Question:
When launching a new concept, how important is it (Or is it important?) to private label everything you sell in the store? It is costly and volumes have to be large, so is it essential to building the brick-and-mortar brand?
– Diane Walden, California Tea & Coffee Brewery, Temecula, Calif.
Answer:
One of the key considerations with private-label products is whether an established brand will be more preferable to consumers than your own brand. If, for example, you were operating an independent c-store and gas station, having a “we proudly serve” coffee program with a great brand would reassure guests that you are committed to a quality product. As a coffee specialty shop, however, the same brand could connote that you are taking a cheap and easy road rather than designing something to optimize the guest experience.
Generally speaking, there are two ways to go with private-label products, and the first option may help with your cost and minimum order size concerns:
- Private label on an existing product. Many manufacturers offer a range of products for you to put your label on. These are off-the-shelf formulations that are tested and ready to go. Typically the same product will be sold under multiple labels, and since it is just a matter of changing the label, there is usually a more accessible minimum order size and price.
- Custom private label. In this instance, you go to a manufacturer with your formula or ask the manufacturer to develop a product specifically for you. It can be yours exclusively, but this requires manufacturing a dedicated batch and needs to account for the research and development costs, whether starting from scratch or working to scale up, source for and test your formula. This second option, as you note, typically requires larger minimums and costs more.
My advice to do this most effectively is to use a mix of trusted brands and private label—initially with the first option mentioned above—wherever you are proud to put your name on quality products. Once you have cash flow from your concept launch, think about developing some private-label products of your own. More on private label here.