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Private Enterprises

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Phase 2

The nuts and bolts of partnering with a private labeler.

Your natural products business is thriving. Or maybe it’s struggling a bit. Or maybe you want to provide more options for your customers. Whatever the reason, perhaps you’ve considered partnering with a private labeler to create a unique brand for your store. Carrying a private label creates brand recognition as well as an exclusive product that can be tailored to your customers’ unique needs and demands.

It may sound like a daunting prospect to enter the manufacturing arena, even as a silent partner focused more on the retail side of things, but more and more businesses are embarking upon offering private label products.

Why Do It?

Different retailers may have different reasons for choosing to have a store brand, but one major reason, said Justin Zehrung, vice president of sales and marketing at the Phoenix, AZ-based manufacturer Essential Source, is because retailers “… want to provide a stand-out product that works better than other products in the category, which in turn speaks about you and your business to your clientele.”

“Starting a private label was essential to strengthening our brand recognition and commitment to quality and pride in our name,” concurred Retailer Marty Burman, owner and operator of Burmans Health Shop in Brookhaven, PA outside Philadelphia. “Plus it keeps people coming back to us when they are satisfied with the results.”

Retailer Michael Kanter, co-founder and president of Cambridge Naturals in Massachusetts, started offering private labels at least 20 years ago at his retail shop. “We wanted not just a private label but one that was superior in quality to anything we carry; we did not want to sell a line just because it had our name on it,” he said.

Private Label Product Trends

Many products can be sold under a private label. In the supplements category, Zehrung said that probiotics are trending. Regina Flight, private label/bulk supervisor at Illinois-based NOW Foods/HealthCO, agreed and added that weight management and cardiovascular items are still popular.

Burman noted that he has seen growth in products for inflammation, such as turmeric. “Our proprietary formulas, like our liver support and colon cleanse formulas, are top sellers as well, but the most popular of all items are our probiotics. We have five probiotic formulas that we keep in stock, and they have been hot products for about three years now. Also sports nutrition like whey protein is a winner,” he said.

Harvey Martens, vice president of business development at NutraEx Food, Inc., a company specializing in tabletop natural sweeteners based in Burnaby, BC, Canada stated, “Plant-based proteins are poised to replace whey as the vegan trend and the growing interest from non-vegan and “flexitarian” consumers in adding more plant-based foods to their diets continues to expand.”

Martens added that, as far as sweeteners go, stevia is outperforming artificial sweeteners, and monk fruit is growing in popularity.

At Cambridge Naturals, Kanter offers between 400 to 500 products under a private label—everything from vitamins to herbs to minerals to essential oils and more. He reported that bestsellers are those products that help alleviate stress and anxiety and those that promote better sleep. Other strong areas are products for general wellness, for joint and digestive issues, multivitamins, essential oils and turmeric. He also said that his private label outsells all other products.

Tips for Finding and Partnering with a Private Labeler

Think of your private labeler as your partner—you both have the same reasons for wanting the relationship to prosper. If the private labeler delivers an inferior product that the retailer sells to the consumer, no one wins. That is why the No. 1 consideration is quality.

• GMP Certification

A good place to start is with NSF International, an independent, accredited organization based in Michigan that establishes public health and certification standards for consumable products. Partnering with a reputable labeler will save you headaches in the long run.

“Start by finding a supplier that is compliant with GMP (good manufacturing practices) regulations. Even before you begin the interview process, review the NSF International list of GMP registered facilities. This is the way to find a supplier that is committed to GMPs,” said David Trosin, director, global business development, dietary supplements at NSF International.

In the sector of dietary supplements, for example, NSF conducts hundreds of audits in manufacturing facilities each year; there are more than 585 manufacturers on the NSF GMP facility registration.

NOW’s Flight said she agrees unequivocally with the GMP certification, which is often synonymous with “quality.” “Since the products bear your name, you want to provide quality products that are safe and effective,” she pointed out. “Retailers are busy and do not need any surprises, so thoroughly check out a supplier’s track record and reputation. They should not only make the process easy for you, but have a product selection that works for your store.”

• Transparency

Be prudent in your research and cautious in your choice, but above all, make sure that the company exhibits a high level of transparency, cautioned Flight. Ask tough questions, she added, such as:

– How frequently are FDA inspections?
– Have you received warning letters?
– What kind of testing do you offer for incoming ingredients and finished products?
– How does testing factor in throughout the manufacturing process?
– Can you take a tour and learn about their quality assurance methods?

Other considerations, added Trosin, include “… establishing turnaround times, cost changes, delivery expectations, and specific conditions that would allow for ingredient changes.” Part of transparency is making sure that the manufacturer provides, and the retailer has access to and regularly reviews, certification and audit reports.

“Testing is also essential. While many contract manufacturers have sophisticated laboratories, at the end of the day, it is the retailer’s name on the product label. An independent testing protocol will offer you the greatest assurance,” said Trosin. Martens agreed, saying, “Utilize third-party testing routinely.”

If you live close by, meet in person. “In two cases, we have done multiple visits to see their facilities, to see their manufacturing, to talk to people, to challenge them on their formulas,” said Kanter, adding that in one case, he even visited a farm from which one company sourced ingredients.

• Retailers’ Perspective

From the retailer perspective, both Burman and Kanter agreed that choosing a private labeler based on both quality and reputation is essential.

Burman happened to find his at an annual trade show and has enjoyed a mutually beneficial relationship for close to two decades.

“The hugest thing is making sure they know you are behind them and they need to be behind you so that you both grow and have mutual goals in thriving as natural product companies,” he said.

Although there is no magic number, and one may certainly suffice depending on your needs, Kanter has chosen to work with three private labelers. “They have different formulas or approaches or ways they put their products together, so it was a way to give our customers choices,” he said. “With very few exceptions, we do not do the same product among the three brands.”

Another consideration is ensuring that you diversify your stock. For one thing, Kanter observed, not all products are available in private labels, so you should certainly establish relationships with other companies. “Your real goal is to sell other products. If you position them right, you can be successful with other brands and your own private label—that it is the key,” he said.

“You want to be really careful that you assure the quality of your product is equal to the other products that you are selling,” he continued. And that should be reflected in your price; if you underprice the products, customers may question the quality. We operate from the fact that we deserve to earn a profit.”

• Customer Service/Education

Customers invariably will have questions about your products, everything from “How is this product different from that product?” or “What does this ingredient on the label mean?” or “How often should I use this?” to a myriad of others.

Intertwined with customer service is a knowledgeable retail staff that thoroughly understands the products and can answer questions confidently and accurately. Kanter said that when he was choosing a private labeler, a major consideration was customer service—would they train the staff, either at the facility or at the store or via webinar, etc.

And because ideally this should be a mutually beneficial partnership, some manufacturers may lend a hand with sales. “Ask any private labelers you are considering what sort of marketing programs they have in place to help sell your products successfully,” advised Flight.

Private Label: Things to Know

Once you have selected a private labeler manufacturer, you will need to establish expectations on both sides of the fence.

Some decisions that you will have to make are, for starters, what product(s) or line of product(s) do you wish to brand as your own? What are the reordering guidelines, including how frequently and how far in advance? How should you design the label, including font and colors? A thousand and one other questions may pop into mind.

If you’ve chosen correctly, your private labeler will help guide you through the process.

• Formulas

You don’t have to be a science geek to work with a company in developing formulas for your products—they are the experts. However, be sure that the company reps do explain the ins and outs of the product(s) so you will know exactly what you are getting.

Burman said that the company should ideally offer a variety of unique formulas that are hard to find and specific to natural retailers. “Also, make sure they don’t sell the formulas to mass market companies,” he recommended.

Zehrung added that the private labeler should be able to disclose from where they are sourcing their ingredients by providing a certificate of analysis. And quality should come before expense, advised Martens. “Consider whether the quality of the cheapest product is good enough.”

• Labeling

It’s in their name—private labelers can work with you on designing your label. For example, NOW can present the retailer with label design options, either from stock or they can work together to customize something unique, as well as to make sure that the label is compliant.

Essential Source offers a graphic artist to work with, though some retailers like to provide the artwork. In fact, Kanter’s wife Elizabeth Stagl (and co-owner of his shop) has graphic design experience and has worked with the companies to design all of their labels.

• Ordering and Reordering

With a cornucopia of products out there, where to begin? “My recommendation for people starting out is try to pick 10 to 15 items at first to get started and test the waters,” said Kanter. He said that some companies help get you started. “They will work with you with the mutual hope and benefit of expanding the line,” which also works to the retailer’s benefit.

“Sometimes it is easier to build a brand with a few products or categories to focus on, like cardiovascular support, digestion, weight management, greens or sports nutrition,” added Flight.

Each private labeler has different thresholds for re-ordering products, so turnover times for orders can vary. For example, Flight said that it typically takes three business days to process an order in NOW’s private label program; minimum orders can be as low as 24.

Zehrung added that his company has recently lowered their minimum order quantities, which allows more retailers to participate. “We also contract with several labs that give us a number of delivery methods we can offer, as well as many packaging options,” he said. Orders for custom formulas, however, may take more time as they are subject to the availability of ingredients.

Once you establish a relationship with a private labeler, you may reap some additional rewards. For example, Burman has been with the same vendor for more than 18 years, and their loyalty has earned them a three piece per product minimum, as well as free shipping for orders over $300.

Advantages and Disadvantages

Exclusivity. Name recognition. Visibility. Customer loyalty. Repeat business.

“Private label provides retailers the opportunity to brand their store’s image, a proven approach to attract and retain business,” said Flight. “As customers become used to a particular store brand, it reinforces their loyalty to the store,” she continued. And, you become an exclusive supplier to your customer base, whether you sell the products in store, online or both.

Similarly, another major advantage is a steady stream of advertising without spending additional money. When a product is on a consumer’s shelf at home, the consumer is reminded of your store on a daily basis, said Kanter.

On the flip side, you’re also putting your good name and reputation on the line. If your private labeler disappoints in any way, either by producing an inferior product or by not honoring any aspects of the agreement, it is your store, rather than the “anonymous” manufacturer, that will bear the brunt.

Zehrung also cautioned that retailers should be prepared to put up some money in the beginning, particularly if their aim is to sell a high-quality product—and it is. “You have to spend it to make it, and the better your product, the more it usually costs to make. The key is finding that balance between high end/high quality, and affordable/price competitive in the category,” he said.

Martens concurred, adding, “Go for quality instead of simply considering low cost.”

Control is another benefit, Zehrung pointed out. Working with your private labeler, the retailer can have a voice when it comes to ingredients, testing, etc. “These are all things the retailer can then use to advertise to their followers to instill faith in their growing product line,” he said.

In fact, Burman said that the company with whom he has dealt with for many years has consistently improved their formulas and has “… brought key trending products to our shelves.” After 20 years of being a player in the private label market, Kanter said he does not feel that there are any real disadvantages, provided that you have confidence that what you are buying, and ultimately selling to the consumer, is of the highest quality.

As Martens said, “Success is only possible when both parties win.” VR

For More Information:
Burman’s Health Shop, (610) 874-8418
Cambridge Naturals, (617) 492-4452
Essential Source, (877) 879-9966
NOW Foods, (888) 669-3663
NSF International, (800) 769-8010, (800) NSF-MARK
NutraEx, (888) 978-8249

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