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As a businessman, we need to look for an alternative on how can we minimised our cost of production for Food & Beverage products.

Especially to launch a newly develop product, which we do not know:

1. The market acceptance
2. Can the product sustain in the market for long term.

Investing in a new product line, we need to put in money either on materials or machinery which are all investment needed to produce a new product.

To run a factory and to do a production, as a manufacturer we need to consider all these costs:

1. Raw Materials
2. Packaging
3. Labour
4. Utilities
5. Misc

What is Private Label or OEM?

OEM or Original Equipment Manufacturer has been around many years ago in the machinery , equipment industries.

Private Label products terms commonly used in the Food Industries also has been implemented in the USA and Europe during the 1980’s.

My first encounter and learned about private label during my first business trip to Carrefour Hypermarket in France 20 years ago. I saw many products from food to household were under Carrefour brand.

At first, I thought that Carrefour France has their own factory but I was told that all products made are from external factory which Carrefour has appointed these factory to do the selected products under Carrefour brand.

When I am back from France, the company which I am attached to, send me over to Dubai for me to work with a long life cake confectionery plant to do snacks cakes under our company label.

Then only I fully understood what is private label all about.  What we can benefits from getting an appointed factory to do private label for our company

I share….

Reasons of doing Private Label:

Why do we do Private Label…

1. When a company without a factory wanting to launch a new product.
2. When a company with a factory but with a tight budget and wanting to launch a new product.
3. When a company wanting to do a product trial and when there are good demand than the company will produce in their own plant.

Advantages of doing Private Label:

1. No hassle on manufacturing cost
2. No hassle on manufacturing process
3. No hassle on audit and certification of plant

Disadvantages of doing Private Label:

1. No control of formulation if using unethical plant.
2. No control of pricing.
3. Many restrictions and agreements need to be discussed for confidentiality.

How to Start a Private Label

STEP 1:

1. Identify the potential Products that has demand.
2. Identify the Product Specifications
3. Identify the Competitors
4. Identify the Market
5. Identify the proposed Pricing

STEP 2:

1. Source for Manufacturer
2. Consider the Location of the factory ,the Logistics and Seaports.

STEP 3

1. Discussion with Manufacturers:
   1. Type of Product
   2. Product Specifications : Raw Material and Packaging Materials.
   3. Packaging Design
   4. Labelling
   5. Food & Regulation Compliance depending on country
   6. Target Pricing
   7. Production Timeline
   8. Production : Minimum Order Quantity
   9. Agreements and Contracts
   10. Samples availability

STEP 4

1. Sales & Marketing Timeline
   1. Advertising and Promotion Plan
   2. Market Segmentation
   3. Exporting Country

STEP 5

1. Product Sampling
2. Feedback to manufacturer for improvisation

STEP 6

1. Product Launching

Once the product is launched, the Sales & Marketing needs to monitor the sales and feedback to the management on the selling progress of the products.

If the product is well accepted. The management need to plan for the next order to the OEM factory to avoid any vacuum and created a space for competitors take over the vacuum in the market. Immediate planning is very crucial. Also during this time, the brand owner can also discuss and negotiate with the OEM factory on pricing for the second order. Pricing should be discuss for volume orders.

Let say, if the brand owner has the manufacturing facility, may be can reconsider on manufacturing the product in the brand owner factory. This depending on the market demand.

I hope with my sharing will be able to give some ideas for those who is interested in doing private label. This is based on my personal experienced of 25 years from the Food Industry point of view. You may have to add more important descriptions if any in the steps which is relevant for your own industry.

Good Luck & Have A Lovely Foodie Day!

Photo Credit : Internet

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