A Retailer Wants You to Make Its Store Brand: 6 Rules Before You Say Yes to Private Label

The call usually comes from a category buyer, and it usually sounds like good news. A national retailer likes your product, has watched it sell, and wants you to make something very similar for its own label. The volume is larger than any order you have ever received. The buyer needs an answer by Friday.

That call is getting more common. According to the Private Label Manufacturers Association (PLMA), US store brand sales reached a record $282.8 billion in 2025, up about $9 billion in a single year, and their dollar share of retail rose from 19.1% in 2021 to 21.3% in 2025. Costco's Kirkland Signature alone generated about $90 billion in fiscal 2025, roughly a third of the company's $269.9 billion in net sales, as reported by The Motley Fool from Costco's annual figures. In Spain, market research compiled by IntoTheMinds puts the private label share of grocery value at 47.3% in 2025, among the highest in Europe.

A private label contract can fill a plant and fund a brand, or it can quietly turn a brand owner into a contract manufacturer with one customer. The difference is almost never the price on the first order. It is the structure you agree to before the first pallet ships.

After more than a century in wine, and decades selling into retail chains across Europe and the United States, my group has learned to treat these requests as strategic decisions, not sales wins. Here are the six rules I would apply before saying yes.

What a private label deal actually is

In a private label arrangement, you manufacture a product and the retailer sells it under its own name. The retailer owns the brand, the shelf, the price and the customer relationship. You own the cost structure and the operational risk.

That is not a criticism. It is a description. Retailers launch store brands because they earn better margins on them and because a strong store brand gives them leverage over branded suppliers. You are being invited to supply the retailer's leverage, so price the invitation accordingly.

Rule 1: Know exactly what the plant is for

The most common reason to accept private label is idle capacity. A bottling line running at 60% has fixed costs that do not shrink when it stops, so any order that covers its variable costs and contributes something to overhead looks attractive.

That logic holds only while the capacity is genuinely spare. The danger is that a marginal-cost price becomes the permanent price, and two years later the private label volume is the base load of the plant while your own brand fights for line time.

Before quoting, answer three questions:

• What is the fully loaded cost of this product, including changeovers, extra quality control, dedicated packaging stock and working capital?
• What happens to our own brand's production plan at peak season if this contract runs at full volume?
• Would we still sign at this price if the line were full? If the answer is no, the deal only works as a temporary filler, and the contract should say so.

Rule 2: Cap the share of volume one label can take

No single private label account should be large enough to decide whether your company survives. Retailers retender store brand contracts regularly, and a supplier that loses a contract that represents 40% of volume does not have a bad year. It has a restructuring.

My rule of thumb is to keep any one private label customer well below a quarter of total volume, and to plan capacity as if the contract could end at the next tender. We wrote about the general risk in our piece on customer concentration risk, and private label is the most acute version of it, because the retailer can replace you without its shoppers ever noticing.

Rule 3: Make a different product, not a cheaper copy of yours

The retailer will often ask for "the same product, under our label, for less." Agreeing to that is how a supplier competes against itself on the same shelf.

Protect your branded product with real differences:

• A different specification: a different blend, vintage policy, recipe, grade or pack size, documented in writing.
• Different packaging that does not echo your branded design, so shoppers cannot read the store brand as your product in disguise.
• A defined price gap you can live with, so the store brand serves a different shopper rather than trading down your loyal one.

Then run a cannibalization test. If a meaningful share of the private label volume would simply come out of your branded sales in that retailer, the incremental profit is far smaller than the order suggests.

Rule 4: Write the contract for a bad year, not a good one

Private label pricing is usually fixed for a period, while your costs are not. Glass, energy, packaging and freight can move sharply within a single contract year, and a margin that looked thin at signing can turn negative.

The terms that matter most:

• Cost pass-through clauses tied to named indices for your main inputs, with a review date.
• Volume commitments and forecasts with real consequences, so you are not left with dedicated labels and packaging when the retailer cuts its order.
• Ownership of the specification: if you developed the formula or blend, the contract should say whether the retailer can hand it to a competitor at the next tender.
• Notice periods and run-off terms long enough to redeploy capacity.
• Recall, labeling and compliance liability, clearly split, because the name on the bottle is not yours but the factory is.
• Payment terms you can finance. Large volume at long terms is a working capital commitment, not just revenue.

Rule 5: Protect your branded shelf in the same negotiation

The same retailer that wants your store brand also lists, or could list, your branded products. Those are not separate conversations, even if the buyer treats them separately.

Use the private label negotiation to secure the branded relationship, never to replace it. Ask for commitments on your branded listings, shelf position and promotional support alongside the store brand contract. If the retailer's real plan is to delist your brand and keep your product under its own name, you want to know that now. Our article on pricing power explains why the brand, not the factory, is what lets a business raise prices over time.

Rule 6: Plan the exit on the day you sign

Every private label contract ends. Retailers retender, merge, change buyers or bring production in-house. The suppliers who do well in private label are the ones who never confused a contract with a customer.

Plan for that day from the start:

• Treat private label profit as cash to reinvest in your own brands, not as the base of your fixed cost structure.
• Avoid capital investments that only this contract can pay back, unless the contract term covers the payback.
• Keep a short list of what you would do with the capacity if the contract ended next quarter.

If you decide private label is a deliberate business line, run it as one: separate pricing, separate reporting and a clear ceiling. If you are unsure, start with a limited pilot before a full launch.

Key Takeaways

• Store brands are growing fast: $282.8 billion in US sales in 2025 and a 21.3% dollar share, according to PLMA, so the request will come.
• Price private label on fully loaded cost, and only use marginal-cost pricing for capacity that is genuinely spare.
• Keep any single private label customer well below a quarter of your volume.
• Make a genuinely different product so the store brand does not cannibalize your own brand on the same shelf.
• Write cost pass-through, volume, specification ownership and exit terms into the contract before the first order.
• Negotiate your branded listings in the same conversation as the store brand.
• Treat private label profit as fuel for your own brands, and plan the exit the day you sign.

Frequently Asked Questions

What are the advantages and disadvantages of private label for a manufacturer?

The advantages are volume, better use of fixed capacity, and lower selling and marketing costs, since the retailer handles the brand. The disadvantages are thin margins, weak negotiating leverage, the risk of losing the contract at the next tender, and possible cannibalization of your own branded products.

What is the difference between a manufacturer brand and a private label brand?

A manufacturer brand is owned by the company that makes the product, which controls its positioning and builds equity in its name. A private label brand is owned by the retailer, which controls the price and the shelf, while the manufacturer supplies the product without public recognition.

What is the difference between private label and white label?

Private label products are usually made to a specification agreed with one retailer and sold exclusively under its brand. White label products are generic products made once and sold to many resellers, who each put their own name on the same item.

Should a manufacturer make private label products for retailers?

It can, if the contract uses spare capacity at a price that covers full cost, the product is clearly differentiated from the manufacturer's own brand, and no single account becomes large enough to threaten the business. Without those three conditions, it usually trades long-term brand value for short-term volume.

The Bottom Line

A private label request is a compliment and a test. The compliment is that a major retailer trusts your quality. The test is whether you can accept the volume without handing over the things that make your company valuable: your brand, your pricing power and your independence.

If you want to see how a family group founded in 1890 thinks about brands, growth and the long term across wine, real estate and hospitality, learn more about Manzanos Enterprises.