5 Reasons to Embrace Private Label…and 5 Key Steps to Get Started

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The popularity of store brands is soaring—as the Private Label Manufacturers Association (PLMA) reports, across all retail channels, private label grew 4.4% for a gain of $5.5 billion in 2018—that growth is four times more than what is seen with national brands (1). And consumers are happy with their purchases. In a 2019 nationwide survey for PLMA, two-thirds of respondents said the store brand they buy is “as good if not better than the national brand version of the same product” (1).

Indication that private label is especially promising in the natural space comes from the 2019 Daymon Private Brand Intelligence Report (2). It points to plant-centric as “the new organic”—and one of the key themes shaping the future of innovation in private label. “The time is ripe,” according to the authors of the report, “for retailers to leverage Private Brand to create an ownable proposition around plant-centric.” The second key theme spotlighted in the report also bodes well for natural products retailers: Functionality; 70% of consumers say products that are customized to their individual health needs are appealing.

“It’s not too late but if you haven’t made the move yet, the time is now,” encourages Kenny Flores VP of sales, Reliance Private Label Supplements, Edison, NJ. “Look around and you will see that Own Brands/Private Brands are expanding everywhere, across all categories and channels of business. Retailers small and large are having great success with their Own Brands/Private Brands and are investing heavier to grow them.”

Private Label and Contract Manufacturing: The Key Difference

When considering potential partners, ask how many products they stock, suggests Jim Lucich of Licata Enterprises. “This will help separate the ‘Private Label’ providers from the ‘Contract Manufacturers.’ Private Label providers typically stock a wide array of products, and you can order a case or two of each, sometimes half-cases, once you have established a history. Contract Manufacturers sell a full-run of a single product, and you will be on the hook for thousands of bottles up front. Contract manufacturing is a challenge for small to medium stores and chains, unless you have a particular product that sells in the thousands of units per year. It would be cost-prohibitive to build a robust variety in your store-branded line this way.”

Your Store Brand Can…

  1. Foster consumer loyalty & confidence: Flores calls it “one of the best ways to retain customers. If customers love your brand they will continue to come back for it.”
  2. Build your brand: “The store’s brand is more than just a line of products, it becomes an integral part of a company’s marketing and branding,” says Jim Lucich, sales director, Licata Enterprises, Huntington Beach, CA. “Store-branded merchandise reinforces the company’s brand through visual brand messaging (logos and packaging), quality, and value. When the product is in the consumers’ home, it reinforces the store brand as well as reminding them to visit that store for their nutritional needs. It’s like having mini-billboards placed in prime locations, even where their shoppers live.”
  3. Outsmart showrooming: Retailers have first-hand experience with “showrooming”—the “modern phenomenon of shopping at your store for information on products, then buying online or anywhere else they can find that product for a lower price,” Lucich explains. Store-branded merchandise protects against this, he says, as “this is one line of goods for which the store controls pricing 100%. Not only that, but they can’t even buy your private-labeled product anywhere else, unless you decide to also make it available online through Amazon or any other source. Even then, it’s only coming from you.”
  4. Offer an edge in the Amazon world: “Even Amazon recognizes that private label is a good thing as they have begun doing it themselves,” says Barb Honiotes, NOW Private Label sales supervisor. “To some extent, they have emulated a good health food store in that they have a lot of information about the supplements they sell, and are transparent about their products by making that information readily available.” In other words, they are trying to move toward doing what comes naturally to you.
  5. Launch with ease: “Some retailers may be reluctant to explore launching a store brand because they don’t know where to start and are daunted by the process, but it really is a lot easier than they think,” says Honiotes. “We have a lot of experience with what works in the natural retail channel, and have refined our program accordingly. From product selection to label design, we can guide retailers to setting a program that will be successful in their specific store.”

Steps to a Successful Launch

1. Determine a sure-to-sell mix: “Go with the best sellers in the category,” advises Jack Brown, VP of sales & marketing, Lily of the Desert, Denton, TX. “Why try to recreate the wheel? Expand within your core private label items with flavor combinations or added ingredients that could make you slightly different that the brand may not do.”

Licata’s Lucich seconds that. “It may be tempting to start with fad-items or unique formulations that aren’t readily available among national brands,” he says. “A couple of years ago, everybody was calling for Garcinia Cambogia…or anything that Dr. Oz may have mentioned on his show. The fad came and went for the most part, and a lot of stores were left with unsold merchandise. A new fad will come along, and people will flock to the stores in search, as they are now doing for CBD.” He suggests newcomers avoid the emerging trends at the start.

The getting-started approach Lucich recommends: Stick with essentials. “Year after year, there are certain supplements that perennially sell well, such as the good old Vitamin E 400 IU,” he notes. “Let the national brands take the big risk on the fad products, at least until they get established. Then start building your line with some unique and effective formulas, such as products that support important functions such as vision, metabolism, or bone health, as well as age-related support for the aging Baby-Boomers, such as prostate health, menopause symptoms, joint pain or insomnia.”

Also consider where you are winning with national brands, says Flores. “Evaluate each category. Do you have too many offerings of the same item? Simplify, make it easier for your customers. Category Management is key. Feature your Private Brand and limit the assortment to a few of the best-selling national brands.”

Honiotes adds that a good partner can offer additional guidance. “We can provide insight into what the top sellers are in the industry, too, in helping stores make those decisions. Those are successful guideposts for deciding what to sell with your own store names on the label.”

When it comes to expanding, Jason Provenzano, CEO and president of Makers Nutrition, Commack, NY, says, “We suggest to crawl, walk, then run. Not to launch an entire line all at once. It is best to establish a staple product and build the brand around that. This way, the line has some trust associated with it as it grows.”

Store brand CBD: What you need to know

It’s no wonder stores are considering adding CBD to their private label lines: Nielsen predicts that, by 2025, the U.S. hemp-derived CBD market could be a $6 billion industry. And Rishi Sehgal, managing director of the Private Label Division for Mile High Labs, feels the market will continue well beyond 2025. “We believe the CBD market is in the early stages of a multi-decade secular growth trend and has the potential to be one of the largest ingredient applications globally,” he says. For those who want in, he says, “High quality, consistently produced CBD is in demand, so it’s important to find a partner that can provide large quantities of product now and in the future.”

Proceed with caution, though—extreme caution. “Perform due diligence when selecting a private label partner,” Sehgal advises. “Ask for testing results and make sure their testing methods are sound. Get proof that the manufacturer employs cGMPs during production. Make sure they can make high-quality product consistently and over the long haul.”

Kathy McIntee, VP of Patient One MediNutritionals and ECS Therapeutics, which offer the opportunity to label a wide range of nutraceutical formulas and hemp/CBD products under other brand names, seconds that. “Ensure products considered are pure, safe and potent. Every batch should be quality-confirmed by rigorous 3rd party testing, including analyses for Cannabinoid Profile, Terpene Profile, Pesticides, Solvents, Heavy Metals, Bacteria, Yeast & Mold, and E. coli & salmonella.”

With vague—and even misleading—labeling in the marketplace, McIntee says, buyers should compare independent testing among brands to understand the potency of CBD and other ingredients they are actually getting. “Labeling varies greatly among brands. Don’t be misled by larger bottles that may include more of the filler oil. Reading the independent analyses is the only way to really know content.” She also advises sticking with a company that transparently discloses the amount of CBD per dose, backed up by independent testing.

More advice from McIntee: The brand should also have a track record in the dietary supplement industry. She warns, “There are many new players in the hemp industry who don’t have any experience or history of following good manufacturing practices.”

And choose a true partner. “Look for a brand that is committed to educating you and your staff,” McIntee recommends. “This is a new frontier in the area of health and wellness and your customers will have questions.” Sehgal adds, “In the CBD world, it’s imperative that you provide clear information on the source of the product. Let the customer know your product’s ingredients have been tested for quality, consistency and purity. At Mile High Labs, we provide our customers with as much education on the quality and consistency of our products so that you can build trust with your customers. CBD is a new market so trust carries extra weight.”

The bottom line from Sehgal: “There is an investment required to launch a store brand; however, by choosing the right manufacturing partner, you can protect that investment and see big wins with your customers as the CBD market continues to grow.”

2. Find the best partner for you: “A store brand is a manifestation of your brand identity, so it’s critical that the product is of the highest possible integrity,” says Rishi Sehgal, managing director, Private Label Division, Mile High Labs, Boulder, CO. “Consumer trust is one of the biggest factors in buying decisions. Your customers already trust you and when they see your products in-store, that trust carries through to the products.”

You ensure quality by asking questions, adds Honiotes. “Does the manufacturer have long standing relationships with their ingredient suppliers? Do they do testing in house, and if so how extensive is their set up and what kinds of tests do they conduct? If they use a third party lab, ask which ones. Ask at what stages they test and if that includes testing the finished products. What third party inspections and certifications do they have? Think about it as if you are vetting products to give your children.”

Provenzano also advises questioning: “Is their product made in a cGMP facility? Is it regularly audited? Are the raw material vendors qualified?” To help ensure success, he stresses, “Look into the partners credentials’ and qualifications, reviews, BBB listings and the like. Do not take chances.”

As Lucich notes, “It is the law that all manufacturers follow GMP guidelines, so your provider should be in compliance, and in good standing with the FDA. The supplement industry has become like a gold rush in recent years, and there are a lot of new prospectors and claim jumpers out there looking to make a quick buck. Ask how long they have been in business. You should try to look for a supplier that has a long history of serving the health food industry, as this is typically a good sign of legitimacy, quality and service. A few, Licata Enterprises included, have been long-standing, trusted providers for several decades.”

Another key line of questioning: “Ask questions early about minimum order quantities, cost of each item, will they warehouse for you and only ship when needed? Will they offer terms? Be willing to look at other vendors doing similar products if the core Vendor is too expensive or has too many demands,” Brown advises, stressing the importance of being aware of the true cost of the project. “Vendors will ask for minimum runs, guarantees on packaging if it is things they don’t normally carry, guarantees on labels, etc. They may not be in up-front cost but still a part of the total cost of a private label SKU.” And be willing to rethink a product for private label if it becomes too cumbersome and costly to carry, he adds. “Not all products fit well in a private label format.”

Beyond that, Flores suggests asking: “What makes you unique? How can you help me differentiate? What are you doing that will bring value to my brand and to my customers? What type of support will you offer?”

Also pay attention to what they ask, adds Lucich. “A good representative for a company will ask you questions to assess what your needs are, so they can properly address them. If serving your company’s needs isn’t their number one priority, you may want to keep looking. And they shouldn’t always agree with you. It’s far better if they express disagreement on an issue, if their insight might keep you from a bad business decision.”
Bottom line: “Do your homework,” Flores urges. “Make sure your Private Brand partner has the resources available to support you and your brand’s success.”

3. Make your brand shine. “If you are going to build a successful Private Brand you must be committed,” says Flores, adding that retailers with successful programs feature the store brand, give it premium placement, promote it with consistency, and make it clear across the organization the importance of building the store brand.

Indeed, Provenzano, contends, “There are no winners or losers, just bad marketing attempts. A product could always be made better or with better ingredients. But you can have the best idea and fail to draw the attention needed to sell it.”

Starting with the label, Honiotes says, “There are two different but equally important components to label design: The label art should reflect the store well and the information on the label must meet legal and regulatory requirements. We provide options that make it simple: Stores can select from a variety of eye-catching stock designs, they can provide their own artwork, or the label can feature their store’s image. All of those options lead to labels that look professional and meet label requirements.”

In terms of style, Lucich suggests, “Keep it simple. Focus on your brand message in the logo, and perhaps a slogan. But for the most part, customers are looking to be able to easily identify the products without confusion. We have seen customers spend a lot of time, effort and money trying to create elaborate labeling, and customers who just go with extreme simplicity. In the case of private label, it seems that simplicity has a slight edge.”

4. Price it right. Brown notes that a pricing strategy depends on the store and the category. “If it is a commodity based item, go low. If it is a premium or unique product, then don’t be afraid to be higher. However most consumers consider the private label to be cheaper than the [national] brand.”

That said, Honiotes notes, “Your store brand shouldn’t be the least expensive on your shelves, because what does that say about your store? Don’t price your private label product too low unless it is on sale. Find a quality manufacturer with a program that seems supportive of your efforts to launch your own brand, work with them to design the line that is best for your store, and give yourself a slightly lower margin than you would with premium brands.”

Above all, says Provenzano, “Always price fairly. Understand and emphasize what makes your product different and always include the unique, added benefits of your product in all of your marketing materials and when mentioning the price.” And remember, he adds, that there are many things that can be done to increase brand awareness and exclusive benefits of the store brand such as BOGOs, or Loyalty Reward programs.

5. Optimize sales. “When you launch your line, make sure it’s visible,” says Honiotes. “Merchandise it on an end cap, highlight it in your newsletter, and announce it on social media. Start with an introductory discounted price to incentivize trial. And make sure you have enough inventory on hand.”

Education is key, Provenzano says. “If you don’t have a person in store to educate a consumer when they are inside the store and your product is sitting on a retail shelf, your only option is an eye-popping product. The best advice is to make a quality product with an appealing label and train your store personnel well!”

Lucich sums it up: “In directing the customer to the store-branded item, it helps reinforce that store’s quality message, the store brand, customer confidence and loyalty. It helps battle the competition from the big chains, Amazon, and the general market. It helps keep volume at a level so as to gain a margin advantage through higher-volume discounts. In essence, the store brand helps build the store and make it stronger.”

Legal Issues to Consider—and Pitfalls to Avoid

“One of the nice things about using a qualified provider for your private label needs, is that your provider has you covered on product liability,” says Lucich. “A good provider will carry its own product liability insurance that covers all the products they sell you.”

Be clear, though, on what is covered. “Is the manufacturer able to provide a Certificate of Insurance on what is in the bottle and stand behind the products they make for you?” asks Honiotes. “Are they able to assist you with any current FDA/FTC label changes so your label is compliant and meets claims?” But remember, she stresses, “your company’s name is on the label, so ultimately you are responsible for label accuracy and product safety.”

Provenzano adds, “With our manufacturing services, we support all products made in-house with additional insurance riders, but that is only for a manufacturing defect, or material workmanship. We strongly advise brands to have their own product liability insurance as well as for anything that might come up because of their marketing.”

Brown advises: “Be sure the Vendor will stand behind the product as much as their potentially Branded product. If not the same Vendor, do research on what kind of legal or recall issues the Vendor has had. Are they known for shortcuts or not putting ingredients in products that are on the label? A lot can go into choosing a Vendor. Someone you know and trust goes a long way. A private label product has the store’s name on it. Treat it like you made it.”

Other pitfalls to watch out for:

  • Ordering too much of a product to start. Lucich explains, “You will want to make sure you can sell-through the product before it gets near its expiration date.”

  • Ordering too little. “It will be hard to build sales of a product if you do not have supply on hand when the customer comes back to make a subsequent purchase,” Lucich says. “It’s the same as with your other, non store-branded products, but since it has your name on it and they can’t go pick it up somewhere else, it becomes an inconvenience and an opportunity for them to switch brands, which takes your store out of the loop.” And know the manufacturer’s lead time, Honiotes says, so you don’t run into a problem with supply.

“It’s going to be your company’s name on the products, so make sure the manufacturers you deal with have your best interest in mind,” says Lucich. “After all, this is a partnership. As your line grows with a manufacturer, they become increasingly important to your company, and you become more important to theirs. Being important to your partner benefits you in return, and vice-versa.” WF

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