Contract Manufacturing vs Private Label

Looking to build and sell a cosmetic product? But can’t figure out how to do it because you’re confused about the difference between Private Labelling and Contract Manufacturing? Don’t worry you’re not alone, it’s a common question. So, let’s dive into the difference and hopefully it’ll help you determine the best approach for your business.

The outcome of these services is the same; a product you can sell. The difference is in the process. Private Labelling is the plug and play option, where you choose an already existing product from a manufacturer and put your company name on it. Contract manufacturing is the DIY option, where you figure out each component of the product, from formulation to packaging, with help from a company or companies.

There are pros and cons to both options, let’s explore them.

Private Labelling – The Plug and Play

This option is typically better suited for smaller companies who don’t have the resources and TIME to spend on figuring out the components of building a cosmetic product from scratch: the formulation, the packaging, and the label. This option is also good for a larger company who is more focused on other aspects of a business.

In this option all you need to do is find a private labeling company that offers a product that your potential customers will like and ask them to reproduce it for you. As this is an off-the-shelf approach, your control over the creation of your product is greatly diminished. You don’t get to control what goes in the product, what the product goes into, what goes on it, and you don’t own the formulation; the manufacturer can choose to tweak the product when they see fit.

The advantages of this option; that it’s turnkey, you can defer the expertise required for manufacturing and packaging to a reputable and competent company. The order minimums tend to be smaller because they’re making these items for you, and somebody else too. The shipping times are much quicker because these companies are stocking these items rather than making them to order. To reiterate look at this bullet form list of advantages:

  • Speed – time to market is greatly reduced
  • Focus – unless you have some domain expertise prevalent to the product creation process, you can leave this to the experts and spend more time on other facets of your business.
  • Smaller upfront investment – typically PL companies have much smaller Minimum Order Quantities (MoQ’s)

Contract Manufacturing

This option is essentially the opposite of Private Labelling. With contract manufacturing you need to figure out the formula, packaging, and label type with your vendors. Which means you must source up to three different vendors, although some companies (one vendor) provide all three functions. First the Formula: so, if you have a unique idea and want to craft a formula that can help position your product differently from other brands, then this option may be good for you. You don’t need to be a chemist to contribute to this process, but you should have a more detailed idea of the formula you want to make. Something more specific than “I want to make a body wash,” like “I want to put CBD in it.”

Most manufacturers have larger minimums than Private Labelling companies, and this can be a barrier to entry for smaller incumbents. However, there are companies like Petra Hygienic Systems  that only has an MOQ of 100 bottles. Yes, that wasn’t a typo, one hundred!

Packaging: is a bit more nuanced. There are tons of packaging companies out there, and you can get lost in the sea of options, and sameness. More popular options are standard bottles like the Boston Round, or Oval. If you’re trying to differentiate your packaging and you want a custom bottle, be prepared because this will require a custom mould which can be quite expensive (tens of thousands). For smaller companies, we recommend going with a stock bottle and lid, get some traction and then look at custom packaging. For an easy to use packaging company we suggest www.sksbottle.com.

Labelling: isn’t too difficult to figure out. Unless you don’t have an existing brand (which is a topic of a much different but equally important conversation) or any artwork. If that’s the case, you can hire a graphics designer using online resources like Fiverr. Otherwise, finding a labeller is straight forward. Just make sure you’re getting a label that works for your clients end use case. If it’s something that is going to be in their showers all the time, then you want to make sure the adhesion used is appropriate.

In most cases the contract manufacturer will, by default, own the formulation and/or product. But with contract manufacturers you have much more room for negotiation and have the potential to own the product you’re creating.

Again to reiterate, the pro’s list:

  • Control – you get much more control over the product, as you will have almost full autonomy (anything that’s in the realm of possibility) over your final product.
  • Differentiation – you’ll be able to standout from everyone else
  • Ownership potential

To summarize, I hope I detailed the difference clear enough for you to be better informed in your decision-making process. The decision really comes down to your businesses unique criteria, and market opportunity. If you’re building a hero product or a brand based on your product, we’d recommend you use a contract manufacturing solution and differentiate yourself. If the goal is to test the waters, or an axillary product to your existing business, or you have market knowledge that you’re confident in, then private-labelling can be a great solution as well. Either way, for cosmetic products, look no further than www.petrasoap.com.

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