Market Overview

Based on the sales from businesses, the domestic cosmetics contract manufacturing market reached 367.5 billion yen in FY2025, marking a 3.6% increase from the previous fiscal year.

The market gained momentum at the beginning of the fiscal year, receiving prospective orders from clients for new releases and product renovations. However, store sales were slower than expected due to consumers' cautious spending habits stemming from increased commodity prices. The growth of mail-order and ecommerce businesses, the increased distribution of South Korean and other overseas products, and diverse customer needs have led to the diversification of sales channels and products. This trend has prompted cosmetics manufacturers and retailers to carefully plan orders from the perspective of proper inventory management, aiming to avoid excess inventory caused by discrepancies in actual cosmetics demand. Consequently, contract manufacturers received multiple small- to medium-size lot orders. Overall, therefore, sales based on volume were slow. Meanwhile, these manufacturers have negotiated prices with clients, because they faced multiple cost-increasing factors, such as rising prices of materials, logistics, and labor. As these rising costs were passed on to selling prices, the vendor-sales-based market size surpassed that of the previous year.

Noteworthy Topics

Impact of the Escalated Middle East Situation on Supply Chains

Since March 2026, the cosmetics supply chain, including contract manufacturing, has been severely affected by the heightened situation involving Iran and the restricted passage through the Strait of Hormuz. Specifically, the situation has stalled the supply of petrochemicals, the raw materials of cosmetics packaging. This has depleted packaging manufacturers’ inventory, suspended production, and led to shortages of plastic containers. Skyrocketing purchasing prices of petroleum-derived raw materials, including surfactants, silicones, and emulsifiers, caused by rising oil prices, have imposed a heavy burden on production activities in the cosmetics market and on cosmetics contract manufacturers in Japan.

Future Outlook

The domestic cosmetics contract manufacturing market, based on sales from businesses, is expected to be worth 379.6 billion yen in FY2026, which is a 3.3% increase from the previous fiscal year.

Despite the declining population, the cosmetics contract manufacturing market is driven by the demand for skincare essentials and anti-aging products. Skincare essentials ensure a clean appearance and healthy skin, while anti-aging products include high-value, functional skincare items, as well as personalized, expensive haircare products tailored to individual hair textures. These products are distributed through various sales channels. Additionally, new categories reflecting the needs of the era, such as men’s cosmetics and femtech-inspired cosmetics that address concerns unique to women, are invigorating the market and garnering attention for their growth potential. However, growing initiatives aimed at increasing sales of South Korean cosmetics and developing private brands could reduce sales floor space for Japanese brands in stores, which could negatively impact orders for domestic contract manufacturers.

Research Outline