White labeling beer, wine or other spirits has been around for a long time. There are tremendous opportunities available in the modern global marketplace that is propelled by more demand for brand development through premium beer offerings like craft brews from independent brewers. Even so, there are major issues and themes faced by any company or brand that wants to get into the bulk, white label beer or private label beer markets.
Getting involved in bulk beer market (white label)
In terms of getting involved in the bulk beer market, there are challenges and opportunities in the marketplace, both domestically and internationally. There is significant demand for bulk beer, you just have to be able to make the case to the potential customer as to why they should select you as a bulk supplier.
Focus on 5 key customer benefits
1. Short production time
2. Scalability of operation
3. Client can control end product to matches other offerings
4. Growth opportunities
5. Choose short-term or long-term contract
A major consideration here is the emphasis on potential growth. By getting into bulk beer production (a.k.a. contract brewing), customers have a way to scale into new product categories without sacrificing quality. Since they have the option to choose between delivery of base or premium beer, they have the ability to control the final product presentation.
Getting involved in private label beer production
Beyond bulk beer, another valuable opportunity is in the private label beer market. These are beers produced, canned and labeled for exclusive use by the customer, usually an off-premises retailer. These retailers can run the gamut, from grocery stores to liquor chains and mass merchandisers like Costco. The key is to have one single distributor for all of these potential retailers. That will reduce the complexity of any logistics and open the way for you to optimize your revenue by selling private label beer. It’s best to focus on large retail chains that will make distribution life easier. For example, it’s better to focus on a liquor chain with 100 different locations within a specific state rather than 100 smaller liquor stores with just 1–2 locations in each state.
Why source private label beer?
Benefit #1: More Margin with private label beer
By far the biggest benefit is the ability to control margins. It’s the “margin difference” between what retailers can make with a national brand and what they can make with a private label brand that is so attractive. Through private label brands, retail stores can control of how much they are willing to pay, and the margins they can generate. With national brands, retailers deal with one large distributor and there is a very little room to negotiate. As a result, margins can rise from 4% or 5% all the way to 20% by embracing private label brands.
Benefit #2: Lower Marketing Costs & Lower Price
National beer brands have to price in marketing dollars spent. In many cases, national brands will spend anywhere from 20–25% on marketing, which raises the price of those beers to the final retailer and then the end consumer. For private label beer brands, the marketing is handled internally by the retailer, and there are economies of scale when the retailer spreads marketing costs over a portfolio of products.
There are 4 more good reasons to consider a private label beer strategy:
1. Easy to create brand to compete with a category leader
2. Use brand equity to create a product that is perceived as unique
3. Generate addition traffic to store or website
4. Piggy back on a product with an established brand story
Whether it’s a product of economic affluence or taste beer drinkers have cultivated over the last 20 years, consumers want premium products.
There are 7 important steps to launch a private label beer:
1. Understand the client’s strategy and motivation
2. Agree on the flavor profile
3. Trademark the name
4. Come up with the right can and/or package design
5. Confirm pricing with client
6. Get regulatory approvals as needed
7. Confirm distribution arrangements
Close the white label or private label deal
Focus on the opportunity for higher margins, as well as the ability to offer an exclusive product that nobody else can offer. You can also focus on the flexibility that such an arrangement offers a retailer or on-premise establishment.
Creating a final go to market strategy
Manage expectations from the outset. It’s important to understand all the factors and challenges available. Also, be sure to focus on logistical efficiency to make the strategy viable.
There are opportunities in the bulk and private label market, both domestically and internationally, that pop up every day. Demand is growing for both bulk beer and private label beer.