Growing operations by partnering with a co-packer is a great way to scale your packaged goods business. In response to members requesting more information about this important topic, Hot Bread Kitchen and Sam Adams Brewing the American Dream organized a panel in March 2021 comprised of experts in the field, answering questions on how to evaluate risk to how a small business can find and successfully partner with a co-packer.
Panelists included: Veronica Lehman (Pure Organic Founder, Emerging Brand Coach (she/her)), Jill Donaldson (Founder of PastryBase, LLC, and Director of Sales at Hatch Packaging (she/her)), and Carolyn O’Hare (Chief Operating Officer, Tiny Organics (she/her))
- Partnerslate is a database to help food and beverage CPG brands easily and efficiently connect with the right partners to help their businesses grow.
- Chicagoland Food & Beverage Network is a membership network made up of food and beverage companies including large international manufacturers, mid-sized regional brands, small startups, ingredient companies, and agricultural inputs. The network also includes food- adjacent companies such as banking and finance firms, law offices, marketing companies, and consultants to assist with the growth and scaling of your business.
- JPG Resources is a consulting firm that helps small businesses and start-ups find a co-packer and assist with your pipeline and portfolio, business origination, innovation marketing and focused strategy.
- Private Label Manufacturers Association is the organizer for the industry’s largest annual trade shows for private labels. PLMA represents more than 4,000 member companies worldwide. They work with manufacturers of virtually every type of food, snacks, and beverages.
“Articulating your values, food values, company values, and your mission and communicating that really clearly can help you find a co-manufacturer because it speaks highly of what you’re trying to do. There are co-men out there who are passionate about working with start-ups and bringing progressive food into the market.”Veronica Lehman
Factors to Keep in Mind When Finding the Right Copacker for Your Brand & Business
- Communication, transparency, and trust
- Partnership minded
- Capacity to grow and scale
- Expertise in your particular type of product
- Geography and proximity to headquarters, raw materials, warehouse, and retail markets
- Tolling Costs
- Adaptability (ie. what if you need to change packaging or ingredients)
- Equipment fit (does the manufacturing plant have the right type of equipment?)
Keeping an open line of communication about how your business and your product are developing are going to make the partnership last.”Carolyn O’Hare
How to Generate a Rough Budget Estimate When Investing in Co-Packing
- How much does the product currently cost for you to make on your own?
- How much product is needed for the next 3-6 months?
- What is the shelf life of the product?
- Can you afford to pay several months upfront to a co-packer?
- Do you know the cash-flow cycle including the ingredient costs, freight cost, and packaging costs ?
- Do you know the retail price structure?
“Communication is number one for sure. You want to feel that you’re being heard and that [they’re getting back to you] within a reasonable amount of time. I talk to my co-packers every day, multiple times of day—you want that really comfortable, trusting relationship.”Jill Donaldson
Financial Implications & Hidden Costs for Starting to Work with a Co-packer
- Plant trials
- Cost terms and conditions
- Minimum order quantities
“Branding is so very important because if you create a brand that is trustworthy, that is valid, that is authentic, that people are familiar with, they’ll pick your brand every single day over the brand they are unfamiliar with. It’s really hard to protect the recipe—you can’t patent your recipe—people can knock off your recipe, people can take it off the shelf and deconstruct it backwards. Those things can happen. So the best thing you can do to protect your recipe is to build a strong brand around your [product.]”Veronica Lehman
Essentials of Co-packing Contracts
- The length of time of contract
- NDA for protecting your intellectual property
- Parameters around loss for packaging, scrap, and food loss
- Responsibility and insurance for recalls
- Procedure if either party needs to walk away from relationship