Stock vs. Custom Formulation For Private Labeling: What To Choose?

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Stock vs. Custom Formulation For Private Labeling: What To Choose?

When creating a private label brand or product, there are a wide variety of factors that one needs to take into account before putting the required processes in motion. Doing adequate research is always a worthy investment and can save you time and money in the long run.

Nowhere is this more important than in the formation of a private label brand. Any experienced entrepreneur will know the challenges and trials that come with developing a brand or product. So it’s always handy to know someone who has experience in the world of business or startups in order to bounce your ideas off and receive feedback, advice or constructive criticism from.

In a global market that is growing on a daily basis, mistakes or mishaps are ill-afforded and can have serious knock-on effects for your business and brand as a whole.

However, many of us do not have direct contact with entrepreneurs (especially successful ones) and are generally trying to create a brand or product line from scratch. It’s not uncommon to try starting a private label brand while still maintaining a day job. This ultimately means that you have less room to experiment and a much smaller margin of error.

This is where we come in. The aim of these articles is to help give you an idea of what you should keep an eye out for when starting a private label brand: the challenges, the hurdles, how to know you’re succeeding or failing, what to do in an emergency and what choices would be better suited to your specific brand or product line.

This basically helps to give you the edge in the marketplace, where trying to make a name for yourself, your brand or your product is an everyday struggle. If it were too easy, the market would become saturated and would probably suffer – this applies to most industries or sectors. So don’t think that it can be done lightly.

That being said, having a guide along the way can help you develop a unique and useful product/brand that consumers will take to. This will help you to solve any problems along the way and aid you in making important brand decisions.

For instance, choosing the right formula for your product (whether you’re in the cosmetics industry, personal care, cleaning etc.) can make the difference between a successful business or one that isn’t. I.e., custom formulation or stock formulation.

Having an idea of which is best suited to you and your business can maximize your production processes, helping to make the overall cost of the product and your manufacturing process more cost-effective and efficient in general. If you’re faced with this problem and need help making your mind up – I’d recommend that you keep reading!

What Is Stock Formulation?

Stock Formulation For Private Labeling

In a nutshell, stock formulation (or stock formulas) are recipes, formulas or products that have been previously created by a specific manufacturer who holds the patent to that specific formula. These are usually lab-based companies that employ chemists to develop unique or generic formulas or recipes based on the current trends in the market be they a specific product, ingredient or even a manufacturing technique or method.

This is something that is not uncommon to the 21st century market and has actually been around for sometime. However, many of these companies are quite niche. As such, they can be overlooked by the general public – making them difficult to find for people who are interested in creating private label businesses. However, finding a reasonable manufacturer is more than possible.

In terms of stock formulation,  once you’ve found your manufacturer, you can basically select the products you would like to sell under your own label and pay to have them made for you. That’s the basic premise of utilizing stock formulas and private labeling – it’s someone else’s product, with your brand and marketing sold as a single product.

It’s really a common mode of starting a business today, as it means that you as the entrepreneur don’t have to worry about garnering the often large amounts of capital required to rent or buy an industrial space, purchase the machines needed for manufacture, hire and train employees or worry about the various forms of paperwork and certification that are required to operate and maintain a legal manufacturing plant.

In fact, a large majority of established and well-recognized brands are even following this route. It enables them to cut down on product costs, maximize margins and efficiency and still retain the rights to their formulas.

This is good news for you as a startup entrepreneur, as it means that you aren’t required to acquire large sums of capital to develop a product. Instead, you are now able to invest a small amount of your savings, gather a smaller, more intimate base of investors and focus more on market-based research (ultimately helping to increase your ROI by focusing on sales) rather than having to go through the tedious steps I mentioned earlier.

Using a stock formula makes this process even easier as it means you don’t have to have a degree in chemistry to start a line of cosmetics products for instance – rather just a small investment, constant research and the will to get out there and sell, sell, sell your product!

What Is Custom Formulation?

Custom Formulation For Private Labeling

In the previous section, I gave a basic outline of the functions and processes involved with starting a private label brand or OEM product/line (Other Equipment Manufacturer). The process is simple: buy someone else’s stock-standard, unbranded product and label it under your own brand – then sell it!

It’s a pretty simple principle and has started to gain traction in the world of business and startups. Outsourcing your manufacturing can help to save you time, money, stress and even reduce the cost of product, thus maximizing your profit margin. This is music to the ears of any businessman or entrepreneur.

In fact, the nature of the sector has evolved quite a lot in recent years and companies constantly keep updating themselves to stay ahead of the curve in terms of product and formula innovation. For instance, a formula from the 80’s would largely be considered out of date by today’s standards as consumer expectations from the products they use, and the ingredients they contain, have changed drastically.

People are a lot more aware of the health hazards related to using harmful chemicals in their products. This has come with the new wave of health conscious, environmentally aware consumers who want their products to reflect their lifestyles.

In short, this means healthy and eco-friendly products manufactured in a sustainable way that are free of parabens, solvents, unnatural colorants or flavorings, MSG’s and sulfates to name a few. And of course, the recipes or formulas of the past were loaded with these. As a means of keeping abreast with the needs of modern consumers, many companies have started to reverse-engineer existing brands and expand their formula range over time.

This means that you as a businessman or entrepreneur have more freedom when it comes to selecting, modifying or customizing your product formulas, thus enabling them to appeal to a modern market.

This also means that you have the ability to create a product or brand that is unique – as using simple stock formulas may make production costs lower and increase profit margins, but there are at least 100 other brands using the same or very similar formula out there.

It’s important to remember that a dynamic brand or product line can also really help to increase your brand equity in the marketplace. This will help consumers identify your brand allow your product to market itself. I’ll get into that in greater depth later.

The Advantages Of Stock & Custom Formulation

It’s true that there are disadvantages to every advantage in life and especially in the business world. Running a business is really a matter of choosing when to sacrifice what and whether that choice will have an overall positive or negative effect on your business.

That being said, because of the purely subjective nature of starting a private label brand or product line, I would like to focus on only the benefits of either stock or custom formulas. This is because each will naturally have it’s downsides, but the real aspect of making a choice in the business world is how it will benefit your brand or business.

I also feel that drawing a comparison between the two will point out the differences between either, rather than focusing on the negative aspects i.e. the risks and rewards will be clearly outlined by the differences in these methods or approaches.

Advantages Of Stock Formulation

  • Save Money With Stock Formulation

    Stock formulation is generally considered the cheaper option as the manufacturing company has already gone through the trouble of creating the formula (the product) as well as ensuring that it actually works. This means that you don’t have to go through a number of trials to get the right formula – it’s already there for you to bottle/package and sell.

  • Companies that manufacture stock formulas in any sector are required to update the required certification related to their manufacturing processes and with regards to their suppliers. This also means that they have to put the formula through the necessary tests and trials to ensure that it is safe and market-ready. This means that you don’t have to worry about spending the extra money on getting this done and that you won’t have to worry about any lawsuits in the future because of an untested or unsafe product.
  • You save money by not having to worry about the quantities and exact measurements contained in each product, as these have already been worked out for you. This means that you can budget efficiently before releasing your line. You can also get a good idea of your profit margin before starting – a great way to encourage initial investment.
  • Using a stock formula gives you the freedom to concentrate on one side of the business, allowing you to maximize your output and stay in touch with changes in the market or trends. If you have to worry about both the manufacturing and the marketing aspect of your business, you’re more likely to get caught up in one, causing the other to suffer.
  • You ultimately cut down on overheads when using stock formulas as you don’t have to hire additional staff to manage or manufacture on your behalf. It’s the quicker, cheaper option. This gives you access to a wider customer base and in turn, a larger share of the market i.e. more sales.

Advantages Of Custom Formulation

  • Build Your Brand With Custom Formulation

    Customizing your formula will give you the edge in a saturated marketplace, helping your brand or product stand out from the rest.

  • A customized formula will help you narrow down on a more specific target market and ultimately allow you to establish more of a niche brand or product line.
  • Having a customized formula will help you to create a product of higher market value (high quality, high cost) and ultimately appeal to a specific type of consumer. This can help you become a more ‘sought-after’ brand, rather than being another cheap ‘pick-me-up’ on offer at the supermarket or retail outlet.
  • A customized formula enables you to capitalize on marketing strategies. Offering a product or brand that is different from others in the sector and has an ethos or vision that is directly reflected in the products is an amazing tool to have at your disposal.
  • Consumers are more likely to spend more on a brand that is well marketed and contains buzzwords that have been popularized in modern times such as ‘organic,’ ‘sustainable,’ ‘safe,’ ‘eco-friendly,’ etc. So long as your product lives up to these claims and is effective, you’ll have better chances of succeeding in the market.
  • Another advantage of using custom formulation in your private label product line is that you will be able to build a more loyal customer base. This means that they’re more likely to stick with your brand over time, unless the formula or price changes drastically. Ultimately, this is much better for your sales and brand equity i.e. your brand’s worth and lifespan.
  • When you choose to go the route of customized formulas, you are only limited to your budget and imagination when it comes to the recipes you create. Personally, I think that there is something quite fulfilling (and ultimately rewarding) about being able to create a product that is yours and original. Nothing sells itself better than something that is new, innovative and personalized.

Should You Choose Stock Or Custom Formulation?

Stock vs. Custom Formulation

In truth, this is really what the subject of stock or customized formulation boils down to: when should you choose either and why? The reality of the matter is that it’s not as simple as an option ‘a’ or ‘b’ scenario, though on paper it may seem that way. While it’s true that some cases lend themselves more to one option than the other, this is largely dependent on each brand or business and furthermore, on each individual product or formula.

There are a lot of variables that need to be considered when choosing your method of formulation. These are largely related to the type of brand you would like to create as well as your desired target market i.e. who are aiming at selling the product(s) too?

If you’re going for a more ‘top-shelf’, high-value appeal then selecting or creating a customized formula would be the better option for you. If your intention is to create a high-value brand, you’re more likely to source larger capital investments to start your business and spend more money getting your brand off the ground – or at least, you should be prepared to do so.

While it’s true that using a customised formula will ultimately cost you more money, the appeal of having a unique and individualised product generally tends to appeal to a specific niche’ in the market – which could help to give you the edge over your competitors.

However, if you don’t have that much money to start your business with, or want to experiment with the market reacts etc, then choosing a stock formula is the better option for you hands down. This is easier as it means that their is less risk involved, lower startup costs, larger profit margins and less hassle to be frank.

I must stress that no business is totally locked into choosing one or either – you can utilize both. In fact, I’ve read quite a few success stories of people who started small, labeling stock formulas and trying to find suppliers that contained unique products in their stock formulas.

Once they had enough traction in the market, and more capital to invest, they extended their range to include more customized formulas, thus increasing their market share and the brands overall appeal. Be sure to do your research before diving in head first, and always make sure you’re aware of any changes in your business model, formula creation or the marketplace as a whole – as changes come quick and often in the modern world.


Understanding every aspect of your business will only strengthen your abilities as a business owner and entrepreneur. Having an insight into how your products are created, which ingredients they make use of and what the demands, trends or changes of the market are will give you the edge in terms of staying afloat and making a success out of your business.

While it’s true that there are a lot of factors or variables that can (and will) influence the success or failure of your business – outlining as many of those as you can before starting will really help you in the early stages of your business. By choosing a stock formula or product base, you’re basically choosing a safer option but sacrificing the ability to stand out. Making this decision is really based on the market or sector you’re in or plan to enter.

If you’re aiming to create a low-cost, high-value brand which aims to undercut the leading brands in the related sector or industry, selecting a pre-made stock formula is probably the best option. However, if you want to create a unique, high-quality brand that stands out from the others in the market, choosing a custom formula, or a company that offers custom formulation is the best route for you.

However, as I mentioned previously – you’re never locked directly into one or the other. A brand and company will inevitably change over the course of time. That being said, a formula is equally subject to changes or alterations and a brand should never limit itself to one or the other. An open mind and constant research are the best tools at your disposal – be sure to do your research before you embark and stay in touch with the changes and shifts in the market place!

Starting your own private label business? Find out how to sell through Walmart and Amazon here at Innovative Private Label!

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