Lesson I - Introduction
Q: What is a “Private Label”?
A: A Private Label is the name typically given to a brand that is not owned by the company that manufactures it. There are many examples of Private Labels in everyday life, from clothing companies that outsource the production of their apparel, to cosmetics that are decorated with different brand names but that are all coming from the same production plant.
In the world of distilled alcoholic beverages specifically, Private Labels have been around for a very long time. In some cases these are brands from countries without distilleries, in other cases they are brands owned by businesses not interested in producing, only in serving their own products, which generate them a higher prof it margin than serving brands owned by other companies (hospitality industry).
Q: So how many different types of Private Labels are there in the rum world?
A: Based on our experience and observations, we tend to classify the Private Label world into the following categories:
1. Rums bottled by the brand owner, at the brand owner ’s facility.
Some wineries or breweries, for example, may purchase rum in bulk and then use their existing bottling equipment to bottle it, under their own company name and with one of their existing brands on the label.
2. Rums bottled for the brand owner, at an independent bottling facility.
This is the world of “Co-Packing”. A Co-Packer is a company that specializes in producing Private Labels for third parties. Sometimes they have access to their own bulk rum supplies, other times they receive the bulk rum from their clients. Co-Packers typically do not have their own brands, their business models revolve exclusively around bottling for others. Some Co-Packers offer formulation services, others simply ask for ingredients and instructions to be provided prior to each production.
3. Rums bottled for the brand owner by a rum distillery.
This category is not as common as the previous two, because rum distilleries have their own brand(s) that they need to protect and promote. For this reason, the distilleries rarely want to sell “good” inventory to third parties (bottled or in bulk), because they fear that doing so could put in risk their own brands, either through direct competition or by cannibalizing inventories they may need later on. Never the less, from time to time, distilleries agree to create Private Labels for third parties, either because of potential synergies, because they don’t fear competition or because they need an injection of cash.
Q: What are some of the advantages and disadvantages of each category?
A: I will answer this question below, using the same category numbers as in the previous answer:
1. The biggest advantage is flexibility. The client can purchase one or more rums from different suppliers, blending or combining them using a recipe that never has to leave the company, which can be of importance to some brand owners. The biggest disadvantage is the lack of consistent supply of rum (if suppliers run out of a particular type of rum or if the price goes up too much) and the fact that the client assumes all the responsibility for quality control (alcohol proofing, filtering, etc.).
2. The biggest advantage is expertise, as the Co-Packer should be familiar with a wide-range of product types and presentations. Another advantage is that Co-Packers are also well-versed in the subject of compliance, and can advise their clients if the products don’t meet some government requirements.
The biggest disadvantage is minimum order quantities, which tend to be very large. 3. The biggest advantage is that the brand owner may be able to infer some degree of “pedigree” simply by mentioning on the label where the rum was bottled. The disadvantages here are multiple and have been listed already, but this doesn’t mean it is impossible to find win-win scenarios. Distilleries that have, for example, a successful business exporting aged rum under their own labels can, if they want to, produce inexpensive white rum brands for their domestic on premise market.
Q: Where should someone start, once that person has arrived at the decision of wanting to develop a Private Label?
A: There are many factors to consider, such as availability of glass bottles, distribution centers, frequency of shipping vessels, etc. Perhaps the best advise is to stay tuned and read all the future installments of this Label Primer series, each one to be published in a subsequent issue of “Got Rum?.
Until next time!