Vertical integration in the beauty industry is not happening by accident — it is happening out of necessity, and it will continue. Over the last five years, the industry has faced a series of disruptions: a global pandemic, shipping delays, port protests, and unprecedented tariffs. These events created repeated uncertainty in business operations. As a result, brands and manufacturers alike have experienced ingredient shortages, major delivery delays, and extreme cost pressures from suppliers, all while customers continue to demand speed, transparency, and uncompromising quality.
The most effective way to meet those customers’ expectations is to take greater control of the supply chain. Vertical integration offers exactly that. By bringing more stages of production and logistics in-house, companies can increase resilience, improve transparency, and reduce dependency on outside partners who may be vulnerable to disruption.
I truly believe that advances in technology, particularly AI, are accelerating this trend. Supply chains can now be connected, monitored, and optimized in real time. With the touch of a button, a contract manufacturer can track the origin of a plant-based extract grown in the Alps all the way to its arrival at their facility for compounding and filling. That level of transparency to our brand partners is increasingly not just a competitive advantage but an expectation.
For a contract manufacturer vertical integration may manifest through acquisitions of ingredient suppliers, other facilities with dual and alternative services, technologies or logistics providers. Owning more of the supply chain, combined with AI-driven capabilities, allows companies to shorten lead times, manage costs more effectively, and ensure quality from source to brand partner.
There are clear opportunities from vertical integration - improved margins, stronger brand trust, enhanced speed to market, and greater innovation agility. At the same time, there are risks. Acquiring and managing supply chain partners requires significant capital investment, operational expertise, and ongoing integration. If not executed carefully, vertical integration can create rigidity, limit flexibility with external partners, and expose companies to greater operational risk if one link in the chain falters. But! What it still offers above all is the ability to be extremely transparent with the brands we serve. If there is a delay, we will know it and be able to notify the brands we serve immediately, this cannot always be stated when working with outside vendors.
Ultimately, vertical integration is likely to continue shaping the beauty industry. The pressures of the last five years have underscored the need for greater control, and the tools now exist to make it achievable in ways that were not possible before. For many contract manufacturers, the question is not whether to integrate, but where to integrate.
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Written by Steven Mason, VP of Sales DMI Solutions