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Co-packing 101

The nearly US$3 trillion food and beverage market is experiencing phenomenal growth, due in part to consumer demand for innovative offerings and healthier product.

The nearly US$3 trillion food and beverage market is experiencing phenomenal growth, due in part to consumer demand for innovative offerings and healthier product, according to Allied Market Research. In fact, the global market for functional food and beverages is expected to reach $255 billion by 2024, according to Research and Markets, which means brands will be bringing innovative products to market faster than ever. But the process from ideation to final product isn’t easy, and brands need to consider key dynamics surrounding partnering with a co-packer or contract manufacturer.

Choosing your co-packing partner. Co-packers may operate on many levels—from manufacturing their own brand to manufacturing several brands—and their capabilities, capacities and experience vary. Brands should look for a co-packer whose priorities and capabilities aligned with their needs, and define who is responsible for certain roles. For example, will the co-packer source and purchase ingredients, or will the brand take on that task? What is the co-packer’s record on food safety and quality?

Benefits of working with a co-packer. Many co-packers often provide additional services, such as in-house research and development (R&D), ingredient sourcing, supply chain management, packaging and regulatory compliance, etc., which can significantly reduce development costs and time to market. Having a partner to handle these details allows brands to focus on the marketing and sales side of the business. That said, issues such as complexity of a formulation and type of processing required can affect costs. A co-packer can help simplify and streamline the manufacturing process so there is greater efficiency, less waste and lower cost.

Drafting a win-win contract. A well-written contract between business partners for the manufacture, supply and distribution of food and beverage products will help brands alleviate uncertainties and clarify the responsibilities of the parties. Ensuring the intellectual property (IP) rights of each party’s pre- and post-execution of the agreement should be carefully spelled out to avoid fights over ownership down the road. The contract also should have a robust quality assurance section that outlines a food safety plan, FSMA (Food Safety Modernization Act) audit procedures and recall procedures.

For more information on considerations when selecting a co-packer, download the digital magazine.

 

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