Rapidly changing customer needs is one of the biggest challenges that vitamin and supplement manufacturers face. In the drive to meet rapidly changing customer needs, such companies invest heavily on research and development which is costly both in time and money thus forcing them to use a supplement manufacturer’s private label to curb this problem. When you think you have developed a perfect formula for your supplements, your competitor adopts something new, thus forcing you to improve on your formula.
According to USA product label manufacturers association (PLMA), private label is defined as a business concept that allows a manufacturing company to sell products produced by another company using its own brand name. Private label supplements have their advantages for sure. As supplement manufacturers or vitamin manufacturers, private label is a simplified solution, particularly if you don’t have the capacity to improve your product or expand your production capacity. Every decision in a business has cost implications. If a company is experiencing growth in its customer base, it has to increase the quantity of product in the market. To do this, it can either expand its production capacity, using contract manufacturers or use a private label. The option that gives the company best product without increasing its production costs is the most viable option and thus, vitamin manufacturers use private label to realize this cost saving, increased product quality, and increased specialization as will be explained later in this article.
The two terms differ in the sense that a contract manufacturer develops a product whose formula and design is produced by vitamin manufacturers. As nutraceutical manufacturers, they are tasked with the responsibility of developing the product formula and design, thus the contract manufacturer is only required to put resources together and produce. A private label, on the other hand, develops the formula and the product. Thus, supplement and vitamin manufacturers can save on setting up a production unit, applying and getting the patents, training employees, acquiring equipment or any other logistics function related to production by using private label manufacturers.
Like any other business, supplement manufacturers and nutraceutical manufacturers exist to increase profitability and grow thus are constantly seeking ways to accomplish that objective. Thus, the idea of private labeling enables them to accomplish this objective in the following ways:
First, to ensure as a supplement manufacturer you meet the demands of customers, which keep shifting constantly. This shift might force a company to change its formula, develop a new formula, or improve the existing one, none of which is cheap to do. Further, every research and development function is unique and might force a company to acquire new equipment or skilled manpower. As the procedure is completed, these resources become unproductive as the supplement manufacturer might not be in a position to utilize the resources in a different experiment. Using private labeling helps supplement manufacturers and nutraceutical manufacturers to avoid this scenario.
Companies must comply with the rules and regulation of the countries in which they operate in. If a manufacturing firm finds itself operating in a country which has banned production of certain supplements or nutraceutical products, then the only way such a company can remain in business is by using a private label. A supplement manufacturer or nutraceutical manufacturers can operate in a specific country which prohibits the production of items in their specific product line without violating the law by using the services of private label.
Expansion into a new region, country or state might need a company to invest heavily in its production resources, particularly skilled human labor and capital or equipment. If as a manufacturer you want to avoid the logistics of hiring staff or procuring equipment, then adopt the concept of using a supplement manufacturer private label. Remember, private label companies have been in existence before you ventured into the specified market, thus they understand your customers’ needs better than you. To meet these needs more efficiently, a supplement manufacturer or nutraceutical manufacturer can adopt the concept of private label.
Starting a manufacturing firm is a costly venture. Many supplement manufacturers don’t have the resources required to start and run a successful supplement business. By using the services of private label, such a small business can survive by outsourcing production and using the little resources at its disposal to develop a strong brand. This is the entry that many health and nutrition manufacturers have adopted in the past. Other that reducing startup costs, manufacturers private label because it ensures that a company reduces the risk factor it is exposed to when launching operation. If a specific business model does not succeed, these manufacturers are able to reduce losses they can encounter by using private labeling.
Specialization is one of the business strategies that has helped build successful firms. When a company has little functions, it can concentrate its resources on the few functions and ensure it produces the best product or service. A supplement manufacturers private label is one of the strategies that allows supplement manufacturers or nutraceutical manufacturers to specialize in developing their brand name. Since production is done by a private label firm, the manufacturer concentrates on packaging, design, marketing, and public relations to develop a strong brand name.