White Label vs Private Label: Outsourcing strategies in the nutraceutical industry

The nutraceutical and dietary supplement market in Italy has shown steady growth in recent years, with revenues increasing more than 6 percent annually, reaching 3.5 billion euros by 2023. Entering this growing market represents a significant opportunity for startups and companies that aspire to make a difference in the health and well-being of consumers. However, developing products in this area requires not only a thorough understanding of regulations and consumer preferences, but also an adequate manufacturing infrastructure, which can be a barrier for new companies.

A viable alternative: outsourcing of production

One practical option for overcoming these obstacles is outsourcing manufacturing to a third party, a popular choice among many companies in the supplement industry. Working with an outside, specialized and already equipped manufacturer offers many advantages:

1. Minimization of initial costs: avoiding massive investment in machinery and infrastructure significantly reduces the barrier to market entry.
2. Industry experience: benefit from the experience and expertise of manufacturers who have already faced and overcome regulatory and production hurdles.
3. Focus on core business: focus on marketing and sales rather than day-to-day production management.
4. Market agility: ability to react quickly to market trends and consumer preferences without the worries associated with production capacity.

Different outsourcing models: white label and private label

In the dietary supplement industry, the “White Label” and “Private Label” business models are two popular approaches to manufacturing and selling products, but they differ in how branding and product customization are handled. The choice between these models can significantly influence aspects such as label design, production, and marketing strategies.

White label: pros and cons

The white label model is based on buying products that are already finished and tested by a manufacturer, which are then resold in the market under the retailer’s brand name. This approach allows companies to offer products without having to invest in research, development or production. In this model, the product is standard and identical to that sold by other retailers using the same supplier.

Advantages:

Reduced time and costs: the white label strategy completely eliminates the time and costs associated with new product development.

• Flexibility: offers the ability to easily test new markets or product categories without a large initial investment.

Disadvantages:

• Competition: it may be difficult to stand out in a market where the same product is sold under different brands.
• Limited control: less control over product quality and production processes.

Implications for labels:

• Standardization: self-adhesive labels must fit standard specifications, such as material or format. In some cases, these are generally standard and provided by the manufacturer, with designated spaces to insert the retailer’s logo and name.
• Ease of production: white labels are designed to be easily adaptable to various brands; therefore, they have a generic design that does not change-except for brand and retailer-specific details.
• Cost and time: white label production is less expensive and faster, since the design does not require complex customization.

Private label: pros and cons

In the Private Label business model, a company commissions a manufacturer to produce an exclusive product and sell it under its own brand. This approach requires a greater investment in research and development, but offers complete control over the product, from formula to labeling. With the Private Label model, it is possible to launch a unique product on the market that reflects one’s brand values and identity.

Advantages:

• Exclusivity: unique products not found elsewhere in the market.
• Complete control: total control over quality, formulation and branding.
• Customer loyalty: the ability to create specific products increases customer loyalty and brand value.

Disadvantages:

• Higher costs and risks: higher initial costs and risks associated with new product development.
• Supply chain management: requires more careful management of the supply chain and production.

Implications for labels:

• Customization: supplement roll labels can be customized to reflect the retailer’s brand identity and values. This includes choices on specific fonts, colors, materials and layouts.
• Production complexity: The production of these labels is more complex and can take longer, especially if proofing and approvals are required to ensure that the finished label accurately reflects the brand.
• Cost: Generally, Private Labels are more expensive to produce, compared to White Labels, due to the customization and lower production volumes typical of these arrangements.

Which strategy to choose?

Choosing a strategy between White Label and Private Label depends on various factors, including business objectives, available resources, and target market. While White Label offers a faster and cheaper route to market entry, Private Label allows for greater differentiation and complete control over one’s offering. It is critical to carefully assess your capabilities and long-term goals before making a decision.

Both strategies offer unique opportunities for brands in the dietary supplement industry. The key to success lies in the ability to leverage the potential of both approaches, tailoring them to your business strategy and consumer needs. With the right combination of product quality and marketing strategies, it is possible to create a distinctive and successful presence in the dietary supplement market.