With the shifting landscape of the global economy and the boom of information and technology, there’s lots of space for new brands to enter the market. The two most common ways for new players to establish themselves in a competitive space are to either opt for private labeling or generic (white labeling).
Though both terms are mistakenly used instead of each other, they are actually quite different. In this article, we will try to differentiate both and help you figure out which one’s best for your business needs.
So whether you are a new brand planning to enter the gummy manufacturing space or an established one looking to expand, this article will answer all your queries.
What is Private Labeling?
Private labeling is when a brand gets its product manufactured by a third-party contract manufacturer but sells it under its branding and taglines. Here, the brands have the freedom to define various aspects of products, including size, taste, forms, visuals, branding, and more. The contract manufacturer exclusively makes the products for the given brand.
Even though the products are made by a third-party manufacturer, the brand has full control over the pricing and margins. This allows them to tailor private-label goods to meet the unique preferences and demand patterns of their target customer base. Hence, they can position themselves as a reliable and cost-effective alternative to other brands.
In recent years, it has become one of the most sought-after ways for new brands to enter the market in the U.S.A. As per a Statista report, private labels have a 17.7% share of the retail market and stand at a valuation of a whopping $200 billion.
For example, TrustWorks is a leading contract manufacturer that deals in the health and wellness supplement manufacturing space. They have a huge catalog of private-label goods, including sleep gummies, immune support gummies, biotin gummies, organic softgels, and more. They are now a top private label supplement manufacturer choice for reputable brands like Walgreens, Rite Aid, GNC, and Kroger.
What is Generic or White Labeling?
Generic or white-label goods are those that are made by a contract manufacturer for multiple brands or retailers. Here, the brand or retailer doesn’t have control over the type, size, weight, or color of the products.
These white-label goods are sold by multiple brands under their packaging and branding or with just a generic label. From a consumer perspective, generic products are the most affordable ones available on the market.
However, the quality may vary because of changes in the original manufacturers. For new brands, generic or white-label goods allow them to sell without having to spend much on branding and manufacturing.
Plus, they don’t even have to spend money on research and development costs, as that is already done by the contract manufacturer. Generic goods are mainly made to target the consumer group that has limited spending power.
Once again, we can understand this with the example of TrustWorks. Being a third-party manufacturer, they offer a great package of white-label services. Their self-developed formulation, no limit on minimum order size, and end-to-end full manufacturing support are boons for various new brands entering the generic supplement space.
They offer a 3-week turnaround time( quickest in the industry), 10 million+ capsule production per month, bottling labeling and packaging services, and even custom gummy manufacturing.
Private Label Vs Generic: Which One To Consider?
Generic or white-label products are generally cheaper for consumers since manufacturers can mass-produce generic products more cost-effectively than customized private-label goods. White labeling also allows faster penetration in the market, which makes it perfect for trendy product niches.
On the other hand, private labeling has an upper hand when it comes to marketing, advertising, and product differentiation. Private-label products are exclusive to each retailer, which allows for unique branding and customized features tailored to the target market. This makes private-label items easier to market with a different identity.
Private labeling is widely used for products that need significant visual identity and differentiation, like health supplements. Generic or white labeling works best for commodities where features matter less, like airpods, generic gummies, capsules, etc.
Initial investment requirements are usually lower for generic white-label goods, but marketing spend might be higher due to a lack of differentiation. Private labels require more initial input costs to customize the products but can be sold at higher prices for unique offerings.
Legal and licensing requirements are simple for brands selling white-label products versus the potential complexities of proprietary private-label items. In short, both models have pros and cons that a brand or retailer must evaluate based on their product category, target market, margins, differentiation needs, and market penetration requirements.
Conclusion
To sum it up, both private labeling and generic or white labeling have their unique pros and cons. If you are in a product space that is already pretty crowded and saturated in terms of innovation, then generic or white labeling is perfect for you.
It’ll allow faster market penetration and more quick customer onboarding due to lower costs. Private labeling is perfect for brands that want to create a unique identity for their products in the market but don’t have the capabilities to manufacture the product themselves.
In both cases, you’ll need a reliable contract manufacturer like TrustWorks, which boasts the fastest turnaround time and end-to-end manufacturing solutions at cost-effective pricing.