Congratulations! Your business is booming, and it’s time to scale up with a copacker. However, before you dive in, there is much to learn about copacking in Canada. Here is a list of questions to decide if choosing a copacking food or beverage company is the right choice for you:
What does a copacker pack?
What a copacker packs may seem obvious, but unfortunately, it is often overlooked. While copackers do exist in a niche industry, they are many more subdivisions than you may realize. Knowing what co-packing production process or food limitations exist will help you narrow down your search.
For example, some copackers do not have frozen food capabilities. Others may specialize in meat processing and don’t accept baked goods.
It’s also essential to think about the future. While you may have found a copacker who meets all your requirements with your current line, remember that at some time, you will most likely change these offerings. You don’t want to be stuck with a copacker that can’t fulfill different orders, as this will cost more money in the future and limit you creativity-wise.
What are the advantages of working with a copacker
Using a contract packager will allow you to invest in planning, marketing, and sales rather than in production and manufacturing technology, making it easier to attract investors once your finished product is more established.
If you are planning on building your own facility once your brand is more established, hiring a copacker at the beginning can help you experience and understand exactly what you will need to operate your facility successfully.
Copackers generally have access to wholesale pricing of ingredients and packaging and have distribution relationships that could benefit your company and save you even more money.
Using a contract manufacturer offers packaging service, reduces your need to hire staff, and gives you an existing facility with all the certifications and inspections you or your product requires. Legally, to operate, the copacker attends to paperwork and inspections to keep certifications in good order and works to the highest standards. This saves you both time and money because you won’t need to make that investment if the copacker has already done so.
What are the disadvantages of working with a copacker
When you work with a copacker, you are at the mercy of their schedule. This can be especially detrimental during peak market periods. They may only have a small window of time available for you, and speed to market is important to consider for the success of your food business.
Choosing a copacker also means you lose some control over the manufacturing process. Your copacker may not have precisely what you need in raw materials or in the quantity you need.
Also, signing non-disclosure and confidentiality agreements may not protect you and your product as much as you would expect. As a brand owner, it is essential to invest the time in building a good relationship with your copacker; gaining a sense of trust with a manufacturer that has the best production systems for your contract manufacturing needs is essential.
If a contract packaging disagreement arises between you and your copacker, you may have a hard time resolving the issues, leading to lost time and increased costs. Obtaining good references from other food companies and clear and detailed contracts from the prospective copacker can alleviate many significant problems that may arise.
How big of batches can they produce?
Batch size is another simple yet important detail to ask about. Many small-batch co-packers simply can’t scale up their production to match high demand. Be sure to ask about specific sizes as well as their production schedule. Start with what a typical 24-hour period would look like to understand the time frames and whether this will meet your own production needs and customer demand.
Again, just as you want to think about future products, think about the trajectory of your brand. If a copacker already has a batch limit that just barely covers your needs, what will happen when your product packaging needs grow? While you may not double in size within the year, you do want to look at your long-term goals and find a copacker who will continue to work for all of your current and future needs.
What happens if substitutions are needed?
What if your copacker needs to make substitutions? If that is the case, your agreement of the substitution is needed before proceeding with making the product since changes could modify the information on your nutritional label.
Substitutions that you are not aware of are a major cause of recalls. It is vital that your agreement with your copacker and their suppliers has a change of notification clause for ALL ingredients and ingredient sourcing.
What extra services do they provide?
You may first turn to a co-packing food company to help create your products. However, some co-packers provide more services than what’s advertised. Some companies can help with packaging, labelling, and sealing. Moreover, larger co-packers may have warehouse space to store your items, as well as an in-house shipping service.
Sometimes, co-packers do not advertise these extra services, so you will need to ask specific questions to find out all the information. Often, a copacker may be waiting to offer these services until there is demand for them. While they may not provide extra services yet, you may be first in line because you have expressed interest when they do.
Is there a better deal to be had?
Smaller co-packers may have a smaller supply chain and may not be able to offer deals as their margins are already thin. However, larger co-packers may be able to give you a discount if you pass certain qualifications.
For example, you may have a line of products that seem similar, but one of the products has fewer ingredients. If produced at a high enough volume, there may be savings that the copacker can pass on to you.
You may not be able to procure a lucrative deal at the start of a relationship. This is because you are an unknown, and a copacker needs to cover their investment, too. However, if you have proven to be a growing business and not likely to go under, you may be able to get a better deal when you renew the contract.
Having a solid relationship with your copacker can pay off as both parties will benefit from continued success.
What are the legal aspects that I need to consider when working with a copacker? / How do I negotiate a contract?
Hiring a potential co packer is not something to be taken lightly. There are many legal implications involved. It is important to have your lawyer look over all documents regarding your relationship with your contract manufacturer.
Make sure to detail all services in writing, including a thorough explanation of timing requirements and all associated costs, are revealed. Ask for a guaranteed price for a reasonable period of time.
Some co-packers may provide their own co packing agreement. If so, it is essential to have your lawyer review everything before you sign to ensure that you are protected in every aspect. There will also be a division of activities; all of this needs to be clearly documented. This applies to everything from food safety and quality control to cost and delivery.
When negotiating a contract with your new contract packager, there are many things to cover. Listed are questions to ask yourself/your copacker before finalizing your agreement:
- How much food safety is needed?
- Where will the food product be sold: provincial, Canadian, into the US, or sold internationally?
- What size of store will the product be sold in: small businesses or major retailers?
- What type of packaging solutions are offered: Shrink wrapping, blister wrapping, clamshell?
- Do the products need special labels, and does the copacker have the capability to make and apply these labels?
- Do you need the Federal CFIA Registration?
- HACCP/GFSI Certification?
- What do the customers want? During what time of the year do they want it?
- Food safety/ quality certifications needed: Gluten-free, peanut-free, organic, halal, kosher, non-GMO?
- The possibility of serious illness, death, and recall as a result of the partnership needs to be included in the contracts.
- In the event of any changes, both parties should be notified- this is a requirement in GFSI standards.
Will my recipe and production methods be held in confidence?
It is crucial to protect your intellectual property through the legal agreement with your copacker. They may be producing a similar product for other companies; knowing this, your own product plans, trade secrets, and ingredients need protection. As mentioned earlier, having a positive relationship with a copacker with a good reputation for ethical practices helps alleviate potential concerns and makes signing an agreement less stressful.
If your intellectual property is stolen, it can be challenging to prove. That is why hiring a copacker with a good reputation and maintaining a respectful relationship is so vital. When you ask a copacker to sign legal agreements pertaining to your intellectual property, they may also ask for you to sign similar agreements to maintain confidentiality regarding the details of their specialized offerings to the market.
What if the product does not turn out for taste, appearance etc., once manufactured?
If the product is faulty in any way, having clauses such as identifying who is responsible for handling unusable products if an error occurs should be included in any agreement between you and the copacker.
Under GFSI Standards, there is a product realization clause with ‘specifications’ on how the processor will meet client needs. They must be able to apply validated process controls for safety as they select ingredients and work on product development.
How do I end a relationship with a copacker?
Hopefully, you’ve done all your research and have found the right co packer with the right amount of food expertise and knowledge. Unfortunately, not all relationships are successful, and you may need to part ways. Before you do, however, think about why you want to leave.
If costs become an issue, try to find a better solution than simply producing and packaging your products in your own manufacturing facility. It may seem like a cost-saving endeavour, but there is a reason you looked for a copacker in the first place. Communicate with your copacker to see if you can bring about a better arrangement.
Think about what is not working with your current copacker; perhaps they continually run out of ingredients. Unfortunately, this happens, no matter how great a copacker is. Often, it’s entirely out of their control and completely dependent on the markets. A simple solution could be to instead look at what ingredients are causing the issue.
Perhaps the fruit you want to use is too season-specific or is prone to drought. If there are issues that stem from farmland, a better solution would be changing your product and using a different ingredient.
Likewise, if suddenly your copacker is charging more for a specific ingredient, perhaps there is a global shortage. Are you able to use a substitution in the meantime?
Before you change a copacker, make sure the issues aren’t any that you will encounter again in other companies.