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Private Label Success

In a surprising report for the Wall Street Journal, Credit Suisse Analyst Robert Moskow noted that after a surge of growth during the down economy, the latest news is that private label product sales are slowing. But for the natural products arena, private label manufacturers say that hasn’t been the case.

“SPINS data shows that sales of private labels within the natural products industry are increasing,” said Peter Sokoloski, private label manager with NOW Foods (Bloomingdale, IL). “We’ve seen tremendous growth in this area over the prior decade, and this continues to be the case today. There are most likely other private label sectors that are seeing a hit, but not our industry.”

In fact, the recessionary economy is driving the growth of private label as consumers trade down from major brands, but also private label is offering upscale products that promise quality ingredients, said Dr. Mohammad Khalid, president with the Irvine, CA-based Pro- Nutraceuticals. “Private label is a growth category in the natural products arena and it is not only driven by valueseeking customers, but also by product innovation,” he added.

“In a retail store, a private label will typically be placed next to a brand name label,” noted Mike Uckele, CN, president and CEO of Uckele Health & Nutrition (Blissfield, MO). “These two products could be manufactured by the same company, even be the same product; however, the private label can bring Higher profits for a retailer because it typically provides a higher margin than a brand name. And the benefit is often passed on to the consumer with a more affordable product available.”

That also sets the store apart, explained Kevin Isley, the company’s vice president of sales. “In addition, a private label manufacturer’s product becomes the client’s product, not just a product. The private label client’s customer can only get it from their outlet, and if it is a firm they know and trust, they will gladly purchase their brand over a big name retail brand.”

Sunil Kohli, COO of Health Plus, Inc. (Chino, CA), agreed. “We continue to encourage retailers to take part in having their own branded products, to bolster the store’s identity in the community and to further distinguish their specialty retail establishment from mainstream stores.”

But despite the successes for natural product private labels, Kohli stated that brand marketers and retailers alike who use private label are being more cautious.

“They know that to remain competitive, they must work with those private labelers that have proven, quality products, and a strong track record of success advising the best supplements that suit their branding and marketing needs, as well as which ones best suit their particular consumer profiles.

“It serves to remind that in a tight economy, people still buy,” Kohli added. “But they tend to buy less expensive options: your own vanity line is less expensive as many costs are cut out—the cost of national marketing, for example.” 

The Customer

The scope of those offering private label lines has expanded: brick-andmortar stores, chains, supermarkets, gyms, home-based startups, health practitioners, etc. However, the single most noticeable area of growth is with e-tailers, noted manufacturers.

As for the consumers, they are now better-educated and more nutrient savvy, according to Jack Grogan, CN, CSO with Uckele. “They want highquality, cutting-edge formulas that will deliver the benefits they desire. Since there are a multitude of nutrients and food supplements available, choosing the right combination and getting a reasonable dose for benefit in a manageable serving size and delivery system is both a challenge and an advancement, especially as nutrition and science evolves and new beneficial compounds are discovered.”

“In our experience,” added Uckele, “the end user of private label products is the customer looking for quality and value. They’re going to purchase from a company or business they trust, so they’re trusting that private label name and reputation.” In addition, consumer segments are growing across a very broad age and financial demographics, because optimal health, energy and prevention are at premium value.


Stand-out Packaging

Gone are the once generic labels and packages used for yesterday’s plain Jane private label products. In fact, according to market researcher Mintel, private label products are starting to look a lot more like brands. Many shoppers now equate private labels with national brands and value them as such.

“As someone who recalls the bad old days of ‘generics’ and ‘plain wrap’ products, we as an industry need to do everything we can to support the growth of private brand products by ensuring they are of the highest quality, And offer value that is far greater than a lower price,” said Jeff Weidauer, vice president of marketing with the Little Rock, AR-based Vestcom.

“Too many retailers continue to see private brands as cheap, and until we truly embrace the complete value equation of store brands, including loyalty, brand equity and trust, we are missing an opportunity.”

Some new packaging trends for private label are incorporating convenience packaging such as StickPack packaging, individualized custom packaging, slip-on shrink sleeve labels, more graphic color and wow-factors designed to grab more attention and shelf appeal, whereas in the past the private label had more of a generic look and feel, said Uckele.

As for private label probiotic products, packaging that helps preserve the bacteria is important, including blister and stick packaging, noted Michael Shahani, director of operations with Nebraska Cultures, Inc. (Walnut Creek, CA).

“We’re definitely incorporating more convenience, color and design to grab more attention for shelf appeal,”

Uckele’s Isley added. “For example, we have recently launched an ancillary line that will be distributed to some of the bigger box chain stores, and developed a different Uckele label look that we think brands us very well and invites the consumer to the shelf. The look is clean, bright and fresh with bold color choices; they have an edge, but with a simple, classic feel. We think they really deliver a good brand message on the shelf.”

Especially for natural products, the consumer definitely wants greener packaging, so manufacturers are answering by combining recyclable packaging with convenience, as well as increasing shelf appeal through color and graphic design.

Reducing unnecessary packaging, and reducing contaminants such as bisphenol A are features retailers are also aware of, Sokolowski added.

“NOW Private Label will work with its customers to meet their ‘green’ packaging needs. For example, we can provide labels printed on recycled paper using soy based inks, plus NOW Private Label utilizes bottles that are recyclable.”

Top Products

The most popular private label SKUs mirror those of national brands: probiotics, detox, nutritional oils and antioxidants.

There are a small number of supplements that are difficult to match in private label, but for the most part nothing is off limits unless patent law protects it, Sokoloski said.

Khalid added that bone and joint health products, such as calcium, magnesium, vitamins D and K, are very popular, and CoQ10 and probiotics have been growing. The challenge, he said, is that innovation has become a huge driver. “New ingredients that feature enhanced delivery systems along with innovative packaging will drive the growth of the sector.”

Some manufacturers stand out by offering their own specialized products, such as probiotic blends by Nebraska Cultures and Health Plus’ cleanse products.

“We receive a steady velocity of orders for our psyllium-based Colon Cleanse lines,” said Kohli. “We do have the consistent, top-selling, psylliumbased Brand of colon cleanse products and customers know that they will receive the same quality manufacturing.” But quality, price and a personal touch are top requirements for retailers looking to add private label to their store’s inventory.

At the Vitamin Center, a retail store in Capitola, CA, where private label products have been offered for 30 years, Owner Jack Macdonald said he has a list of attributes he looks for in a manufacturer: quality control, raw material Sourcing, product availability, in-house labeling, quality packaging, versatility and cost. He also puts a manufacturer’s ability to offer service as a top priority.

“The [manufacturer’s] chemist talks to me and works with me and offers a lot of feedback. There’s a lot of communication,” said Macdonald. “We’re able to converse and we meet every six months or so to discuss how to make changes and improvements.”

Manufacturers offer similar advice, and emphasize the importance of cur- Rent good manufacturing practices (GMP) now required. “Look at how long a manufacturer has been in business and how long their key staff has been in the industry. Ensure they are GMP certified and have had no quality problems,” Kohli said. “Also ask, what do you do best? Who are your ingredient suppliers? And ask for references from satisfied customers. You may want to inquire as to any assistance with marketing and promotional ideas.”

Health Plus recently placed an emphasis on cutting-edge quality. Kohli pointed out that the company just opened a new on-site, fullcapacity QA/QC laboratory, which makes the company a vertical operation from seed to shipment. “Controlling our own analysis cuts down on Both time and expense,” he explained.

“We recently purchased and implemented leading edge near infrared reflectance equipment that allows us to conduct raw materials identity testing on all new and incoming ingredients.

Along with other physical tests, we now have the ability to perform both quantitative and qualitative analyses in house on ‘inprocess’ and finished product testing. In our new microbiological laboratory, we are able to conduct a full series of food safety tests, (including total plate counts, coliforms, E-coli, salmonella, staphylococcus aereus, yeast and mold counts). The R&D lab allows us to formulate and conduct pilot scale testing of new products and sensory evaluations.”

For Nebraska Cultures, GMP compliance and the ability to properly store and process probiotics are most important, Shahani said, since probiotics require special handling and storage conditions such as keeping them cool and dry.

Along with the retailer finding a private labeler that is compliant with federal GMP regulations, they need to feel secure that both the finished product and nutritional text (on the labels) are compliant with the law; once those are in place, it’s much easier to bring a product line to market, said Sokoloski. “Hand in hand with this, the retailer needs to find a manufacturer with excellent customer service, one that can help them grow their business as needed.”

Being a good partner with the client is a “very high priority,” agreed Uckele. Also, he added, “We believe in working with startups on very small runs, and we run quite large orders with wellestablished companies. It’s important to us to offer unique, quality formulations and many varieties of packaging and products that cross a wide spectrum of basic and condition-specific nutritional needs.”

“We believe in partnership with the client through the whole step-by-step process,” Isley said. “We provide product development, formulation, education and understanding of the product and how it works, knowledge of regulatory demands and restrictions, the capability to supply packaging, assist with label design, and can assist with branding and marketing, education materials and marketing materials.”
And for Uckele, there’s been no slowing in private label sales. “In fact, we continue to see significant growth,” Isley added. “At the end of the day, the consumer is looking for names and suppliers they trust.

Whether it’s a retail store, an internet site or a healthcare provider of any sort, if the consumer has a positive experience, the price is fair and they trust the product, it’s a good fit.”

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