Looking Beyond Distribution by Setting Up Your Own Private Label Brand

by Timothy R. September 11, 2014

Looking Beyond Distribution by Setting Up Your Own Private Label BrandWith the rise of private label branding comes the opportunity for many different types of businesses in the nutritional supplement industry to open new revenue streams, increase their brand recognition, and grow their business beyond their original core model. Whether you start out as a manufacturer, retailer, or distributor the advantages of private labeling can expand your business into new areas and offer high-value products with your brand name on it that can compete against some of the leading national brands. According to a 2008 report by the global business advisory firm, AlixPartners, from 1997 to 2005 the sales of private label brands grew at double the rate of national brands.

Distributor's Benefits of Private Expansion

While many distributors in the nutritional supplement industry can enjoy success from distributing popular, big-name brands, their potential profit margins are still stymied by the exclusivity of their roles. Being the middle man in a business model does mean you will always be in need, but it may also mean little growth over time and limit what your company can potentially offer. Purchasing from a manufacturer is a constant ebb and flow for a distributor when it comes to profit margins. Many factors—depending on each individual company—can come into play, including acquisition prices, shipping, possibly delivery costs, and other various overhead costs. As a distributor, you then have to balance the gross profit margins of these operational costs against the total sales you will receive.

Profit GrowthBeing able to offer your own private label brand products can help your company to be more marketable, becoming a viable option for retailers you already have business relationships with as a distributor. This allows you to generate an even greater profit margin because you will be purchasing your own private label brand at a lower negotiated price. For example, if you are, on average, generating a 20% profit margin when purchasing products from a manufacturer after accounting for all the operational overhead, having your own private label brand could potentially increase your profit margin an additional 15%–20%.

As a distributor, if you had the opportunity, why wouldn't you want to increase your profit margins and market products with your own brand name on them? A distribution company, regardless of its size, can significantly increase its own revenue stream and marketability by creating a line of branded products instead of being pigeonholed as a purchasing middle man while promoting and selling someone else's brand-name products. Developing your own private label brand can offer your company true competitive market staying power and open up various channels that your company wouldn't be privy to otherwise.

Decisions When It Comes to Private Label Nutritional Supplements

SoftgelsMarketing your private label brand will bring about different business decisions from distribution. Growing a brand with the right label design and pricing is one thing. However, understanding where your opportunities are to successfully market and choosing what types of products you wish to market will give you the best chance to promote your private label brand and increase profit margins. Showing the value of your brand in a side-by-side comparison to a national brand, for example, can help your client realize the potential cost-saving benefits of choosing your private label products. These important decisions will ultimately help your business become more dynamic in an ever-changing market environment and open up stable, new revenue channels for the future.

The Responsibility of Integrity for Brand Establishment

For distributors, establishing a private label line of products is a sensible and efficient way to develop new opportunities for growth. However, with this venture comes some vital decisions to be made. Because it's expensive to become an all-encompassing company that manufactures, distributes, and retails, you will most likely need to outsource the manufacturing to another company. Since your brand name will still be on the finished products, choosing the right contract manufacturer that adheres to good manufacturing practices (GMPs) is vital to not only your private label brand's integrity, but also your company's value as a whole.

A Well-Rounded Business Is a Successful Business

Amid the constant growing global demand for nutritional supplements, private labeling allows brands—no matter the size of the parent company—to grab a share of the market. In other industries, national and global brands that have been established for decades can dominate the market. However, the nutritional supplement industry is fractured on many levels, allowing many different companies to grab a slice of the market share. By catering to different demographic needs; geographical needs; demand for premium formulas or bulk generic products; and cultural trends, distributors can take advantage of numerous highly lucrative opportunities within the industry. With the right resources, knowledge, and plan to develop their own brand of products, the question of finding new revenue streams can be made into reality for nutritional supplement distributors. The answer lies in private label brand products.

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