What are some key considerations brands need to keep in mind?
What is their volume sweet spot?
Understanding the co-packer’s volume capabilities is important and you need to know what their sweet spot is. Co-packers will often restrict the amount of volume they will do with a customer. This could be for a few reasons: they don’t want to have too much reliance on any one customer; they could be a small manufacturer and not have the capacity; or they could have volume restrictions put in place by other customers. All reasons are legitimate, and as long as you understand what their sweet spot is, you can manage the relationship accordingly.
Do they have their own brand?
It’s important to understand how important you are to them. You should find out if they are they a full-time co-packer or if are they just filling up excess capacity while they are brand building. Because if they have their own brand, their brand will take precedence when capacity becomes tight.
How important is the culture of quality at the co-packer?
You co-packer must have a culture dedicated to quality and food safety. They are producing your brand, and if there are quality issues, it is your brand that will wear it. Yes, they will be responsible for any costs, but your brand is the one who will suffer. Make sure to get a read on their corporate culture. Here’s a pro tip on how you can help do that: tour their manufacturing facility and be sure check on two areas: the men’s washroom (the one used by the production staff) and the plant manager’s office. If they are not clean and tidy, be wary.
Will they keep your relationship confidential?
Some brands don’t care if it is known that they use co-packers. If you are one that does, make sure to write the confidentiality requirement into the agreement. And make sure it applies to the entire spectrum of their corporate communications. Co-packing companies often like to highlight who their customers are when doing company presentations like investor pitches or industry presentations. Make sure to make it clear of your need for confidentiality across the whole spectrum.
Protecting your recipe?
Virtually all recipes can be reverse engineered and so getting an exclusive could be a challenge. A good R&D lab can reverse engineer a recipe in a couple of days. Keep in mind, that for a co-packer to be efficient, it probably works for many customers in the same category and so recipes can be very similar. For that reason, getting the co-packer to sign an exclusive on a recipe is likely not going to happen. The best way to protect your recipe is to have a component of the recipe – a special flavouring, or a special spice mix, or a special functional agreement – made by someone else and sent to the co-packer for inclusion in the recipe. This way you can preserve some mystery about your recipe.