The nearly US$3 trillion food and beverage market is experiencing phenomenal growth, due in part to consumer demand for innovative offerings and healthier products, according to Allied Market Research. In fact, the global market for functional food and beverages is expected to reach $255 billion by 2024, which means brands will be bringing innovative products to market faster than ever.
But the process from ideation to final product isn’t easy. Understanding trends, ingredient considerations, supply chain issues and production processes is paramount for success; cost and logistics can present hurdles, too, especially for new or small brands. Fortunately, you don’t have to go it alone.
Co-packers or contract manufacturers are food processors that provide an attractive option for food and beverage brands to quickly launch products in the market. Co-packers often offer additional services, such as product development, ingredient sourcing, cost containment, packaging, warehouse storage, label review, regulatory compliance and ability to scale up product. What’s more, co-packers may operate on many levels—from manufacturing their own brand to manufacturing several brands—and their capabilities, capacities and experience will vary. The key is finding the right fit for your product.
Finding the right contract manufacturer to meet your needs is tantamount to finding the perfect life mate. You do a lot of dating before committing to a relationship, and the same is true in business. Geographic proximity to you and/or largest concentration of customers also should be weighed when choosing a co-packer.
“You should feel your contract manufacturing partner’s priorities and capabilities are well aligned with your needs,” said Liz Myslik, chief marketing officer at Fresca Foods Inc. “For example, if you need help sourcing and purchasing, can they do that for you? Are they aligned well in terms of size and scale? A large-scale manufacturer might not be the right fit for a startup if you will not get the same focus and attention you would get at a smaller company.”
In addition to a stellar track record, people, food safety and quality are non-negotiable priorities when considering a co-packer. “Protecting their employees and their partners’ brands is the most important job for any food production company,” Myslik emphasized.
Chris Bekermeier, vice president, marketing and legal affairs at PacMoore Products Inc., agreed, noting trust must be the No. 1 priority when entering a business relationship.
“How can you align yourself with someone you do not trust?” he said. “Top quality systems and execution are critical, but value (not price) is the most important measure when assessing cost.”
But no relationship is without hiccups, and brands will experience quality issues, cost challenges and other pressures when working with a co-packer.
Pros and cons of using a co-packer
Many small brands don’t have the capital for their own equipment and facility. Using a contract manufacturer reduces those costs (and headaches) so they can focus on the marketing and sales side of the business. Many contract manufacturers also offer in-house research and development (R&D) that can significantly reduce development costs and time to market.
Like any relationship, there can be downsides. One issue to consider is potential loss of control over the product and its manufacture. Brands should develop a contractual agreement to ensure the products are manufactured according to specifications—ingredients, formulation, processing, packaging, etc.—in a timely manner. Other disadvantages can arise when equipment and/or facility limitations impact scale-up and production. Production scheduling can also be problematic, especially if the co-packer has multiple clients with similar products.
Learn more in INSIDER’s Navigating the food and beverage co-packing landscape digital magazine.