Which to Choose? Private Label Manufacturing vs. Contract Manufacturing
When you begin exploring manufacturing options for your supplement company, you’ll quickly come to realize there are two primary paths to take:
Private label manufacturing
Contract manufacturing
Before you go any further, it’s important to delve into private label manufacturing vs. contract manufacturing so you can choose the path that is right for your business.
What Is Private Label Manufacturing?
Private label manufacturing is a service for companies that want to sell a product but don't want to create it themselves. A private label manufacturer has ready-made or ready-to-make products that a business can buy, customize, package, and sell as their own. This eases the company’s workload and speeds up the product’s time-to-market.
A private label manufacturer takes care of:
Research and development
Sourcing
Formulating
Manufacturing
Compliance and testing
Packaging
Shipping (some private manufacturers offer this service)
Pros of private label manufacturing:
Low hassle to get up and running
Few day-to-day interruptions for companies
Good for small businesses who are focusing on growing their brand
Takes advantage of the manufacturer’s expertise
Extensive catalog of ingredients, products, and manufacturing methods
Quick and easy to add to a brand’s product line
Low minimum order quantity
Potential for higher profits in the short term
Cons of private label manufacturing:
Little control over the process
No opportunity for patenting products
Lower profit margins in the long term
Up-front investment:
Generally small, and much lower than taking over your own production with its associated staffing, equipment, and certification requirements
Expected timeframe:
Significantly shorter than developing, producing, and shipping your own products
Much shorter than contract manufacturing (see below)
An Example of Private Label Manufacturing
Annaville’s apple cider vinegar teas became an instant online hit, so the owner wants to add a few more products to her lineup—quickly. She wants to offer apple cider vinegar topical cream and apple cider vinegar bath salts but doesn’t know how to start formulating them herself.
She partners with a private label manufacturer who already has the sustainability-sourced ingredients and all the other compounds and additives required to make a stable, quality product. The manufacturer takes care of everything for her, including all testing and compliance requirements.
This makes the entire process very fast and affordable, which means she can have her products ready for the upcoming holiday season.
What Is Contract Manufacturing?
Contract manufacturing produces a product from a company’s already-sourced ingredients and proprietary formulations. Or, contract manufacturing can also help a brand owner research and develop a new product from the ground up.
A contract manufacturer takes care of:
Manufacturing a company’s own unique product that already exists
OR
Sourcing ingredients
Researching and testing ingredients for a new formulation
Developing and manufacturing the new product
Pros of contract manufacturing:
Works well for unique ingredients, formulations, and products
Allows for products to be patented
Good for expanding current, in-house production
Often available in pilot batches
Volume discounts offered
Long-term profit margins may be much higher
Cons of contract manufacturing:
For existing products, sourcing, formulating, packaging, and shipping is the brand’s responsibility
Development and testing of new products are expensive and time-consuming
Up-front investment:
Large minimum quantity requirements are likely, which make the upfront costs higher than with smaller or nonexistent quantity requirements
Expected timeframe:
Can take 60–360 days for a product to be approved for production
An Example of Contract Manufacturing
GeoHealth is a growing supplement business that is quickly outgrowing its current production capability. The owner decides the time has come to move their biggest seller, Geo Bone Strength Powder, to be manufactured at a larger, dedicated facility.
They partner with a supplement contract manufacturer to increase the output of GeoHealth’s proprietary formula for three reasons:
To increase their inventory, thus reducing the time it takes for orders to be shipped around the world
To have the ability to patent GeoHealth’s product
To gain higher profit margins that GeoHealth is currently missing out on
Earth Lab Botanical Services
While we’ve provided a lot of information here, the only way to really know which manufacturing option is right for you is to speak to the source. And whichever direction you end up going, it’s absolutely crucial to choose the right partner.
Earth Lab Botanicals is both a supplement private label manufacturer and a supplement contract manufacturer, so we are the right people to come to for advice. Our vast knowledge and experience in these areas will serve to guide you to a decision that is the best and most profitable path for your supplement company.
Contact us to start a conversation!