” explained Rob Skillicorn, VP-manufacturing and compliance. “We don’t hold the formula hostage, either.” 

AYO Labs can scale up to 2 million units per month, ensuring flexibility for startups and established brands alike. 

At GAR Labs, haircare remained its strongest performer in 2024, according to Director of R&D Peter Curtis. He noted that clean formulations and scalp-focused treatments, continued to resonate with health-conscious consumers. Skincare also saw solid growth, especially anti-aging serums and barrier-repair moisturizers. 

“On the other hand, men’s grooming products didn’t meet expectations—likely due to market saturation and shifting consumer priorities,” he admitted.

FP Labs and Federal Package had an outstanding 2024, said Jeffrey Martin, director of marketing.

“While we had a very profitable year, it felt like it took a lot of effort and energy to get to the finish line,” he explained. “Overall, we saw a lot of interest across our entire portfolio of offerings early in the year. By Q4, we saw a lot of brands producing their “tried and true” products or line extensions instead of crafting new products from the ground up.”

Samantha Burd of Lady Burd Exclusive Cosmetics admitted 2024 was not Lady Burd’s best year of all time, “but not the worst either. Our lip products continued to fly off the shelves and keep our kettles occupied.”

For Accupac, skincare was a standout in 2024. According to Michelle Chavez, VP-innovation. Demand was driven by consumers’ increasing focus on skin health and wellness. Anti-aging products, moisturizers and sunscreens, especially those with clean, natural ingredients, performed well. Haircare also saw strong demand, with a particular focus on scalp health, hydration and reparative treatments, including products that used sustainable ingredients and packaging. 

“Oral care grew as consumers became more aware of the link between oral health and overall well-being,” Chavez said. “Premium oral products, including whitening toothpaste and eco-friendly oral care solutions, saw strong consumer interest.”

Finally, sustainability remained a major theme, with consumers demanding eco-friendly packaging and clean formulations across all product categories.

The Current Situation

Martin of FP Labs and Federal Package summed it up perfectly—2025 is picking up right where 2024 left off: unpredictable and uncertain. 

“Fortunately, we are seeing investment from brands looking to expand and grow. FP Labs is seeing a lot of interest in anhydrous products, specifically a resurgence in antiperspirant development and new deodorant profiles,” he explained. “New ingredients and new formats, like high-performance serum sticks, are bringing a lot of fresh energy to the beauty and skincare landscape.” 

Chavez of Accupac expects skincare and haircare to continue dominating, with a stronger emphasis on multifunctional, innovative products that combine effectiveness with sustainability.

“The rise of personalized beauty will fuel growth, with personalized skincare and oral care gaining momentum, as consumers seek customized solutions tailored to their unique needs,” she said.

In oral care, innovations such as smart toothbrushes, targeted treatments and eco-friendly products will continue to drive interest. Additionally, sustainability will remain a top priority, with demand for biodegradable packaging and clean, responsibly sourced ingredients leading the way in 2025.

According to Burd, 2025 is shaping up to be better than 2024 led, once again, by demand for lip products. Lady Burd Cosmetics is also getting a surprising number of powder orders, she added.

For GAR, 2025 is off to a strong start. There’s notable growth in sustainable, multifunctional personal care products, especially those with active botanicals and clinical claims. 

On the flipside, Curtis told Happi that some traditional body care SKUs are slowing, as consumer attention shifts toward hybrid solutions that blur the line between cosmetics and wellness.

AYO Labs recently expanded its team. Shelby Wong is the new VP-sales and marketing and Edward Smith is the new director of sales and marketing. Prior to this appointment, Wong was with L’Oréal, Sundial Brands, Grace Beauty and Quallis Brands. During his career, he’s driven brand growth, scaled businesses and built successful partnerships. 

Smith helps brands scale through strategic partnerships and innovative manufacturing solutions. At AYO, he collaborates with both emerging indie brands and established industry leaders to help bring their product visions to life. Before joining AYO, he spent more than a decade at leading global advertising agencies, where he led brand partnerships, developed marketing strategies and ran award-winning campaigns for Fortune 500 companies.

Ones To Watch

Martin said peptides and niacinamides are particularly exciting, as is emerging technology and ingredients that support the healthy skin microbiome.

“We are excited to work with brands that are embracing the effectiveness trend and looking for ways to build the maximum effectiveness in their products through formulation, whether it’s cosmetic or an OTC,” he explained. “Having in-house chemists helps us to find the right ingredients and formulations to meet the performance expectations of our customers.”

FP Labs Senior Director of R&D Paul Marotta finds the evolution of ‘Version 2.0’ ingredients particularly compelling, as these formulations enhance bioactivity while providing accelerated and more discernible results. 

“A prime example is Barnet’s BV-OSC (tetrahexyldecyl ascorbate), which exemplifies advancements in vitamin C derivatives, offering remarkable stability and user-friendliness across diverse product formulations,” explained Marotta.

He added that the exploration of the skin microbiome through targeted ingredients is a burgeoning area of interest. 

“This shift moves beyond traditional pH balancing; instead, it focuses on creating formulations that support and enhance natural skin chemistry,” Marotta said. “Evonik’s innovative approach demonstrates the potential for advancements in skin compatibility and efficacy.”

“Exosomes are one of the more exciting frontiers — we’re watching closely,” agreed Curtis. “Their potential for cellular communication and skin regeneration is massive. While regulatory clarity and scalability are still works in progress, we see promise in marrying this tech with biomimetic peptides and advanced delivery systems.” 

Low MOQs facilities quick changeovers, enable AYO Labs to get new products in customers’ hands in 60 days versus 80-100 days for other contract manufacturers. Low MOQs and speed to market make AYO Labs a preferred partner with indie brands, according to company executives.

“We have the access to expertise that developing brands don’t possess,” said Wong. “We partner with them throughout the process. A lot of contract manufacturers don’t see the value in that. They want a quick hit.”

In fact, AYO Labs features a business incubator and accelerator built for and around minority entrepreneurs, empowering businesses to scale. AYO Innovations is specifically designed to empower and elevate Black and minority entrepreneurs. Entrepreneurs are invited to submit their business proposals and ideas for evaluation. An internal committee of industry professionals and company leaders screens, interviews and selects the most promising ventures. Visit ayolabs.com to apply. If selected, AYO Innovations provides funding and support. AYO experts work closely with selected startups to help them navigate the challenges of scaling their health and beauty businesses.

“From legal advice to product development to packaging expertise, we can provide the resources that these brands need to succeed,” Smith told Happi. 

AYO’s program can be the difference between success and failure in the highly competitive world of beauty. The landscape is expected to become increasingly difficult as trade tensions boil over. 

Tariff Troubles

Last month, US President Trump had imposed a 125% tariff on goods coming out of China. At the same time, he placed a 90-day pause on “reciprocal” tariffs for many other trading partners. The pause came after stock market indexes tumbled and talks of recession rose. Analysts had suggested that there was a 50/50 chance of the US economy falling into recession if those 10% tariffs had gone into effect. Trump’s pause is set to expire in July, shortly after US Independence Day (July 4). For what it’s worth, White House officials contend the US was close to deals with more than 10 trading partners.

But off or on, Trump’s trade policies have business leaders scratching their heads.

Curtis noted that tariff chatter always introduces a layer of unpredictability. To reduce the uncertainty, GAR is proactively diversifying its supplier base and exploring regional sourcing to maintain agility. 

“Our goal is to shield our clients from unnecessary disruptions while staying cost-competitive,” he explained.

Martin agreed that tariff storm clouds are certainly on the horizon. He noted retaliation tariffs from the EU in cosmetics and weakening customer sentiment only exacerbate the situation.

“As the prices of everything from raw materials to finished goods are hit with tariffs, we will certainly see the effects ripple through beauty and personal care,” he said. “We are working to stay as flexible as possible as we enter this storm with our customer brands. These effects could be severe, depending on the magnitude and duration of the ongoing tariff landscape.”

Skillicorn agreed that tariffs are the biggest uncertainty. 

Lady Burd Cosmetics executives monitor the tariff drama, but the company sources as much as possible in the US anyway, so it’s not hugely impactful, according to Burd.

“We are looking into packaging options in South America to have backup plans for everything else,” she said.

Expansion Plans

AYO Labs expects to break ground in July on a new 30,000 square-feet facility in the Brooklyn Navy Yards. The facility is expected to be up and running in Q1 2026.

“It will be a gamechanger,” predicted Wong.

In addition to the new facility, AYO is betting on artificial intelligence to boost efficiency. Skillicorn pointed out that AI helps streamline a variety of tasks, including reverse-engineering.  

Cobalt Labs is the innovation division of Accupac. Chavez noted the beauty and personal care industry is undergoing a significant transformation. Consumers are shifting from reactive solutions to proactive, preventative care that emphasizes holistic health. This evolution is driven by a growing awareness of the importance of maintaining overall well-being through advanced ingredients and products that nurture, protect and rejuvenate. 

Among Cobalt Labs’ standout innovations is Waterless Cleansing Balm. This 100% waterless product deeply hydrates and nourishes skin as the user removes dirt, makeup and impurities. Formulated with upcycled plant oils and natural waxes, it not only removes impurities but also deeply nourishes the skin while preserving its natural barrier. Another Cobalt Labs innovation is its Peptide Defense Barrier Serum with Advanced Pollution Shield, It provides multifunctional protection against environmental stressors while strengthening the skin’s natural defenses, offering a lightweight, breathable shield for daily use.

“Another key innovation is our Scalp Activator Essence, an anti-aging treatment specifically formulated to target the scalp and help reduce the appearance of thinning hair. This advanced formula features a biomimetic peptide and a patented root extract to support healthier, fuller-looking hair,” said Chavez. “We’re also excited about our Shower Free Shampoo, a non-aerosol alternative hair mist to help cleanse and refresh an oily scalp in between washes without weighing hair down or leaving any residue.”

Oral care health plays a critical role in overall wellbeing. That’s why Cobalt Labs developed products that offer multi-faceted benefits to protect the delicate ecosystem of the mouth while targeting bad breath, leaving your mouth feeling clean, refreshed and healthier.  One example is Microbiome Mouth Rinse, which contains enzymes that naturally clean, along with pre- and post-biotics to support a healthy mouth. 

“Our Multivitamin Gum Serum is formulated with encapsulated vitamins A, C, E and B3 to help support tissue repair and reduce inflammation designed to meet the modern consumer’s needs,” said Chavez. “We offer innovative solutions for your oral care regimen to maintain your overall health, vitality and wellness.”

FP Labs is continuing to invest in its in-house testing and quality assurance capabilities. Providing top-quality beauty and personal care products that delight consumers has always been the focus, according to Martin. 

“As laws and regulations from federal and state sources emerge, manufacturers and brands need to be aware to futureproof new products for long-term success,” he added.

GAR is expanding compounding capacity and adding high-efficiency filling lines to support scaling customer demand. 

“On the R&D side, we’re launching pilot programs with brands that are leaning into claims-based clean beauty,” explained Curtis. “Internally, we’re doubling down on formulation innovation and investing in upgraded stability and compatibility testing to support next-gen product development.”

Lady Burd Cosmetics is developing dashboards to have more insight into every facet of its business.

“Data, data and more data!” exclaimed Burd.

What To Look For

But no matter what the economy is doing, there are always certain things to look for when choosing a contract manufacturer. Happi spoke with leading consultants in the beauty space to find out what recommendations they make when working with clients. 

At the SCC Annual Meeting in December, Krupa Koestline, founder of KKT Labs, received the Florence Wall Women in Cosmetic Chemistry Award. Koestline is the founder of KKT Labs in Orlando. She started KKT in 2020 after beginning her career at Johnson & Johnson, Estée Lauder Companies and smaller brands. Since its founding, KKT has grown to include five chemists, all of them focused on innovation and custom formulation.

“We understand the products and chemistry to help indie brand owners innovate,” said Koestline. “Unless you understand every component of a formula, you can’t create innovative products.”

KKT is expanding into ingredient innovation. The company partners with labs all over the world and has expertise in fermentation, exosome development and novel ingredient development.

“We are small, but agile,” Koestline concluded. “Our goal is to become the innovation powerhouse.”

SCC Vice President Marisa Plescia founded FemChem Beauty in January. The startup specializes in R&D and formulation consulting. FemChem Beauty may be new, but Plescia is a veteran in contract manufacturing business as a formulator. 

“I’m doing what I love—working with entrepreneurs, startups and brands to bring their formulations to life,” she said. “I’m bringing clarity to cosmetic chemistry.”

FemChem Beauty specializes in suncare, skincare and personal care. But whatever the category, Plescia said collaboration is critical for success.

“Research & development and product development need to collaborate and have critical discussions when developing products. I want to facilitate that collaboration.”

That collaboration includes vetting contract manufacturers by reviewing their quality systems, SOPs and testing abilities.

“How much do they invest in R&D? Can they properly scaleup? Transparency must be part of the process,” Plescia explained.

In her former and current roles, Plescia keeps a close eye on product trends. Among the most popular these days are waterless products.

“We need contract manufacturers that can handle powders,” she said.

In haircare, there’s been much focus on healthy hair growth. Marketers are rolling out entire systems devoted to hair health.

“Consumers want formulas that work. It’s not enough to put 0.1% of a marketing active into a product,” observed Plescia. “There’s a lot more efficacy testing. Brands are putting money into clinical testing.”

When working with startups, Plescia loves to teach entrepreneurs about what works and what doesn’t.

“I’m very clear about what makes the most sense to make the formula the best it can be. The key is to gain their trust,” she explained. “The cosmetic industry is about passion more than anything. It’s easy to fall in love with this business.”

Luciana Coutinho, founder of Lulube, told Happi that many indie beauty founders and science-led startups are overwhelmed by the process of finding the right contract manufacturer. 

“There are many databases they can use to search for them, but sometimes they don’t ask the right questions at the beginning of the conversation—they don’t know what they don’t know—and get stuck with a less optimal partner,” she explained.

To get to the heart of the matter, here are the first seven questions Coutinho asks during an intro call with a contract manufacturer:

1. What types of products do you specialize in?

Don’t take “we do everything” as a real answer. Some CMs are better at emulsions, others specialize in surfactant systems, powders or anhydrous blends. You want someone who has deep, proven expertise in your product category. Specialization often equals fewer surprises and better outcomes.

2. Can you walk me through your minimum order quantities (MOQs), and how they change as we scale?

I’m fortunate to work with brands that started small and later scaled significantly. If a CM can’t grow with you, you may eventually need to tech transfer to a larger manufacturer delaying your timeline and requiring extensive re-validation of formulas. It’s better to plan for scale from day one.

3. What certifications and quality standards does your facility follow (cGMP, ISO, FDA-registered)?

Just because you’re a startup doesn’t mean you need to settle. These certifications protect your brand from compliance risks and give retailers and consumers confidence. No certifications? That’s a red flag.

4. Do you offer in-house formulation? Can I bring my own? And who owns the final formula?

I always encourage my clients to own their formulas. It gives you more flexibility and control, not just in manufacturing but in future growth, licensing or brand expansion. I’ve seen too many ugly IP fights. Let’s avoid that entirely by getting this clear upfront.

5. What are your typical lead times, from sample approval to finished production?

Timelines matter. They impact your ability to coordinate launches, funding, PR and retailer commitments. I always advise clients to add a buffer and to understand how realistic the CM’s timeline projections really are.

6. Could you send me samples of 2–3 finished products (in my category)? Is it possible to speak with a current or past client?

Any reputable manufacturer should be proud to show their work and connect you with references. If they hesitate, you have your answer.

7. Can you share examples of situations/projects that didn’t go as planned—delays, failed batches or supply chain issues?

No one has a 100% perfect track record. I always ask how they handled issues, how transparent they were and how involved clients were in the resolution. Crisis response reveals a lot about how they treat partnerships.

On the Luluble website (www.luluble.com/quiz) beauty founders and startups can take a quiz to discover if they are ready to manufacture.

“If they have questions, they can book a 20-minute complimentary session with me,” said Coutinho. “This way I can help them on this sometimes bumpy journey.”