In today’s competitive business landscape, it is imperative for companies operating in the beauty, personal, and home care industries to have a refined grasp of the different types of product manufacturing options that are available before launching their product in the market. The most common methods are private label versus white label, and contract manufacturing.
Each of these options presents unique advantages along with some challenges. Picking the right model becomes imperative for a company to gain market share and increase revenues.
Having a keen understanding of these various manufacturing models, their manufacturing process nuances, and distinguishing traits is indispensable for those who seek to wholesale their products into the market. Here are some key benefits and challenges each option offers.
Private Label: A Quick Path to Branding
Private label manufacturing involves selecting an existing product from a manufacturer and branding it under your company’s name.
Such a model is particularly beneficial for businesses when an established product that requires little time, expenses, and effort to produce; the quicker time to market saves months in production, allowing companies to focus on making other investment-based decisions and plans.
Specifically, one of the key financial advantages to private label manufacturing is gained initially because companies incur lower costs compared to others since the design and development tasks are borne by the manufacturer, meaning that it relieves the operator of any pressure to heavily invest in research and development.
However, there are some challenges with a private labeling venture. Limited customization is one major issue. Private label products usually allow limited flexibility regarding design and formulation, which makes it pretty hard for a business to differentiate itself suitably from other firms. Furthermore, private label product users have to build their whole business around the quality and consistency from an individual manufacturer, which puts them at a substantial risk if that manufacturer fails to meet expectations.
For example, an instance that is suitable for private label manufacturing is a grocery chain that sells its branded products, which are produced by a contractor. In this model, the grocery outlets work closely and develop with the private labor manufacturer without requiring the store having to venture into the business of independent manufacturing.
White Label: A Flexible Manufacturing Opportunity
White label products are generally more generic items than those produced under private label manufacturing, that multiple retailers can rebrand and sell using their own logos and packaging. This model is particularly appealing for businesses seeking to expand their product offerings without the need for significant investment in research and development or production facilities.
Another benefit of white label products is the scale of production, which helps in cutting manufacturing costs. It is because of this mass production that they gain favor among retailers since they cost less per unit. The white label concept permits a company to establish an extension of its brand with little cost in further development and customization, or inventory expansion.
However, a challenge is posed by white labeling: less differentiation. Since white-label products are generic, various brands can sell the same products, making it difficult to distinguish one brand from another in a competitive market. Also, although firms may be able to personalize the labels and packages, they usually cannot change the specifications of the product itself.
An example of white label manufacturing can be seen in the production of generic smartphones found at various carriers but branded differently. Despite the product being the same, each carrier signifies its uniqueness by branding it uniquely and trying to attract its audience.
It is also important to note that with contract manufacturing, companies in many cases can retain ownership of their formulas, allowing them to maintain their [CLC] formulas and products built when a contract expires or a business relationship ends. This means they can continue producing with a new manufacturer, avoiding costly disruptions and ensure long-term stability in their supply chain.
Contract Manufacturing: Tailored for Innovation
Contract manufacturing is a business partnership between the company and a manufacturer contracted to design and develop their product based on their requirements. This is a tremendous advantage for those businesses who want their product to be different from the norm, fit into their brand, and meet client needs.
It is also important to note that, unlike with a private or white label company that may go out of business, with contract manufacturing, companies retain full ownership of their formulas, allowing them to perform a seamless tech transfer when a contract expires or a business relationship ends. This means they can continue producing the same product with a new manufacturer, avoiding costly disruptions, maintaining brand consistency, and ensuring long-term stability in their supply chain.
Another advantage of contract manufacturing is having the variant or custom design of a product. The ability for companies to tailor product design and specification to create a truly unique offering can be a gamechanger when seeking to increase market share or elevate a brand within the beauty, personal or home care sectors.
Brand exclusivity is another advantage. Products developed through contract manufacturing are unique and are not duplicative in the market, with the same specifications or model number. There is also an advantage for scaling products. A contract manufacturing partnership will often allow for increased production of a popular product to meet supply demands.
When it comes to challenges, contract manufacturing does have a few that businesses should be aware of. One of the important challenges is the higher setup cost that comes with contract manufacturing. Research and development, tooling, and initial setup costs should be considered prior to choosing this option. In addition, the production process may take longer than expected while creating the product from scratch. Along with that, the management of the relationship and quality control can be more time consuming, especially for businesses using this approach for the first time.
A practical example of contract manufacturing is a company developing a specialized piece of equipment with a dedicated manufacturer. This collaboration enables the company to create a product that meets precise specifications and serves a niche market effectively.
Identify And Adopt The Right Model
Choosing the right manufacturing model—private label, white label, or contract manufacturing—requires careful consideration of several factors, including business goals, budget, timeline, and target market. If the speed-to-market aspect is prominently high on the list of goals for your product, your best bets are the private or white label manufacturing options, which typically allow the products to hit the shelves the fastest. Businesses with limited resources can benefit from both models, sustaining themselves with cost-effective ways of having quality products without breaking the bank.
If high customization and exclusivity options are more important, or if brand differentiation is a bigger incentive, contract manufacturing beats the others because it allows the businesses to create unique products that set them apart in the market. For businesses wishing to undertake long-term growth, contract manufacturing also may provide the most attractive production path as it supplies the flexibility to scale and innovate over time and as market demands change.
Understanding the differences between these three models is essential for making strategic decisions in product development. Each has its own unique set of advantages and challenges, and the right choice depends on aligning the manufacturing approach with your business goals. Your choice should be one that takes into consideration production speed, overall manufacturing efficiency, cost, and brand individuality to ensure business success and market share gain in today’s competitive beauty, personal and home care sectors.
Bright Innovation Labs is a CMO that is recognized as an innovation hub with U.S.-based manufacturing facilities, with a dedicated R&D team to collaborate with beauty brands to enhance existing formulations or develop new ones. Contact our team to start working with Bright Innovation Labs today!