Is private label manufacturing your route to the US market?
The U.S. market has seen a double digits growth in private label sales this year, which is also twice the rate of national brands!
Private label (PL) goods are becoming increasingly attractive for consumers as well as grocers in these inflationary times. Shoppers gravitate toward private labels because of the price point, and PL products can help minimize the amount of choices they need to make. Retailers, on the other hand, appreciate private-label products for their exclusivity, better margins, optimized production, and lower costs associated with distribution, launch and marketing. The US retailers are rapidly looking to add new product lines to respond to the increasing demand for PL products. The current landscape offers great potential for Finnish manufacturers to tap into.
Requirements for winning PL contracts in the US
Private label manufacturing can be a very attractive way to expand into new markets. Since manufacturers won't need to worry about packaging, branding, or marketing costs, it can be a faster and more cost-efficient route to market. The manufacturers also won't need to learn the ins and outs of the complicated US retail distribution or invest heavily into sales organization to grow. The biggest difference for entering a new market with a private-label product versus with own brand, is that private-label deals can help manufacturers secure future income through cooperation contracts.
Just like branded products, many private-label products require testing and Good Manufacturing Practices (GMP) compliance before they can enter the North American and other markets.
US Food and Drug Administration (FDA) registration is required for all food products entering the US market. The manufacturer needs to add its manufacturing address as well as all warehouse addresses for the product in question in the FDA's system. The registration itself isn't complicated or burdensome, and Business Finland can help you understand the process better. The manufacturer is required to have an FDA agent with a US address. Some manufacturers who already have an address in the states can do the FDA registration self, but there are qualified paid consulting agencies helping companies set up the FDA registration and act as an FDA agent. In addition to registration the manufacturer will need to create a HARPC safety plan. When it comes to the label requirements, the PL buyer such as the retailer is responsible for the label compliance and following FDA requirements.
Prior to shipping the products to the customer, manufacturers will need to obtain liability insurance. Depending on the deal size the manufacturer may want to consider setting up a US subsidiary which is required to get liability insurance in the US. Business Finland can help Finnish companies get connected with vetted lawyers and insurance brokers.
The certifications are important to attract PL buyers but not all need to be in place before connecting with a buyer. Kosher and halal certification process could be arranged by the buyer whereas for example gluten-free standards need to strictly follow FDA requirements. The USDA organic certification is the most common certification in the US grocery stores and requires considerable resources to obtain. Other popular US certifications are NON-GMO, gluten-free, vegan, fair trade, keto and whole30 diet which is popular in the US.
Explore Private Label opportunities with Food from Finland
In 2023 Business Finland's Food from Finland program will be focusing in building private label cooperation in the US. We are planning to arrange an info webinar during the spring for those interested in developing private label capabilities. In November 2023 there will be PLMA USA trade show in Chicago and our plan is to organize a visit to explore the opportunities at the trade fair and meet buyers. Nordic visibility at the trade fair is also under discussion.
A private label, also called a private brand or private-label brand, is a brand owned by a company, offered by that company alongside and competing with brands from other businesses. A private-label brand is almost always offered exclusively by the firm that owns it, although in rare instances the brand is licensed to another company. The brand usually consists of products, but can also encompass services. (Wikipedia)