Co-packing – Is Your Business Actually READY?

We get hundreds of brands large and small joining PartnerSlate every month and almost all of them are looking for co-packing partners for their products. 

However, the truth is… many are not actually READY for a contract manufacturer.

Outsourcing your production can be a game changer for your brand. It can enable you to ramp up volume in order to take on larger accounts and increase overall revenue. 

However, working with a co-packer is a BIG STEP. It’s important that you are at the right stage in your business to go down that route, because if you aren’t it can cause a big waste of time and resources for your business, which for a startup could mean life or death.

If you are thinking about going the co-packing route, read through these 4 steps first to make sure the it’s the RIGHT time and decision for your business.

What stage is your business in?

Every business goes through several different stages and food industry consultant Deb Mazzaferro from Growing Your Specialty Food Business does a great job of identifying the different stages for food brands. She breaks them up into four stages: Exploring, Startup, Emerging & Legacy. 

If you are in the Exploring stage, you are probably just thinking about starting a food or beverage business and you may or may not even have a product idea. If you are at this stage you are most likely not ready for a co-packer. 

If you are in this stage, that’s awesome, continue doing just that. Explore what type of product you want to make, do your research, develop a formula and if you need help, start by reaching out to a food scientist or consultant because you are still a bit premature to begin co-packing conversations.

Now the Startup Stage is a bit tougher to determine if the time is right. At this point you have likely decided on a product, developed a recipe or formula, and possibly even sold some units at farmers markets or local grocery stores. However, if you are still not selling more than you can produce, then it’s probably not quite time yet to move to a large production operation. 

On the flip side, if you feel that you’re business is on a strong growth curve and you need the ability to scale up quickly, then it’s probably time for a co-packer. 

A bit of advice on picking the right partner, Match Size! Do your best to find a co-packer that is about the same size as you. If you find someone too big, than you’re the small fish and most likely at the bottom of their schedule priority. So it’s good to find a partner that is large enough to grow with you but also truly values your business.

Emerging and Legacy Brands are typically already working with co-packers or producing their product themselves. But even these businesses that are doing relatively large volume are constantly looking for new co-packers to produce new product lines. If your brand is in the legacy stage, but producing your product in house, it might be time to run the numbers and see if outsourcing production would save you time and money moving forward. 

Money! Money! Money! What is your company’s financial situation? 

If you haven’t figured it out yet, starting a food business is expensive. We hear it all the time:

“I am just going to make my product on the side and reinvest all proceeds and grow it really inexpensively.”

Well the truth is, that likely won’t work. Sure you’ll be able to sell a few Pasta Sauce jars at the local farmer’s market, but that’s likely as far as it will ever go. 

The harsh reality is that you can’t build a successful food or beverage business (or at least it’s VERY difficult) without a solid chunk of capital.

And, this is more so the case if you plan to work with a co-packer. Even if you convince a co-packer to do a tiny batch for you, it will still be thousands of dollars at the very least. It’s also not uncommon for the manufacturer to ask how you are funded, as they want to make sure you will be around for a while.

So take a look at your finances and make sure you are ready to make the FINANCIAL commitment necessary to begin a co-packer relationship.

Have you done your research?

The second you begin your conversation with a co-packer they are going to immediately start firing questions at you about your product. 

Make sure that you have informative answers ready. Here are some examples of the type of questions you should be ready to answer.

• What type of volume in units are looking to get produced?
• How many different SKUs?
• What are you monthly sales volume by SKU?
• What’s your annual sales projections?
• Does your product require special equipment?
• What type of packaging will the product be in?
• What are your current sales channels?
• What is your brand’s current gross margin?

It’s super important that you have spent the time and done your research before reaching out to potential manufacturers about producing your product. 

It’s okay if you are a startup and don’t have concrete answers to all of these questions, but just make sure that you understand them and have educated answers so that you at-least sound like you know what you are doing 🙂

Okay, now what?

Okay, so you have determined based off your business stage, financing and research that it’s definitely time to take your business to the next level and begin mass producing your product at a co-packing facility. Now you need to determine what happens next: logistics.

Some co-packers will be able to store the product for you and maybe even ship it directly to your customers, but it’s typically pretty expensive. You’ll likely have the product shipped to your own warehouse from the co-packing facility and then have your distributors pick it up there. These logistics are important to have ironed out when beginning negotiations with co-packers.Learn more about supply chain and freight here!

Hopefully some of these tips have helped you think through whether you are ready to take the plunge into working with a co-packer.

I promise that this post wasn’t meant to scare you! It’s hopefully just motivation to put in the work so that you are as prepared as possible and ready to start a successful co-packing relationship with the RIGHT partner.

(Source: blog.partnerslate.com)