For smaller artisan food producers, creating a quality product is more than just a business venture— it’s a source of pride. After all, each batch that’s sold goes out with your name on it and bears your creative stamp. As your business grows, it becomes a challenge to manufacture the quality product you’re known for in the quantities consumers are now demanding. You face a decision: either invest in more efficient in-house production, or outsource production to a co-packer.
What is a Co-Packer?
Co-packers manufacture and package food and beverage products for a variety of food labels. Contract packing companies are the heavy lifters of the food production industry, creating some of the most well-known food products on grocery store shelves. Co-packers are often used as the sole producers for many small, independent brands without production facilities of their own. They can also serve as a source of excess capacity for large food producers with their own production lines. There are hundreds of co-packing companies operating in the United States that produce and package a dizzying range of products from diet sodas to organic salsas.
For someone just beginning their research into co-packing, it can be difficult to know where to begin. In this post, we’ll cover the industry basics, help you determine if your business is ready for co-packing services, and share seven key things to look for when vetting potential co-packing partners.
Pros and Cons of Co-Packing
Like everything in life, teaming up with a co-packing facility comes with advantages and drawbacks. The decision of whether or not to relinquish direct control over product production is a big one. After all, you’ve successfully built your brand to this point by overseeing the process from start to finish. Turning that over to someone else is a major shift for most small business owners. To help you clarify your thinking, we’ve compiled a list of the major upsides and downsides to co-packing.
- Long-term savings — Co-packers frequently have access to better ingredient pricing and offer the advantages of economies of scale. Although rarely cheaper in the short-term, co-packers can offer significant savings in the long run.
- Access to niche certifications — If you’re interested in producing products with specific certifications like gluten-free, organic, or nut-free, certain co-packers have access to production lines that meet these higher standards. Co-packing provides a cheaper and more convenient means of producing specialized products.
- Shortened time frame to bring products to market — With access to large-scale production equipment, co-packing companies are in a position to produce at high volumes. If you’ve recently landed a new contract or are struggling to meet current demand, a co-packer can assist in fulfilling orders at a faster pace than a small-scale operation.
- Access to add-on services — Some co-packers offer a range of services beyond just product production and packaging. These add-on services include things like product storage, shipping directly to your customers, and R & D capabilities for refining existing product formulations or creating new ones.
- Higher upfront investment — Co-packers often require a large upfront payment in order to begin working with a new client.
- Defined quantity runs — Co-packers need some level of business certainty. They’ll require you to commit to a minimum production run in advance. You’ll lose some of the flexibility you were used to in controlling just how much and when you produced your product.
- Loss of direct quality control — When you were the producer, you maintained direct control over exactly what ingredients were used, where they were sourced, the cleanliness of the facility used in production, and a host of other factors. When working with a co-packer, you lose immediate oversight of the production process.
- Inability to adapt to custom production requirements — If your product requires some specialized process or uses novel or high-end ingredients, a co-packer may require modifications that may potentially compromise the quality of the finished product.
When Should You Start Using a Co-Packer
For most small food producers, using a co-packer will become part of the business model at some point. But knowing when you’re ready to partner with one can be tricky. Here are some scenarios that indicate you may be ready to work with a co-packer.
You need access to industry expertise
Scaling a recipe up from small batches to large-scale production requires a level of expertise that many artisan producers just don’t have. Co-packers can help by providing resources to assist with the transition to an increased volume of production.
When demand exceeds supply
If your current commercial kitchen setup is struggling to keep up with the volume of orders you’re receiving, a co-packing company can help you scale up production quickly.
You’re running into time constraints
At a certain point, spending a large amount of time actually making your product starts to become counterproductive. After all, you have limited time resources. Co-packing can relieve the day-to-day product production burden, freeing you to devote more of your time to other activities.
You need to conserve capital
As your business grows, there will come a point when you’ll need to either outsource production to a co-packer or heavily invest in a manufacturing facility of your own. For many small to medium-sized food and beverage producers, using a co-packer frees up long term capital to invest in other parts of the business that would have otherwise been spent on improving production capabilities.
You’re ready to expand your product line
Sometimes adding complementary products to your original line of offerings makes sense. If you specialize in organic teas, piloting a line of coffees or hot cocoas may be something you’re interested in, for example. A co-packer can leverage their existing expertise in producing a new line of products, saving you the time and energy of doing the research yourself.
How to Choose a Co-Packer
Once you’ve decided to move forward with co-packing, it’s time to vet a handful of potential prospects. Here are some of the most important things to track down as you do your research.
1. Ask about their manufacturing certifications
Ask if your co-packer’s production facilities hold any industry certifications like HACCP (Hazard Analysis and Critical Control Points) or GMP (Good Manufacturing Practice). Certified facilities are likely to uphold higher levels of food safety during production.
2. Consider the proximity to your base of operations
If at all possible, choose a co-packer that’s close to your base of operations. After all, shipping costs are based on how far goods need to travel, so picking a manufacturer closeby can cut overall production costs. For your onsite visits, the closer the better too.
3. Do they have prior experience with your product type
Co-packers tend to specialize in certain types of foods or beverages. By partnering with a specialist in your niche, you’ll gain access to a higher level of industry expertise.
4. Do you meet the minimum order requirements
Locate a co-packer who is willing to produce the amount of product you’ll need, even if it’s small to start. Some co-packers are more flexible than others when it comes to running small batches.
5. Ask for references
Ask for references from current clients. Then follow up on those references to see what their experiences have been like working with that co-packer.
6. Request an on-site inspection
There’s no substitute for seeing the operation yourself. Schedule a time to take a tour of the co-packer’s plant. Keep an eye out for any red flags when it comes to cleanliness and worker safety.
7. Carefully review contract details
If you’re new to co-packing, engage an industry lawyer to review contract stipulations and verbiage to ensure you’re agreeable to the terms.
Co-packing Packaging and Labeling Considerations
In addition to product production, you’ll also need to think about how you’ll handle the packaging and labeling of your products. Co-packers have different capabilities when it comes to packaging and labeling, so you’ll want to find out if they have in-house capabilities such as design and label creation, and if so, what the quality is like. You may find that you’d prefer to use another outsourced provider to handle packaging design and label production.
Deciding to partner with a co-packer is one of the most important decisions a small food and beverage producer will make. While co-packing offers an exciting opportunity to scale up production, it doesn’t come without risks. However, by carefully evaluating the current and future needs of your business, you’ll gain the insights you need to make a smart decision for your unique situation.
When you’re ready to start expanding your production capabilities, Frontier Label can help by providing you (or your co-packer) with top-notch labels for your food and beverage product packaging. If you would like expert recommendations on label materials, knowledgeable feedback on your artwork, or even a sample of your printed designs, contact us!