Private Labeling for Packaged Goods: How the Process Works 2022

Are you a retailer interested in private labeling for cleaning products and other consumer goods? Private labeling allows retailers and distributors to get goods branded with their own names on their shelves by leveraging the manufacturing capabilities of third-party suppliers. Done right, private labeling lets you boost your brand and your sales without the headache of setting up your own manufacturing lines and getting through regulatory approval (where required). Here’s how it works and what you should look for in a manufacturing partner.

What is Private Labeling?

A privately labeled product is a good that is manufactured by a third party and then sold to another company that will sell the product under their branding. This process allows retailers to take part in a product’s creation process—choosing the ingredients, appearance, branding, etc.—without having to deal with the additional stress of in-house manufacturing.

Private labeling offers significant advantages for retailers and distributors.

  • Compared to setting up your own manufacturing capabilities, private labeling reduces costs and speeds up timelines for getting product to your shelves–after all, the manufacturer already has the factories, capacity and expertise, so they can start producing product as soon as the specifications have been nailed down.
  • At the same time, private labeling allows retailers to get their own brand front-and-center, increasing brand power and, often, profit margins when compared to selling “name brand” consumer goods.

Private Labeling vs White Labeling: What is the Difference?

A similar process that is often confused with private labeling is white labeling; this is when a generic product is sold to multiple retailers. In this case, the retailer only has control of the branding; the materials, formulation and packaging design are the same for all distributors. Companies may also have to pay a premium to the manufacturer to relabel their existing product. Private labeling helps companies maximize their budget while eliminating the need to pay the inflated costs that come with selling another brand’s product. Furthermore, it gives companies the opportunity to offer better-tailored products to their consumers.

Private Labeling, in Conclusion…

While, in the past, private labeling has been viewed in a negative light, we are now seeing consumers opting to purchase store-brand products. Buyers are now realizing that the majority of store-brand products offer the same quality and value as big-name brands; well-known brands typically charge more for their products and can be difficult to find at times due to their popularity.

According to Statistica, in 2020, private-label brands accounted for 19.5 percent of the market. Further, they reported that the sales of packaged goods being sold under another company’s branding reached around 160 billion U.S. dollars. And Statistica predicts that these numbers will only increase in the coming years.

For example, Walmart’s Great Value brand has been credited as a major part of the company’s success. In 2020, Walmart’s CEO, Doug McMillan, shared that their Great Value brand contributes over $27 billion of their sales annually. And, it’s no shock that most other major retail companies use private labeling, such as Costco’s brand, Kirkland.

How the Private Labeling Process Works

Before engaging with a manufacturing partner for private labeling of consumer goods, make sure you know how the process works and what questions to ask.

Step 1: Establish a Vision for the Product

Establishing a vision for your product is one of the most important steps in the private labeling process. In this first stage, the brainstorming and researching process is conducted. This design thinking process is crucial in determining whether your product’s idea is profitable. Meeting with a trading partner can help finalize your vision and determine the need for the product.

Questions to ask during this step:
  • Is there a need in the market for a product that is not currently available? Or are there market niches (e.g., price point, performance, functionality, availability) that are not currently being filled?
  • How can I expand my brand with the use of a trusted manufacturing partner?
  • Is there an alternative way to make an already-available product suitable to a larger demographic?
Step 2: Define the Overall Project Plan

In this step, you’re defining the project’s goals and objectives.

  • Project Goals: what you plan on achieving by the end of the process.
  • Project Objectives: the specific tasks that must be completed in order to achieve your end goal.

Some common examples of project objectives are:

Brand: This includes your brand’s image and awareness. Your branding can help increase customer loyalty and help with promotion, among other things.

Timing: There are many factors that go into the creation of a product—the design, sourcing raw material, compliance applications and certifications, and more. For household cleaning products and similar consumer goods, we recommend that you plan to provide around 14-18 weeks, starting from the initial concept phase to the product’s final delivery.

Quality: Quality objectives relate to the value of the product, services and processes. This helps to improve product performance and operations and reduce the number of products with defects.

Budget: Project budgeting is important for understanding the costs of developing a product. A formal budgeting process will ensure that you stay within your planned budget. Allocating dollars for specific goals and objectives will help you accurately estimate your total required budget. Check out our article, Understanding the Costs of Wet Wipes, for an example of costs we budget for.

Step 3: Design a Contract

When creating a contract, vendors will often request a minimum investment from their prospective customers to commence the engineering and design phase. This shows that the customer is serious and allows the manufacturer to allocate resources for the project. In some cases, this will be credited if, and when, the purchase order is received.

Step 4: Agree Upon Exact Specifications

Once the overall project plan has been completed, the product’s exact design must be nailed down. Some examples of product specifications are:

  • The materials
  • Packaging plan (e.g., will a flow pack be used or a canister?)
  • Packaging labels
  • Merchandising for the packages
  • Quality requirements (these are specific to a customer’s application)
  • Testing and registration requirements
Step 5: Provide Final Proposal

Once both parties are able to reach an agreement on the product’s material specifications, formulation, packaging, and visual design, a finalized proposal will then be created for the project.

Step 6: Purchase Order

After the customer and the manufacturer agree on the pricing, the purchase order will then be created, and the vendor can begin to order the raw materials.

Step 7: Finalize Product Design

When finalizing the product’s design, both parties must:

  • Agree upon the exact weight and size of the product.
  • Decide the exact dimensions and materials for the packaging.
  • Finalize compliance applications, if applicable.

Additionally, in this step of the process, the vendor will provide deadlines for the graphics you wish to use for your product’s packaging. Further, the vendor will order the required raw materials. Finally, the vendor will provide a final agreement for you to sign off.

Step 8: Manufacturing

Once the product design has been finalized and the raw materials have been received, manufacturing can finally begin (based on the start date in the production schedule). For more of an inside look at how manufacturing works, check out our How Wet Wipes Are Manufactured article.

Step 9: Delivery

And lastly, after the production process is complete, the finished product will be delivered to you–ready to sell! The private labeling process makes it simple to add great-quality products to your shelves.

Nuvik, the manufacturer of Crocodile Cloth, now offers private labeling for surface wipes and other products. Interested in putting our manufacturing capacity to work for you? Contact Nuvik Sales at sales@crocodilecloth.com or 855-552-5684 to set up a discovery call.

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