Contract Manufacturing Vs Private Label
Looking to build and sell a cosmetic product? But can’t figure out how to do it because you’re confused about the difference between Private Labelling and Contract Manufacturing? Don’t worry you’re not alone. I was confused too, even after three years of working for a company who provides both these services. Thankfully I figured it out when I became COO and put this blog together to save you from the perplexity, I faced for so many years.
The outcome of these services is the same; a product you can sell. The difference is in the process. Private Labelling is the plug and play option, where you choose an already existing product from a manufacturer and put your company name on it. Contract manufacturing is the DIY option, where you figure out each component of the product from formulation to packaging with help from a company or companies.
There are pros and cons to both options, so let’s explore them in a bit more detail, so you don’t go down the wrong path and I can go do something else.
Private Labelling — The Plug and Play
This option is typically better suited for smaller companies who don’t have the resources and TIME to spend on figuring out the components of building a cosmetic product from scratch: the formulation, the packaging, and the label, or a larger company who is more focused on other aspects of a business. In this option, all you need to do is find a private labeling company that offers a product that your potential customers will like and bam you’re done.
Because of this off-the-shelf approach, your control over the creation of your product is greatly diminished. You don’t get to control what goes in the product, what the product goes into, what goes on it, and you don’t own the formulation; the manufacturer can choose to tweak the product when they see fit. It’s like having a child that you didn’t make, feed, or cloth but has your name on it, so scandalous. The advantages of this option; that it’s turnkey, you can defer the expertise required for manufacturing and packaging to a reputable and competent brand (hopefully).
The order minimums tend to be smaller because they’re making these items for you, and somebody else too. The shipping times are much quicker because these companies are stocking these items rather than making them to order. To reiterate look at this bullet form list of advantages, they also help increase the length of my blog:
· Speed — time to market is greatly reduced
· Focus — unless you have some domain expertise prevalent to the product creation process, you can leave this to the experts and spend more time on other facets of your business.
· Smaller upfront investment — typically PL companies have much smaller Minimum Order Quantities (MoQ’s)
This option is essentially the opposite of Private Labelling. With contract manufacturing, you need to figure out the formula, packaging, and label type with your vendors. Which means you must source up to three different vendors, although some companies (one vendor) provide all three functions. Formula: so, if you have a unique idea and want to craft a formula that can help position your product differently from other brands, that may just be a brand, then this option may be good for you. You don’t need to be a chemist to contribute to this process, but you should have a more detailed idea of the formula you want to make. Something more specific than “I want to make a body wash,” like “I want to put CBD in it.” Most manufacturers have larger minimums than Private Labelling companies, and this can be a barrier to entry for smaller incumbents, but you can do it you little entrepreneurial grasshopper. I believe in you… so much so, that Petra Hygienic Systems only has an MOQ of 100 bottles. Yes, that wasn’t a typo, one hundred!
Packaging: is a bit more nuanced. There are tons of packaging companies out there, and most of them are missing some creative flair in their product development divisions. Bottles are boring; do you want a Boston Round, or an Oval? No, you don’t! You want a bottle the shape of a star, because that’s what you are. Be prepared, a custom bottle means a custom mould, so if you go down this route, you better throw down… the cash. For smaller companies, we recommend going with a stock bottle and lid, get some traction and then look at custom packaging. For an easy to use packaging company we suggest www.sksbottle.com.
Labelling: gloss on, gloss off; that is the question. Labelling isn’t too difficult to figure out. Unless you don’t have any artwork. If that’s the case, you should go back to art school. Or hire a graphics designer on www.fiverr.com. Otherwise, finding a labeller is straight forward. Just make sure you’re getting a label that works for your clients end use case. If it’s something that is going to be in their showers all the time, then you want to make sure the adhesion used is appropriate.
In most cases, the contract manufacturer will, by default, own the formulation and/or product. But with contract manufacturers, you have much more room for negotiation and have the potential to own the product you’re creating.
The good old pros list:
· Control — you get much more control over the product, as you will have almost full autonomy (anything that’s in the realm of possibility) over your final product.
· Differentiation — you’ll be able to stand out from everyone else
· Ownership potential
To summarize, I hope I detailed the difference clear enough for you to be better informed in your decision-making process. The decision really comes down to your businesses unique criteria, and market opportunity. If you’re building a hero product or a brand based on your product, we’d recommend you use a contract manufacturing solution and differentiate yourself. If the goal is to test the waters or an axillary product to your existing business, or you have market knowledge that you're confident in, then private-labelling can be a great solution as well. Either way, for cosmetic products, look no further than www.petrasoap.com.