Entrepreneurs that market beauty and nutrition products have options for manufacturing their products. The difficulty can come in deciding which of these choices works best for their business. Most common among these are contract and private label manufacturing. Although both of these methods help to get products to market, there are key differences in how they provide these services. Understanding these differences will help determine which option would be the best fit.
Contract manufacturing allows the greatest degree of control to business owners. Sometimes referred to as co-manufacturing, these companies manufacture products to any specifications. This allows companies to offer the products their customers want without the hassle of manufacturing in-house.
Co-manufacturers make products of a higher quality, and at a lower cost, than doing so in-house. They do this by focusing their expertise on manufacturing and distributing products. They have experience with the shortcomings of the process and know what to avoid. They also offer advice and criticisms that come from years in these markets.
Expanding capacity can be a very costly venture. It requires a large commitment on the part of a business and can be risky. Co-manufacturers have the excess capacity to begin producing at any level of demand. This means significantly lower upfront costs when compared with expanding capacity.
When introducing a new product line, co-manufacturing can be the best option. It saves the business the time and effort involved in retooling. They can use these resources on marketing the new product and monitoring feedback from customers. This makes it easier to offer a wider range of quality products to customers.
This option is best used by businesses that have an established brand or a unique formula. By outsourcing manufacturing, business owners are able to focus on driving sales. The same goes for introducing a product in a new geographic region. Co-manufacturers are already established all over. Taking advantage of their existing infrastructure can mean a major saving of time and money.
Private labels are great for businesses that want to market an established product. Private labels will add your logo and branding to one of the manufacturer’s tested formulas and sell them directly to consumers. This results in much higher margins than other manufacturing options.
Developing products is very risky. There is a chance that none of these costs will be recovered. Private labels are attractive because the formulations these companies use are market tested. Businesses can turn to private labels to quickly bring a product to market and take advantage of trends.
There are also marketing advantages to selling an established product line. Consumers will be familiar with the formulation and comfortable with using it. Marketing efforts can borrow from the popularity of existing brands that use similar formulas. This is a major hurdle in marketing a new product that can be overcome by selling private labels.
The most important advantage comes in cost. The cost of selling private label products is likely the lowest of any option. Private label manufacturers have the expertise of other third-party options but are able to provide this at a lower cost. This is because they limit the amount their clients can customize their products. Scaling manufacturing in this way represents a major cost saving.
Private labels also have more flexibility and less commitment than other options. They are able to offer limited runs without major upfront costs which is good for a company testing the market for a new product line. It also allows a company to offer a wide range of products without spending on development.