What Does Private Label Agreement Mean

Companies that buy private label products are usually not too concerned about your patent status. However, you run the risk that the company decides to manufacture the product or that a competitor will quickly introduce the same product. If you have enough money, you can apply for a patent before contacting the company. If your resources are limited and you plan to apply for a utility model, you can apply for a provisional patent that gives you a one-year margin until you need to apply for a utility model. Note, however, that you cannot patent your product if you wait more than a year to register your utility model. Manufacturers who are still seduced by private label production must first understand that managers always look at the production possibilities of private labels on the basis of the incremental marginal cost. The fixed overhead costs associated with overcapacity to produce private label products would be incurred anyway. But if private label production were valued on an entirely cost-oriented basis rather than an incremental basis, in many cases it would seem much less profitable. (See the table “The True Cost of Private Label Manufacturing.”) The more private label production increases as a percentage of total production, the more relevant a full-cost analysis becomes. You can`t afford to rest on your laurels after signing a contract. You need to write a plan for the first year in order to get your product up and running.

Your plan should include sales promotions, sales materials, customer site visits, required training, new product development, participation in trade shows, market research for new products, an ongoing customer feedback system, and quarterly sales status checks. Your goals for the first year are to ensure that sales and marketing efforts for your product are top-notch, and to connect with both company contacts and influential end users. The success and perseverance of your deal will increase as you make yourself known to the people involved in the product. Like everything else, private labeling has drawbacks. The good news is that by planning ahead, you can usually avoid the main drawbacks of private labeling. But more and more U.S. retailers like Kroger Company believe that strong private label programs can successfully differentiate their businesses and solidify buyer loyalty, strengthening their position vis-à-vis brand manufacturers and increasing profitability. In addition, cash-rich European retailers such as Ahold (a Dutch supermarket chain) and Sainsbury`s have begun acquiring US supermarket chains and may try to replicate their private label programmes in the US.

You`ll need a broader deal if you sell to another company, which then markets the product under its own name. The agreement can cover all or most of these points: brands exist because consumers still need quality assurance if they don`t have the time, opportunity or ability to consider alternatives at the point of sale. .