Private label. It looks like a big order, and it moves far more than the price.
The request almost always comes the same way: big volumes, a single pack size, and a question that sounds technical. “Can you produce under our brand?”
With the name on the label, a formal responsibility moves 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”. But the producer doesn't drop out of the picture, and the same article explains why.
Margin is lost in four places, and only one of them is the price. The other three are dedicated costs (pack size, label, moulds), stock that stays yours until collection, and payment terms.
The deciding question is about the end, not the beginning: when the agreement closes, what do you have left? If the brand, the network and the relationship with the end buyer are theirs, you're left with the equipment and no market.
This piece is part of the guide to export operations for small food producers and covers a moment that doesn't have its own section in the guide, because it comes out of sequence: the proposal to produce under the buyer's brand, which usually turns up mid-negotiation and changes the nature of the negotiation itself.
The template, to download
One file, two sheets. The first has this page's eight questions, ready to send, with three columns for you: the buyer's answer, whether it came in writing, and when. The second does the two sums you can do before deciding: the share of your production that customer would represent, and a line-by-line tally of the items that sit outside the volume.
| File | Contents | Link |
|---|---|---|
| Private labelExcel, two sheets | The eight questions with space for the answers, the capacity share and the line-by-line sums. |
The files are free. There's no form in the way, we don't ask for an email address, and we don't get notified when anyone downloads them. The sheet shows no percentage of lost margin, for the same reason this page doesn't: there's no reliable figure for small Italian food producers.
What changes when someone else's name is on the label
The formal side is written down, and it's clearer than people think. Article 8 of Regulation (EU) No 1169/2011 says 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 deal, responsibility for the information on the label follows the name, so it moves to your customer. Many producers stop reading here and take it as being let off the hook. The next paragraph says otherwise.
The same article also 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 the label is wrong, supplying the product anyway isn't a position you can defend.
The name changes who is responsible for the information. It doesn't change what you know about your own product, and there's no stepping away from that.
On top of this come the general rules on food safety and product liability, which follow a different path and don't move with the brand. The practical point for a small business is this: write the private label agreement knowing who checks what, and who sends you in writing the wording that will go on the label. The rest of the destination country's labelling rules still apply exactly as before.
The sums that look done, but aren't
An order under the buyer's brand is nearly always judged on volume, because volume is the big number. The items that decide whether the order leaves you any margin all sit outside the volume.
| Item | What changes compared with your own brand | Where you lose if it's left unsaid |
|---|---|---|
| Price | It starts lower, because the buyer brings the market and knows it. Their remaining lever is comparing you with another producer. |
A price accepted with no validity date and no review linked to raw materials becomes your price for years. |
| Dedicated costspack size, label, moulds | You need a pack size, artwork and sometimes equipment that are only any use for this buyer. |
Who pays those costs if the deal stops after two orders? If it isn't in writing, the side that paid up front does. |
| Storage | Production often has to be brought forward on their forecasts, and the stock stays yours until they collect it. |
Finished goods under someone else's brand that you can't sell to anyone else, with a best-before date getting closer. |
| Payment | Large buyers' payment terms are nearly always longer than you're used to. |
The cost of waiting to be paid rarely makes it into the price, and it's an item that already hits the first export order. |
| Capacity | A large volume ties up lines, people and raw materials that are no longer available for other customers. |
Beyond a certain share, saying no to that customer becomes impossible. And sooner or later, they notice. |
Redo the sums with your own figures, line by line, using the same logic as the export price list: delivery terms, minimum order and price validity matter more here 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 year three, when one customer accounts for so much of your production that a single phone call from them decides your quarter.
At that point two things happen, both predictable. First, their requests for discounts stop being negotiable, because losing them would cost too much. Second, your business has stopped investing in its own brand, because the capacity was taken and the money was coming in anyway.
There's no universal threshold, and anyone who gives you a precise one is guessing. But the useful question can be asked right now: if this customer disappeared tomorrow, how much of my production would stand idle, and for how long? If the answer makes you uneasy before you've even signed, that's the information you needed.
The questions to ask before you say yes
None of them is rude, and an established buyer expects every one. A buyer who gets irritated when you ask is telling you something useful, just as with the signs that mark out 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 isn't telling you to say no. It's telling you to decide with the numbers in front of you, because there are situations where a deal under the buyer's brand is the right thing to do.
- When it fills capacity that would otherwise sit idle. A line running at sixty per cent has fixed costs that run regardless: extra volume at a lower margin can be excellent, as long as it stays extra and doesn't replace anything.
- When it buys you an apprenticeship. Producing for a demanding customer forces you to rethink processes, checks and paperwork, and that work stays with the business afterwards. It's a real investment, as long as you recognise it as one rather than stumbling on it by chance.
- When it's a door, not the room. A private label deal that opens a market you then enter with your own brand too is a strategy. A deal that replaces your brand is a different choice, a legitimate one, but one to make knowingly.
No tool decides the difference between these three cases and the three problems described above. It's a decision for the person who built the business, made on their own numbers. Our principle, set out in Ethics, applies here too, even though there's nothing to automate: a system can prepare and flag, but the decision stays with a person. The only useful things you can put on a sheet before that decision are the capacity share it ties up and the line-by-line sums.
We don't publish percentages of margin lost to private label, or retailers' own-brand market shares applied to small Italian producers. The figures going around on this subject come from different samples, different markets and different business sizes, and we couldn't trace them back to a relevant primary source. When the source doesn't stand up, the figure stays out.
The only legal statement cited here comes from the text of the law and is quoted word for word: Article 8 of Regulation (EU) No 1169/2011 on responsibility for food information.
This page isn't legal advice and doesn't replace reading a contract. A supply agreement under someone else's brand, with a foreign buyer, is exactly the kind of document to show 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”, which means your customer.
But the producer doesn't drop out of the picture: the same article forbids operators who don't affect the information from supplying food they “know or presume”, as professionals, to be non-compliant. And the rules on food safety and product liability follow their own path, which the brand doesn't change.
Is it worth accepting a private label order from abroad?
It depends on three things that aren't in the order: the real cost structure (dedicated pack sizes and labels, different minimums, stock that stays yours), the share of capacity the order ties up, and what you're left with when it ends.
It pays when it fills capacity that would otherwise sit idle, when it teaches the business something that stays, or when it opens a market you'll also enter with your own brand. It pays far less when it replaces the work on your own brand without anyone having decided that.
Which clauses need to be in writing in a private label agreement?
Six, and you always notice they're missing too late. Who is formally the operator placing the product on that country's market, and who is responsible for label and packaging. Who owns the recipe and anything developed during the relationship. Exclusivity: territory, channel, duration, and the minimum volumes that justify it.
Then: who pays for moulds, labels and stock if the deal ends; payment terms, and what happens to batches already produced if the agreement is terminated; and the exit notice period, the same for both sides, 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 haven't found a reliable figure for small Italian food producers, and an average would be useless anyway.
What we can say is where it goes: the lower starting price, the dedicated costs of pack size and label, storage if the stock stays yours until collection, and the cash cycle if the terms are longer than you're used to. Do the sums with your own figures, before you reply to the offer.
How do you get out of a private label agreement?
The way you wrote down at the start. Painful exits almost always have the same cause: no notice period agreed, stock produced against forecasts left with the producer, moulds and labels paid for by the party that then can't reuse them.
Three questions before signing: how much notice each side must give to leave, who is left holding goods already produced, who is left with the project's specific costs. If an answer is missing, the agreement is putting it off until a moment when the party with more bargaining power will decide it.
Notes on sources
- Regulation (EU) No 1169/2011, Article 8 (Responsibilities), quoted word for word on which operator is responsible for food information and on 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 figures cover samples, markets and business sizes different from the ones discussed here. When the source doesn't stand up, the figure isn't published.
- The list of points to agree is a practical checklist built for use in negotiation, not a contract template: it doesn't replace a lawyer reading the contract.
A big order should be judged by what it leaves you when it ends.
A big order should be judged by what it leaves you when it ends, and that sum is done by a person, not a tool. At Itria we start from the outside and build tailored digital systems for exporters. For you, that means more enquiries, fewer losses and less manual work. Drop us a line about what's slowing you down. We'll make the first move: we'll look at what a buyer sees when they search for you, and tell you what we found. Even if we never end up working together.