Feasibility Study for Contract Manufacturing, Private Label and Packaging in Egypt

How a contract-manufactured brand makes money, and where it loses it

In contract manufacturing you own the formula, the name and the pack, and a licensed factory makes the product for you: creams and shampoos, detergents, packaged food. You do not buy production lines, but you do buy a whole batch upfront. The factory sets a minimum order quantity, and that batch, with its containers and labels, is paid for before you sell a single unit; then you wait for the distributor or pharmacy to pay you.

So a contract manufacturing feasibility study does not start from the factory's price per unit. It starts from three questions: how much cash does the first batch lock up? How many months will it take to sell before it gets close to its expiry date? And who holds the product notification or registration in their name? The real risk is not a bad product. It is a minimum order quantity larger than you can sell.

If you are a small company offering filling and packaging to brand owners, you are the manufacturer in this relationship, and your decisive number is line hours used per month and the changeover time between clients' orders. This page is written from the brand owner's side.

Who notifies the product? The Egyptian Drug Authority's rules for cosmetics

Cosmetics in Egypt are notified to the Egyptian Drug Authority (EDA); the Arabic version of the guide calls this "listing". Under the Regulatory Guide for Cosmetics Notification, a cosmetic product, whether made locally or imported, can be circulated only after it is notified in the Authority's electronic database¹. The notification number is issued within 10 working days on the normal track and 3 on the fast track, counted from meeting the requirements and paying the fees, and it is valid for 10 years¹. What matters to a brand owner:

• The product owner is the applicant. The EDA claims guide issued on 22 July 2026 defines toll manufacturing as the applicant contracting with a cosmetics manufacturer to carry out manufacturing, with or without storage², and the regulatory guide allows the product-owning company to notify where the applicant differs from the manufacturer¹.
• The manufacturing contract is part of the file. It must state the storage location, the factory's store or its storehouses, which must be licensed by the Authority, and the factory itself is listed once on the platform¹. Before applying, make sure the factory's licence includes a production line for your product; otherwise the product is rejected and you must change the manufacturing site².
• Your name and the factory's go on the pack. For toll-manufactured products the artwork shows the applicant company and the manufacturer, with the notification number, and the purpose of use must be in Arabic for locally made products¹.
• Changing factory is not instant. Transferring manufacturing or adding a manufacturing site needs the Authority's approval first, with re-analysis¹. The variations guide issued on 4 August 2025 requires, for a manufacturing transfer, a waiver from the old factory or proof that it was formally notified of the contract's termination, and a new notification is issued for the product³.
• Claims are restricted. Claims such as slimming, anti-acne and anti-cellulite are not accepted for cosmetics, and an error in the registration type (imported, local or toll-manufactured) means the request is rejected and resubmitted with new fees².

Food falls under the National Food Safety Authority, whose decisions define food so as to exclude pharmaceutical products and cosmetics⁴. Whether a food brand made under contract needs a licence or registration in its own name, and which authority covers dietary supplements and household detergents, must be confirmed in writing with the authority before launch. Medicines are a different regime this page does not cover: they have a register of toll-manufacturing companies that requires a full-time pharmacist manager and a dedicated store of at least 100 square metres⁵. Maher Consulting Firm can handle the company formation.

Illustrative example: a moisturising cream with a 5,000-unit minimum

The figures in this illustrative example are assumptions, except the wage, social insurance and tax, and all are before VAT. A brand launches a 200 ml moisturising cream in one fragrance and sells it to pharmacies and beauty shops:

• Factory: a 5,000-unit minimum per order at EGP 30 a unit, including formula and filling. Half is paid on order and half on delivery, two months after the order.
• Packaging you buy and hand to the factory: a pump bottle at EGP 11, a printed carton at EGP 4 and a label at EGP 2.
• Per batch: quality testing EGP 12,000, transport from the factory to your store EGP 4,500, and 2% of units used as samples and testers.
• Sales: EGP 120 a unit to the pharmacy, delivery EGP 3 a unit, payment after 60 days. Sales are 300 units in the first selling month, then 450, 600 and 750, then 900 a month.
• Shelf life: 24 months from production. We assume a batch arrives in the month it is made and that pharmacies refuse units with less than 12 months left, so each batch has 12 months to sell.
• Fixed monthly costs: a sales rep at EGP 8,000, above the private-sector minimum wage of EGP 7,000 from 1 March 2025⁶, plus the employer's 18.75% social-insurance share⁷, EGP 9,500 in total; a small store EGP 3,000; an accountant EGP 2,000; marketing and samples for doctors and pharmacies EGP 15,000; other costs EGP 2,000. Total EGP 31,500, and the owner draws no salary.
• Start-up costs: EGP 60,000 for formula development, pack design and company formation, excluding the government fees for notification and trademark registration, which you add once you have them from the authority.

The factory price is EGP 30, but the unit costs you EGP 51.33 before it leaves your store: packaging, testing, transport and samples add 71% on top of the factory price. Break-even = 31,500 ÷ 65.67 = about 479.6, so 480 units a month. At 900 units, operating profit is EGP 27,606 a month before profit tax. The method is explained in our article on break-even and working capital.

Cash: from the factory deposit to collecting from pharmacies

The first batch costs EGP 251,500: 160,000 on order (half the factory value and all the packaging) and 91,500 on delivery (the second half, testing and transport). Selling starts in month two and the first collection arrives in month four. Each later batch is ordered two months before stock runs out:

(Other cash out = start-up costs in month 0, then fixed costs and delivery. The months not shown have no factory payments, and the balance rises by EGP 73,800 in each of them.)

The brand passes break-even in month four, but collections do not pay back the first batch until month seven, the same month you pay the deposit on the second. So the deepest cash need reaches EGP 469,400 in month eight, about 1.9 times the cost of a batch, and the balance does not turn positive before month 18. The difference between profit and cash is explained in our article on cash flow for small businesses.

What if the minimum doubles, the factory raises its price or sales slow down?

The same example with one assumption changed at a time (the last row combines two), over 18 months; figures are in EGP:

Doubling the minimum cuts the unit cost by EGP 1.68 because testing and transport are spread over more units, but it raises the deepest cash need by EGP 173,850, and 500 units expire even at base-case sales. A 10% factory price rise lifts break-even by 24 units a month and pushes a positive balance beyond month 18. Selling at half speed puts the brand below break-even, and combined with a 10,000-unit batch, 5,150 units costing EGP 255,661 expire and the cash need passes EGP 1 million. Before cutting the price to sell faster, read our article on how to price your product.

The lever that matters most: batch size before unit price

Many founders negotiate pennies off the unit price and accept whatever minimum the factory sets. In the example, a 2,500-unit batch locks up less cash even if the factory charges 10% more for it:

The smaller batch at the higher price lifts break-even by 52 units a month, but it lowers the deepest cash need by EGP 52,600, and by EGP 78,500 if sales come in slower, with nothing left to expire. The price is repetition: 6 batches in 18 months instead of 3, each with its own testing and transport, so the balance in month 18 is EGP 94,500 lower. Use the small batch to test the market, then raise the quantity once your selling speed is proven.

Watch fragrances and colours too: the EDA accepts one notification for a product with the same name and purpose even if the fragrance or colour differs¹, with a service fee for each fragrance or colour added to the notification fees². But if the factory applies its minimum per fragrance, launching three fragrances makes the first batch EGP 754,500 instead of 251,500. Manufacture one fragrance until you know your selling speed, and compare listing later fragrances in the same notification from the start with adding them afterwards, since adding one after notification needs the Authority's prior approval and re-analysis¹. Ask for a separate minimum on printed cartons, since the carton printer may set a larger minimum than the factory.

VAT on the factory invoice and on your sales

The general VAT rate is 14% from fiscal year 2017/2018⁸ and the mandatory registration threshold is EGP 500,000⁹; anyone who reaches it must apply to register within 30 days, while an exporter must register whatever the size of its transactions⁸. In the example, cumulative sales are EGP 468,000 at the end of month seven and 576,000 at the end of month eight, so the brand reaches the threshold during month eight, and the price to the pharmacy becomes EGP 136.80 including VAT.

The point specific to this activity: the factory's invoice and the packaging suppliers' invoices carry VAT, EGP 21,000 on the factory and 11,900 on packaging for the first batch, so EGP 32,900 in cash with the batch, and the law gives the right to deduct VAT already charged on inputs to the registered person⁸. If you are not registered when you buy, it may become a cost you do not recover, and the cash table above does not include it because it is before VAT. Settle the timing of your registration with your accountant before the first order.

Common mistakes in a contract manufacturing feasibility study

1. Costing the product from the factory price alone, when in the example the real cost was 71% above it.
2. Accepting the minimum without checking it against selling speed and shelf life; a batch that takes more than 12 months to sell partly expires on the shelf.
3. Forgetting the cost of bottles, cartons and labels, EGP 85,000 in the example, paid with the deposit.
4. Signing a contract that does not name the licensed storage, responsibility for quality, re-manufacture if tests fail, and termination terms; transferring manufacturing needs the factory's waiver or notice of termination.
5. Spending the marketing budget before registering the trademark, which makes the name and pack easy to imitate.
6. Printing claims the Authority rejects on the pack, so the request is rejected.

To sell through a distributor on credit, read a trading and distribution company feasibility study, and to sell online direct to consumers, read an online store feasibility study.

Frequently asked questions about a contract manufacturing feasibility study

Sources

1. Egyptian Drug Authority. Regulatory Guide for Cosmetics Notification (EDREX:GL.CAPP.009, version 1) (2022-03-06); Egyptian Drug Authority. الدليل التنظيمي الخاص بإدراج ملفات مستحضرات التجميل (in Arabic) (2024). Checked 22 October 2026.
2. Egyptian Drug Authority. Claims Guide for Cosmetics Notification (EDREX:GL.CAPP.010, version 6) (2026-07-22). Checked 22 October 2026.
3. Egyptian Drug Authority. Documents Required for Variations of Cosmetic Products (EDREX:GL.CAPP.041, version 1) (2025-08-04). Checked 22 October 2026.
4. National Food Safety Authority via FAOLEX. قرار مجلس إدارة الهيئة القومية لسلامة الغذاء رقم 6 لسنة 2020 بشأن قواعد تنظيم ترخيص استيراد الغذاء (الوقائع المصرية 161) (in Arabic) (2020-07-16). Checked 22 October 2026.
5. Egyptian Drug Authority. Regulatory Guidelines of Decree No. 505 of 2021 on licensing requirements for registering companies in the Register of Toll Manufacturers (EDREX:GL.CAO.005, version 3) (2023-12-07). Checked 22 October 2026.
6. Ministry of Planning and Economic Development. الاجتماع الأول للمجلس القومي للأجور: رفع الحد الأدنى لأجور القطاع الخاص إلى 7000 جنيه (in Arabic) (2025-02-09). Checked 22 October 2026.
7. Andersen Egypt. Social insurance in Egypt (contribution rates under Law 148/2019) (2026-06-30) — secondary source. Checked 22 October 2026.
8. Financial Regulatory Authority. قانون الضريبة على القيمة المضافة رقم 67 لسنة 2016 وفقًا لآخر تعديل (in Arabic). Checked 22 October 2026.
9. Egyptian Tax Authority. ما هو حد التسجيل الإلزامي لضريبة القيمة المضافة، وما هي الأنشطة المعفاة منها؟ (in Arabic). Checked 22 October 2026.