Should I opt for a Brand Agency or should I use a Contract Manufacturer ?
There is a world of difference between these 2 concepts and these differences can have a dramatic effect on what is being offered and how they should be approached. Both have merit, but which one is the best for you requires a lot of thought on what you are trying to achieve and in many cases, whose brand you are building.
Brand Agency
This is where a Brand Owner appoints an agent for their Brand in a specific market or region. This can be a good way for the Brand Owner to gain entry into a new market. Depending on the terms of the Agreement, this can benefit both Brand Owner and Agent. It can also seriously disadvantage the Agent as time goes by. It is not uncommon for a Brand Marketer to offer an Agency for their brand and, once the Brand has been built up usually with your marketing funds and activities, the Brand Owner can then rescind the Agency and either take over distributing the brand themselves or appoint another Agent. In either case, you have invested in the Brand only to lose both the Brand and your investment. While this may seem like a “worst case scenario”, it happens perhaps more than many people may think.
You are also limited to the product range, and often product packing, that the Brand Owner carries. “Localising” the product can often be accomplished by over-stickering to meet local requirements.
If there are ingredients that are not permitted, or ingredient potencies that are not allowed, then that product cannot be marketed, no matter how good the rest of the product is.
One up-side of taking someone else’s Branded product means that you can take smaller quantities of a product and when you order a quantity, you can get exactly what you order. The Agency may be linked to volume which can again disadvantage you should the product not sell as well as expected. Failure to meet these minimums can mean the loss of the agency.
You are also paying an additional layer of margin to the Brand owner.
Contract Manufacture
Working with a Contract Manufacturer provides a much greater level of security and flexibility and can also offer a unique brand if required.
Security means that the product is under your brand and any investment in marketing and promotion is investing in your brand and not someone else’s who can take it away at their discretion. You own the brand, the investment is in your future. Most importantly, no-one can take the Brand off you after you have invested to build it.
It is natural to expect that a Brand Owner is going to try and expand his market using on-line selling and usually at prices that you can never hope to meet. By using a Contract Manufacturer to develop your own brand, your customer is not going to see the product on the internet at a lower price. The world of on-line shopping can really impact on you and the Agency product that you may be carrying.
Flexibility means that you can tailor the formulation to exactly what you want, not what the Brand owner says you can have. Labelling, packaging and claims can be tailored to your requirements.
In most cases, you are also paying the same price as the Brand owner would be paying for the product, thereby increasing your margin.
Brand Agency
Pro’s:
- Flexibility in Batch Size
- Potentially established brand
Con’s:
- Lost investment should Agency be taken away
- Potential loss of business to on-line sales going to Brand Owner
- Limited to existing formulations
- Ability of Brand Owner to supply appropriate regulatory support
- Potentially short shelf life
- Potential added layer of margin to Brand Owner if they are not a manufacturer
Contract Manufacture
Pro’s:
- You own the Brand
- Product made to your order- maximum shelf life
- Secure marketing investment
- Formulation can be tailored to meet your needs
- Packaging to your needs
- Available on-line if you want it on-line
Con’s:
- Potentially larger batch sizes
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