It’s an open secret in the cannabis industry that many brands don’t manufacture their own products. Rather, CEOs often make the practical decision to outsource this process to a white label manufacturing partner, also known as private labeling, which has the facilities and capabilities to fulfill large-scale production needs. This helps to ensure that the brand’s products make it onto shelves in a timely and cost-effective manner.
There’s no shame in the white label game, as it can be a mutually beneficial relationship between brands and manufacturers. However, not all white label partnerships are created equal. It’s important for brands to select their partners wisely and make their respective decisions by considering factors beyond performance track record.
Below are three factors to consider when selecting a white label partner:
Certain companies have the capital, time and experience to implement a vertically integrated business model. But for most cannabis start-ups, it’s simply not a feasible option to manufacture their own products. The challenge of securing and setting up a licensed facility, followed by hiring enough qualified manufacturers to design proof of concept and then create your product, can take years and cost hundreds of thousands of dollars, if not more.
White label partners can seamlessly use their facility’s equipment and operations to execute a brand’s vision. However, it’s important for brands seeking to collaborate with a white label manufacturer to do their homework. Make sure that the white label manufacturer will diligently manage quality control and compliance, two typical hurdles faced in the process of bringing products to market. Also, brands should select a white label partner with a variety of experts and resources at their disposal across the supply chain. This could include scientists, researchers, chefs, terpene manufacturers, and more.
Trusting a white label partner to produce the products one’s team has conceptualized frees up brand leaders to focus on their other strengths that translate into success, including marketing, building relationships with retailers, and establishing a core customer base. Some white label partners can even make themselves more valuable to brands by directly extending their licenses. When this occurs, brands don’t have to deal with the lengthy and bureaucratic process of applying for their own licenses. Instead, they can start having their products manufactured straight away.
Return on Investment
As previously mentioned, launching a product with a white label partner has a much lower price point than manufacturing that product in house. When turning to a white label manufacturer, brands don’t have to worry about otherwise common production costs like equipment, rent or mortgage payments on a facility, additional production staff, among other costs incurred. In terms of numbers, a product launch utilizing a white label manufacturer will likely cost $10,000-$25,000, while setting up a vertically integrated model can run into the millions of dollars.
Allowing brands to stay lean and improve their chances of turning a profit is a baseline benefit of a white label partnership, but when navigating the process of choosing a partner, it’s important to ensure that one’s chosen manufacturer can accommodate plans to scale and can fill new orders on schedule. To determine this, and if a white label manufacturer is worth their asking price, here are several key questions to ask:
- Have they worked with your type of product before?
- Do they bill hourly, or by project?
- How many other brands do they work with and how do they prioritize client projects?
- What is their typical production timeline?
- What is their minimum order quantity?
- What are their specific production scaling capabilities?
- Do they offer other services and partnerships?
- What licenses and certificates do they offer?
- How do they set themselves apart from competitors?
Open communication, transparency and honest reporting by a chosen white label partner are all crucial factors. Before signing on the dotted line, determine a schedule for touching base on how the manufacturing process is coming along. In addition, make sure that the white label manufacturer confirms a well-established reputation for security and confidentiality. The more questions asked and the more answers received in advance, the better.
Ultimately a successful white label partnership is beneficial to both parties, as well to the cannabis industry as a whole and to consumers. It spurs product innovation, as well as allows forward-thinking brands to make strides in other areas, such as design and marketing. Though for best results, it’s important for brands to be meticulous and research the partner that best fits their current production needs and future goals.
This article was republished from Cannabis Business Executive. Read their article here.
Arshad "Adam" Lasi
Arshad “Adam” Lasi is CEO of Nirvana Group, a vertically integrated family-owned cannabis company in Oklahoma. Their operations include a cultivation and extraction facility, a processing facility, house brands and the only cannabis cash & carry concept in Oklahoma. Nirvana Group also owns an expanding list of medical dispensaries throughout the state.