I was having breakfast at a local
restaurant the other day when I noticed on the table there was a
bottle of hot sauce with the restaurant's name on it. I was
impressed because I knew this was no chain - it is just a small
independent restaurant who was taking advantage of private labeling.
I was even more impressed when I recognized the company on the label
and realized that we had actually printed these labels for one of
our customers who specialize in private labeling.
What is Private Labeling?
First, let's be clear about what I mean by Private Labeling.
According to Wikipedia, the online encyclopedia, private label
products or services are typically those manufactured or provided by
one company for offer under another company's brand. So this covers
everything from Wal-Mart brand products to the small restaurant
putting their label on someone else's hot sauce.
It is amazing the number of businesses now that are engaged in some
form of private labeling. Restaurants, hotels, spas, hair salons,
even car dealers are all putting their own brands on products such
as hot sauce, lotions, shampoos, coffee, lip balm, bottled water and
wine. Many corporations want to put their own logos on products that
they give away to reinforce their brands. The corporate gift market
is particularly busy around Christmas. There are also many small
businesses that want to appear more professional by having their own
brands of products to sell - coffee and bottled water are especially
popular here.
Getting Started
So how do you get started in private labels? The easiest way is to
just start selling to other local companies. If you sell coffee then
start with the local cafés and donut shops - many companies are
happy to support other local companies, particularly if they can get
their own brand name on the products. Obviously, your existing
customer base would also be a good place to start.
Once you have a few private label customers you can then start a
formal "Private Label Program" giving prospects examples of what
other companies have done. One important point to note is be sure to
make it as easy as possible for your customers. You should offer to
do all the work for them including the labeling, so they will just
receive the finished product. You may end up having lower margins on
your private label products, but you can make up for that with
increased volume.
Private Label Resources
You don't have to do it alone in your private label venture; there
are plenty of resources out there to help you. There are two main
publications that you can read:
Private Label Magazine
Private Label Buyer
There is also a national
organization - the Private Label Manufacturers Association
(www.plma.org) that puts on a big
trade show every year just for the private label industry. I would
also expect your own industry trade association will be a useful
resource for you, they may even have some information on private
labeling.
A simple search request for "private label" on Google brings up over
10,000,000 pages. Add your industry to that search and you will have
a wealth of information more specific to your needs. For instance,
the search "private label coffee" brings up over 13,000 pages. You
should do this to see what your competitors are doing in your
industry, which actually could give you many ideas. While you are
online you should also look for blogs and news articles within your
industry - there is a lot being written about private labeling.
Here at Lightning Labels we will be happy to help you with the label
part of your private label program. We see dozens of designs every
day, so we can help with the design of your labels as well as the
printing. The big advantage for you, as a Lightning Labels customer,
is that you can offer small quantities to your private label
customers and then "gang run" many jobs together to get a better
price for your labels. You can even add your own brand labels to
these jobs, so your own per-unit label costs will be reduced.
Reaching the Next Level
If you continue to do all the production work yourself there is
obviously a limit to how large your private label business can be.
If you want to reach the next level you will need to hire the
services of what is known as a Contract Packager. Basically, these
are companies that take your product and packaging and put it all
together for you and then ship it to your customers. They can even
mix your ingredients for you to create your end product. You need to
be at a reasonably high volume for this to be worthwhile, but the
beauty of outsourcing your production work is that it scales very
easily - and it leaves you time to focus more on bringing in
business.
The Contract Packaging
Association is the trade group for contract packagers and their
web site has a wealth of information. You can read about the
criteria you should use when choosing a contract packager. They can
even help you find a contract packager in your area with the
capabilities that you need.
Once you have a relationship with a contract packaging company then
you can really begin to scale your business. All the large
supermarkets and drug retailers are increasing the number of
products that they sell under their own label. Store brand products
now account for 25% of sales at US supermarkets and 40% of sales at
Wal-Mart. Now, I realize it is going to be difficult to get your
products in to Wal-Mart or any of the big national chains, but there
are plenty of smaller regional supermarkets and drug store chains
where you will have a better chance.
The Potential
Here at Lightning Labels we have seen it many times. A customer will
start out small ordering their own brand of product. Then they will
start private labeling with a few of their key customers. The next
thing you know they are sending us dozens of different labels for a
large number of customers as they expand their private label
business.
I know it may be just a dream for many of you to have your products
as the store brand at a national chain, but if you don't start out
down the private label road you may never know the potential for
your product. If you are completely focused on selling your products
under your own brand at wholesale or in a retail store you may be
missing out on a huge growth opportunity. The private label trend
shows no signs of slowing down - you could very well find that the
sky is the limit.
