Supplement companies and brands often need to make pivotal decisions about the manufacturing process. Two prevailing approaches for dietary supplement manufacturing are contract manufacturing and private labeling.
Each supplement manufacturing approach has its own set of pros and cons. In turn, that can impact factors such as cost, scalability, and branding.
In light of this, we’ll thoroughly probe both approaches. We’ll further shed light on the upsides and downsides of both manufacturing services.
Lastly, we’ll explain the salient distinctions between each method and address your frequently asked questions.
What is Contract Manufacturing?
Definition and process
As you see, contract manufacturing is a type of business model. In this arrangement, a company or firm outsources the fabrication of its products to a third-party manufacturer. That allows businesses to take the most advantage of the resources and facilities of a recognized manufacturer.
It further eliminates the requirement for companies to invest in their supplement manufacturing infrastructure.
Concerning contract supplement manufacturing, companies often outsource production to a CMO or a CDMO. The former stands for Contract Manufacturing Organization. Meanwhile, the latter refers to a Contract Development and Manufacturing Organization.
A supplement brand hires a CMO to handle production. That may encompass the designing, fabrication, and shipping of the products. Their goal is to manufacture products per the brand’s specifications and meet regulatory and quality standards.
Conversely, a CDMO provides both research and fabrication services for supplements. They are associated with each phase, from research and development (R&D) to fabrication and packaging.
Yet, both CMOs and CMDOs fabricate supplements according to the brand’s requirements.
Advantages of Contract Manufacturing
The following are the salient advantages of contract manufacturing concerning supplements:
1. Access to contract manufacturer’s resources and expertise
By collaborating with a CDMO especially, you gain access to their resources and expertise. They guide you through everything, from selecting ingredients to fulfilling regulatory requirements.
2. Substantial dominance over product quality and formulation
With a contract manufacturer, you have considerable dominance over product quality and formulation. You can opt for specified ingredients to include in your product, giving you more choices.
3. Scalability to adjust production
With contract manufacturing, you gain the flexibility to adjust production efficiently according to market demand. That ascertains steady transitions as your sales of supplement products increase.
4. Capability to fabricate unique products
Contract manufacturing enables you to create customized supplement products. It allows your brand to stand out and set apart from others.
Disadvantages of Contract Manufacturing
Contract manufacturing further has its share of disadvantages. The prominent of them are:
1. Time-consuming and complex
Fabricating a unique supplement product may be more complex and time-consuming. That encompasses sourcing raw materials and setting up an R&D batch.
2. Greater upfront expenses
Partnering with a contract manufacturer may outcome in greater upfront expenses. That’s because the formula being fabricated is specific to your brand. That necessitates fulfilling minimum order quantities.
3. Manufacturer dependency
Supply chain delays or disruptions can impact your business operations as a brand.
4. Risk of non-compliance
The contract manufacturer may fail to fulfill quality standards. That may result in non-compliance with industry-specific regulations.
What is Private Label Supplement Manufacturing?
Definition and process
Private labeling is unlike contract manufacturing. In this business model, a company opts for a pre-existing supplement product. That’s from the manufacturer’s catalog.
The manufacturer fabricates this product under the company’s branding.
That strategy reduces the expenses and time required for product development. As the product already exists, only brand design and brand identity are added.
The private label model’s success is mainly reliant on two primary factors. These include the selected product quality and the company’s brand strength.
Advantages of Private Label Manufacturing
The following are some notable advantages of private label manufacturing when it comes to supplements:
1. Swift and easier process
As the formulas already exist, it eliminates the necessity for developmental time. The raw materials are typically already in stock. A company opts for a formula and places an order. That’s the most of the process.
2. Lower upfront expenses
Private label manufacturing typically incurs lower upfront expenses. That’s because the MOQs (minimum order quantities) can be very low (e.g., a few hundred bottles).
That means the initial investment required to get started is significantly lower.
3. Brand control
Private label manufacturing provides greater brand control. It enables businesses to create customized branding, pricing strategies, and packaging.
Disadvantages of Private Label Manufacturing
Apart from its upsides, private label manufacturing also has some distinct downsides. These encompass:
1. No control over formulation and quality
With private label manufacturing, you have almost no control over formulations as they are pre-existing. The quality of the raw materials restricts you. You also can’t make any modifications, e.g., removal and addition of ingredients.
2. Hard to differentiate products
Many brands may offer similar private label supplement products. That brings about harder differentiation. As a result, consumers may opt for your products merely based on price.
3. Restricted product customization
With private label manufacturing, you are restricted to the manufacturer’s prevailing formulations. You also have limited access to the specified manufacturers’ resources and expertise.
4. The private label manufacturer may discontinue a product
The private label manufacturer may opt to halt a nutritional supplement product. In that instance, you can’t transfer your production to another manufacturer.
That’s because you don’t own the formulation. You may also necessitate to cease selling the supplement product.
Pivotal Differences Between Contract Manufacturing and Private Label
Both manufacturing models — contract manufacturing and private labeling— offer varied benefits. Yet there are pivotal differences between them that you must consider.
The following table elucidates such distinct differences concerning differing aspects:
| Aspecto | Fabricación por contrato | Private label manufacturing |
| Involvement in the design, packaging, and branding | Greater | Less
|
| Dominance over the formulation and product quality | Greater | Less
|
| Upfront expenses | Higher (more suitable for established brands) | Lower (more appealing to small-sized companies) |
| Accessibility to resources and expertise of a specific manufacturer | Yes | No or restricted |
| Capability to innovate, customize, and differentiate supplement products | Yes | No or restricted |
| Complexity and time consumption of the process | It is more complex and typically necessitates more time | It is less complex and typically necessitates less time |
| Flexibility to scale the fabrication process (up or down)st | Yes | No or restricted
|
| Pricing control | Less control | More control |
Handian provides comprehensive supplement manufacturing solutions
You probably know that Handian Nutrition is amongst the globe’s most esteemed nutritional supplement manufacturers. We offer comprehensive supplement manufacturing services, encompassing both contract and private label manufacturing.
Relating contract manufacturing, we fabricate supplements in differing forms that encompass:
- Gomitas
- Polvos
- Cápsulas Blandas
- Cápsulas
- Tablets and more
We further have expertise in customizable formulations and specialize in small-batch flexibility.
As a private label manufacturer, we provide over 6,000 supplementation formulas for you to choose from. You can introduce your label or count on us to design the brand.
Conclusión
The selection between contract manufacturing and private labeling relies on your business objectives and resources. The former is ideal for companies with a particular product design or formulation in mind. Moreover, they prefer to use another company’s production capabilities to bring that product to reality.
Conversely, private label manufacturing suits those companies that intend to build a brand. Yet, that’s without delving into the intricacies of product creation.
Such companies only aim to add their branding to generic products and sell them.
Preguntas frecuentes
Which option is more cost-efficient for a new supplement brand?
Private labeling is the preferred choice for a new supplement brand, as opposed to contract manufacturing. That’s because it necessitates a smaller investment to bring a product to the market. With such a model, you eliminate the product development requirement.
Thus, it’s an appealing option if you’re aiming to respond to market trends swiftly. That’s while retaining brand recognition to an extent.
Briefly, it’s an ideal choice for companies that are devoid of resources to invest in product development. That’s from the very beginning. On the other hand, contract manufacturing entails a larger upfront investment. It’s due to the related expenses associated with product design and development.
How long does it take to get a supplement product to market with each method?
For contract manufacturing, it typically takes 14-18 weeks to fabricate and launch a supplement. That’s from the date a (P.O.) purchase order is received and applies to the first order. Succeeding orders typically requires less time to complete.
Private label manufacturing typically has lesser lead times. That implies you can bring your supplement product to market quickly. On average, the fabrication time for private label products ranges from 4 to 12 weeks.
Moreover, the lead time on commencing orders can differ from one company to another.
What are the risks of choosing private label supplements?
Opting for supplement manufacturing via the private label model presents certain risks. Some noteworthy of these are:
- You have restricted customization options on supplement products.
- Your products will be identical to those of competitors who use the same manufacturers.
- You get limited dependency on the manufacturer’s expertise or quality control.
- The client company may be confined to selecting formulas from the private label manufacturer. This results in scaling difficulties and the inability to meet the elevated demand for supplements.
- The brand identity established because of private labeling can be less conspicuous. That’s especially true when compared to a wholly customized supplement product.