What is The Difference Between Private Label Manufacturing and Contract Manufacturing?
Private label and contract manufacturing differ in major ways. The end purpose of both is same that is to manufacture an appealing product that is sold to consumers. Private label manufacturing is considered, when you wish to create a personal house brand produce and add it to your existing product-line. Contract manufacturer is chosen when a recognizable food product brand desired to add another creation to their product-line but may have no space or equipment required.
Briefly speaking, in private label manufacturer is the owner of created end-product, whereas in contract manufacturing just the manufacturing process is outsourced to the other company. However, private label manufacturing needs can also be outsourced. Visit naturestouchfrozenfoods.com to learn more.
Private label manufacturing benefits
- Low marketing & selling cost – As the manufacturer owns the store and marketing channels, the overhead cost is practically NIL.
- Product control – Manufacturer can alter the formula, ingredients, and other aspects, he sees suitable.
- Quality control – Food manufacturer is liable for following mandated quality standards, which can be strictly controlled.
- Better marketing control – Manufacturer can offer input in the label design, logo’s and the tag lines.
Contract manufacturing benefits
- Low marketing risks – Production quantities are specified.
- Tap advanced skills – Working with contract manufacturer means the skillset available will be larger. For example, if you wish to expand your snack foods line then you get a chance to work with the contract manufacturer’s food scientist team and create some tasty new snack.
- Great focus – Outsourcing will help you stay focused on other crucial things like establishing relationships and marketing.
Private label manufacturing disadvantages
Private label manufacturers can experience impulsive changes in ingredient prices, ingredient quality assurance, supply sourcing, compliances, and other variables, which can impact their daily operations. Disadvantaged of private label manufacturing and contract manufacturing are same.
Contract manufacturing disadvantages
- Loss of control – Outsourcing means you give up control over the new food creation. The contract manufacturer will determine how to create your food items. The quality or taste may not be what you expect if you had it created on your own.
- Manufacturing restrains – Outsourcing manufacturer may also be working with other companies. Chances that they may prioritize requirements of customers with bulk orders over yours. Their resources will get diversified thus delaying your order or you may not get products when you require them. For example, if you experience demand around Christmas then your ability to escalate the snack manufacturing process will depend on the contract manufacturer’s shoulder.
- Trade secret loss – Outsourcing means you will need to trust the contract manufacturer with your proprietary recipes.
Find the right manufacturer if you plan to outsource your food manufacturing process either as private label or under a contract manner.