Picking a manufacturer to make your health supplement might be the most important business decision you make. For obvious reasons.
I’m writing this article to aspiring entrepreneurs about the biggest misconception someone could have when beginning the process.
Many companies that advertise themselves as supplement manufacturers have an inconvenient secret:
They’re not supplement manufacturers!
Or any kind of manufacturer.
They’re just advertising/storage companies that outsource their manufacturing. And charge you a markup.
I learned this the hard way when I began my entrepreneurial journey. I was taking quotes for Incredible Greens and received three different offers that differed by about $10,000. I later found out they were all going to be made in the same place!
Yep. Same formula, same quoting department, and a 5 digit pricing difference for my first batch. Yowza. I only found out through a competitor who told me about the arrangement as an attempt to get me to switch manufacturers.
I still remember the next week meeting with a sales rep from one of the brokers after I knew their company was a broker and not a manufacturer. He made a remark about how young I was, and then made an elaborate presentation about how their manufacturing operations worked. He never made eye contact once throughout the conversation.
How To Separate the Wheat from the Chaff
Reputable manufacturers adhere to section 21 CFR 111 of GMP Regulations, as defined by the FDA. The FDA itself doesn’t contract with outside organizations to conduct its regulatory inspections. But there are two organizations that independently verify manufacturing facilities for adherence to GMP manufacturing standards. They’re the Natural Products Association and NSF. Their inspections mimic FDA guidelines and they offer their own certification programs so outsiders can tell if a manufacturer is legitimate or not.
They also keep lists of the companies who are currently in good standing with their certification programs.
Whenever you’re shopping for a supplement manufacturer double check to see if they’re listed on one of these two websites. If they are you’re in good shape. If not they’re either a broker, small-time, or possibly up to some sneaky stuff (like degrading their product with low grade stuff from China).
Different Types of Certifications
The NPA only offers one type of certification. NSF offers three. By perusing their website, it looks like the NPA GMP certification only pertains to companies that actually manufacture products. At least going by the wording on this page. However NSF offers three different types of GMP certifications:
- Packaging Certificate – This means the company bottles and labels products according to GMP standards.
- Storage/Distribution Certificate – They store products according to NSF/GMP standards. This usually means a temperature controlled facility.
- Manufacturing Certificate – They make products according to NSF/GMP standards.
When it comes to finding a manufacturer, the last one is the only one you care about. The other two are fluff. It’s also where you have to be careful. Some companies that advertise themselves as NSF certified supplement manufacturers are actually NSF certified distributors. If you are only looking to put your label on something then that’s fine. You can buy one of their stock products and put your label on it, and rest assured that when they buy their stuff it’s being stored in a safe place.
But you should not be using these guys for custom formulations. They’re just turning around and giving it to the quoting department of the company that actually makes it and charging you a markup.
Naturally their prices will always be on the high side. To their credit, these companies are quite good at explaining their increased costs. The manufacturing industry has large amounts of informational asymmetries. When confronted with uncertainty people routinely place increased emphasis on alarmist outcomes. When buying under uncertainty people take comfort in paying more because they feel like they’re being insulated from risks they cannot quantify.
Brokering/distributing companies emphasize the importance of GMP compliance and how much it costs, and insist their price is what it takes to ensure a high quality product. They’re correct that regulatory compliance has its costs but they fabricate reality. Most supplement manufacturers can make batches of powders and tablets starting at around 500 or 1000 bottles of tablets or powders and still make a profit. Liquids and packets are more.
The tricky part is that the primary business activity of a supplement broker is sales, so they’ll typically have more refined customer service skills than a pure manufacturer. So if you don’t know any better it’s easy to mistake the brokerage company as more reputable.
When They’re Appropriate
Brokers and distributors aren’t inherently bad, it’s just important to understand when that’s all they are. I’ve spoken with many companies that were transparent about their brokerage, and when I inquired about a formula/product they didn’t make we discussed the possibility of them buying it in large quantities (10,000+) and splitting the batch between several companies. That’s fine.
But many of them advertise themselves as something more than what they are (something all companies do I might add). I’ve found that most of them are quite adept at wording their sales copy and objections to technically be in the truth but still obfuscate their true nature.
How To Use This Advice
If you’re looking for a supplement manufacturer you should internalize this information as your first step in filtering potential manufacturers.
If you are looking to private label then brokers and distributors are a good first place to start since they’ll have lower order minimums on their stock products. This is a good idea if you’re an independent retailer or looking to test marketing approaches for a custom product.
If you’re looking to design a custom supplement then you should limit yourself to the organizations listed on the two links at the beginning of this article.