The Price-per-Kilo Fallacy
Two fragrance oil quotes in front of you: one at 1,200 TL per kilo, the other at 1,800 TL. Choosing the cheaper one seems natural. But if the cheap oil has to be used at 2.5% instead of 1.5% in a shampoo to reach the same scent intensity, the fragrance cost of one kilogram of shampoo is 30 TL with the cheap oil and 27 TL with the expensive one. The expensive one is the cheaper one.
Cost-in-use is not a raw material's price per kilo but its contribution to the unit cost of the finished product: price per kilo × usage rate. The purchasing decision is made on this figure; a decision made on price per kilo does not see the dosage difference.
The same logic applies to every raw material other than fragrance oil: a more expensive but more effective solubiliser, a fixative that works at a lower dose, a more concentrated dye. The difference is not always a few per cent; with high-priced items like fragrance oil it determines a significant part of the product cost.
The Calculation: A Three-Line Formula and an Example
The calculation is simple; the hard part is finding the right inputs.
| Step | Formula | Fragrance Oil A (1,200 TL/kg) | Fragrance Oil B (1,800 TL/kg) |
|---|---|---|---|
| Equivalent dose (by odour test) | — | 2.5% | 1.5% |
| Fragrance oil in 1 kg product | dose × 1,000 g | 25 g | 15 g |
| Cost-in-use | kg price × dose | 1,200 × 0.025 = 30 TL/kg product | 1,800 × 0.015 = 27 TL/kg product |
| Fragrance cost in a 250 ml bottle | CIU × 0.25 | 7.50 TL | 6.75 TL |
| Difference at 10 tonnes a year | difference × 10,000 | 30,000 TL (in favour of B) | |
The prices are illustrative; the logic holds. The critical line of the table is the first: equivalent dose. Without that line, the rest of the table merely rewrites the price per kilo in another form.
To find the equivalent dose, the two fragrance oils are prepared in the same base at different doses (for example A: 1.5% / 2% / 2.5%; B: 1% / 1.5% / 2%) and the pair found to have "equal scent intensity" in a blind panel is selected. The panel should be three people and two sessions; one person sniffing once is not enough for a dosage decision.
Hidden Costs: Beyond the Dose
The cost-in-use calculation starts with the dose but does not end with it. Five items are invisible in the price per kilo.
Performance over time. A cheap oil may smell just as intense on day one but weaken after three months on the shelf. A twenty per cent scent loss in four weeks of accelerated stability testing effectively raises the dose by twenty per cent.
Base compatibility. An oil that causes cloudiness, colour change or sweating in the base requires extra solubiliser, opaque packaging or a lower dose; each is a cost.
Regulation. If an oil with a low IFRA limit cannot be used at the target dose, the cost-in-use calculation is meaningless; an oil with a long allergen declaration raises label and packaging costs.
Supply. Minimum order quantity, lead time, lot consistency. A supplier that requires an odour test on every lot is a hidden quality control cost.
Waste and labour. A viscous, solid or hard-to-dissolve oil takes time in filling and mixing; weighing errors and waste increase. These look like small differences; at ten tonnes a year they become visible.
The Purchasing Decision: Step by Step
Here is the practical way to tie cost-in-use into the purchasing process.
- Define the target
Which product, which scent intensity, which shelf life. Something like "shampoo, medium intensity, 12 months".
- Test the candidates in the same base
Each candidate oil at three doses, same base, same day. The equivalent dose is determined by blind panel and written down.
- Calculate cost-in-use
Price per kilo × equivalent dose. Not the sample price, but the price at the target order quantity.
- Score the hidden costs
Stability, base compatibility, IFRA, supply, labour; for each, "no issue / caution / blocker". A candidate with a blocker is eliminated; those with cautions go into the notes.
- Calculate the annual impact
Cost-in-use difference × annual production. If the difference is a few hundred lira a year, the decision is left to scent preference; if it is tens of thousands of lira, the number decides.
- Record the decision and the dose
The chosen oil, its equivalent dose and the test date go into the formula file. When the supplier changes the price, the calculation is updated from this record.
Frequently Asked Questions
The most common questions about the cost-in-use calculation.
What exactly is cost-in-use?
How do I find the equivalent dose?
Does a cheap oil always need a higher dose?
How much should the fragrance cost be in one kilogram of product?
Is this calculation meaningful at small production volumes?
What should I do when the fragrance oil price changes?
How do natural fragrance oils look in cost-in-use?
Can I do the same calculation for a solubiliser or a fixative?
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