Private Labeling in Hospitality: Part 1

Last week, I connected with a founder who had just started her business a few years ago. After years in hospitality, she left her job and started making soaps. It’s changed my routine: I now have a morning soap to wake me up (orange, bergamot — a delight!), and if I take an evening shower, a calming soap puts me to sleep (lavender, chamomile — zzzz’s). As I am sure you know, the soap industry is competitive. Yet, she created a product unlike any I have experienced before, and it’s local here in Ontario. When I use it, I know I am supporting someone’s growing ambitions to start a business in a competitive marketplace.

I was talking to the founder about private label requests. She told me it was possible but candidly shared the importance of keeping her brand on the bar to help her create brand awareness and grow her business on both the B2B and B2C sides.

Shortly after, someone sent me this article about Trader Joe’s private label practices. This article is a must-read, even if you’re not in the CPG or grocery space. I will explain why this relates to hospitality shortly.

A very high-level summary of the article:

• Trader Joe’s almost exclusively works with private-label products

• A few founders, specifically the founder of the Brooklyn Dehli, shared her experience. After initially showing interest in her product and soliciting samples, Trader Joe’s ghosted her, and she found a knocked-off version in stores at a much lower price. She even had customers reaching out asking if it was her product.

• The article describes this happening to many founders: products are knocked off without any credit, permission, or explanation.

Creating a product or service (or any business) takes grit and passion, and it's often more challenging for minority-owned and women-owned businesses. Founders work around the clock trying to find ways to keep their margins intact to help scale their businesses and maintain product quality. Seeing stories like this, where an emerging brand’s desire to scale is taken advantage of, is disheartening.

Why am I talking about this, and how does it relate to what we do in hotels, restaurants, cafes and other hospitality spaces?

Private-label products often give a sense of premium and exclusivity. A feeling that we aim for guests to have so that they come back.

Do guests care about service? Of course. Do they want to feel like they are a part of something special? Yes. Does premium still mean private label? - I would say, at least at the Guestbook, we’re not convinced.

Guests are now more than ever looking to connect to the story behind products and understand the values and people who made them. We see people identifying with the products they purchase; e.g., if you’re wearing Vejas, you’ve probably considered organic and transparent manufacturing practices and maybe even find yourself in awe at the average marketing spend per shoe and are wearing them with pride.

It’s no different when people enter hotel rooms or bars and start to look at where and how things are sourced. Check out this global study that evaluates over 75 brands and shows that consumers are 4-6x likely to trust, buy, champion and protect companies with a strong purpose over those with a weaker one (full research study linked, here).

‘Companies with a purpose prevail,’ and we think showcasing those companies in their own right is a better way to engage guests nowadays than to private label with the name or place they already know they are staying or dining at. I mean, where’s the fun in that?

Could we even say that if you lean toward a private label, you might lose the opportunity to re-engage and inspire a guest? (This is maybe controversial, we know.)

We encourage you to read the Taste article about Trader Joe’s and follow along with the Momofuku trademark uproar (shoutout to Fly By Jing and others for standing up and speaking out!). There are lessons that translate from CPG and retail directly into hospitality, and having an awareness of the story and values behind the label is vital to uplifting communities, SMBs, and individuals.

Consider spreading the love by showcasing brands in their own right and allowing guests to discover delightful details. As an industry, we can help emerging brands scale while creating memorable and exciting guest experiences. Which we’d bet, will keep them coming back.