Private label vs branded strategies
How coffee businesses weigh private label contracts against building their own branded products, and the economic trade-offs involved.
- Coffee Basics Nerds
- 2 min read
Article 10 of 12 in Economics & Coffee Markets/
Private Label Strategy
- Definition: Producing coffee for another company’s brand (e.g., supermarket chains, hotel groups).
- Advantages:
- Steady volume contracts → predictable revenue.
- Lower marketing and branding costs.
- Useful for filling roastery capacity.
- Challenges:
- Lower margins compared to branded sales.
- Less control over consumer experience.
- Brand identity remains with retailer, not roaster.
Branded Strategy
- Definition: Selling coffee under your own company’s name and identity.
- Advantages:
- Higher profit margins.
- Builds long-term brand equity and consumer loyalty.
- Greater storytelling potential (origin, process, ethics).
- Challenges:
- Requires investment in marketing, packaging, and distribution.
- Higher risk—success depends on customer adoption.
- Slower volume growth compared to private label contracts.
Economic Comparison
- Private Label:
- Wholesale margins ~10–20%.
- Large, stable purchase orders.
- Sensitive to retailer bargaining power.
- Branded:
- Margins ~40–70% depending on channel (wholesale vs retail vs café).
- Volatile demand but higher upside.
- Requires strong QC to protect reputation.
Hybrid Approach
- Many roasters do both:
- Private label contracts provide cash flow stability.
- Branded line builds long-term equity.
- Capacity utilization balanced across streams.
Strategic Considerations
- Market Positioning: Premium roasters often avoid private label to protect exclusivity.
- Scale: Small roasters may rely on private label for cash flow before expanding brand.
- Risk Diversification: Blending both strategies spreads revenue sources.
Summary
Private label strategies prioritize stability and volume but limit brand growth, while branded strategies carry higher margins and equity potential but demand more investment. Many successful roasters pursue a hybrid model, balancing short-term cash flow with long-term brand development.