Toilet Preparation Manufacturing (NAICS 325620) — A U.S. Industry Primer

1. Overview

"Toilet preparation manufacturing" is the federal statistical label for what most people call the beauty and personal-care products industry: the factories that blend, compound, and package perfumes, makeup, skincare creams and lotions (including sunscreen), shampoos and other hair products, deodorants, shaving preparations, toothpaste, nail products, dental floss, denture preparations, nonmedicinal mouthwash, and premoistened towelettes.[1] It is a large, brand-driven, and unusually recession-resilient corner of chemical manufacturing — a business where the physical product is cheap to make and most of the value lives in brand, formulation, and marketing.

Why an investor should care: demand is steady and lightly cyclical (consumers keep buying lipstick and moisturizer even in downturns — the so-called "lipstick effect"), gross margins on branded product are high, and the sector throws off consistent cash. The trade-off is that it is intensely competitive, marketing-heavy, and now facing a new federal regulatory regime and tariff pressure on imported ingredients.

There are two clean ways in. Public-market investors can own a handful of listed beauty pure-plays and a longer list of diversified consumer-goods companies with beauty segments. Private investors increasingly play the industry through its "picks-and-shovels" layer — contract manufacturers that make product for hundreds of brands — and through indie-brand roll-ups and direct-to-consumer (DTC) startups, where the manufacturing is outsourced entirely.

2. What it is and how it's structured

NAICS 325620 (the North American Industry Classification System code) covers establishments primarily engaged in preparing, blending, compounding, and packaging toilet preparations: perfumes and colognes, cosmetics and makeup, face and body creams and lotions, sunscreens, hair-care products, deodorants and antiperspirants, shaving preparations, and dentifrices (toothpaste).[1] "Toilet preparations" is a legacy trade term for grooming products, not products used to clean toilets.

A typical plant receives bulk chemicals, oils, waxes, alcohol, fragrances, pigments, and active ingredients; weighs and mixes them in batches; heats, cools, emulsifies, or homogenizes the formulation; tests it for identity, stability, microbial contamination, color, odor, and viscosity; and fills it into bottles, jars, tubes, aerosols, or compacts. Packaging, labeling, batch documentation, changeovers, cleaning, quality control, and inventory management are significant parts of the operation.

What it excludes matters, because the boundaries are not intuitive:

• Bar soap and detergents sit in NAICS 325611 (Soap and Other Detergent Manufacturing), not here — despite "toilet soap" sounding like a toilet preparation.[1]
• Medicated products classified as drugs (most acne treatments, medicated ointments) fall under NAICS 325412 (Pharmaceutical Preparation Manufacturing).
• Retailing beauty products is NAICS 456120 (Cosmetics, Beauty Supplies, and Perfume Retailers); wholesaling is separate again. A Sephora or Ulta store is not in this industry.

A regulatory quirk worth flagging: several products made inside this industry — sunscreen, antiperspirant, anti-dandruff shampoo, fluoride toothpaste — are legally over-the-counter (OTC) drugs in the FDA's eyes, even though they are manufactured and sold as everyday cosmetics. They may be physically produced on similar lines but must also satisfy drug requirements.[23]

Ownership mix. The industry has three overlapping business models under one code:

1. Integrated brand owners who formulate, manufacture, market, and distribute their own brands — from global giants to tiny indie labels. Even large integrated players mix approaches: Coty, for example, reported manufacturing approximately 81% of its fiscal-2025 products internally while obtaining approximately 19% from third parties.[24]
2. Asset-light brand owners who outsource most or all production to contract development and manufacturing organizations (CDMOs).
3. Contract manufacturers / CDMOs and private-label producers that develop formulations and fill products for other people's brands. Voyant Beauty and kdc/one are examples of this network model.[20][25]

Ownership skews toward large corporations and private equity at the top, with a long tail of small independents. Much of the product Americans buy carries a foreign parent (French, British, Japanese, German), even when it is physically made in U.S. plants.

3. How big it is

Federal statistics for the domestic manufacturing base:

(Employment estimates vary by source and methodology; County Business Patterns and BLS establishment surveys use different coverage and definitions.)

The establishment count shows a substantial small-plant tail — 444 establishments had fewer than five employees — alongside a much smaller group of large factories.[4]

Read the $36.5 billion carefully — it undercounts the market as consumers experience it. That figure is the domestic factory-gate value of what U.S. plants ship. The retail U.S. beauty and personal-care market is far larger. Estimates vary by source and methodology: Mordor Intelligence puts the total at roughly $130 billion in 2025[5], while Circana's measured retail data show $36.0 billion in prestige beauty and $72.7 billion in mass-market beauty for 2025.[27] The gap exists because retail figures include imported product, distributor margins, and retail markup, none of which show up in a domestic manufacturer's shipment value, while different sources use different category definitions and measurement approaches.

Two more undercount caveats specific to this industry:

• Asset-light indie brands that outsource all production to contract manufacturers are typically not counted as manufacturing establishments — they show up (if at all) under wholesale or company management. So the count of "beauty businesses" is much larger than 1,131 firms; the census counts factories, not brands.
• A large share of U.S. output comes from U.S. subsidiaries of foreign multinationals, so domestic firm counts understate how concentrated global brand ownership really is.

4. The investable universe

There are only a few U.S.-listed pure-play beauty companies; most exposure comes through diversified consumer-goods firms or foreign majors traded as American Depositary Receipts (ADRs). Revenue figures below are company-wide (global), not U.S.-only, and include products beyond NAICS 325620.

Beauty-focused U.S. public companies

Diversified / personal-care names with meaningful beauty exposure

Foreign majors (via ADRs or foreign exchanges): L'Oréal (the single largest beauty company in the U.S. market, with €11.7 billion in North America revenue in 2025, though this includes Canada and products outside this NAICS)[30], Unilever, Shiseido, Beiersdorf (Nivea), Puig (Spain — Rabanne, Charlotte Tilbury; IPO'd 2024), Intercos, and Kao all sell heavily in the U.S. and often manufacture domestically.

Major private and other owners: Chanel (private), Mary Kay and Amway (direct-sales), and Revlon (emerged from bankruptcy reorganization as a private company no longer listed on an exchange)[31]. Critically, the private contract-manufacturing layer includes kdc/one (owned by KKR), Voyant Beauty, Elevation Labs (Knox Lane), and Innovative Beauty Group (Fremman Capital) among many.[20][25] Hundreds of DTC and indie brands are held by venture and growth-equity firms.

Upstream exposure is available through fragrance and specialty-ingredient suppliers such as International Flavors & Fragrances, Givaudan, Symrise, and Croda, and through packaging companies such as Aptar, Amcor, and Silgan. These businesses trade beauty-brand risk for broader customer diversification.

5. How the money works

This is a branded consumer-products business, so the economics look nothing like commodity chemicals. Owners make money on three levers:

• Gross margin and the price-to-cost gap. The raw formula in a prestige moisturizer or fragrance is a small fraction of its retail price; the rest is brand, packaging, and marketing. Prestige beauty routinely runs gross margins of 70–80%, mass-market lower. The product is cheap to make; the brand is what's expensive and valuable.
• Marketing intensity and product velocity. Advertising and promotion frequently run 15–25%+ of sales. Winners launch constantly, ride social-media and influencer trends (e.g., e.l.f.'s rapid share gains), and keep SKUs turning. Growth is a function of new-product cadence and share of consumer attention, not of building bigger factories. e.l.f. reported SG&A equal to 63% of sales in FY2026, illustrating how brand economics differ from factory economics.[28]
• Capacity utilization and input costs (for the manufacturing side). For contract manufacturers, the game is a more classic factory model: keep plants full, manage input costs (fragrance oils, pigments, specialty chemicals, and packaging — much of it imported), and earn a thinner margin on volume. Their earnings swing with capacity utilization and raw-material and tariff costs. Coty notes that essential oils, alcohols, specialty chemicals, containers, and packaging components are principal inputs, and that higher energy costs have affected glass, glass components, and resins.[24]

For licensed fragrance brands, royalties add another cost layer. Coty disclosed $853 million of future contractual royalty payments at June 2025, with actual payments expected higher because some are sales-based.[24]

The sector's defining trait is cyclicality that is unusually mild. Personal-care staples (deodorant, shampoo, toothpaste) are near-necessities, and even discretionary makeup and fragrance hold up in downturns as affordable luxuries. That demand stability is what makes the cash flows attractive. However, retailer destocking can cause a manufacturer's shipments to decline even while consumer sell-through remains sound.

6. What drives demand

• Consumer discretionary spending and premiumization. As incomes rise, buyers trade up to premium and "prestige" products — a durable tailwind that lifts industry revenue faster than unit volumes.[22] Circana reported U.S. prestige beauty retail sales grew 4% in 2025, while mass-market beauty grew 5%.[27]
• Demographics and "skinification." An aging population drives anti-aging skincare; Gen Z drives color cosmetics and fragrance; men's grooming is a growth pocket. Skincare has been a strong category, with hybrid products combining makeup, skincare, and treatment claims.
• Social media, influencers, and DTC. Virality now makes or breaks launches; the cost of building a brand has fallen, flooding the market with indie entrants. A viral brand can scale quickly through outsourced manufacturing, lowering entry barriers to brand creation.
• Fragrance boom. Fragrance has been a standout growth category in the mid-2020s — prestige fragrance grew 5% and mass fragrance 15% in 2025[27] — benefiting Inter Parfums, Coty, and others.
• Channel shifts. E-commerce, specialty beauty retail (Sephora, Ulta), and travel retail all reshape where and how product sells; softness in China and travel retail has been a specific drag on prestige players like Estée Lauder.
• Scalp care and hair treatments. Stronger demand for scalp-care products and treatment-oriented hair care is a growth pocket. Mini and travel sizes continue to gain share.

7. Regulation

The big story is the Modernization of Cosmetics Regulation Act of 2022 (MoCRA) — the most significant expansion of FDA authority over cosmetics since 1938.[17] Enforcement of its core requirements began July 1, 2024.[18] MoCRA requires manufacturers to:

• Register facilities with the FDA (renewing every two years) and list each product and its ingredients, updating annually;[17]
• follow Good Manufacturing Practices (GMP), maintain safety substantiation for products, and report serious adverse events within 15 business days;[17]
• comply with new rules on fragrance-allergen labeling and asbestos testing in talc.

FDA also gained mandatory-recall authority and records-access powers, and can suspend a facility registration in specified serious-risk circumstances.[17]

Small businesses (average annual sales under ~$1 million) are largely exempt from registration and GMP — but not for higher-risk products such as those used near the eye or injected.[18] The practical effect: MoCRA raises the fixed cost of compliance, which tends to favor scale and squeeze the smallest operators.

Common misconceptions: FDA generally does not approve cosmetics or their ingredients before sale, other than regulated color additives; the responsible company bears the safety and labeling obligation.[23] "Cosmeceutical" is not a legally recognized category — therapeutic claims can turn a cosmetic into a drug. And "organic" is not defined by FDA for cosmetics; USDA regulates organic agricultural ingredients under the National Organic Program, and qualifying operations must be certified before using applicable USDA claims.[32]

Other layers: FDA color-additive approval, federal labeling rules, California's Proposition 65 and a wave of state-level ingredient bans (certain PFAS "forever chemicals," formaldehyde donors, and others), and — for exporters — the stricter EU cosmetics regime.

8. Competitive dynamics and consolidation

The industry is fragmented at the bottom, concentrated at the top. Federal concentration data for 2022 show the largest firms take a big share of shipments even as ~1,100 firms compete:[3]

(The Herfindahl-Hirschman Index for the industry is suppressed in the federal data, so we do not report it.)[3]

This is neither a simple oligopoly nor a fully fragmented commodity market. Branded consumer demand is concentrated among large global portfolios and powerful retailers, while the physical manufacturing base includes many small plants and specialist contractors.

Retailer power is material. In fiscal 2026, Target, Walmart, Amazon, and Sephora represented 18%, 13%, 11%, and 10% respectively of e.l.f.'s sales.[28] Retailers can reduce orders, destock, demand promotions, change shelf space, or impose service and inventory requirements without a corresponding decline in end-consumer category demand.

Consolidation is a constant. Strategic buyers snap up fast-growing indie brands (e.g., Unilever's acquisition of Dr. Squatch),[21] and private equity has zeroed in on the contract-manufacturing layer as a lower-risk way into beauty — buyers get the cash flows of production without betting on any single brand.[20] Meanwhile, incumbents like Kenvue are reviewing whether to shed skin-and-beauty divisions entirely.[16] Expect continued M&A: indie founders find scaling costly and see acquisition as the exit, while consolidators chase distribution and margin.

9. Risks

• Tariffs and input costs. Import duties on ingredients, fragrance oils, and packaging rose sharply in 2025 (from a typical ~2.4% toward ~30% on affected imports), pressuring margins and pushing some production toward domestic reshoring.[19] e.l.f., which sources and manufactures the majority of its products through third parties in China, attributed its FY2026 gross-margin decline primarily to tariffs.[28] Industry reporting has put one large beauty company's tariff exposure at roughly $70 million for fiscal 2026.[19]
• Supply chain concentration. Asset-light brands exchange plant capital requirements for supplier concentration, lead-time, quality-control, and capacity-allocation risk. Dependence on specialized pumps, applicators, or single-source ingredients creates vulnerability.
• Regulatory and litigation exposure. MoCRA compliance costs, ingredient-safety scrutiny (talc/asbestos, PFAS), and product-liability litigation are ongoing.
• Trend risk and brand fatigue. Demand is driven by fashion and social media; a brand can lose relevance quickly, and heavy marketing spend is required just to stand still. Faster trend cycles shorten SKU lives and raise launch, forecasting, and obsolete-inventory risk.
• Channel and geographic concentration. Dependence on a few big retailers, and on China / travel-retail demand for prestige, creates concentrated exposure (a key factor in Estée Lauder's recent sales declines).[8]
• Substitution. Private label, lower-priced "dupes," imported K-beauty and other international brands, and salon products all compete for share.
• Private-market cyclicality. For the DTC/indie layer, funding and exit windows can freeze; PE buyers have at times pulled back from beauty M&A amid macro uncertainty.[20]

10. How to invest and the outlook

Public routes. Direct exposure comes from the pure-plays (EL, COTY, ELF, IPAR, ODD, OLPX) and the diversified consumer names with beauty segments (KVUE, EPC, CHD, PG, CL), plus foreign majors via ADRs (L'Oréal, Unilever, Shiseido, Beiersdorf). There is no large, dedicated U.S.-listed "beauty" ETF, so most investors build exposure through individual names or broad consumer-staples/discretionary funds. Because valuations diverge widely — high-growth mass players like e.l.f. trade at richer multiples than mature prestige houses — this is a stock-pickers' sector where growth rate and brand momentum, not just category, drive returns. None of these is a clean proxy for domestic NAICS 325620 output, as they combine global operations, multiple product categories, and varying degrees of vertical integration.

Private routes. For private investors, the most active plays are: (1) contract manufacturers/CDMOs, the "picks-and-shovels" layer that PE has favored for its brand-agnostic cash flows;[20] (2) indie-brand roll-ups, buying and scaling small DTC brands; and (3) early-stage/DTC beauty startups, where an asset-light founder outsources manufacturing and competes on marketing. Building or buying a brand and outsourcing production is now the dominant new-entrant model. The essential diligence question is which profit pool is actually being purchased: brand equity and customer acquisition; licensed intellectual property; formulation and regulatory capability; or physical filling capacity.

Near-term drivers (forward-looking). Watch four things: the pace of tariff pass-through and reshoring; the ongoing cost of MoCRA compliance (a tailwind for scaled players, headwind for the smallest); the continued strength of fragrance and skincare; and the recovery — or not — of China and travel-retail demand that has weighed on prestige. The base case is a steady, low-single-digit-growth domestic market with premiumization lifting value ahead of volume, punctuated by aggressive M&A. The industry's core appeal is unchanged: cheap-to-make product, durable demand, and high branded margins — offset by relentless competition, trend risk, and a heavier regulatory and tariff burden than it carried a few years ago.

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Sources

1. U.S. Census Bureau / NAICS Association. NAICS 325620 — Toilet Preparation Manufacturing (2022 definition and scope). 2022. https://www.naics.com/naics-code-description/?code=325620
2. U.S. Small Business Administration. Table of Small Business Size Standards (NAICS 325620 = 1,250 employees). 2023. https://www.sba.gov/document/support-table-size-standards
3. U.S. Census Bureau. 2022 Economic Census — Concentration by Largest Firms, NAICS 325620 (value of shipments, firm count, CR4/CR8/CR20/CR50). 2022. https://www.census.gov/programs-surveys/economic-census.html
4. U.S. Census Bureau. County Business Patterns 2023 — NAICS 325620 (establishments, employment, annual payroll). 2023. https://www.census.gov/programs-surveys/cbp.html
5. Mordor Intelligence. United States Beauty and Personal Care Products Market ($130.25B in 2025). 2025. https://www.mordorintelligence.com/industry-reports/united-states-beauty-and-personal-care-products-market
6. Grand View Research. U.S. Beauty and Personal Care Products Market Report. 2025. https://www.grandviewresearch.com/industry-analysis/us-beauty-personal-care-products-market-report
7. [Removed — superseded by source 30]
8. The Estée Lauder Companies Inc. Reports Fiscal 2025 Results (net sales $14.3B, −8% vs FY2024's $15.6B). 2025. https://www.elcompanies.com/en/news-and-media/newsroom/press-releases/2025/08-20-2025-110025649
9. [Removed — superseded by source 24]
10. Inter Parfums Inc. 2024 Results / market data (revenue $1.45B; market cap ~$3.2B). 2024–2026. https://companiesmarketcap.com/interparfums/revenue/
11. e.l.f. Beauty, Inc. Form 8-K, Q4 FY2025 (full-year net sales ~$1.31B, +28%). 2025. https://www.sec.gov/Archives/edgar/data/1600033/000160003325000013/q42025er-992.htm
12. StockAnalysis. e.l.f. Beauty (ELF) market capitalization (~$4.3B). 2026. https://stockanalysis.com/stocks/elf/market-cap/
13. CompaniesMarketCap. Interparfums (IPAR) market capitalization (~$3.19B). 2026. https://companiesmarketcap.com/interparfums/marketcap/
14. Simply Wall St. Coty (NYSE:COTY) overview and market cap (~$1.65B). 2026. https://simplywall.st/stocks/us/household/nyse-coty/coty
15. PitchBook / market data. Edgewell Personal Care (EPC) — stock price and market cap (~$1.26B). 2026. https://pitchbook.com/profiles/company/10803-07
16. Personal Care Insights. Kenvue considers skin health and beauty division sale (valued ~$6–9B). 2025. https://www.personalcareinsights.com/news/kenvue-skin-health-sale-tylenol.html
17. U.S. Food and Drug Administration. Modernization of Cosmetics Regulation Act of 2022 (MoCRA). 2024. https://www.fda.gov/cosmetics/cosmetics-laws-regulations/modernization-cosmetics-regulation-act-2022-mocra
18. Wiley LLP. Cosmetic Facilities Must Comply With FDA's New Registration Requirements by July 1 (small-business exemption). 2024. https://www.wiley.law/alert-Times-Up-Cosmetic-Facilities-Must-Comply-With-FDAs-New-Registration-Requirements-by-July-1
19. CosmeticsDesign / BeauteTips. Beauty brands face tough choices as tariffs drive up costs (rates ~2.4% to ~30%; ~$70M FY2026 exposure example). 2025. https://www.cosmeticsdesign.com/Article/2025/04/02/beauty-brands-face-tough-choices-as-tariffs-drive-up-costs/
20. Capstone Partners / BeautyMatter / DC Advisory. Private equity opportunity in beauty contract manufacturing; kdc/one (KKR), Elevation Labs (Knox Lane), Innovative Beauty Group (Fremman). 2024–2025. https://beautymatter.com/articles/private-equity-opportunity-beauty-contract-manufacturing-development
21. Beauty Packaging. Mergers & Acquisitions in the Beauty Industry — Unilever acquires Dr. Squatch; 2024–2025 deal activity. 2025. https://www.beautypackaging.com/exclusives/mergers-acquisitions-in-the-beauty-industry-in-2025/
22. IBISWorld. Beauty, Cosmetics & Fragrance Stores in the US (retail revenue ~$69.0B, 2025; premiumization). 2025. https://www.ibisworld.com/united-states/industry/beauty-cosmetics-fragrance-stores/1055/
23. U.S. Food and Drug Administration. Cosmetics Safety Q&A — Personal Care Products (product classification, OTC drug status). 2024. https://www.fda.gov/cosmetics/resources-consumers-cosmetics/cosmetics-safety-qa-personal-care-products
24. Coty Inc. Fiscal 2025 Form 10-K (net revenue $5.89B; 81% internal manufacturing; principal inputs; royalty commitments $853M). 2025. https://www.sec.gov/Archives/edgar/data/1024305/000102430525000030/coty-20250630.htm
25. Voyant Beauty. About Voyant Beauty (U.S. contract manufacturing network). 2025. https://www.voyantbeauty.com/about-voyant-beauty/
26. U.S. Bureau of Labor Statistics. CES Benchmark Article, Table 1 — NAICS 325620 employment (58,200 jobs, March 2023). 2023. https://www.bls.gov/ces/publications/benchmark/cesbmart23-tables.htm
27. Circana. U.S. Prestige and Mass Beauty Retail Deliver a Positive Performance in 2025 (prestige $36.0B +4%; mass $72.7B +5%; fragrance growth). 2025. https://www.circana.com/post/us-prestige-and-mass-beauty-retail-deliver-a-positive-performance-in-2025-circana-reports
28. e.l.f. Beauty, Inc. Fiscal 2026 Form 10-K (70.7% gross margin; SG&A 63% of sales; tariff impact; customer concentration). 2026. https://www.sec.gov/Archives/edgar/data/1600033/000160003326000020/elf-20260331.htm
29. Inter Parfums Inc. 2025 Results (63.6% gross margin; 18.2% operating margin). 2025. https://www.sec.gov/Archives/edgar/data/822663/000175392626000347/ex991_1.htm
30. L'Oréal. 2025 Annual Results (global sales €44.05B; North America €11.72B). 2025. https://www.loreal-finance.com/eng/press-release/2025-annual-results
31. Revlon, Inc. Announcement of emergence from Chapter 11 reorganization (now private). 2023. https://www.sec.gov/Archives/edgar/data/887921/000114036123016005/brhc10050829_ex99-2.htm
32. U.S. Department of Agriculture, Agricultural Marketing Service. Cosmetics, Body Care, and Personal Care Products — Organic certification requirements. 2024. https://www.ams.usda.gov/grades-standards/cosmetics-body-care-and-personal-care-products