Private label. It looks like a big order, and it shifts much more than the price.
The request almost always arrives like this: significant volumes, a single format, and a question that sounds technical. «Can you produce under our brand?»
With the name on the label, a formal responsibility shifts too. Article 8 of Regulation (EU) No 1169/2011 names as responsible for food information «the operator under whose name or business name the food is marketed». The producer, however, doesn't leave the stage, and the same article says why.
Margin is lost in four places, and only one is the price. The other three are the dedicated costs (format, label, moulds), the warehouse that stays yours until collection, and the payment terms.
The question that decides concerns the end, not the beginning: when the agreement closes, what is left to you? If the brand, the network and the relationship with the buyer are theirs, what remains at the end is equipment and no market.
This piece is part of the guide to export operations for the small food producer and covers a moment that has no section of its own in the guide, because it arrives out of sequence: the proposal to produce under the buyer's brand, which usually appears during the negotiation and changes the nature of the negotiation itself.
The template, to download
One file, two sheets. The first carries the eight questions on this page, in English to send them and in Italian to understand them, with three columns of your own: the client's answer, whether it came in writing, and when. The second does the two sums that can be done before the decision: the share of your production that customer would account for, and the line-by-line calculation of the items that lie outside the volume.
| File | What it contains | Link |
|---|---|---|
| Private labelExcel, two sheets | The eight questions in two languages with space for the answer, the capacity share and the line-by-line sums. |
The files are free. There is no form in front of them, we don't ask for an address and we receive no notification when someone downloads them. No percentage of lost margin appears in the sheet, for the same reason it doesn't appear on this page: no reliable figure on small Italian food producers exists.
What changes when the name on the label belongs to someone else
The formal part is written down, and it is clearer than people think. Article 8 of Regulation (EU) No 1169/2011 establishes that «the food business operator responsible for the food information shall be the operator under whose name or business name the food is marketed or, if that operator is not established in the Union, the importer into the Union market».
In practice: in a private label agreement, responsibility for the information on the label follows the name, so it shifts to your customer. Many producers stop here and read it as offloading responsibility. The following paragraph says something else.
The same article in fact provides that operators who don't affect the information «shall not supply food which they know or presume, on the basis of the information in their possession as professionals, to be non-compliant with the applicable food information law». In other words: if you know that label is wrong, supplying the product anyway isn't a defensible position.
The name changes who is responsible for the information. It doesn't change what you know about your product, and that you can't step away from.
On top of this there remain the general rules on food safety and product liability, which follow another path and don't shift with the brand. The operational point, for a small company, is this: the private label agreement should be written knowing who checks what, and who sends you in writing the texts that will end up on the label. The rest of the labelling rules of the destination country continue to apply unchanged.
The sums that look done, and aren't
An order under the customer's brand is almost always judged on volume, because volume is the big number. The items that decide whether that order leaves a margin all lie outside the volume.
| Item | What changes compared with your own brand | Where it is lost if left implicit |
|---|---|---|
| Price | It starts lower, because the customer brings the market and knows it. The lever left to them is comparison with another producer. |
A price accepted without validity and without a revision linked to raw materials becomes your price for years. |
| Dedicated costsformat, label, moulds | You need a format, artwork and sometimes equipment that are only worth anything for them. |
Who pays those costs if the agreement stops after two orders? If it isn't written, whoever advanced them pays. |
| Warehouse | Production often has to be brought forward on their forecasts, and the stock stays yours until collection. |
Finished goods under someone else's brand that can't be sold to anyone else, with an expiry date approaching. |
| Collection | Large buyers' payment terms are almost always longer than your usual ones. |
The cost of late collection rarely enters the price, and it is an item that already weighs on the first export order. |
| Capacity | A large volume occupies lines, people and raw materials that stop being available to other customers. |
Beyond a certain share, saying no to that customer becomes impossible. And sooner or later, they notice. |
The sums should be redone with your own figures, line by line, with the same logic as the export price list: the delivery term, the minimum order and the validity of the price matter here more than anywhere, because here the contract lasts.
The capacity share, which is the real risk
The risk of private label doesn't show at the first order. It shows in the third year, when a single customer accounts for such a share of your production that one phone call from them decides your quarter.
At that point two things happen, both predictable. First: requests for discounts stop being negotiable, because the cost of losing them has become too high. Second: your company has stopped investing in its own brand, because capacity was occupied and the money was coming in anyway.
The threshold isn't universal, and whoever gives it to you precisely is guessing. The useful question, however, can be asked straight away: if this customer disappeared tomorrow, how much of my production would stand idle, and for how long? If the answer makes you uncomfortable before you have even signed, that is the information you needed.
The questions to ask before saying yes
None of these is rude, and a structured buyer expects all of them. Whoever gets irritated when you ask is telling you something useful, exactly as in the signals that distinguish a serious buyer.
1. Volumes: expected annual volume, minimum commitment per order and per year, forecast revision notice. 2. Ownership: who owns the recipe, and any development made during the agreement? 3. Exclusivity: which territory, which channel, for how long, and against which minimum volume? 4. Label: who provides the artwork and the wording, who is the operator placing the product on the market, and who verifies compliance for each country? 5. Specific costs: who pays for moulds, plates, dedicated packaging and unused stock if the agreement ends? 6. Stock: who owns finished goods produced on forecast, and after how long are they invoiced? 7. Payment terms, and what happens to goods already produced in case of termination. 8. Exit: notice period for both sides, in writing.
The eighth point is the one agreements skip most often, and the only one that really counts on the day the relationship ends. A symmetrical notice period, written in one line, is worth more than ten pages of technical specifications.
When private label makes sense
This page doesn't say to refuse. It says to decide with the sums in hand, because there are situations where an agreement under the customer's brand is the right thing to do.
- When it fills capacity that would otherwise stand idle. A line running at sixty per cent has a fixed cost that runs anyway: additional volume at a lower margin can be excellent, as long as it stays additional and not a substitute.
- When it buys an apprenticeship. Producing for a demanding customer forces you to review processes, controls and documentation, and that work stays with the company afterwards. It is a real investment, provided you recognise it as such instead of discovering it by chance.
- When it is a door, not the room. A private label agreement that opens a market you then also enter with your own brand is a strategy. An agreement that replaces your brand is a different, legitimate choice, to be made knowing you are making it.
No tool decides the distinction between these three cases and the three problems described above. It is a decision for whoever built the company, taken on their own numbers. For us the principle is written in Ethics and it applies here too, where there is nothing to automate: a system can prepare and flag, the decision stays with a person. The only useful things that can be put in a spreadsheet, before that decision, are the capacity share committed and the line-by-line sums.
We don't publish percentages of margin lost with private label, nor market shares of retailer brands applied to small Italian producers. The numbers circulating on this subject concern different samples, different markets and different company sizes, and we couldn't trace them back to a relevant primary source. When the source doesn't hold up, the number stays out.
The only regulatory statement cited here comes from the text of the law and is quoted verbatim: Article 8 of Regulation (EU) No 1169/2011 on responsibility for food information.
This page isn't a legal opinion and doesn't replace reading a contract. A supply agreement under someone else's brand, with a foreign buyer, is the kind of document worth showing to a lawyer before signing, not after the first dispute.
Questions and answers
What changes if my product is sold under someone else's brand?
What changes is who is responsible for the label information. Article 8 of Regulation (EU) No 1169/2011 names as responsible «the operator under whose name or business name the food is marketed», so your customer.
The producer, however, doesn't leave the stage: the same article forbids operators who don't affect the information from supplying food which they «know or presume», as professionals, to be non-compliant. And the rules on food safety and product liability follow a path of their own, which the brand doesn't shift.
Is it worth accepting a private label order from abroad?
It depends on three things that don't appear in the order: the real cost structure (dedicated formats and labels, different minimums, stock that stays yours), the capacity share that order commits, and what is left to you when it ends.
It pays when it fills capacity that would otherwise stand idle, when it teaches something that stays with the company, or when it opens a market you will also enter with your own brand. It pays much less when it replaces work on your own brand without anyone having decided so.
Which clauses should be put in writing in a private label agreement?
Six, and their absence is always noticed late. Who is formally the operator placing the product on that country's market and who is responsible for label and packaging. Ownership of the recipe and of developments made during the relationship. Exclusivity: territory, channel, duration, minimum volumes that justify it.
Then: who pays for moulds, labels and stock if the agreement is interrupted; payment terms and the fate of batches already produced in case of termination; and the exit notice, symmetrical, which is the most important clause and the least negotiated.
How much margin do you lose with private label?
We don't publish a percentage, because we found no reliable figure referring to small Italian food producers, and an average would be useless anyway.
What can be said is where it goes: the lower starting price, the dedicated costs of format and label, the warehouse if the stock stays yours until collection, and the collection cycle if the terms are longer than your usual ones. The sums are done on your own figures, before replying to the offer.
How do you exit a private label agreement?
In the way you wrote at the start. Painful exits almost always have the same cause: notice period not defined, stock produced on forecast left with the producer, moulds and labels paid for by whoever then can't reuse them.
Three questions before signing: with how much notice each party can exit, who is left with goods already produced, who is left with the project-specific costs. If an answer is missing, the agreement puts it off to a moment when whoever has more bargaining power will decide it.
Notes on sources
- Regulation (EU) No 1169/2011, Article 8 (Responsibilities), quoted verbatim for identifying the operator responsible for food information and for the duty of operators who don't affect that information. Checked against the consolidated text.
- No statistics on private label margins or market shares appear on this page: the available numbers concern samples, markets and company sizes different from those discussed here. When the source doesn't hold up, the number isn't published.
- The list of points to clarify is an operational checklist built to be used in negotiation, not a contract template: it doesn't replace a lawyer reading the contract.
A big order is judged on what it leaves behind when it ends.
A big order is judged by what it leaves behind when it ends, and a person does those sums, not a tool. With Itria we start from the outside to build custom digital systems for exporters. For you that translates into more requests, fewer losses and less manual work. Write us a line about what weighs on you. We take the first step: what a buyer sees when they look you up, and what we found there. Even if we don't end up working together.