The Real COGS Killer: Bad Planning.

Most founders and managers assume COGS is simply what they pay suppliers. They believe it is about the cost of the bottle, the pump, the carton, the formula, and the duties and logistics stacked on top. They sit in supplier meetings thinking their job is to shave cents off the component prices. They treat COGS as something imposed by suppliers and imagine negotiating power is what makes the difference.

But this view, while partially valid, misses the point completely for small and mid-sized brands. In that universe, COGS is not only determined by suppliers. It is determined also by how often the brand produces, in what batch sizes, and how disciplined the planning is. Two brands can buy the exact same bottle from the same Italian supplier, fill the same formula from the same beauty house, and yet one will have a COGS that is twenty to thirty percent higher than the other, purely because of operational habits.

COGS for small brands is not a material cost. It is a planning consequence.

This truth is misunderstood because founders instinctively fear excessive inventory. They push for small, frequent runs believing it minimizes risk. In reality, it multiplies amortization inefficiencies, creates cash strain, invites emergency freight, and destroys gross margin. They take comfort in “safety” while unknowingly paying a structural premium.

To be clear, this dynamic is not universal. For large brands running at consistently high volumes, line efficiency is already optimized. In that world, amortization is not the bottleneck. Cash-flow cadence becomes the dominant driver, and more frequent runs can indeed be justified. But that luxury only exists because of scale, tight forecasting, and constant line utilization. It is not available to small players, and applying “big brand behavior” to small volumes is what ruins economics.

This article focuses squarely on accessible beauty brands operating between thirty and one hundred dollars retail, where COGS inefficiencies cannot be masked by pricing power, where supply-chain immaturity is lethal, and where discipline is not optional but existential.

 

What Actually Shapes COGS in Beauty Brands

Before going deeper into operations, it is worth acknowledging that COGS is influenced by a set of structural inputs. Pretending otherwise would be intellectually lazy. COGS is impacted by the specific product execution and quality, packaging costs, the cost of formula, the cost of logistics and duties, the margin taken by intermediaries when they exist, and the broader purchasing contracts a brand may have. Currency fluctuations play a role as well, particularly when components are sourced in euros and selling markets operate in dollars or sterling. Scale matters too, because high-volume buyers enjoy more negotiation leverage or better contract structures from suppliers.

None of this is surprising. It is textbook economics. There is nothing controversial in saying that a brand filling three million bottles a year in Italy will access better terms from the bottle maker than a brand filling one hundred thousand. Marketplace buying power is real.

However, here is what most founders and many managers fail to grasp. These elements have influence in only part of the COGS. They shape the baseline but they do not determine the destiny. The destiny is determined by how the brand executes, plans, schedules and amortizes. The operational posture of the brand is the multiplier. The planning discipline is what pushes COGS into either economic sanity or economic ruin.

The irony is that founders spend all their time arguing about the elements that move COGS one or two percent and ignore the one factor that moves it twenty to thirty percent. Suppliers become scapegoats while leadership habits remain untouched. What actually matters is not pressuring bottle makers or beauty houses. What matters is when and how you ask them to produce.

That is why this article focuses intensely on frequency, batch size and forecasting discipline. Those three strategic levers overshadow everything else. The other inputs exist, but they are not where the battle is won or lost.

 

The misunderstanding at the root of most mistakes

Founders fear carrying too much stock. They fear having unusable inventory. They fear tying up cash and being left with dead items in the warehouse. Those fears are understandable and, up to a point, justified. As a result many founders push their operations team to produce frequently in small batches so that they feel protected. The logic feels safe: better to run a small production every eight weeks than one big run every year. That way, the brand risks less capital.

But this strategy, although psychologically comforting, is financially detrimental. Small runs multiply fixed costs. Every production run requires line setup, line cleaning, priming, calibration and manpower. Whether you produce five thousand bottles or fifty thousand, much of the setup cost is identical. When you do four productions a year of twelve thousand bottles, you are effectively paying most setup costs four times. When you do one production of forty eight thousand bottles, you amortize those costs over the full volume.

The numbers are not small. The impact is not theoretical. It determines gross margin. And when you have a thirty or one hundred dollar beauty where the retail price cannot be stretched endlessly (check our article Profit Starts with Price: The Real Strategy Behind Successful Beauty Brands — CARRARA Advisory), gross margin is survival.

The other unspoken consequence of frequent small runs is that they invite emergency costs. When the brand discovers that demand exceeds supply, or when a retailer requests an unexpected reorder, the brand often scrambles. Scramble means airfreight. Scramble means short-run penalties. Scramble means higher cost per unit. Scramble means potential quality inconsistency and additional QC time. The effort to avoid carrying inventory ends up creating a heavier economic burden which is the irony nobody talks about. This is why so many young beauty brands grow yet never make money.

The crucial point is that COGS is the expression of how mature the brand is in its planning. The suppliers are not the beginning of the story. They are the last link in the chain. The beginning of the story is leadership discipline.

 

Why the solution is not “more stock” or “less stock” but the right industrial rhythm

Let us be blunt. You should not produce once a year unless you are a giant brand with accurate forecasting and an extremely high velocity SKU. You also should not produce every two months unless you enjoy paying inflated unit costs and running inefficient operations. The answer rarely sits at the extremes. The answer is in the middle.

For many accessible beauty brands, the optimal model is to produce two to three times a year per SKU. This allows you to amortize setup costs properly, avoid the ongoing inefficiencies of frequent runs and protect the business from excessive stock risk. It also gives you enough runway to adjust demand if the market shifts. This middle path is less glamorous to talk about than the “just in time” fantasy that founders cling to, but it is the difference between a beautiful brand that bleeds economically and a beautiful brand that can scale.

This is not theory. It is lived experience across dozens of brands.

 

SKU-level thinking instead of portfolio-level assumptions

One of the significant weaknesses in founder mentality is that they talk COGS at an overall brand level. They neglect the fact that every SKU has its own rhythm. One SKU might rotate perfectly and can be produced twice a year in medium batches. Another SKU might be slow and should be produced once a year in a cautious volume. Another might be a rising star and deserves proactive production decisions because running out of it would cost far more than the carrying cost of inventory.

Every SKU tells its own economic truth. A brand that looks at COGS as a single aggregated number is looking at its economics with a blurred lens. SKU-level discipline is where costs improve. SKU-level forecasting is where profitability starts. A portfolio average is only a symptom.

 

The true shape of risk and why fear drives bad decisions

The fear of inventory is legitimate, but the misunderstanding is that inventory risk threatens COGS. Inventory risk threatens cash flow. It is the working capital posture that is at stake, not the cost of goods in a vacuum. When leadership confuses these two concepts, they make decisions that ruin margin in the name of protecting cash.

The correct approach is this: choose the right production cadence and batch size to yield healthy unit economics, then protect the business with a structured Plan B if demand drops or volumes slow. Plan B should be defined before production, not during the panic. Plan B might include controlled promotional strategies, reallocating stock to digital channels or converting stock into controlled gift sets rather than dumping it. Having a Plan B is what turns inventory from a risk into a manageable variable. Not having a Plan B is what turns inventory into a sword hanging over the founder’s head.

Many boards behave as if inventory is an uncontrollable threat. It is not. It is a manageable outcome. And when it is managed, brands enjoy the COGS they deserve.

 

The maturity curve of a beauty brand

The difference between a young brand and a mature brand is not storytelling, packaging, or retail placement. The difference is industrial adulthood. Young brands treat production reactively, like something that happens to them. Mature brands treat production as a strategic lever of unit economics. Young brands negotiate supplier quotes. Mature brands negotiate their own internal habits.

This maturity is visible in one metric more than any other: forecasting accuracy. Forecast accuracy does not mean predicting miracles. It means understanding velocities, retailer ordering patterns and seasonality, and planning against them with a margin of safety. When brands do that, they avoid emergency costs. And avoiding emergency costs is what actually preserves COGS.

 

The unavoidable reality of amortization

In every industry where manufacturing involves setup costs, amortization matters. Beauty is no exception. It is astonishing how many founders pretend those costs do not exist. They exist and they are measurable. Cleaning a line, setting a line, calibrating for viscosity, filling, capping, crimping, boxing, and palletizing all have constant elements that do not care how many bottles are going to be filled after. When those fixed elements are spread across five thousand bottles, COGS jumps. When they are spread across fifty thousand bottles, COGS drops. The arithmetic is not glamorous, but it is the arithmetic that decides profitability.

A beauty bottle is not expensive because the bottle maker is greedy. It is expensive because you forced yourself into the economics of small batches, which forced your supplier into the economics of short runs, which forced you into the economics of amortization inefficiency. This is not about ethics. It is not about negotiators. It is mathematical necessity.

 

The psychological responsibility of leadership

Here is the truth most boards do not want to hear. If your COGS is structurally high, it is not because suppliers mistreated you or because inflation existed or because shipping rates changed. It is because your planning created the conditions for inflated unit economics. Once leaders understand this, they can fix it. Before they understand it, they will blame everything except themselves and nothing will change.

COGS is not the enemy. Poor planning is.

The hidden driver is the maturity of your internal decisions.

 

The resolution that unlocks profitability

When you adopt the balanced production model and accept that producing two or three times a year is the right economic posture, everything changes. Your forecasting becomes functional. Your supplier relationships become professional. Your freight costs become predictable. Your quality consistency improves. Your emergency costs disappear. Your gross margin takes a full breath for the first time.

And most importantly, you gain control over your destiny.

You cannot scale chaos. You can scale discipline.

The accessible beauty pricing zone does not forgive emotional decisions. It does not forgive founders who need to “feel safe” more than they need to be correct. It rewards brands that act like grown-ups and accept that planning is uncomfortable but mandatory.

The difference becomes glaring when you model two production strategies against the same sales curve.

 

Case Study of Production Cadence Impact

To make this point concrete, consider a case study from one of our clients. Two production strategies for the exact same beauty SKU. The brand sells identical volume over the year in both cases and finishes with the same ending inventory. The only difference is production cadence.

In the first scenario, the brand runs eight small batches across the year, aiming to keep roughly two months of inventory on hand at all times. Inventory moves steadily, but because each run carries its own setup, amortization, inspection, quality control, and minimum charge implications, the brand pays a structural premium every time it produces.

In the second scenario, the brand produces twice per year in larger batches. Inventory builds higher twice during the cycle, then declines, but the amortization and setup costs are spread over significantly more units per batch. Total production for the year is the same. Ending inventory is the same. Sales are the same. Yet the eight-run model carries materially higher cost per unit purely because the operational cadence forces process repetition.

Nothing changed in component pricing, formula cost, (partially) freight, or duties. The only variable was production timing. This is the essence of structural COGS leakage for small brands. It is invisible until modeled, but once seen it is impossible to ignore.

For the specific client, the COGS of the leading SKU, a perfume, moved from an yearly average of 7.12 eur/100ml to 5.33 eur/100ml or a cost saving of 25% without having changed anything from a product perspective.

The economics are driven not by what you buy but by when and how you produce.

 

Closing observation

Most founders never discuss amortization, cadence, and planning discipline because these topics don’t make for romantic brand folklore. They don’t sparkle in pitch decks. But they make or break financial viability.

COGS is not a vendor outcome. It is the arithmetic reflection of operational maturity.

For small and mid-size brands, low volumes and immature forecasting create real amortization penalties. This is where production cadence becomes the decisive lever. When you produce too often, you pay setup costs multiple times. When you produce too seldom, you invite stockouts and emergency costs. The middle path is where sustainable unit economics live.

It is important to clarify this: for large brands operating at consistently high volumes, the dynamic shifts. Once the line is always running at optimal efficiency, amortization stops being the constraint and cash flow becomes the management priority. In those cases, more frequent production can be beneficial. But that is the privilege of scale. You earn that advantage; it is not available to small players.

For accessible brands and challenger beauty houses, COGS is not a “supplier problem”. It is an internal posture. It lives in forecasting, in SKU-specific planning, in disciplined decision making and in the willingness to manage inventory strategically rather than emotionally.

Great brands do not negotiate pennies. They build the operational habits that generate dollars.

And when they do that, they stop being at the mercy of emergencies, freight premiums and last-minute scrambling. They start controlling their own destiny.

And that is why the real competitive edge in accessible beauty is not marketing bravado but disciplined industrial thinking. That is the difference between brands that merely exist and brands that survive time.