Starting a Cosmetics Business: For Entrepreneurs

Denis Grigoras

Denis is a lawyer who draws on his background in complex legal disputes and transactions to problem-solve for his clients.

The Canadian cosmetics industry generates billions of dollars. In 2021, the cosmetics market in Canada generated approximately USD 1.24 billion in revenue, and industry revenue is expected to grow by 1.45% annually to reach USD 1.8 billion by 2024.

Cosmetics Business


The Canadian cosmetics industry generates billions of dollars. In 2021, the cosmetics market in Canada generated approximately USD 1.24 billion in revenue, and industry revenue is expected to grow by 1.45% annually to reach USD 1.8 billion by 2024.

It is vital for companies to ensure their product claims remain strictly cosmetic and avoid drug-like assertions unless the product is registered as a drug with Health Canada. (Ad Standards’ 2014 Cosmetic Claims Guidelines help advertisers differentiate between cosmetic and drug claims.)

Cosmetics, as per the Food and Drugs Act, include substances intended for cleansing, improving, or altering one’s appearance, such as deodorants and perfumes. In contrast, drugs involve substances meant for diagnosis, treatment, mitigation, or prevention of diseases, disorders, or abnormal physical states, or to restore, correct, or modify organic functions. The key difference between the two is their intended use, with cosmetics affecting appearance superficially, while drugs possess a physiological role or effect.

This distinction imposes limitations on cosmetic product claims and challenges marketers importing U.S. cosmetic products and advertisements into Canada. Often, claims acceptable in the U.S. must be adjusted for the Canadian market to comply with regulations.


The Food and Drugs Act and Cosmetic Regulations oversee cosmetics, specifying labelling requirements and mandatory filings by manufacturers or distributors. Manufacturers or importers must file a cosmetic notification with Health Canada within 10 days of the first sale in Canada. Failure to do so can lead to product removal or denied entry. Cosmetic notifications involve submitting ingredients, labels, and other information, but they do not entail evaluation or approval. If the initial notification becomes inaccurate, a revised notification must be submitted within 10 days.

Section 16 of the Food and Drugs Act forbids selling cosmetics that may cause injury to users. Health Canada maintains a Cosmetic Ingredient Hotlist, detailing prohibited and restricted ingredients deemed unsafe or unsafe without adherence to guidance. Some ingredients are allowed in specific products and concentrations, while others are not. Health Canada can mandate labelling revisions or halt the sale or distribution of cosmetics containing Hotlist ingredients.

For instance, alpha-hydroxy acids (AHAs) like citric acid and lactic acid are restricted but not prohibited Hotlist ingredients. AHAs are permitted in consumer products at concentrations of 10% or less and a pH of 3.5 or higher. Greater concentrations and lower pH levels might be allowed for professional use with clinical safety evidence. “Leave-on Skin” cosmetics containing AHAs at concentrations of 3% or more require specific cautionary statements.

When preparing a cosmetic label, the Cosmetic Ingredient Hotlist and the list of ingredients must be considered. Cosmetic labelling is governed by the Cosmetic Regulations, the Consumer Packaging and Labelling Act and Regulations, and the Consumer Chemicals and Containers Regulations.


To ensure legally acceptable cosmetic claims, they must pertain to cosmetic benefits without implying therapeutic or biological effects, which are deemed drug claims. Health Canada and Ad Standards offer Guidelines for the Nonprescription and Cosmetic Industry Regarding Non-therapeutic Advertising and Labelling Claims to help marketers comprehend acceptable and unacceptable claims.

Some popular claim types and their treatment in the Guidelines include:

  1. Treatment/Therapy/Repair: Claims to “heal,” “treat,” or “repair” dry skin, split ends, or dry-damaged hair are allowed, but only with reference to a specific cosmetic effect. General “repairs damaged skin” claims are forbidden.
  2. Antioxidants/Vitamins: Claims about antioxidants and vitamins are permitted if connected to a stated cosmetic benefit or product preservative effect and supported by adequate evidence. However, therapeutic effects or describing a product as a “source” of a vitamin are not allowed.
  3. Anti-aging: Claims are acceptable if they relate to the appearance of aging rather than the process. “Age-defying” is an acceptable term.
  4. Firming: Claims to firm, tighten, or tone the skin are allowed if accurate and supported.
  5. Healthy: Products can make skin appear or feel healthy, but cannot claim to make skin healthy or promote health. Claims related to hair growth are not permitted.
  6. Nourish: Claims to provide “nourishment” are acceptable if it is clear that the nourishing aspect is not therapeutic.
  7. Replenish: Products can claim to replenish the skin’s moisture barrier but cannot claim to “repair” it.

Further examples of unacceptable claims, along with potential permissible alternatives, include:

  1. “100% protection from harmful sun rays.” Issue: With limited exceptions for hair care products, sunscreen protection claims must be for a licensed drug or natural health product, adhering to the Sunburn Protectant Monograph or the product’s market authorization. Alternative: “Our product enhances the look of your tan while also protecting against the sun’s drying effects.”
  2. “Our anti-aging formula works miracles, eliminating all wrinkles and making your skin younger.” Issue: “Anti-aging” must be qualified in a cosmetic sense. The claim to “eliminate all wrinkles” implies a cellular-level effect, constituting a drug claim. “Make your skin younger” is unacceptable unless modified to relate to the appearance of the skin. Alternative: “Our anti-aging moisturizer fights the appearance of wrinkles, making your skin look younger.”
  3. “Our product makes your skin healthy thanks to a mega dose of highly active antioxidants.” Issue: “Dose,” “active,” and “healthy” are considered drug claims. Alternative: “Our product contains antioxidant X to reduce the appearance of wrinkles and help your skin look healthy and at its best.” (Note: You must provide evidence linking the reduction in wrinkle appearance to antioxidant X.)
  4. “Product X cleanser wakes you up every morning.” Issue: “Wakes you up” or “energizes you” claims cannot be used in an unqualified manner. Alternative: “Product X cleanser, with the energizing scent of cucumbers, makes your skin look and feel revitalized.”

As outlined above, the Guidelines’ listings serve as examples. It is advised to have your lawyer review all on-pack and advertising claims to ensure your cosmetic product does not become classified as a drug due to the claims made, which may result in a recall. If a claim characterizes the product as a drug, it must comply with the Food and Drugs Act and Regulations provisions applicable to drugs, including all drug submission and labelling requirements. The product cannot be sold without a DIN (Drug Identification Number) or an NPN (Natural Product Number for natural health products).


Requirements for Outer Labels

Outer Label Requirements: Most cosmetics require specific information on the package’s principal display panel (the “front” panel). Other mandatory details, like the manufacturer or distributor’s name and address, may be placed elsewhere but not on the package’s bottom. Exceptions apply for “ornamental” containers.

Label information must be legible and remain so throughout the cosmetic’s useful life. Requirements include:

(a) Product Identity — Must be in English and French on the principal display panel, with exceptions for bubble-packed products or accurate pictorial representations. Font size must be at least 1.6 mm in height.

(b) Net Quantity — Must be in metric units, English and French, on the principal display panel. Bold face font and minimum height requirements apply. Supplementary information cannot be misleading.

(c) Dealer Name and Address — Required by the Consumer Packaging and Labelling Act, to be placed anywhere other than the bottom, in either French, English, or both. Font type must be at least 1.6 mm in height. Imported products must include a statement of origin.

(d) Avoidable Hazards & Cautions — Label must include safe use instructions if a cosmetic presents an avoidable hazard. The Cosmetic Regulations require specific disclosures in English and French for certain product types.

(e) Ingredients — Most cosmetics must have an ingredient listing on the outer label. The INCI (International Cosmetic Ingredient Dictionary) name must be used. Ingredients must be listed in descending order of concentration by weight, with some exceptions.

In Quebec, INCI is considered sufficient to meet the Charter of the French Language’s labelling laws. If a package is too small for a legible ingredient list, it can appear on a tag, tape, card, or leaflet accompanying the package at the point of sale.

Requirements for Inner Labels

Assuming a compliant outer label, the inner label requirements are as follows:

(a) Product Identity must be displayed in English and French on the principal display panel, with the specified sizing, unless the identity is obvious.

(b) Dealer Name and Address, in English, French, or both, must be in a legible font and can appear anywhere except the bottom of the package. The rules for outer labels of imported products apply here as well.

(c) Avoidable Hazards & Cautions require some regulated language on inner labels, with requirements depending on product sizing. Inner labels must warn of all known hazards in both languages.


Navigating the complex landscape of cosmetic regulations in Canada can be challenging for entrepreneurs in the cosmetics industry. Understanding the distinctions between cosmetics and drugs, as well as the requirements for acceptable claims and labelling, is essential to avoid violations and ensure your product is compliant with Canadian regulations.

To minimize risk and optimize success, consider engaging a commercial transactions law firm with experience in the cosmetics industry to assist you in navigating these regulations. By doing so, you can focus on growing your business and developing innovative cosmetic products while remaining compliant with Canadian law.

Navigating the Canadian cosmetics industry and its regulations? Ensure your products are compliant and avoid costly mistakes.

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