It is prudent to have an in-depth discussion about each of these issues in order not to be surprised later.
Sales Volumes. The first question a co-packer asks is, “How much
volume over what period of time do you expect to sell?” Make sure to
notate in your business plan your volume projections for at least the
first three years.
“M“Manufacturers tend to ask the same set of
questions and it is a time-saver to be prepared by
knowing what exactly you need.”
Product Specifications. What type of organic product are you
planning to produce—100 percent organic, organic (at least 95 percent) or made with organic ingredients (at least 70 percent organic
ingredients)? In addition, are there any other requirements, such as
allergen-free (gluten-free, dairy-free, soy-free, etc)? Are there any
other regulatory or formulation restrictions for the product?
Product History. What is the product history? Is it an R&D formula or has it already been manufactured elsewhere? Who retains
ownership of the final formula? What is your familiarity with the category? What financial resources do you bring to the table?
Packaging Desired. What type of packaging is desired for the
product? Does it exist in the marketplace? Is there flexibility in the
type of package? Does it need to be environmentally responsible
packaging? What are the sizes and case pack needs?
Preferred Timetable. Is the product seasonal? Is there an optimum time to deliver the product to retailers? Create a rough
timetable to discuss with the co-packer.
Terms. Usually, “terms” refers to payment terms, but other items
need to be discussed. Is this a turnkey process or will key ingredients
and/or packaging be provided? Who takes ownership of ingredients
When seeking out co-packers, it’s important to realize that co-packers, especially the most reputable ones, are often selective themselves. Being organized and clearly presenting your business ideas
and needs conveys that you will make a good partner as well.
Ron Rash, partner in Organic International, a brokerage and marketing firm, has worked for co-packers and represented companies in
need of co-pack capabilities. “As a well-known organic contract manufacturer, we would get dozens of calls from potential clients each
week,” states Rash. “We were impressed by those that were knowledgeable about the category, distribution and the retail environment.
The world doesn’t need another organic salad dressing unless there
is a clear point of difference in the market. We wanted to work with
smart, well-capitalized companies and we could afford to be picky.”
comprehensive directory of sources
for private label or contract manufacturing for organic products. A good
first step is to consult the Organic
Pages Online, maintained by the Organic Trade Association (OTA) at
www.ota.com. Search by product category, such as cookies, crackers, dairy,
frozen entrees, etc. There are also several private label trade magazines/di-rectories and often, a Google search
for private label or contract manufacturing will turn up some sources.
Often, product development consultants have had extensive experience
with sourcing particular manufacturers and can provide sources through
their business networks.
Where to Find a Co-packer
Once the information listed above is put together, a prospective
list of manufacturers should be developed. Unfortunately, there is no
Supply chain management is one
of the most important issues to consider when introducing a new product, and the contract manufacturer is
almost always a partner in this
process. Because of this, it is best to
seek out manufacturers who are already producing organic products,
are familiar the challenges of the organic supply chain and have relationships with organic suppliers. Plus, the
process of certifying a facility may add
10 to 12 weeks to the timetable.
Organic ingredients and commodities are often in short supply,
therefore contracts for forward buying are critical for procurement. Spot
shortages may occur, so it is best not
to have a product dependent on a single one ingredient. Good organic co-packers should have a solid supply
chain in place and help you navigate
through tight spots in the market.
A few companies may opt for “toll
processing,” where the company buys
all the ingredients and ships them to
the co-packer and then just pays a
processing fee. The majority of companies, however, rely on their co-packers to do most of the ingredient
sourcing because of the manufacturer’s buying power and connections