Finding the right contract manufacturer or co-packer for your food or beverage product can be quite daunting and poses a unique set of challenges. Keep reading for a helpful how-to list for finding the right manufacturing partner.
Food processing and packaging is a complex field. You will need to find a manufacturer that understands your product and the challenges associated with making it. There are a few steps to take in order to find the right partner:
Determine your needs
Conduct a search
Evaluate potential partners
Establish needs and expectations
Define your product(s) specifications
Negotiate and finalize your agreement
Have a backup plan!
Careful planning and consideration of each of these aspects will help ensure the success of your brand and protect your reputation and financial stability. I have spent over a decade identifying, vetting and working with and for contract manufacturers across the US in a variety of food and consumer goods categories. I’ve helped launch new products like chocolates, started up new manufacturing processes for hot filled beverage concentrates, and even overseen the launch of various infused products. In this blog post I will take a deep dive into the steps for finding the right manufacturing partner so that you can hopefully avoid the pitfalls that I’ve seen and helped brands work through in the past.
1. Determine your needs:
Before you start your search, it's important to have a clear understanding of what kind of partner it is that you need. Do you just need someone to package your product? That’s a copacker. Looking for someone to put your label on their formula? That’s a white label manufacturer.
Before you reach out to any manufacturers or copackers, understand the process that you seek (beverage, powder, hot fill, aseptic?), your estimated annual or monthly production volume, specific packaging requirements or equipment that may be required (especially for new and novel products). Contract manufacturers can offer turn-key solutions (some including R&D!) and some allow for you to handle certain aspects of the process so determine how much help you will need in advance as well.
2. Explore potential partners:
Start by researching potential partners that specialize in your category of product or have experience with similar products. Search online directories such as Food Master or industry associations such as the Institute for Food Technologists. Trade show catalogs and industry magazines are another great place to begin your search. Lastly, I’ve found that ingredient vendors can be a fantastic source of referrals and sometimes they are in fact contract manufacturers themselves, but just don’t advertise it widely. Create a list of at least three potential options to start really evaluating but keep an open mind to others that may pop up later.
3. Evaluate and audit:
Once you have a list of potential companies, start evaluating them based on the following factors:
experience and capabilities
quality control processes
Certifications (organic, non-allergen, kosher etc)
Pricing and MOQs (minimum order quantities)
Ask questions about their facility, how long they’ve been in business and what types of products they currently make or have the ability to make. Then before any site visits, request copies of and review all of their paperwork, including licenses, audits, food safety plans, recalls etc. This will save you the expense of traveling if they don’t pass these first two phases.
When you are ready, request a site visit and be sure to let them know you want to be onsite during manufacturing hours so they don’t schedule you for a time when they are not in production. It may seem expensive to perform a site audit, but it is very much in your best interest to see what kind of operation you are signing up to work with.
If you aren't sure what questions to ask, what documentation to request or what to look for during your visit, you can work with an expert, like The New Flavor, to help you audit a potential partner before you sign any contracts.
4. Establish both parties needs and expectations:
Once you have identified your short list of potential partners, it's important to communicate your product and manufacturing needs clearly and discuss any specific requirements or concerns you may have. If you haven’t already, it’s time to get an MNDA in place.
Just as importantly, make sure you are comfortable with the responsiveness and communication of the potential partners during the entire vetting process. When it comes to working with a coman or copacker, communication is the foundation. Setting up communication expectations early is going to be one of the most important things you do with a 3rd party manufacturer. And trust your gut! If they seem to be avoiding answering any questions that can be a huge red flag!
5. Define the specifications for your product
Have clear instructions for what your product is and what parameters must be met by the 3rd party in order for them to deliver a product that will meet your needs.
Launching a gummy? Make sure you define the color and flavor targets along with Brix and pH. Powder product? Define the tap density, color and particle size. Every detail, down to the lot code formatting should be considered. Make sure you agree in writing what the parameters are before finalizing your contract. You will likely have more than one specification, each aligning to a certain part of the manufacturing process.
Note: When defining the ranges for the attributes on the specifications, plan to work with the manufacturer, not against them. You should establish reasonable and attainable ranges, nothing too wide or too narrow. Also, figure out what can be defined by physical measurements vs. subjective means - this will help prevent any disputes should any arise. Pictures are an awesome addition to a written specification (especially for acceptable and unacceptable appearance targets).
Lastly, align with your distribution partner ahead of time. Your distributor may dictate specific packaging needs and you will have to alert the coman/copacker to these requirements.
6. Negotiate and finalize your agreement:
Once you have identified a 3rd party manufacturer that you want to proceed with, it's time to negotiate the terms of the agreement and finalize your contract. This can be one of the longest steps depending on your company size and the requirements for your product(s). Most contract manufacturers and copackers have a boilerplate template they can send you to start from. If you haven’t engaged a lawyer yet you might want to at this point.
In this phase you should be:
Negotiating pricing: Ask yourself: “Do I want/need to pay for their turn-key services?” If not, then do you have the ability to handle certain aspects of the manufacturing process such as ingredient or packaging procurement? How aggressive is your timeline? Is anything on your list of requirements a “nice to have” and not a “must have”? These questions and more are important to consider when negotiating pricing (like buying a car!).
Establishing payment terms:Some manufacturers require a deposit, others will give terms and some will not. You might even want to discuss this earlier on if you know that you are unable to provide the upfront investment for your production and are seeking terms.
Agreeing to production lead times
Establish and agree to reasonable lead times for your contract manufacturer based on your timeline and order needs. Your potential partner should be able to agree to a production timeline. Make sure to define in the contract what the ramifications are should the lead times not be met.
Defining finished goods deliverables and resolution of disputes should they arise
Even if lead times are met, perhaps the product specifications were not met. Have a written agreement in place to determine how disputes will be handled should something unexpected arise. Lastly, make sure the manufacturer is insured for anything in their possession that you own, including the value of the finished product!
7. Since there is a certain amount of risk involved - Have a backup plan!
A defined backup plan may sound arduous, but I can assure you - no matter what the economic or global supply chain is like, you will want to have backups for everything (ingredients, packaging and comans/copackers). In fact, this is typically a requirement for a lot of brands and manufacturers. Secondary and tertiary suppliers for raw materials can ensure a consistent supply chain and easier to manage Costs of Goods Sold (COGS). AND, heaven forbid, should you part ways with your coman for any reason, you have an immediate solution in place and can potentially avoid losing shelf space due to running out of stock.
Conclusion
Overall, finding the right manufacturer or co-packer for your product can be a lengthy process. It requires a lot of research, a detailed evaluation, clear communication, and a backup plan. However, by taking the time to identify the right partner, you can help ensure the success of your product(s) and your business. Still not sure? The New Flavor has the experience and knowledge to help guide you through this process.
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