According to a study by Japan’s Yano Research Institute, the market for contract manufacturing of cosmetics in 2012 was worth ¥208.5bn, up 3.7% on 2011. The key factor that has contributed to the growth of the market is a 2005 revision to the Pharmaceutical Affairs Law that regulates the industry. The revision enabled companies that did not have their own licensed facilities for manufacturing cosmetics to source their products via OEM makers. This lowered the barrier to market entry for newcomers while also enabling established makers who needed extra capacity to deploy technologies that required facilities they did not possess for researching, developing, or manufacturing products.
The market for OEM manufacturing is forecast to grow by a further 2.6% to ¥214bn in 2013. Although the retail cosmetics market is virtually stagnant, it remains an attractive target for companies outside the industry who think they possess technologies or processes to create innovative products.