(FORTUNE Small Business) – When the discount chain Costco wanted to launch a new offer for "Two pillows for $10," it called Leo and Jeff Hollander, the father-and-son team that owns Hollander Home Fashions. When Laura Ashley decided to introduce its own branded pillows, down comforters, and mattress pads, it struck a deal with Hollander. And when Bloomingdale's needed a mattress pad with extra fluff on top, it asked Hollander to make it. Considering that the company is one of the largest bedding manufacturers in the country, cranking out 150,000 pillows a day, it's more than likely that something in your bedroom is made by Hollander. It's also likely that until recently, you would have had no way of knowing it.

For most of its 50-year history, Hollander, based in Boca Raton, has kept a lower profile than the CIA. Its products were sold under other brand names, such as Eddie Bauer or Simmons Beautyrest. Hollander also made store-brand products for retailers including J.C. Penney, Kmart, Kohl's, and Bed Bath & Beyond. The name "Hollander" appeared in fine print on some packages and on the federally required contents tag (the crinkly label that lists the materials and sometimes warns the customer against eating them).

Whether or not anyone has ever heard of it, Hollander—a third-generation family-owned business—is an undisputable success. It has managed to compete against billion-dollar domestic mills as well as an onslaught of cheap foreign imports, in part because it shifted some manufacturing to China years before most businesses were even thinking about doing so. Focusing exclusively on licensed and private-label merchandise brought the company revenues of about $200 million a year. Still, experts say that if Hollander had put its brand in the marketplace, it would probably be in even better shape today. "Basing a business on good quality for a good price allows companies to do well," says Linda Kaplan Thaler, CEO of Kaplan Thaler Group, an advertising firm in New York City. "But it will never achieve what we call the 'big bang'—something that explodes in the market."

More than ever, companies of all sizes—and especially smaller ones—are recognizing the importance of bolstering their brand. For some businesses that once relied on private-label work as their bread and butter, that means recognizing the increased benefits of stepping out on their own. Take Chic Boutique, based in Norwood, N.J., which makes mostly private-label fashion dolls for retailers like Toys "R" Us and Wal-Mart. Recently Chic Boutique declined a major toy retailer's offer to purchase the entire production of its newest and most unique line, Hottiez. "We can do at least ten to 20 times the amount of sales if we can sell to the whole universe," says Chic Boutique CEO Murray Bass, who declined to name the retailer. Bass could be right. For decades, Boston-based Abington Shoe Co. made private-label boots exclusively for various companies. Then, in 1973, it created a waterproof leather boot that the owners considered so innovative they decided to sell it under their own brand. They called it Timberland, and that boot's colossal success changed the focus—and the future—of the company.

Although promoting a new Hollander brand could put the company in the awkward position of competing against its long-established retail and private-label clients, Hollander has decided that is a risk it must take to differentiate itself. "We were struggling to get our share of the marketplace," says chairman and CEO Leo Hollander. "People see six pillows in a store—all are 20 inches by 26 inches and down-filled and all have a cotton-poly shell. They look the same, so people buy the one they recognize. We needed to promote our brand so the consumer could see we were equal—or better."

An opportunity to get the Hollander name out front came in October 2002, when Bed Bath & Beyond asked the company to upgrade BB&B's fiberbed product (a padded cover that lies on top of a bed to make it softer). Hollander agreed to the request on one condition: that the new fiberbed be sold under the Hollander label rather than as a BB&B product. Over the next two years Hollander would spend more than $1 million, renegotiate some of its private-label agreements, and eventually unveil an entirely new—and profitable—line of branded business that has been hitting store shelves this year.

The Hollander family fell into the bedding business almost by accident. In the 1940s, Bernard Hollander, Leo's father and Jeff's grandfather, worked as a peddler selling combs, glasses, and whatever else he could to make ends meet. Bernard also stumbled upon pillows, which proved serendipitous a few years later when the Korean war created a feather shortage. (The government appropriated large quantities of feathers to make sleeping bags for soldiers.) But Hollander's pillow business, based in his Irvington, N.J., garage, was small enough to be overlooked. With that rare supply, one sewing machine, and a homemade measuring board, Bernard Hollander started manufacturing pillows and selling them to retailers. He tracked orders on wrapping paper.

Leo, now 67, has been involved in the business since those garage days. As a teenager he cut the fabric and attended open buying days at department stores. He took over in 1964 and began adding factories in Los Angeles and Chicago. Leo's kids grew up in the business as well. After attending Wharton and working at a Washington, D.C., ad agency, Leo's oldest son, Jeff, returned to the family business in 1981. "They paid me less than half of what I was making, but I knew I'd have a better future," says Jeff, now 42. (He was right; today he's the company president.)

For U.S. bedding companies, the late 1980s and early '90s were a time of rampant consolidation, and in the years to follow, the big domestic mills began to falter under the debt they'd run up to buy competitors. A flood of foreign goods didn't help. "There has been failure after failure in the major home-furnishing and textile companies," says Joel Havard, home-furnishing analyst at BB&T Capital Markets in Richmond. Pillowtex, once the largest U.S. home-textile company, ceased operations in July 2003. Home-furnishing companies Dan River and WestPoint Stevens, both publicly held, declared Chapter 11 bankruptcy and are now under reorganization. Hollander survived, though, and today it's one of the few U.S. pillowmakers from the 1950s still in business. (Its main competitor is Seattle-based Pacific Coast, also family-owned. It vies with Hollander to be the country's biggest pillowmaker; Hollander sells more units, but Pacific Coast earns more in revenue. It has been selling its own branded pillows for more than ten years.)

Hollander avoided the acquisition wars of the 1980s and also succeeded by taking early advantage of the global marketplace. In the 1970s it started buying fabric in Europe, where it found some prices 25% cheaper as well as fabrics such as jacquards (intricately patterned textiles woven on special looms) that were no longer available domestically. In the 1980s, when Hollander had trouble getting detail work such as hand sewing and double-needle sewing done in the U.S., it looked overseas again—this time to China. While offshoring to Asia is a recent trend for many U.S. manufacturers, Hollander has made all its down shells in China for the past 15 years. "We never felt the competition globally because we avoided it by being there already," says Leo. (Hollander still has nine U.S. factories, which it uses to add detail work to about 90% of its products.)

Over the years Hollander has done a lot of things right—but not without setbacks. In 1990 the company voluntarily recalled 467,000 baby cushions after several complaints alleged that they contributed to infant suffocations. Hollander settled a handful of lawsuits and says its warning labels on the cushions were adequate. But it was a trying time for the company and for Leo Hollander, who had previously lost a child, Jeff's younger brother, to sudden infant death syndrome (SIDS). Other manufacturers faced similar recalls, but Leo says Hollander was the only company that survived. Ironically, one branding expert says, its low profile may have helped it weather the crisis. "There were times that it absolutely benefited them that they had no brand," says Sean Sweeney, CEO of CramerSweeney Marketing Communications, based in Moorestown, N.J. "There was no consumer correlation between the company and the problems."

Marketers say the most important factor in designing a brand is figuring out what a company is and how it wants its customers to perceive it. That sounds like psychobabble, but it's the brand that we see every day, that we remember, and that makes us go out of our way for a $3 tall house blend or a certain brand of water in a bottle. Figuring that out proved tough for Hollander. For years it had competed on price and quality, two of the least sexy criteria when creating a brand. Hollander wanted its brand to encompass everything it had going for it: technology (the company invested millions on automation equipment), knowledge, and comfort. But when it hired a branding and marketing consulting firm in New York City called In the box (yes, the firm spells its name with a lowercase "b"), experts there stressed the importance of focusing on just one thing, and they believed that should be comfort. "Whether you live in a mansion or a one-bedroom apartment, a pillow is a quality item everyone can afford," says Steve Tollen, managing partner at In the box. "It's an aspiration; that's what brand is all about."

To get that message out, In the box set about creating a tag line to explain the Hollander brand. It came up with dozens of ideas, which were then tested in focus groups. "Get comfortable" and "Live comfortably" were the clear winners, but the decision between them was essentially made for Hollander: "Get comfortable" was already owned by Sears Canada. In the box also upgraded the Hollander logo, which is now woven onto a silk label along with the tag line and sewn on its products. "The idea is to look like a wine label," says Jeff Hollander. "Simple, organized, and classy."

Hollander bought ads in trade publications to introduce its new brand. It also invested in store displays, such as a current Wal-Mart promotion in which footsteps on the floor lead customers to the down department. And to promote its "Live comfortably" ideal, the company created a website at livecomfortably.com featuring a panel of advisors, including a feng shui expert, a chiropractor, and a color specialist, who answer questions and offer advice. The site includes such articles as "Spring Cleaning for Comfort" and "Tips for Pillows," which are also sent to the media in a bid for free publicity. (So far it's working: The Hollander experts have been covered in the Atlanta Journal-Constitution, Fitness, and the Pittsburgh Post Gazette.) While the livecomfortably site has a link to Hollander's corporate site, it doesn't actively promote the company or sell merchandise. "We want to get some branding out of it, but we don't want to compete against our retailers," says Jeff Hollander.

Hollander may not be competing against its retailers online, but it is competing against them in their own stores—something some experts say could be problematic. "That's a tough business to be in," says Wendy Leibmann, founder of WSL Strategic Retail in New York City. She explains that stores make higher margins on their own brands and usually don't want to give that up. Jeff Hollander counters, "We haven't heard any complaints." To date, the company says, it hasn't lost any private-label or license customers. Simmons, which has worked with Hollander on its feather and down products since 2001, says the introduction of Hollander's brand has been "invisible" so far. In fact, Simmons wanted to expand into new licensed products with Hollander, says Brandy Nagel, manager of domestic licensing at Simmons in Atlanta, but Hollander declined. Ivy Tan, senior vice president at Laura Ashley in Fort Mill, S.C., isn't concerned either. "Our competition is Ralph Lauren or Liz Claiborne. Those are competitive names, lifestyle brands. Hollander doesn't have that."

While the fashion brands may not yet see it as a competitor, Hollander is getting noticed. "Hollander was an established company chugging away nicely, but now it's become energized," says Don Hogsett, business editor at Home Textile Today, who has followed Hollander for 25 years. "They've been shrewd and capable manufacturers, and now they are becoming better marketers."

Currently a third of the business is branded, and the products are doing well. Sales of the Hollander-branded fiberbed were up 30% to 40% within three months of its launch at Bed Bath & Beyond. Ross Stores recently decided to sell Hollander as its top line. And consumers are starting to recognize the name. Jeff Hollander recently attended a school soccer game, and a woman there told him, "I bought 12 Hollander body pillows today. Did you make them? I noticed they said Hollander."