Why the Line Between Contract Manufacturing and Private Label Is Blurry

When I first learned about contract manufacturing and private label production, I thought they were completely different. The common belief is that private labeling means choosing a product from a catalog and slapping your brand on it, while contract manufacturing is more about creating something from scratch, with full control over the product. But over time, I’ve realized it’s not that simple, especially when you’re working in industries like textiles, food, paper products, and jewelry.

In Turkey, where I’ve been sourcing for years, the line between these two models is often blurred. In fact, in my experience, private label production and contract manufacturing share a lot of similarities, and the key difference often comes down to the contract terms. Let me walk you through what I’ve learned.

Private Labeling vs. Contract Manufacturing: Not as Different as You Think

Most people define private labeling as picking a ready-made product from a manufacturer’s catalog and branding it as your own. This works in industries like cosmetics or food, where you can take a standard formula (like a shampoo or biscuit) and give it your own packaging and name.

Contract manufacturing, on the other hand, is seen as a process where the buyer has full control over the design, formula, and materials. You tell the manufacturer exactly what to make and how to make it, and they produce it to your specs.

But here’s the thing: In my work in Turkey, this clean-cut definition doesn’t always hold. Private label production can be just as customized as contract manufacturing—especially in sectors like fashion or jewelry, where designs are unique and require specific materials. The difference is really about who controls the intellectual property and how the agreement is written, not about whether you picked something from a catalog or built it from scratch.

Private Label Manufacturing

• Common Understanding:
  • Private label production is often described as a process where a business selects a pre-designed, off-the-shelf product from a manufacturer’s catalog and simply applies their own branding to it. This is a common practice in industries like cosmetics, food, and generic consumer goods. The company buying the product doesn’t necessarily have control over the product design or formulation.
• What Really Happens:
  • In many industries, like textiles, fashion, and jewelry, private label production isn’t just about choosing from a catalog. Brands often customize designs, modify specifications, and adjust production to suit their needs, even though they may not technically own the formula or design. In some cases, the private label manufacturer works closely with the brand to create a product that meets their specifications—just as they would in contract manufacturing.
  • In apparel and jewelry, brands like Zara will work with Turkish workshops, having their specific designs produced but under strict contracts. These manufacturers cannot resell the designs or offer them to others. This is more than just picking from a catalog—there’s a lot of customization involved, and the manufacturer is still creating products under the brand’s name.
  • In the case of jewelry, customers may expect unique designs even though these designs might resemble others. However, the manufacturer produces it under the client’s brand, making it “private label.” It’s not about offering a ready-made design from a catalog in this context but about creating custom or semi-custom designs for that specific brand.

Contract Manufacturing

• Common Understanding:
  • Contract manufacturing is often viewed as a more customized production process, where the buyer has full control over the product’s design, formulation, and production specifications. The manufacturer produces the product according to the contract and typically doesn’t use a brand name.
• What Really Happens:
  • Contract manufacturing can sometimes be indistinguishable from private label production, depending on the level of customization and the relationship between the brand and manufacturer. For instance, in our olive oil example, Europeans contract Turkish farmers to grow and harvest olives according to strict guidelines. They don’t use a brand name at this stage, but when they later produce olive oil from these olives, they may brand it under their label. This process is contract manufacturing because the entire supply chain is governed by contracts.
  • As pointed out with Zara, this is also a form of contract manufacturing. Zara contracts Turkish workshops to make their products to precise specifications. While the design and intellectual property belong to Zara, the Turkish manufacturers execute the production. There’s no catalog of ready-made products; it’s entirely based on Zara’s designs.

Real Examples from My Work in Turkey

Let me give you a few real-world examples from my work that show how these terms overlap.

• Textiles and Fashion: In fashion, big brands like Zara come to Turkey to have their designs produced. They contract small workshops to create specific pieces—cutting, sewing, ironing, and labeling them with Zara’s brand. The contract ensures that the manufacturer can’t sell those designs to anyone else. This is contract manufacturing, but many people would also call it private labeling because Zara’s label is on the clothes.On the flip side, I’ve also had clients come to Turkey and select garments from a manufacturer’s catalog, choose fabrics, and make slight tweaks. The items are still custom-made for their brand, and they apply their own labels. That’s traditional private label manufacturing.
• Paper Products: I sourced two containers of paper products for a client who came to Turkey, visited several factories, and reviewed their catalogs of existing products. My client chose from options like single-layer, two-layer, and three-layer paper towels, but then added their own branding. This fits the private label model.However, for the same client, I also helped source customized packaging, where we had to negotiate detailed terms with the manufacturer. The contract outlined everything from material use to delivery times. This was more in line with contract manufacturing, even though the product was essentially “private labeled” at the end.
• Jewelry: In the jewelry sector, it’s common for clients to want something unique. I’ve worked with Turkish manufacturers to produce custom-designed jewelry where the client controlled the design, materials, and production process. This looks like contract manufacturing, but again, it’s often called private label production because the jewelry is sold under the client’s brand.

The difference often comes down to ownership and control over the product. In contract manufacturing, the brand usually owns the intellectual property of the product, while in private label manufacturing, the manufacturer may retain the rights to the product design or formula but produces it exclusively for a particular brand.

What About Third-Party Manufacturers?

Now, let’s talk about third-party manufacturers. These guys are key when you need someone to handle a specific part of the production process, like packaging or assembly. For example, I’ve worked with third-party manufacturers who specialize in packaging for private label brands. The product is made by one manufacturer, but the packaging is done by another. This gives the brand flexibility to source different parts of the supply chain while still maintaining quality control.

Third-Party Manufacturers in the Fashion Sector

In the fashion industry, I often work with clients who prefer to source different components of the production process from multiple suppliers, which is where third-party manufacturers come into play. For example, many of my clients ask me to source the fabric separately from the sewing phase. In these cases, we reach out to fabric suppliers to get price offers for specific types of fabric in particular colors. If the fabric requires printing—such as with children’s clothing that often features animal or flower prints—we contact specialized fabric printing companies to handle this step.

Once we’ve settled on a fabric supplier, we calculate the exact amount of fabric needed for the production line. This is part of contract manufacturing, and we use third-party suppliers, like the fabric printing company, to handle certain phases of production. There’s no need to brand the fabric at this stage—it’s purely a matter of logistics.

After securing the fabric, we turn to small to medium-sized textile workshops to actually produce the garments. For example, when producing children’s dresses for girls, we specifically search for workshops experienced in this type of clothing. In Turkey, there are about 300,000 workshops, and I’m part of seven WhatsApp groups that each have about 700 members on average. It’s also easy to find manufacturers through online portals where you can post requests for free, and there are knitting organizations that provide additional networking opportunities.

Once we shortlist manufacturers who specialize in children’s wear—especially girl dresses—we gather quotes for the full range of services: patterning, cutting, sewing, ironing, packing, and labeling (what we call the “finished product”). Even though these orders often involve low MOQ (below 1,000 items), we still arrange contracts that give the client ownership of the product. This is especially important when the client makes specific changes to the skirt design, chooses custom sizes, and dictates the colors. This type of project fits both private label manufacturing and contract manufacturing models because of the customization involved.

On the other hand, I’ve had clients who wanted a simpler process. For instance, one client asked us to find a manufacturer for standard Three Yarn Fleece, in solid colors and three sizes. The manufacturer we found specialized in making hoodies and had pre-existing designs for the client to choose from. This is a more typical private labeling scenario, where the client selects from standard options. However, producing something more customized—like night dresses for women—is a different area, and requires more input from the client, turning it into a mix of private label and contract manufacturing.

Third-Party Manufacturers in Food Flavor Production

n 2007, I co-founded a chemical company in Turkey that develops food flavors, including cocktail flavors and essentials for perfume and cologne making. While my primary focus is on sourcing, I also play a significant role in the research side of the company, while my husband leads the development process.

Our main business model is wholesale—we sell our flavors in bulk, with a minimum order of 25 kg. Many of our clients choose to sell these flavors under our brand because it’s well-established in the sector. We don’t typically create formal contracts for these bulk orders; instead, we sell immediately from our stock and allow the client to either use our branding or their own.

However, when clients request specific flavors—like village butter flavor, yogurt flavor, or a mandarin-scented room fragrance—and we need to carry out research and development, we shift into contract manufacturing. In these cases, we draft a contract that outlines the production process, delivery schedule, and the agreed quantity of product to be delivered every three months.

If clients choose to sell the product under their own brand, they are free to do so. However, if they want to use our brand, we impose strict rules. For instance, any client selling under our brand cannot alter the product in any way without our permission. Typically, they purchase the 25 kg bulk product and then divide it into smaller bottles (e.g., 10 ml) and apply their label. Even in this case, they must include our company’s name as the manufacturer.

So, does this example fall under private labeling or contract manufacturing? The answer is that it can be both. When the client resells our standard products with minimal alterations, it fits the private label model. But when they request custom flavors and we handle the entire process from research to production, it shifts into contract manufacturing, since we’re crafting something specifically tailored to their needs.

So, What’s the Real Difference?

What I’ve learned is that the difference between private labeling and contract manufacturing isn’t as clear-cut as people think. In many cases, the product is customized to the brand’s needs in both models. What really matters is the contract.

In contract manufacturing, the buyer usually owns the design or formula. They have more control over the production process, and the manufacturer produces exactly what the client specifies. In private labeling, the manufacturer might retain rights to the design or formula, but they produce it exclusively for that brand.

But in practice, I’ve seen private label brands in Turkey that involve just as much customization as contract manufacturing. It really depends on the product and the agreement.

In my experience, especially working with contract manufacturers in Turkey, the distinction between these two models is really about how much control you have over the product and the terms of the contract. For generic products—like paper goods or food items—you might be happy with private label production that uses a catalog and focuses on branding.

But if you’re creating something more customized—like a unique clothing line or jewelry design—you might lean more toward contract manufacturing, where you control every aspect of production.

At the end of the day, both models require contracts, and the specifics of those contracts define how much control you have over the process. That’s why I don’t see the need to strictly differentiate them the way some people do.

Why the Catalog Concept of Private Label Isn’t Always Accurate

The idea that private label manufacturing always involves choosing a product from a catalog is an oversimplification and doesn’t apply across all industries. In reality, the term “private label” can encompass a wide range of manufacturing relationships, from selecting stock products to developing fully customized items. Catalog selection is more typical in sectors like cosmetics, health supplements, and generic food items, but even here, there’s often flexibility for customization.

In industries like fashion, textiles, and jewelry, private label production is much more involved and resembles contract manufacturing, with businesses typically requesting changes, unique designs, or custom features.

If manufacturers were merely offering catalog products to brands, this could raise ethical concerns around design stealing or lack of originality, especially in industries like fashion and jewelry. However, most private label agreements include clauses that ensure designs are exclusive to the brand and cannot be resold or replicated by the manufacturer.

Conclusion: It’s All About the Contract

Whether you’re choosing private label production or working with a contract manufacturer, it all comes down to what you’re looking for. In Turkey, I’ve seen both models in action across multiple industries, and in most cases, there’s overlap between the two. The key is understanding what you need and finding the right partner who can meet those needs.

That’s my take. I hope this helps clear up some of the confusion around these two models. Let me know if you’d like more details or examples from my work. I’m always happy to share what I’ve learned from working with contract manufacturers in Turkey.

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