Whether you believe it or not, in this competitive world of product development and retail, how you bring your product to market is the key factor that determines your brand’s success.
Although you can produce your products in-house, it could be expensive and time-consuming. That’s why many businesses use private labelling and contract manufacturing to launch and expand their product lines.
While both models involve third-party manufacturers, they are poles apart in terms of control, customisation, investment, and long-term brand strategy. So, how do you decide which to choose?
To help you make an informed decision, here we’ve compiled the guide for private label vs contract manufacturing. So, make sure to take a look!
What is Private Label Manufacturing?
Private label manufacturing is when a manufacturer produces goods that are sold under another company’s brand name, rather than its own. So, basically, in this private label skincare arrangement:
- The manufacturer handles the production and sometimes packaging and shipping.
- The retailer or brand owner controls the branding, marketing, and sales of the product.
For example, a supermarket might sell peanut butter under its store brand, though the peanut butter is manufactured by a third-party company.
As a brand, you’ll be able to save on production infrastructure. On top of that, you can even request specific formulas, designs, or packaging and enjoy various benefits of private label manufacturing.
What is Contract Manufacturing?
Contract manufacturing is when you hire a third-party manufacturer to produce products on your behalf, often using the hiring company’s own designs, formulas, or specifications.
When you hire a company, they usually provide the product design, recipe, or technical details. The manufacturer will handle production and sometimes packaging and logistics. This way you can scale up or down production without owning factories.
Pros and Cons of Private Label Manufacturing
Here we’ve jotted down the pros and cons that come with using private label manufacturing!
| Pros | Cons |
| It has lower startup costs since there is no need to invest in R&D, manufacturing equipment, or hiring technical staff. | You get limited customisation opportunities on products. |
| Faster time to market because of pre-developed products. | Since you don’t own the formula, the labels and sell the identical formula to others. |
| You can claim the brand ownership. | Brand depends on manufacturer. |
| Reduced risk of quality and compliance issues. | Your products will be similar to competitors using the same manufacturers. |
| Easy to scale and expand. | Less control over production standards |
| Allows the businesses to focus on marketing and sales. |
Pros and Cons of Contract Manufacturing
Let’s take a look at the pros and cons of contract manufacturing!
| Pros | Cons |
| Full control over product design, ingredients, materials, and functionality | Longer development time and higher setup costs |
| You own the formula/design, which is unique to your brand | More responsibility for R&D, testing, and regulatory compliance |
| It offers you highly differentiated products that stand out in the market. | Requires close oversight and quality assurance |
| More control over materials and production standards | Risk of IP leakage without strong legal protection |
| Freedom to innovate and adapt products quickly | Complex production process can slow time to market |
| Protects your innovation and formulas |
Key Differences Between Private Label Manufacturing and Contract Manufacturing
Here is a list of the key difference between private label and contract manufacturing, so make sure to go through them.
| Feature | Private Label Manufacturing | Contract Manufacturing |
| Product Design & Formula | Created and owned by the manufacturer | Created and owned by the hiring company |
| Branding | Products are sold under the buyer’s brand, but with limited changes | Fully customized to match the buyer’s brand and specs |
| Customisation | Limited (standard formulations and designs) | High (everything from formula to packaging can be customized) |
| Development Time | Faster (pre-developed products) | Longer (custom development required) |
| Minimum Order Quantities | Often lower | Often higher |
| Control Over Products | Less control | Full control |
| Examples | Store-brand foods, white-label supplements | Custom-designed electronics, personal care products, tech devices |
| Cost | Generally lower startup costs | Potentially higher due to custom development |
So, basically, when you choose a private label, you’re buying a ready-made product and putting your brand’s name on it. While if you go for a skincare contract manufacturer, you’re designing the product and hiring someone else to make it.
Private Label vs. Contract Manufacturing: Which is Right for You?
There is no one-size-fits-all answer to this question! The best choice apparently depends on your budget, brand goals, timeline, and risk tolerance. Below we’ve jotted down some parameters to help you decide what to choose!
| Factor | Private Label | Contract Manufacturing |
| Investment | Low | High |
| Time to Market | Fast | Slower |
| Customisation | Minimal | Extensive |
| Brand Differentiation | Low | High |
| Control | Limited | Full |
| Risk | Lower | Higher |
Naturo & Orgo: The Ultimate Solution!
Nevertheless, if you’re looking for a mix of private label and contract manufacturing, we recommend checking out Naturo and Orgo, which is one of the top body care manufacturers in India. It can offer you several compelling advantages for businesses in the personal care and wellness sectors.
1. Comprehensive End-to-End Services: Naturo and Orgo provide a full spectrum of services, including custom formulation development, packaging design, manufacturing, etc.
2. Customisation and Flexibility: We offer tailored solutions to meet the unique needs of each brand, allowing for custom packaging and brand-specific product designs.
3. State-of-the-Art Facilities: Our manufacturing facilities are equipped with the latest technology that ensures high-quality production standards and compliance with industry regulations.
4. Expertise in Natural and Organic Products: We specialise in natural and organic ingredients and cater to the growing demand for eco-friendly and health-conscious products, like hair care, skincare, and body care products.
5. Regulatory Compliance and Certifications: Naturo and Orgo adhere to quality control measures and hold certifications such as Good Manufacturing Practices (GMP), Halal, and Ayush.
Conclusion
Ultimately, if your goal is to quickly enter a market with minimal risk, private labelling is a smart move. On the other side, if you’re looking to build a unique, high-value brand with standout products, an organic skin care contract manufacturer will be perfect, though it will be expensive.
However, if you want to outsource manufacturing to launch your skincare brand in 2025, you can check out Naturo & Orgo and contact us to get samples of our products to fuel your decision-making process.
FAQs
Q. What’s the main difference between private label and contract manufacturing?
Ans. Private label uses pre-made products with your branding, while contract manufacturing involves developing a custom product based on your specifications.
Q. Can I switch from private label to contract manufacturing later?
Ans. Yes, many brands start with private labels and later transition to contract manufacturing as they grow and need product differentiation.
Q. Do I own the formula with private label manufacturing?
Ans. No, the manufacturer owns the formula; you’re licensing it for use under your brand.