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Making it Work:
Private Label

By Aisha Kabani

You have a successful business and a great customer base and you know it is your passion that brings your customers back to you day after day. But ask yourself the question - how much of your product offerings are major national brands?

Entrepreneurs, just like you, continuously seek to develop more solid relationships by demonstrating that major national brands are not the reason for customer loyalty; rather, it is your expertise and skills at creating the perfect beverage, your ability to offer outstanding customer service and of course, the mix of products you sell. This is what keeps your customers excited and your business fresh and innovative.

The very thought of Private Label can cause insecurity, confusion and challenges. In the process of developing a private label program, there are hundreds of questions to ask, such as how does it work, what are the costs involved, what is the best marketing strategy, how long does it take, what should it taste like, how does it perform with your other private labeled products and so on and so forth.

It is necessary to plan a journey to a destination that builds on your drive to differentiate yourself in the market by developing a superior product, reducing costs and improving margins, and most importantly, building a stronger customer loyalty program.

Creating a private label brand which shows off your passion and excites your customers because they believe your product is more unique, more tasteful than other “me too” products is daunting. This article demonstrates how two entrepreneurs developed their private label program in the food and beverage industry and offers some tips of how to begin and how to select suppliers along the way to help you on your journey of creating your dynamic private label program.

About the Entrepreneurs

  • Case Study 1: Coffee Stand Owner - Karissa Bresheare, Gourmet Latte
  • Case Study 2: Restaurant Owner - Joan Channon, Bamboo Restaurant
Gourmet Latte started 14 years ago and today has 10 coffee stand locations in the Northwest. Owners Karissa and Russ Breshere manage all stores and the day to day operations of the stands, including purchasing, delivering supplies and managing cash flow.

Brooke and Joan are a mother and step-daughter team who have launched into the world of private labeling with a product born of “Bamboo,” their family restaurant in Hawaii. After nearly two decades and millions of Lilikoi Margaritas, they decided their Lilikoi (Hawaiian for Passion Fruit) mix was just too good to keep to themselves.

Please describe how you began building your brand?

Karissa Bresheare: To build our brand, we had our logo on cups, mugs, loyalty cards and shirts. Next, we private labeled our signature chocolate covered espresso beans, which we served with each drink atop of our lids. Private labeling these espresso beans was a natural next step toward solidifying our brand, especially since it was an item already approved by our customers.

Joan Channon: Brooke came into my life as a bubbly 12-year old. Looking for a “project,” I bought a 100 year-old building and converted it into Bamboo Restaurant and Gallery. Before even opening the restaurant, I gathered my friends at the bar and set out to create a Lilikoi Margarita. This tart, tangy and yet sweet fruit was abundant in Hawaii, and it’s golden color was a delight. Working behind the bar, we tasted and tested, made and re-made every possible combination of lilikoi, lime and tequila.

What was the impetus for venturing into private label?

KB: My second venture into private label came out of necessity. The manufacturer of our beloved syrup brand that we had served our customers for more than eight years was being discontinued. I was panicked. However, what I thought was a scary and worrisome situation, turned out to be a wonderful opportunity to not only continue on with our branding, but to actually have control with a product so essential to our business. By private labeling direct with a local manufacturer, I was able to not only stabilize my costs, but to be directly involved with creating our own unique flavor profiles. I involved quite a few of my employees in the process, even bringing them to the manufacturing plant, so that the whole company was on board with our new private label syrup line.

JC: The Lilikoi Margarita has been the signature drink at Bamboo for seventeen years. Our love of lilikoi has also led us to create numerous other drinks including the Lilitini, a Hula Girl, the “Bamboozer” Long Island style cocktail and non-alcoholic Lilikoi Iced Tea. Because Lilikoi is also used in the salad dressings, barbecue sauce and cheese cake, Bamboo Restaurnat is the largest consumer of Lilikoi in the state of Hawaii (which probably means the country!).

Customers have clamored for our lilikoi mix, margaritas, salad dressings and sauces. In a classic “one day” moment, Brooke said, “Hey Mom, let’s just make the lilikoi margarita mix. This is too good to keep to ourselves. It would be fun!” We had no clue as to how to do that. We had never heard of the concept of “private label,” and a bit of research told us that there were no bottling facilities in the state of Hawaii. A bit more research online revealed that there were companies who did private label brands, but that most of them had their own recipes, and they put your label on their product. That was not the plan.

Describe the process of approving your products for private label

KB: The formulation and approval process of our syrup line was absolutely a lot of work, but the end results were overwhelmingly well worth every effort made. I was extremely hands on and particular about our flavor profiles. This was yet another reason why I chose the manufacturer - they were willing to create an all new custom flavor line for our exclusive use. Few manufacturers are willing to create all new profiles specifically for you. Most will not, but will allow you to put your own label/brand on their existing formulas. Exclusivity and uniqueness was a huge deal for me.

With having the opportunity to create a custom product direct from the manufacturer, it was easy for me to have a sky high “wish list” of what I wanted to incorporate into a new product. After all, it would carry my brand and logo on it and I really wanted that wow factor from the Customers. I had to make decisions to keep costs reasonable, but did not compromise on the flavors or ingredients themselves. Instead, I opted to make simpler labels since I wasn’t re-selling the syrups.

JC: The development process had its fits and starts…with everyone’s schedules the ball was handed back and forth, sometimes with a long hiatus in between. The first sample seemed to have a “chemical” taste we didn’t like, but the color and viscosity was perfect. More pure lilikoi and the Bamboo mix was again sent to compare. The second sample we received was quite good. At the restaurant, we tested it on customers - the lab sample side by side with the fresh version. There was still a difference, but fans of the lilikoi margarita said they would buy the mix. Another question was pulp or no pulp? The fresh version has lime pulp, but that added an extra level of expense. In the end, the second version without pulp was accepted. Several weeks later, we decided to make another change to the product, based on feedback from customers and potential buyers. The lab was willing to once again review the product and make the necessary changes to the product. We are finally settled on the formula and are prepared for a launch.

How will you be marketing the product?

KB: Our products are sold within our stands and currently we do not sell our syrups or chocolate beans. Maybe hopefully in the future we will consider it.

JC: We are planning the marketing campaign, and again, family and friends will be helpful with their advice and connections. Obviously, our restaurant will be a key market for the Lilikoi mix - directly to customers. At the restaurant, we have made contact with a nation-wide grocery manager who is willing to kick-off the product in his store. Through Brooke’s contacts in the food and beverage industry, a nationwide liquor distributor is “waiting” for the Lilikoi Mix in order to create a drink for a new vodka line - the “Lilitini.” Also waiting for the finished product are the beverage manager of a worldwide restaurant chain and the manager of a nationwide hotel chain. We are also developing a web site for internet sales, and will be attending hospitality and grocery trade shows

What was (on average), the initial start-up cost for private label?

KB: There were definitely some start-up expenses involved for both our private labeled items, inlcuding hiring graphic artists, having the actual labels printed and the associated plate charges and minimum quantities that most printers have. We spent well over $6,000 for graphics and start up labels alone but that figure could be higher/lower for someone else depending on several factors. For the products themselves, there are also much larger minimum quantities (usually pallets) we must now purchase in order to buy direct. Those interested in private labeling also need to remember that they will need storage space and an inventory management system.

JC: At this point, the budget for the initial set up and run of the Lilikoi Cocktail mix will be approximately $10,000. This estimate includes label design and printing, bottling, web site design and implementation and legal fees. At least we are hoping it’s not more than that.

How did you select your partners - designers, printers, manufacturers?

KB: For one of our privately labeled items, I simply went straight to the distributor and negotiated volumes and pricing for our own private label. Fairly easy, as we were already satisfied with their product enough to make it our own. It was then a matter of packaging design and expense.

For our syrups, I selected a local manufacturer with an excellent reputation and one that we could simply pick up our orders from rather than having to go with the expensive shipping route. The manufacturer I decided upon not only could easily provide the syrups I was needing right now, but could also provide other additional items I may one day want to venture into in the future too. I loved the prospect of more private label opportunities!

JC: As the development process has moved along, many new people and partners have been involved in the process. Brooke’s husband is a top marketing guru who strongly advised that the authenticity of the lilikoi mix was a key selling point - it’s a real drink that comes from a real place in Hawaii. Hence the label featuring a funky watercolor of the one hundred year old building that houses Bamboo. In another stroke of fortune, my stepson has his own successful advertising firm in San Francisco and he created and designed the label.

Looking online, we found a company that advertised private label beverage mixes - exactly what we were looking for. Within weeks, pure Hawaiian lilikoi and the Bamboo Restaurant Lilikoi mix was sent to them to try to duplicate at their laboratory and the rest was history.

As you can see from the two entrepreneurs, each one faced similar situations and similar concerns regarding their product. There are five main questions to ask when beginning to develop a private label program.

First, what is the product? Is your product innovative (like the Lilikoi) or are you replicating a market leader? If you are trying to replicate a market leader, you must consider flavor profiles, consistency and ingredient characteristics. If you are differentiating yourself from the market leader, what about your product will make it better than what is currently in the market? Select a supplier that specializes in the product you want to private label and meets your quality and taste profiles.

Second, how do you select your partners and suppliers? This is a critical step in the success of your program. From the conversations, you can see both entrepreneurs had very clear needs of what they were looking for: company reputation, response time, flexibility, proximity and expertise in the category. Select a manufacturer that shares your values and your goals because they will share your drive to succeed.

Third, how do you navigate the R&D process? This is tricky. Both entrepreneurs knew what they wanted and were tasting ‘their’ product against another, whether it was another brand or a freshly made drink. On the R&D side, there is always a balance to keep ingredient costs low and value perception high. Select a company that manufactures similar products because they will be able to offer you the experience and product knowledge and better price points on high use or high priced items like sugar, cocoa and flavors.

Fourth, how do you package and label a product that makes customers want your product? Just because you put your name on it does not mean customers are going to love it. Tim Duncan, from Richmark Label in Seattle has this advise: “an effective packaged label has to grab the customer’s attention with design and imagery that fire emotional triggers.” Select packaging and design labels that speaks about your passion and stands out among distribution and selling channels.

And finally, how do you take the product to market? This can either be one of the easiest areas or one of the most challenging. With Gourmet Latte, they already had a captive audience, their customers. They developed a product that appealed to their customers and then served it to them. Many of you will be able to do this. Your customers are already using a similar product that you may want to private label. With Bamboo Restaurant, they have to work harder to develop the marketing channels and clearly, it helps if you know people who know people! Select a partner that understand your marketing plan and can help steer you towards your goal of selling your products and drinks around the world. It’s time for your own private label.

Tea & Coffee - April, 2010

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