Beauty contract manufacturing is Warren Becker’s legacy—and he’s continuing to build that legacy.

The former CEO of Cosmetic Solutions, the copacker his father Mervyn started in 1991 after his uncle Hilton began formulating skincare for doctors’ offices in the decade before, Becker has spent around $500,000 to launch Next Beauty Labs, a new private-label skincare manufacturer in Boca Raton, Fla., housed in a 5,000-square-foot space with the capacity to scale up to 20,000 square feet and 5 million units annually. The turnkey company goes beyond production to guide brands through packaging, graphic design, logistics, quality assurance and regulatory compliance. It currently has 10 brand clients, with about 20 more in the pipeline.

As private equity has reshuffled beauty manufacturing—the firm Lee Equity Partners now owns Cosmetic Solutions—some manufacturers that previously catered to small brands have moved upstream to focus on bigger brands, creating an opening for manufacturers focused on the emerging end of the market. Next Beauty Labs has swooped into that opening.

“We’re being agile, nimble and flexible so when a customer calls and says, ‘I need it in three weeks,’ we make sure we have the right resources to deliver that,” says Becker. “In our prior business, because it grew so quickly, it was hard to pivot and make those changes. Ultimately, we couldn’t service all the customers we needed to service.”

Beauty Independent talked to Becker about Next Beauty Labs’ working relationship with brands, formula ownership, increasing input costs, the United States Food and Drug Administration’s warning letters to manufacturers, artificial intelligence and automation, and the mistakes he sees young brands make over and over again.

Why did you start Next Beauty Labs?

I joined Cosmetic Solutions in 2006. We were able to work with hundreds of brands that started small, and we saw their successes and failures. Some of the customers started with just a dream and a concept and turned into major brands that ended up in Ulta and Sephora and were acquired.

We grew the business 10X and sold it at the end of 2019. I stayed on for another four years as CEO. In the middle of 2023, I started to exit. I went to a board-level role. The strategy of that business started to change. Minimums increased. We were dealing with supply chain constraints and rising costs.

A lot of customers that had been the soul of that business couldn’t meet the minimums and had to move on. And growing businesses managing their cash flow better were looking for smaller runs and quicker turnarounds. In my mind, there was a need for a small-run, but also scalable partner that could support brands at all stages of growth.

We are living in very uncertain times, not just for brands, but for smaller manufacturers. It’s challenging for them to keep inventory in stock so you can turn things around quickly, and keeping up with regulations is a challenge.

How do we curate a range of amazing effective products that could be easily customizable to create differentiation? How do we source packaging? How do we do that in a compliant manner so we can stay up to speed with regulations? That’s what I’m doing.

What are your minimums at Next Beauty Labs versus the minimums of Cosmetic Solutions?

Their minimums are 5,000 and 10,000. There is a whole market that they can’t service. Our minimums start at 50 pieces for stock formulas and, for semi-custom, it’s around 500. That would be taking an existing stock formula or base and doing slight modifications to create differentiation.

It’s a modular and agile facility that we’ve built. When you’re running different SKUs at varying quantities with different formulas and packaging, you can’t really do that on fully automatic equipment. You need creative ways to get things filled, labeled and packed.

I started with a warehouse shell, and I have built out a production room, lab, creative and graphics team that is doing label sourcing and printing. I was fortunate to reconnect with some of the prior team members at Cosmetic Solutions. I’m trying to bring in the right talent who knows this business and small product runs. We will be producing hundreds to thousands of different SKUs a year consistently with quality.

Next Beauty Labs founder Warren Becker

When you were at Cosmetic Solutions, speed to market was a priority for you. What about now?

Speed to market is critical. On our stock formulas, we want to turn orders around in three to four weeks. That requires investment. We have to have inventory and raw materials in stock. We have to have local vendors who can deliver packaging and labels. We have spent time building the network to do that.

At Cosmetic Solutions, it has so many formulas and raw materials that the cost of being able to do that became difficult. We would maybe have 39 of the 40 raw materials we would need for a formula, and one would be weeks away.

So, we are making sure we are using materials we can get and, if not, we want to be upfront with customers and say, “The vendor is telling us this raw will be weeks away. Do you want to order an alternative?” If customers want to be quick, they have to operate within the sandbox of what is feasible.

We’ve seen estimates that there are about 250 to 300 beauty contract manufacturers in the country. Does that seem right to you?

When we did our deal in 2019, there was a lot of consolidation in our space. That’s slowed over the last couple of years. You have KDC/ONE, Voyant and Cohere. They are the bigger ones that have built platforms. Then, there are the midsize players, which would be Cosmetic Solutions, Elevation Labs, Allure Beauty Concepts, Bentley Labs.

At the bottom, it’s very fragmented. There are a lot of smaller manufacturers under $10 million. The mid-range level is plus or minus $50 million, and there are maybe 20 players. Above $50 million, there’s a handful. From $10 million to $20 million, there’s probably 20 to 30, and then under $10 million, there could be 100.

What’s happening with consolidation?

I don’t think the consolidation is done. KDC/ONE has just made another acquisition [of British manufacturer Barony Universal]. We did tuck-ins at Cosmetic Solutions that made sense geographically or strategically for us, but it’s been a tough environment to do deals. The cost of cash and interest rates have not helped.

With tariffs, it’s hard to put a business outlook together when there’s uncertainty around input costs, and there’s been cost creep in our industry. I also think consumers have changed spending habits, trading down from prestige to mass and masstige. Brands have to shift and rationalize SKUs. There’s been less new innovation, and old SKUs die, but I think everyone’s outlook is positive. Beauty is still a resilient space.

What are you seeing brands do as a result of the tariffs?

From where we are positioned in the premium prestige space, we are not getting a lot of brands that are overseas looking to come to the U.S. The brands doing that are more mass brands manufacturing overseas for economic reasons. What we are seeing is a lot of brands are buying packaging from China, and they are looking for domestic or other sources.

It’s tough for brands to figure out what to do because by the time they are up and running, the tariffs could be different. It’s not just Asia, it’s tariffs on Europe as well because a lot of the raw materials come from Europe.

For the past six to 12 months, we weren’t seeing the price increases come through. U.S. distributors had inventory. We are starting to see them as new inventory comes in. From a manufacturing perspective, we try to pass it on. It’s the whole thing again like post-COVID where prices went up, and the consumers traded down. It’s a big challenge.

What input costs have you seen shift?

Part of this could be geographic. Being based in South Florida, in 2023 and 2024, labor cost increased in some cases 50% for roles in our labor market. We have seen that start to stabilize, but the cost of insurance and business services like IT have gone up.

There has been a lot of SG&A and raw material cost creep over the last few years. The packaging and raw material costs had started to stabilize, but they are going up again. It can be a tariff surcharge that has to be passed to the brand, and the brand has to decide whether to pass that on to the consumer. They are also dealing with the same personnel and business service costs along with the costs of marketing having gone up.

Located in Boca Raton, Next Beauty Labs is a turnkey private-label beauty contract manufacturer focused on smaller brands or brands looking for small production runs. Its minimum order quantities start at 50 pieces for a stock formula and 500 for a semi-custom formula.

How have the costs pushed up manufacturing prices?

Our finished good prices are probably up from five years ago 30% to 40%. If we were selling a unit for $3 previously, that’s probably $4 a unit today at least.

What mistakes do emerging brands frequently make?

A lot of startups don’t fully understand the competitive nature of the industry. There are probably hundreds of thousands of brands. They are not clear on their target market and how to acquire them as a customer. They underestimate marketing costs.

They underestimate the costs in this regulatory environment and making sure their brand is compliant. It’s not just domestically, but all the things they have to do to have a global distribution model. You have to know about that sooner rather than later for global formulas. I have seen brands reformatting two or three years in for Europe, and that’s expensive.

What’s your take on formula ownership?

I have always been a proponent of brands owning their own formulas as long as they are unique to them. What we want in return is manufacturing exclusivity for a period of time as long as they are meeting standards. For formula ownership, we don’t charge. We like a time commitment.

There are formulation companies that will develop formulas for $20,000, $30,000, $40,000, $50,000. There are formula development costs with us as well depending on what we are doing, maybe $5,000 to $10,000.

At the end of the day, a formula can be taken to any lab, and they can get pretty close. I understand ownership is important to a brand from an investment perspective, but from a manufacturing side, it’s not something I use to keep customers. We want customers who want to work with us. If you are on time with quality, your customer will have no reason to go anywhere else.

Some brands go to independent formulators for formula ownership reasons.

We have had good working relationships with a lot of independent formulators, but there have been major challenges because they are developing products in a lab. They don’t necessarily have the knowledge of how a formula can be commercialized in a 1,000-kilo tank. When we try to put it together, it doesn’t make what the customer believes it will make. It requires tweaking, and the brands get frustrated.

There are great manufacturers with very strong R&D teams. I personally don’t believe brands need to be going to independent formulators. My advice would be to find a partner who you feel comfortable with that can commercialize your product that has a strong R&D department. They can do the R&D, and they shouldn’t charge you to do it if you are going to be manufacturing with them. There’s probably not as much hand holding, but that doesn’t mean that the end result is going to be any better or any worse.

The manufacturer Naturich recently got a warning letter from the FDA. Cosmetic Solutions received a warning letter in 2024. What’s going on?

There is definitely enhanced regulation and oversight going on. We are seeing more warning letters referencing MoCRA. That is an indication that the FDA is starting to police cosmetics more than they ever have.

At Cosmetic Solutions, we had the FDA in there in mid-2023. We had an audit and a couple of 483s [or forms that list objectionable conditions from the FDA], and the response to the audit wasn’t sufficient. That led to the warning letter. That business has spent a lot of money to remediate and fix all the concerns, which they have done.

Not every manufacturer is going to be able to do that. They aren’t going to have money to bring themselves up to speed. There have been countless other facilities that may not get a warning letter that are spending millions to elevate what they are doing from a quality perspective. That is happening across the industry, and I’m seeing smaller manufacturers that have the FDA in, and they can’t do that, so they are looking to sell their business or client list.

For beauty brands operating at the pace of TikTok, speed is critical. Next Beauty Labs estimates it can turn around a stock formula product in three to four weeks.

Factories often use staffing agencies. What’s been the effect of tougher immigration policies on them?

There’s definitely been an impact. We will bring in temporary staff when we need, and we use staffing agencies. Historically, we would put the burden on the staffing agency and say, “Make sure the people you are sending here are legal to work.” As I was moving out of Cosmetic Solutions, I saw a shift with the staffing agencies where they were like, “If you want us to guarantee that, the pay rate has been bumped up.”

Their business is numbers. They were employing as many people as possible and saying, “Show me a social security number. We don’t really care where it comes from, we will put you in a job.” We have had some amazing people come and work for us over the years, and we will do spot immigration verification and sometimes we find the information is not accurate.

It’s changing, but a lot of it has been cost dependent. If you want to pay minimum wage and use a staffing agency, in your mind, you are putting the burden on them, and they just send you people.

How are you integrating AI tools?

If you are not looking at AI as a business, you will get left behind. I have been using AI to help automate and supercharge marketing efforts. We are also using it for customer service to load up all of our product information, ingredient lists and regulatory claims so if people ask questions, they can be easily answered, and on the regulatory side we are using it to check clean lists and global compliance. We are looking at supply chain software to forecast demand.

How do we make the people we have more efficient and turn the four- to five- person team we have into 10 or 15 people? If we do more with less, we can be more effective with our costing.

Beyond the basic OpenAI, Sora or Midjourney, I’ve built tools myself. I have recently looked at an MRP system called Worldover that looks very interesting. I have seen some formulation systems integrating AI for formulation. You are still going to need a chemist putting together a formula on the bench, but instead of taking 8 hours to 10 hours to create a formula, maybe it will take two.

What about greater automation on the factory floor?

I haven’t seen major advancements in factory automation in the last couple of years. What you could maybe see is software pieces that can now be added on to compounding equipment and production tanks. Can the machine auto check? Can it use AI to say this is an adjustment that needs to be made? Maybe there will be less of a need for mechanic intervention.

It already exists, though. There is automated compounding, production and packaging equipment. With AI and more automation, you might see humanoid robots, but can they put on caps and pack boxes? That is something we may see.

Why has there been lack of beauty innovation?

A lot of the innovation has historically been driven by the raw material suppliers with new innovative actives. That’s definitely slowed. Twenty years ago, we would have raw material suppliers in every day, and we would be asking about what is new versus what is being seen on TikTok and trying to create something similar.

That is also a reason why brand loyalty is continuing to decline. When you are using a product for efficacious results, you stick with that product. If you are following trends, the next one that comes out, you try that.