There are many who are not clear about the difference between Private Label and Contract Manufacturing. Both styles of manufacturing are prevalent in several industries.
There is a fair bit of confusion about the difference between the two, and advantages/disadvantages of these two styles of manufacturing.
Here at Private Label Skincare Florida, we do both.
Basically, the end goal of both private label and contract manufacturing is same, which is to produce great products that consumers will love and buy often. The better the products produced, the more volume.
What is Private Label Manufacturing?
These products are typically those that are made by one company but are marketed under another company’s label. The manufacturing company retains control over the product (specifications, quality, testing, formulation, etc.). In other words, the manufacturer is the owner of the formula, but that formula can be purchased and is positioned as a low-cost alternative to well-known products of the same or different brand. For example, many superstores sell their own brands along with other well-known brands. They are generally more profitable to the store.
Contract manufacturing, on the other hand, is simply outsourcing of the manufacturing process to another company. The owner company gives the specification of the product along with specific units of the products to be made. The contract manufacturer has no say in changing the specification of the products, so contract manufacturing is simply, process execution. Many large personal care name brands do this to off-set over-loaded production lines.
Advantages of Private Label Manufacturing
- Lower Marketing and selling costs. Since the stores and marketing channels are owned by the larger store or brand, the cost associated with these business heads is virtually nil.
- Control of product. The manufacturer retains the control of product. He can change and tweak the specifications, the ingredients, the formula and other things as he sees fit, to totally conform with all the regulations and testing. The client signs off on the formulation when it is exactly as he wants. The client determines the packaging, label design and arranges all this outside the manufacturer. The manufacturer can put his attention on R&D and coming up with new and innovative products that will WOW the clients.
- Better control over marketing. The manufacturer can decide upon the label design, give input on Logos and tag lines etc.
- Brand recognition. The store or the carrying Brand may be different, but the product still carries your brand. If customers like the product, they will come back to your brand, asking for more.
Advantages of Contract manufacturing
Contract manufacturing is an attractive option for those who are looking to reduce marketing risk and maximize their operational efficiencies.
- Lower marketing risk. The production run is made to order for specific quantities.
- Economies of scale. Contract manufacturer usually takes bulk orders, of 5-10,000 pieces They also usually work with multiple customers and take bulk orders from each of them as well. This means that they can maximize with economies of scale.
- Advanced skills. Since the manufacturer does not have to spend his resources on marketing, logistics and other business activities related to operating a brand, they develop their skills on improving production processes, improving quality and lowering costs.
- Quality of the product. We are talking about adherence to the specifications here. In those terms, one can expect a high level of adherence to the specification for each individual unit manufactured or each batch that is made. The Client comes with his own formulations and owns them.
So you can see, that Private label manufacturing and Contract manufacturing are two different facets of how you want to run your business. Marketing is a tricky business and comes with a lot of risks.
For a start-up venture, Private Label is the way to go, as there is no risk, and your deposit is 100% deducted from your first order. We go the extra 10 miles to ensure your product is the very best that it can be. At Private Label Skincare Florida, we want you to succeed as our success is dependent on your success, so we try to help with every aspect of the process, not just making the product. Call us and we will get your vision to market and do our best to ensure your success to the best of our ability.