A private label agreement is the contract between a maker and a buyer, often a store or co-op, when the maker produces a product the buyer sells under its own brand. Most of it protects both sides in the same places. Brand and recipe: the buyer owns its brand and label art; you keep your recipe and process unless you agree to sell them. Exclusivity: whether you can make the same product for anyone else, or under your own brand. Price: what it includes and how it changes when butter or oats go up. Forecasts and minimums: the buyer's monthly forecast, your minimum run and lead time. The clause small makers forget is branded packaging: bags printed with the buyer's brand come in printer's minimums of thousands, so the agreement should say the buyer buys back what's left if it ends the deal. Then the label: the buyer's name goes on it qualified by "Distributed by", since it didn't make the food, and someone has to approve allergens and claims. Add quality and lot records, recalls, insurance, payment and how it ends. In the example below, a granola maker works out a co-op's store-brand offer. Below are the clauses, the example, and a free template.
The short version
- A private label agreement covers a maker producing a buyer's own-brand product.
- The buyer owns its brand and label art; you keep your recipe unless you sell it.
- Settle exclusivity, price changes, forecasts, minimums and lead time.
- Branded packaging comes in big minimums: get a buyback if the deal ends.
- The label names the buyer with "Distributed by"; agree who approves allergens and claims.
- Lot codes, recalls, insurance, payment terms and how it ends.
- TaroStack makes the store brand a product of its own, with its own lots and packaging stock. More below.
The clauses
| Clause | What to settle |
|---|---|
| Products and specs | Recipe, size, spec sheet, and how changes are agreed |
| Brand and recipe | The buyer owns its brand and art; you own your recipe and process |
| Exclusivity | Whether you may make the same product for others or under your own brand |
| Price | What the price includes, and how and when it changes with costs |
| Forecasts and minimums | Monthly forecast, minimum order, minimum run, lead time |
| Branded packaging | Who orders and pays, and a buyback of what's left if the deal ends |
| Labeling | Who approves; "Distributed by" with the buyer's name and address; allergens and claims |
| Quality and lots | Lot codes, best-by dates, retained samples, certificates |
| Recalls | Who decides, who pays, how fast lot records are shared |
| Insurance | Product liability limits, each naming the other |
| Payment | Terms, deductions and chargebacks |
| Term and ending | Length, notice, and what happens to stock and packaging |
The label rule: a business named on a label that didn't make the food is qualified with "Manufactured for", "Distributed by" or similar (21 CFR 101.5). How private label works and prices in general is in what is private label food, and making for another brand under a co-packing contract in co-packing agreement template. This is general information, not legal advice; have a lawyer read the contract before you sign.
An example: a co-op's store-brand granola
Cache Valley Granola Co., the made-up granola maker in Logan, Utah, I use in these examples, was offered the granola for a regional co-op's store brand, 600 bags a month:
| Line | Amount |
|---|---|
| Price to the co-op, a bag | $4.10 |
| Granola and labor | $2.67 |
| Bag printed with the co-op's brand | $0.38 |
| Margin a bag | $1.05, 26% |
| Co-op's shelf price, and its margin | $6.99, 41% |
| Minimum run, and months it covers | 900, 1.5 months |
| Printed bag minimum, and months it covers | 5,000, 8.3 months |
| Left holding if the co-op ended the deal after a few months | $2,817 |
The margin is thinner than on Cache Valley's own bags, and that's normal for store brands; the volume is the reason to say yes. The risk is the bags: 5,000 printed with the co-op's brand cover eight months, and three months in, 3,800 bags ($1,444) and 450 finished bags ($1,373 at cost) would be worth nothing to anyone else. The agreement Cache Valley signed has the co-op buy back unused branded bags and finished goods at cost if it ends the deal, a 90-day notice, and a price review when oats or almonds move more than 10%. What the bars and bags cost is in granola business plan.
Get the template
Download the private label terms template. Two sheets: the numbers, with the price against your cost and branded packaging, your margin and the buyer's, the forecast against your minimum run and the packaging minimum, and what you'd be left holding if the deal ended; and the clauses, each with what to settle and a column to tick off. It's an ordinary Excel file with no macros, and it works in Google Sheets, LibreOffice and Numbers.
Where this stops working
The agreement says the co-op buys back what's left. On the day it ends, you need the count: how many branded bags, how many finished bags, from which lots, at what cost.
How TaroStack does it
TaroStack makes the store brand a product of its own, with its own packaging and lots.
Its own product and bag. The store-brand granola is its own item with its own recipe, using the co-op's printed bag as its own packaging item, so its bags are counted apart from yours.
Lots and recalls. Each run is a batch with its lot and best-by date, and the co-op's orders record the lots they got, so a recall report shows every order a run went out on.
Cost at hand. Stock is valued at cost, so the buyback figure for branded bags and finished goods is there when it's needed.
| The job | Spreadsheet | In TaroStack |
|---|---|---|
| Branded bags on hand | Count the boxes | Stock of the bag item |
| Finished store-brand bags | Mixed in with yours | Their own item and lots |
| Buyback at cost | Worked out under pressure | Stock value at cost |
| Which orders got a run | Invoices | One recall report |
Recipes, batches, lots, stock value and recalls are on every plan, from $49 a month. The first 30 days are free, with no credit card. If you'd like a hand setting up, ask, and we'll do it with you.