The appeal of private label products continues to grow, and manufacturers are innovating hard to meet retailer and consumer demands.

Regardless of the end of the “Great Recession,” marketing reports show consumers are continuing to purchase private label products at an increasing rate.

According to the Private Label Manufacturers Association (PLMA), in a 2010 GfK Custom Research North America study, half the respondents said they had recently switched to a store’s brand in categories where they had previously only bought a national brand. Nearly all who switched were pleased with their decisions—nine in 10 compared store brands “favorably” to their previous national brand choice.

Further, The Hartman Group (Bellevue, WA) said it is no surprise store brands give national brands a run for their money. “In many instances, shoppers can no longer distinguish between national and private label brands. What’s most interesting is not so much the fact that it’s happening, but that people don’t really care that they’re unaware of the difference. The importance of branding and the badge value of brands in the past are giving way to a greater emphasis on the product and the overall experience, which is controlled by the retailer.”

Consumer Reports also gave a ringing endorsement to store brands’ quality and value. A study, “It Pays to Buy Store Brands,” said if concern about taste has kept consumers from trying store brand foods, they should hesitate no more. In blind tests, professional tasters compared a leading national brand with a store brand in 29 categories; the store brand tasted “equally good or better” than the national brand in 23 categories.

The market for private labeling has grown exponentially over the last several years and will continue on that same growth pattern, added Bob Dunn, director of sales at Nuvite, a private label manufacturer in Chandler, AZ. “Retailers are finding out that they don’t have to be a Big Box national retailer to have a private label line. The smaller local retailers can create their own lines with the same quality product and not break the bank.”

Dunn said the economy has actually had a positive effect on the private label portion of the dietary supplement and natural products industry over the last year. “People are looking for cheaper alternatives that offer the same quality and benefits as brands that they may have paid much more for prior to the economic downturn. Many private label brands offer superior products and lower costs to retailers than the national brands.”

Customers

More private label brands are appearing on the shelves of stores throughout the country, and manufacturers of these products are seeing sales from a variety of customers.

Mike Uckele, CN, CEO of Uckele Health & Nutrition (Blissfield, MI), said his company has experienced steady growth in private label and feels that sales will continue to grow in a positive direction because the slowed economy has triggered health-conscious consumers to educate themselves. “People are taking their health into their own hands and are looking for less-expensive alternatives to costly doctor visits and prescription medicines. They are trading down from the big brands to private labels that promise upscale products, quality ingredients and product innovation because they perceive more value for their dollar with private label.”

Exactly how much do consumers save? As a whole, American shoppers who reached for the store-brand version of their favorite grocery products rather than the national brand enjoyed an estimated $32 billion in annual savings. On an individual basis, research by PLMA reveals that shoppers consistently save about 35 percent off their grocery bill by choosing store brands over national brands.

The target consumers are those who are creative and who want a product that is unique, said Anna Singh, sales and marketing director for Dreamous Corp. (Torrance, CA), a developer of health and beauty products. “They look for a product that has been researched and has been successful in the market. This also gives [manufacturers] the freedom to customize it—where they can add or subtract ingredients to enhance any formula. The private labeler generally wants a low-price product or wants to have some say in its cost. This helps with the overall gross profit margins that the [retailer] is looking for to advertise and distribute their products in a highly competitive market.”

Any retailer who wants the opportunity to have their brand in front of customers on a regular basis [should be interested] in private label products, said Dunn, who added that Nuvite partners with retailers both large and small to help them create a quality, lasting Brand. However, there truly is no “target” customer for Nuvite. “We work with [everyone], from online retailers to retailers who have a single store to national retailers who have hundreds of stores,” said Dunn. “Private labeling gives retailers the opportunity to create another profit center for their store(s). Private labeling one’s own brand offers more control and higher profits than the national brands can offer.”

Uckele noted that his company’s customer demographic is growing across broad age groups and financial segments because optimal health, energy and prevention are at a premium value. “These are the customers who are asking the question, ‘What is the cost of getting sick?’ They are taking a proactive approach with prevention,” he said. “Private label customers value quality, yet are looking for economy. This is where a private label company’s track Record is extremely important. Customers are going to purchase from a company or business they trust, so they’re trusting the private labelers that have a proven history of quality products and a strong reputation of success.”

In addition, private label customers do their homework and know their facts, added Uckele’s Kevin Isley, vice president of sales. “As the science of nutrition evolves and beneficial compounds are discovered, they want the high-quality, cutting-edge formulas that deliver the right combination of ingredients in a reasonable dose through a manageable delivery system. And it has to be affordable.”

Challenges

Competing with national branded products might just be the toughest challenge for private label manufacturers. With one hurdle beaten—many consumers now believing that store brands are as good as or better than national brands—the next step is to be more innovative.

“Getting the consumer to really buy into the fact that the product can be of the same quality with a different name is certainly a challenge in itself,” said Demetrius Bledsoe, director of sales and marketing for National Enzyme Co.

(NEC, Forsyth, MO). “The company that is trying to develop the private label Needs to be able to make the investment of meeting the contract manufacturer’s product minimums to introduce their product. They also must be confident that their private labeled product will sell.”

Additionally, with a need for manufacturers to differentiate themselves from others offering similar services, the manufacturing process is paramount in the formulation of private label products.

Uckele’s Isley strongly advocates a manufacturing process that produces a good quality supplement at a fair price that will be effectively broken down, absorbed and utilized by the body. “A supplement is only as good as they quality of the ingredients it contains and how it’s processed. Consistency, quality and processing are paramount. An inferior grade of raw material may be less expensive, as well as the methods of processing it, but it will be rendered vastly less effective if it’s processed with high heat or pressure, with excipient, binders, fillers or coloring agents. And some tablets are compressed so tightly they are impossible for the body to break it down,” Isley explained. 

Another challenge can be meeting the minimum order requirements defined by the manufacturer, Isley said. It’s especially helpful for smaller, startup companies with cash-flow considerations when private label manufacturers work cooperatively with them on smaller minimum order requirements. It can be a challenge when a company requests a custom formula they want to be developed from scratch, in that it takes more time and cost to develop, test and finalize those products from start to finish. When asking for a new formula, it’s important for companies to allow for realistic turnaround times so their expectations can be met, Isely noted.

Packaging

Developing good packaging has always been a key element in making store brands more attractive and, hence, more successful. One of the primary reasons store brands have grown is the recognition of the importance of functional and attractive packaging. This means not only design, but also how the package opens, closes and sits on the store shelf, in the pantry or refrigerator.

While variety is key, since retailers have created a single look that is similar in many items throughout the store, there is a special challenge in creating something unique. “Packaging is part of the store brand strategy and the strategy cannot be well executed without well designed packaging,” said Candis Scott, CEO of Highland Laboratories (Mt. Angel, OR), a private label and contract manufacturer of nutritional supplements. “In many cases, the consumer’s choice will be based on product packaging. 

Retailers want a variety of packaging options so they can differentiate their store brand from others.”

NEC’s Bledsoe agreed that packaging plays an important role in private labels. “Retailers and consumers want flexibility. Convenience packaging allows different capsules and/or tablets to be put Into the same package for a one-time use. This package can be taken with you and used during the day or night without the hassle of carrying various boxes or bottles.”

Quality, sturdy packaging is important to survive shipping, and should have good consumer appeal and offer ease of product use, noted Isley, adding that some of the graphic trends are StickPack packaging, individualized custom packaging and slip-on shrink labels. “Whereas in the past, the private label had more of a generic look, graphic design is now incorporating more color to grab attention for more shelf appeal,” he said. “We think a good brand message delivers a clean, bright, fresh look with bold color choices that have an edge, but with a simple, classic feel.”

At Nuvite, Dunn said the company uses the Digital HP 4500 Indigo press, making the quality of its labeling and packaging one of the best in the industry. “We offer over 175 standard, highquality, pressure-sensitive label designs to our customers,” said Dunn. “These labels offer our customers the ability to quickly pick a label design without having to spend too much time and money designing a custom label.”

Quality Control

For manufacturers, safety and quality assurance standards are huge issues when formulating private label products. GMPs are regulatory requirements that provide guidelines for necessary processes, procedures and documentation to assure the product has the identity, strength, composition, quality and Purity it is represented to possess. This certification program requires regular on-site inspections of the manufacturing facilities.

“The products we formulate and manufacture use GMPs and FDA compliant practices,” said Uckele. “We check every raw material for identity and safety. We are committed to quality, and can guarantee that we manufacture only the highest-quality, affordable supplements using the purest ingredients with full-fact labels, a complete analysis, ingredient list, a lot number and Best if Used By date.”

Jack Grogan, CN, CSO for Uckele, added that the company has a quality control (QC) laboratory in house, which saves in time and cost on in-process and finished product testing. “We can perform food safety tests for E. coli, salmonella, Staphylococcus, yeast and mold. By controlling our own analysis, we have cut down on time and expense, and improved the safety of our products.”

Safe and effective products require testing to assure ingredients are truly the product listed on the label and are free from contaminants, noted Highland’s Scott. “[We] utilize HPLC (high performance liquid chromatography) and/or FTIR (infrared spectroscopy) to test all raw materials upon receipt making sure that they meet our specifications,” Scott said. “All raw materials are quarantined until accepted or rejected by the QC department.”

Highland is dedicated to providing materials that are free from contaminants such as pathogenic bacteria or heavy metals, continued Scott. ISO-Grid System testing provides a methodology for determining an individual sample’s total bacterial count. “If raw material microbial counts are higher than allowable levels, the lot is rejected and returned to the vendor,” she explained. “Heavy metal contamination is another concern based on the frequency of herbs being imported from outside the United States. Highland also uses ICPMS to assay for heavy metals.”

Better inspection of all ingredients used as well as obtaining certifications and purchasing raw materials within the United States is vital, agreed Dreamous’s Singh. “Following all GMP, FTC and FDA guidelines and informing the public that you are conforming to rules that even exceed government guidelines is essential.” NIE