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12 tips for doing business with European buyers of natural ingredients for cosmetics

Takes about 17 minutes to read

There are good opportunities on the European cosmetics market if you understand the needs of buyers and can offer value beyond meeting legislative requirements. Here are tips that can help you in doing business with European buyers of natural ingredients for cosmetics.


1 . Know industry standards and buyer requirements

The European cosmetics industry has strict legislation on product safety and efficacy.

You will need to have the relevant documentation on ingredient safety, handling and performance available for your customers.

For new ingredients in particular, you will need to provide them with documentation on safety and efficacy from credible laboratories, and where applicable on traditional uses. Furthermore, as the largest international companies are increasingly looking for one formulation for all countries, it is always advisable to check that a new ingredient is listed on the China list of ingredients. This is not obligatory but the biggest companies look for this. On the other hand this gives smaller companies an opportunity to be first to market with an innovative ingredient to be sold in other countries, even if it cannot be sold in China.

Tips:                                                            

  • Read about complying with REACH (Registration, Evaluation and Authorisation of Chemicals), the European Union policy on chemicals.
  • Study the requirements to be an Only Representative under the REACH legislation. In certain situations this may have advantages for non EU exporters
  • Read our study about buyer requirements in the European natural ingredients for cosmetics market.
  • Non-compliance: If there are any reasons you cannot comply with industry standards or your buyer’s requirements, you need to be honest about it and explain why.
  • Complaining or joking about your buyers’ requirements will not be appreciated.
  • Refer to our guidelines for documentation for cosmetic ingredients  for more information. Our other studies about specific products also contain information on the documentation that you will need.

2 . Know your target market and segment

Make sure you know what the characteristics are of the European cosmetics market and weave that information into your promotional materials. What are the trends? What are popular new types of products? Which segments are growing? Why? If you are already selling the same products to the food market, remember that the cosmetics industry is a different market, with different requirements. It is critical to know the details of the cosmetics market, even if you are a supplier of ingredients.

Provide buyers with detailed information on the technological or brand developments of your product and its suitability for their markets and applications.

You can develop a better understanding of your target market by identifying what your competitors are offering. The more specific your knowledge on an industry segment becomes, the better you will be able to identify what your competitors are offering and how they are positioning themselves. In this way, you will also find it easier to identify and analyse new and relevant market developments (e.g. new requirements, price fluctuations, changes in the supply chain etc.).

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3 . Make sure you can offer buyers detailed information about your product

Knowledge about your product is crucial. Make sure you can communicate about and have documentation about your product’s:

  • Identity
  • Safety (especially if new ingredient)
  • Efficacy (especially if a new ingredient)
  • Source
  • Risk management (in sourcing and in production)
  • Method of collection or cultivation
  • Methods of extraction
  • Shelf life and use of preservatives
  • Physical and chemical behaviour of your ingredient during processing (heat, solubility, etc.)
  • Properties (activity, functional)

Buyers will need detailed information about your product to know whether it fits in their formulations and how. They need to know the properties of your ingredient (that it is a soothing extract for example), and they need to know whether it retains these activities over time (its shelf life) and under the different processes that they may use to produce their formulations.

This information needs to be backed up by the required tests and documentation. The basic information consists of:

  • a product specification sheet
  • a Safety Data Sheet
  • a Certificate of Analysis (by lot)
  • documentation to demonstrate safety (especially in the case of new ingredients)
  • and documentation to back up any claims on efficacy (functionality or performance)

It is not necessary to present this information at the same time. Start with a Product Information Sheet (or Sell Sheet) with a focus on the benefits, supply chain and basic data on the ingredient. Then you can provide more technical information as requested by your customers.

Your buyers will also expect detailed documentation of the steps in your production process (standard operating procedures) as well as traceability of your ingredient and the raw materials you have used. By doing so, you can demonstrate to your buyer that you are in control of your production process and of product quality.

Tips:

  • Go to the Soap Kitchen for examples of Safety Data Sheets (SDS) and certificates of analysis.
  • Ask your buyers whether or not you need to supply additional documentation.
  • Rehearse your presentations to buyers. Include the key topics about your company, products, safety and efficacy, processing, supply chain, corporate social responsibility and pricing.
  • Be careful in sharing safety and efficacy documentation with buyers. Carefully consider if a non-discloser agreement should be in place for proprietary information.
  • See our manual with guidelines for documentation for the cosmetic ingredients industry.

4 . Differentiate yourself from the competition

You need to stand out from your competitors if you want to be successful in Europe. Think about what makes you unique. Look at what your company and product has to offer and match this with the market requirements and trends you have uncovered in your market research (see our study about finding European buyers for natural ingredients for cosmetics). Find out how your competitors market their products.

If you supply an established ingredient, you will need to demonstrate how your product offering is different or better than the competitors’. And/or think about ways of improving your product’s value, e.g.:

  • Offer a better price. Value for money is the primary driver and price is a key component of value! Always try to get the highest profit margin for your product but be prepared to negotiate. This means that you need to know your own prices and margins in detail especially in relation to volumes, before the negotiation.
  • Improve your service level, for example by offering expert advice on your product, reliability or pricing.
  • Offer different processing, preservation and delivery options, based on the demands of buyers.
  • Implement documented resource management systems.
  • Adopt sustainable processes and attain certification for your ingredient: FairTrade through Flocert, IMO Fair for Life, organic status.
  • Certification can be expensive and auditing can be very time consuming. In some cases, where there is no legal standard (unlike organic certification), or no need for a certified ingredient to be part of a certified finished product (like the Fairtrade label) you can consider creating your own company policies and standards based on recommended best practices. Ultimately it is a business decision as to whether the investment in certification can be recovered.
  • Some standards can be self-audited, for example the new ISO standard for natural and cosmetic ingredients, ISO 16128, which can be purchased online at the ISO store.
  • Establish principles of corporate social responsibility (CSR).

If you are launching a new ingredient, you need to make sure it stands out from the existing ingredients on the market. Try finding the answers to the following questions:

  • Does your ingredient have more effective properties than other ingredients?
  • How does that property benefit cosmetic formulation?  
  • What makes it more efficient? e.g. by using less or at a lower price.

If you are making changes and improvements, you also need to consider the return on investment, in terms of higher margins for example.

You also need to consider defining and communicating these as Unique Selling Points (USPs), which is closely linked to your promotional strategy (also see the tips under number 6 below).

5 . Provide relevant product information in your marketing

As part of your promotional strategy, you need to provide relevant information that will help you market (promote) your products. When doing this, you must know who you are targeting. If you are looking at specific industry segments, find out who you need to address, which departments, and think about the kind of information they need to receive.

In each company, there will be purchasing staff, product development staff, quality control and marketing departments. Who needs to know about your product?

These different departments have different interests. Product development staff are probably interested in functionality and processing conditions for example, while marketing staff are more interested in the story behind the product, its ingredients and origins, so that they can sell it in their own marketing to the consumers.

Remember that at the beginning you may only meet one person from one department and they will take your information, or request further information, to share with the company.

You need to match your message to your audience, don’t overload them with your whole presentation, just share the information that is relevant and of interest to them.

Tips:

  • Research the right terminology: Cosing or SpecialChem are a good starting point, but always verify these on websites of European manufacturers and trade fairs (such as In-cosmetics).
  • Know how to deal with questions from your buyers. For example if buyers do not associate your product with your origin (Indian sandalwood from outside of India), you need to be prepared to tell him/her why they should use your company as a supplier.
  • Tell them which of your product’s characteristics appeal to buyers. Actively communicate your Unique Selling Points (USPs): e.g. Corporate Social Responsibility (CSR) qualifications, Good Manufacturing Practices (GMPs), food standards like HACCP (Hazard Analysis and Critical Control Point) etc.
  • Tell them about your company’s identity.
  • Find a balance between informative and persuasive: i.e. information on your company and products versus rational or motivational arguments why the reader should choose your product e.g. better efficacy, fair trade certification (rational) or stories on traditional use or collection (motivational).
  • Don’t use terms related to health or “free-from” (note that connotations can be slightly different per country).
  • Added value: if you do not produce ingredients yourself, be prepared to explain what your added value is, both in the chain and to your buyer (e.g. consolidation, quality control, training of suppliers).

6 . 6. Use online marketing

European buyers will expect you to have a professional website that is easy to navigate. This will give your company credibility and enable you to communicate your brand identity.

It needs to look professional and contain clear and relevant information about your company, your identity, your product range and your sustainability practices and certifications. The objective is to catch their attention and get them to contact you, for more specific/technical information.

It needs to clearly include your (up to date) contact details or a contact form.

When making a website, be aware of the perception others may have of your country and/or the origins of your ingredients.

Include any logos you have on certification: HACCP, GMP, ISO, Organic, Fairtrade etc.

Tip:

  • Beraca is a good example of a website that enhances credibility as well as a clear company identity.

7 . Set competitive and sustainable prices

Your prices need to be competitive, sustainable and represent good value to the buyer; different buyers have different opinions on what value means for them.

Include all the costs in the price calculation and consider carefully how to apportion the fixed costs. You need to have a good understanding of your breakeven and then prepare trial sales budgets with different volume and sales price scenarios (based on reality).

Base your price on what the market is demanding and your own cost structure. But be aware of mark-up or mark-down based on buyer specifications. Make sure you include all the costs from the value chain. But, if you cannot justify a higher cost price, you will need to reduce costs.

If you supply a new ingredient, you will need to earn back your cost of innovation within a realistic timeframe (e.g. not with your first order). This also applies to larger costs in the first year for certification and testing for example. Look at your costs and income over a period of time and spread them out over three years. This will enable you to incorporate expenditures into a realistic price. However, you may need to reduce these prices in the future to maintain your business relationships.

Take a very close look at your buyer’s specifications before sending out an offer. Do not overpromise and under deliver.

Tips:

  • For more information, see this very helpful article showing the benefits of different pricing strategies with a focus on agro-based products.
  • Have different quotes available for different volumes to offer incentives to buy bigger volumes. Also ensure you can provide quotes based on different delivery times.

8 . Communicate honestly and on time

You need to provide European buyers with clear and upfront communication, anticipating the information they require. This will help them to make quick and informed decisions.

You also need to be honest about what you can deliver (e.g. realistic delivery times/product specifications etc.). This will help you to build trust with European buyers. A European buyer would rather know up front than he/she has to wait, rather than be disappointed at a later stage for example. You don’t want to be considered unreliable or disinterested.

You need to understand the differences in business cultures across Europe. Buyers of cosmetic ingredients will expect you to conform to their particular business norms. Marketing and sales staff especially expect you to be able to cope with cultural differences in a professional manner.

Remember when to face-to-face with a customer (existing or potential) with a that your tone and body language are relatively more important than what you say and can affect people’s impression of you.

Tips:

  • Respond to requests as quickly as possible.
  • If you can’t answer straight away, give your (potential) buyers a short reply, explaining that you will respond as soon as possible.
  • Keep regular contact with your buyers. Keep them up-to-date on news about your company and product. This will show that you are committed to building a serious and sustainable business relationship.
  • Read this overview provided by Passport to Trade 2.0 for insights into the different business cultures across Europe.
  • Face-to-face meetings are very important: arrange to meet contacts, new and existing, during congresses and trade fairs.
  • Avoid surprising your buyer, especially if there are problems!
  • If you struggle with negotiation take a course to improve your skills.

9 . Be professional when sending samples

Sending samples to your buyers is a vital point in the buying process. Depending on the type of ingredient, it usually happens at the end of a process of assessing the technical documentation and pricing information. However in some cases such as essential oils, where the fragrance is an especially important quality criterion, buyers may want to receive a sample earlier in the process.

When buyers request a sample, they will need to receive a certificate of analysis that has been taken from a specific batch. This needs to be representative of the Specification and accompanied by a Safety Data Sheet, conform international GHS standards. Examples of both can be found on the Soap Kitchen website.

Samples need to be representative of what you can deliver in terms of quantity, quality and lead time. Buyers will specify what they expect based on the specifications in your technical data sheet and product information. Make sure you can meet these requirements. If the batch does not conform with the specification then that will create a problem.

If your buyer doubts the authenticity of your samples, they may not buy your products and you will need to take them back at your own cost. Your reputation with that buyer may also be damaged. This could be passed on to people in their network, and very damaging to your business.

Tips:

  • For essential oils, ISO offers specific standards for sampling and preparation of test samples.
  • Guarantee traceability of the specific lot by marking your sample with a lot number.
  • If you send a sample that does not correspond to a specific lot but is representative of your product’s quality, mark it as a type sample.
  • If you cannot send the product with the same quality as the sample sent, inform your buyers before shipment.
  • Make sure you track the process of selecting and sending your samples to reduce the risk of a buyer claiming that the sample (pre-shipment sample) differs to the final order that was shipped.

10 . Be aware of exclusivity agreements

Be aware of the expectation from some European buyers for you to sign exclusivity agreements with them. Exclusivity agreements can be for a specific product or a specific market and are always for a specific time frame. You need to consider carefully what an agreement covers and what this will mean for your entry to market. For example:

  • What can you expect from your buyer?
  • What can your buyer expect from you?
  • Will an agreement be based on measureable targets?
  • How can you clarify your and their expectations?
  • How many products does the other party sell, and how much time, effort and marketing can you expect for your product?

11 . Work with confidentiality agreements

It is common practice to use confidentiality agreements (also called non-disclosure agreements) with buyers to protect your interests and your investments in the case of new ingredients as well as the interests of the buyer. Always consider setting up a confidentiality agreement before disclosing proprietary or commercially-sensitive information or data.

Don’t forget that within the framework of a confidentiality agreement, you do not have to disclose everything. Only disclose confidential data that you really need to disclose.

Tips:

  • Identify and label confidential information properly and choose a time frame for the period of the contract that allows for sufficient product development time – typically at least 3 years.
  • Visit the website of the Intellectual Property Office of the UK government for information about non-disclosure agreements, including some examples.

12 . Agree on acceptable payment and delivery terms

Payment and delivery terms are an important part of business transactions. Buyers in Europe will want to negotiate favourable terms because this directly affects their sourcing risks and costs.

Try to find a middle ground in terms of payment terms. In general, make sure you understand exactly what the conditions are, in particular with regard to the milestones upon which you can expect payment. Although buyers often do not want to make advance payments, you might be able to negotiate a first payment upon shipping. Like anyone, buyers want to pay for what they have ordered. If there is any risk that what they have received is not what they ordered then you will struggle to get paid or get the full amount that was originally agreed.

Whilst different companies set different policies, within Europe, the payment period is usually 30-60 days after the date the invoice was received. For new businesses overseas, European buyers may accept other terms.

A very common payment term is the CAD (Cash against documents), when banks pay for a transaction on presentation of documents or within 30 days after the B/L (Bill of Lading) has been issued.

Whatever your terms, you will need a robust financial model for working in the European ingredients market. It is a good idea to contact your local bank or local business support organisation to find out what the costs are and whether they can pre-finance your exports. You can also contact national governments for information about subsidies. In this case, you could even grant more favourable payment terms.

Make sure you work out different cash-flow scenarios accordingly, including worst-case scenarios: e.g. late payments, cases of conflict. Ensure that your customers receive a copy of your terms and conditions of sale before agreeing to a sales contract. Also ensure that you comply fully with delivery terms as agreed upon with your buyer.

Familiarise yourself with the International Commercial Terms (Incoterms). Find out what they mean in terms of ownership transfer and insurance. What are your responsibilities and those of your customers? Make sure you handle the logistics according to the agreed terms and take quotations from different forwarders. Ask them to break down their offer so you can make an informed, cost-effective decision.

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