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The end of materials-based manufacturing relationships

In a product lifecycle, ingredients and finished products are transferred from one company to another, yet information beyond product development is not often shared.

When outsourcing production, a brand owner engages in an exchange of goods. While this is primarily true, it is also a narrow perspective that has moulded the business model of the vast majority of contract manufacturers and private label companies today. Often, contract manufacturers limit their service strictly to the production end of the process, leaving everything else to the brand owner. The latter would benefit greatly from product-related intelligence and insight throughout development, registration, launch and sales, yet faces these challenges alone. In a product lifecycle, ingredients and finished products are transferred from one company to another, yet information beyond product development is not often shared. These intelligence gaps accumulate, affecting product development and leading to the brand owner feeling insecure prior to product launch.

Food supplement consumers are increasingly health-conscious and educated, demanding that products have proven benefits. As awareness and availability of information rise, so does the pressure on companies to introduce products to the market. Products that aren’t tailored to fit the consumer and don’t have a clear added value have limited chances of success. It is, therefore, imperative that new product development is an integrated, interconnected process, spanning from the ingredient supplier to the brand owner, with information flowing from start to end. Only this way can one expect a product to be based on the best ingredients, formulated optimally to be both safe and efficient in solving the end user’s problems, and fit for a specific market.

The first step is the choice and sourcing of ingredients. An overview of the raw materials market—what are the latest cutting-edge substances, and what are their effects, applications and regulatory concerns—and cooperation with ingredient suppliers are key when developing competitive products. In the worst-case scenario, the formulating is done by the brand owner who is never in contact with the ingredient supplier because sourcing is left to the manufacturer. Important information on the ingredient may not be passed on through the chain, along with insight into the ingredients market. Communication with raw material suppliers is an underestimated part of product development.

When working with a contract manufacturer, another potential challenge is lagging communication during development between a brand owner and private label company. Private label providers often develop products generally suited for any given market or client. With today’s mindful consumers, region-specific core values increasingly affect buying choices, and products need to be tailored to specific environments. It’s vital to assess trending health areas, product form preferences, supply chain transparency and other specific consumer requirements. Analysis of the market, consumers, client and competition is required for the development of a superior product, and close cooperation between the two involved parties is a prerequisite.

Manufacturing companies traditionally aren’t involved past the point where they sell and hand off the product to the client. Unfortunately, even with an ideal product, success is not guaranteed without solid launch, marketing and sales strategies. Private label companies have the unique position of access to information on launches of their products by different clients in different markets. Best practices and lessons learned from previous cases are priceless in minimizing risks and ensuring optimal usage of resources, yet private label providers tend to limit their service to production. If involvement in post-sale activities is limited, so is the possibility of relevant, experience-based consultancy.

Once provided with the product, brand owners still face myriad issues, including risk of a failed launch. Manufacturing companies have a long way to go in developing business models that provide the information needed to produce a superior product, as well as consultancy for a successful product launch. It is perhaps unrealistic to expect a classic contract manufacturer to develop these relationships, obtain this information and undergo a business change of such extent. Agile companies are likely to outrun the competition and end the era of traditional manufacturing. It is time for contract manufacturing and private label companies to be perceived more as service providers, instead of materials providers. As more companies in the food supplement industry are coming to realize there is no supplement for service.

Blaž Gorjup is chairman and founder of PharmaLinea Ltd., a company dedicated to providing clinically substantiated, private label food supplements. Building on his passion for health industry innovation, experience from the corporate world and based on his relentless pursuit of excellence, Gorjup founded PharmaLinea with a vision of delivering best-in-class private label services.

Looking to know more about the regulatory responsibilities of a contract manufacturing partnership? Join us for the Managing Quality in a Contract Manufacturing Partnership workshop on Saturday, Nov. 10, at SupplySide West 2018. This workshop is underwritten by Sora Laboratories.

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