Reduce Your Cost of Goods by Labeling Your Own Supplements

by Christine Hronec

The dietary supplement industry offers countless opportunities for small businesses to earn a piece of the market share. Brand managers are continuously looking for approaches to stay competitive by streamlining costs. While the majority of the most popular supplement ingredients are commodities, this leaves little to no room to reduce costs by utilizing specialty raw material sources. There are alternative approaches to reducing the cost of goods; one such approach is purchasing unlabeled product from your contract manufacturer. Whether you are ordering small or large volumes of finished product, there are benefits and drawbacks involved in resourcing the labeling of your products to reduce costs.

For starters, the ultimate savings is in the reduced unit cost of the final product. Depending on order volumes, one may be able to save anywhere from $0.25 to $1.00 per unit by sourcing labels and purchasing product unlabeled. In order to capitalize on the maximum level of savings one would need to purchase label quantities on order of 1000-5000 labels per SKU to achieve the lowest unit costs. If you are private labeling a stock product, the lead times associated with label printing services of high gloss wrap-around labels tend to hold up the production and delivery time of your products where unlabeled stock products are typically in inventory and can be shipped in a shorter time frame.

In addition to sourcing the labels independently from the supplement manufacturer, the brand owner would need to manage the labor associated with either manually or automatically applying the labels. Depending on the order volumes, it may even be cost effective for small companies to purchase small scale labeling equipment or even in-house printers. For companies that purchase truckloads of finished product on a monthly basis, this may translate into cost savings therefore improving your bottom line.

A drawback to sourcing your own labels involves the need to resource a reputable graphic designer. While there is certainly no shortage of freelance graphic designers; it is beneficial to work with the experience of the design department of a private label manufacturer. Graphic design departments have access to stock photos and fonts that would otherwise increase your design costs by having to purchase the rights to use each image and graphic associated with your label. Private Label manufacturers typically charge a label design fee where freelance designers will simply design the label given the nutritional information but cannot offer a label review with respect to FTC or FDA label guidelines. Private label contractors generally offer this service inclusive of the set-up fees. However, the design process associated with your brand lays the foundation for all sales and marketing and may not be an item to seek the most cost effective solution as the final product represents the image you wish your brand to portray.

Lastly, the labor associated with managing the labeling may or may not be too much of a burden to manage. Each company must outweigh the pros and cons by considering their internal capabilities. While sourcing your own labels may reduce your cost of goods by 1 to 3%, the hassle associated with managing the label ordering, lead times, application, and labor may make it worth it to have all of your services managed through one single company. Contact your current manufacturer to learn more about these options and consider what works best for your brand.

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