Contract Manufacturing

Contract Manufacturing for Food, Beverage, and CPG Companies

Ok, so you've got some amazing new products you want to bring to market, but scaling up production feels like a mountain to climb. Maybe you're wondering how to meet demand without investing in your own manufacturing facility. Contract manufacturing is probably what you're looking for. Here is the 101 on what it is, how it works, and how to find a good partner.

What Is Contract Manufacturing?

Contract manufacturing is when you outsource the production of your products to a specialized company that makes products like yours. These companies are called contract manufacturers (or co-manufacturers for short) but sometimes also referred to as co-packers, which is a similar concept with a few differences and have the capabilities, equipment, and people to produce goods for multiple brands. By partnering with a contract manufacturer, you can focus on what you do best—innovation and marketing—while they handle the manufacturing side.

Why Choose Co-manufacturing?

Let's cover some of the reason's you might choose contract manufacturing over running your own facility.

Capital

Building a manufacturing facility requires an investment investment in infrastructure, equipment, and staffing. Startups especially need to prioritize allocating capital to growing the commercial side of the business instead of investing in a fixed asset like a manufacturing plant.

Access to Expertise and Resources

Contract manufacturers are specialists in production. They understand the intricacies of manufacturing processes, quality control, and regulatory compliance. By leveraging their knowledge, you can enhance your product quality and reduce production challenges.

Cost Savings

Sincecontract manufacturers buy ingredients and materials in bulk for multiple clients, they can get better prices from suppliers. With a good partner, some of these savings will be passed on to you as lower production costs than if you do it all yourself. 

Scalability

Whether you're launching a new product or experiencing seasonal demand shifts,contract manufacturers offer flexibility. They can adjust production volumes to meet your needs, helping you respond quickly to market changes.

Focus on Your Core

By outsourcing manufacturing, you free up time and resources to concentrate on growing your brand, developing new products, and connecting with customers.

Types of Co-manufacturers

Contract manufacturers come in various specialties, and finding one that aligns with your product is important.

Food and Beverage Specialists

Thesecontract manufacturers focus on edible products, understanding the strict regulations and safety standards required. They have experience with everything from baked goods to beverages.

Consumer Packaged Goods (CPG) Co-manufacturers

These manufacturers handle a wide range of packaged goods, including personal care items, cleaning products, and more. They understand packaging requirements and consumer trends.

Niche or Specialty Product Manufacturers

If your product requires specialized equipment or processes, such as organic certification or allergen-free facilities, look for acontract manufacturer with those capabilities.

How to Find the Right Contract Manufacturer

Referrals

Ask industry peers, suppliers, or trade associations for recommendations. Personal referrals can provide valuable insights into acontract manufacturer's reliability and quality. The Startup CPG slack channel is a great place to get referrals from people that have done it before.  

Use Online Search Tools

Websites like Thomasnet have been around for a while but have a lot of noise in them. We built comanufacturers.com get more signal and less noise through our co-man finder - find info on their facilities, capacity, products they can make, certifications and contact details for any manufacturers we cover.  

Attend Industry Trade Shows

Trade shows offer opportunities to meetcontract manufacturers face-to-face. You can discuss your needs directly and get a feel for their capabilities.

• PACK EXPO: One of the bigger events in the packaging and processing industry, including co-manufacturers and co-packers.
• Natural Products Expo West and Expo East: hese will attract co-manufacturers specializing innatural, organic, and healthy products.
• SupplySide West and SupplySide East: contract manufacturing for dietary supplements, food, and beverages.
• Institute of Food Technologists (IFT) Annual Meeting and Food Expo: a leading forum for food science professionals. 
• Process Expo: dedicated to bringing together food and beverage processors and equipment suppliers. It includes co-manufacturers and co-packers showcasing processing solutions.
• Winter and Summer Fancy Food Shows: for co-manufacturers in gourmet and artisanal food categories.
• PLMA Private Label Trade Show: a key event for retailers and manufacturers in the private label industry.
• WestPack: an expo covering packaging design, materials, and technologies for various industries.

Preparing to Work with a Contract Manufacturer

Before reaching out to potentialcontract manufacturers, gather all the necessary information to present your product effectively.

Compile Detailed Product Information

• Formulations or Recipes: Provide exact ingredients and quantities.
• Specifications: Include details like pH levels, texture, shelf life, and any other quality parameters.
• Packaging Requirements: Specify packaging materials, sizes, and labeling details.
• Regulatory Compliance: Note any certifications needed, such as organic, non-GMO, or allergen-free.

Estimate Production Volumes

Be honest about your expected production volumes for the next few years. Accurate projections helpcontract manufacturers assess whether they can meet your needs and provide appropriate pricing.

Prepare Your Brand Story

Sharing your brand's mission and values can help thecontract manufacturer understand your goals and align their services accordingly.

Selecting the Perfect Contract Manufacturer

Choosing the rightcontract manufacturer is a significant decision. Here are key factors to consider:

Alignment with Your Product and Volume Needs

Make sure thecontract manufacturer has experience producing products similar to yours and can handle your current and future volume requirements.

Quality Assurance and Compliance

Verify that thecontract manufacturer follows strict quality control procedures and complies with all relevant regulations. Ask about their certifications and audit history.

Communication and Responsiveness

Effective communication is vital. Assess how promptly they respond to your inquiries and their willingness to address your concerns.

Transparency and Trustworthiness

Look for acontract manufacturer that is open about their processes, pricing, and any potential challenges. Trust is the foundation of a successful partnership.

Facility Visit

If possible, visit thecontract manufacturer's facility to see their operations firsthand. This can provide valuable insights into their capabilities and quality standards.

Crafting a Strong Partnership

Building a successful relationship with yourcontract manufacturer's involves more than just signing a contract.

Open Communication

Maintain regular contact to discuss production schedules, forecasts, and any issues that arise. Open dialogue helps prevent misunderstandings.

Collaborative Problem-Solving

Work together to address challenges. Whether it's supply chain disruptions or production delays, a collaborative approach fosters mutual success.

Respect and Professionalism

Treat yourcontract manufacturer as a partner. Show appreciation for their expertise and efforts, and they will be more invested in your success.

Legal Considerations

Protecting your interests is important when entering a contract manufacturing agreement.

Non-Disclosure Agreement (NDA)

Before sharing proprietary information, have both parties sign an NDA to safeguard your confidential details.

Detailed Contract

Create a comprehensive contract that outlines:

• Product Specifications: Clear definitions of the product requirements.
• Pricing and Payment Terms: Agreed costs and payment schedules.
• Minimum Order Quantities (MOQs): The smallest amount you can order per production run.
• Quality Standards: Expectations for product quality and procedures for handling defects.
• Intellectual Property (IP) Rights: Ownership of formulas, recipes, and any developed IP.
• Termination Clauses: Conditions under which the agreement can be ended.

Consult Legal Professionals

Engage an attorney experienced in contract manufacturing to review agreements and protect your rights.

Protecting Your Intellectual Property

Your product formulas, recipes, and brand assets are valuable. Here’s how to safeguard them:

Clearly Define IP Ownership

Specify in the contract who owns the IP and any developments or improvements made during the partnership.

Limit Access to Sensitive Information

Share only the information necessary for production. Consider producing certain proprietary components yourself if feasible.

Monitor for Compliance

Stay vigilant about how your IP is used. Include audit rights in your contract to verify compliance.

Managing Risks and Challenges

Working with acontract manufacturer can present challenges. Here's how to handle common issues:

Quality Control

Establish clear quality standards and testing procedures. Regularly review production outputs to confirm they meet your expectations.

Supply Chain Disruptions

Discuss contingency plans with yourcontract manufacturer for sourcing ingredients or materials in case of shortages or delays.

Communication Barriers

If working with an overseascontract manufacturer, consider language differences and time zones. Set up communication protocols that accommodate these factors.

Capacity Constraints

Confirm thecontract manufacturer can handle increased production volumes as your business grows. Discuss scalability during initial negotiations.

Best Practices for a Successful Partnership

Start Small

Begin with a smaller production run to test the partnership. This allows you to address any issues before scaling up.

Provide Accurate Forecasts

Share realistic sales projections and update yourcontract manufacturer regularly. This helps them plan production and manage inventory effectively.

Stay Informed

Keep up with industry trends and regulatory changes that could affect your product or manufacturing process.

Build a Long-Term Relationship

Invest time in nurturing the partnership. A stable, long-term relationship with yourcontract manufacturer can lead to better terms and more collaborative efforts.

Frequently Asked Questions

What is contract manufacturing?

It's the practice of hiring a third-party company to produce your products. This allows you to focus on other aspects of your business while leveraging the manufacturing expertise of thecontract manufacturer.

Why should I consider contract manufacturing?

Contract manufacturing can reduce costs, provide access to specialized expertise, offer scalability, and allow you to concentrate on your core competencies like marketing and product development.

How do I protect my intellectual property?

Use NDAs, clearly define IP ownership in your contracts, limit the sharing of sensitive information, and monitor compliance throughout the partnership.

What should I look for when choosing acontract manufacturer?

Consider their experience with your type of product, capacity to meet your volume needs, quality assurance practices, communication style, and trustworthiness.

How can I maintain product quality?

Set clear quality standards, establish testing procedures, and maintain open communication with yourcontract manufacturer to address any quality issues quickly.

The Bottom Line

Contract manufacturing can significantly impact your business. By partnering with the rightcontract manufacturer, you can enhance product quality, reduce costs, and focus on growing your brand. Remember to do your due diligence, protect your interests, and build a strong, collaborative relationship with your manufacturing partner.

Ready to take the next step? Start exploring potential contract manufacturers today, and unlock new opportunities for your products.