When it's time to scale up your production, selecting the right co-manufacturer is a critical decision for your brand's growth and success. In this blog, we dive into five essential tips to help you navigate the selection process effectively, ensuring that your production scales smoothly and your brand continues to thrive.
The first question is, how do you find a co-packer? There are thousands in the U.S. alone, and many specialize in particular types of products or processes. Start your search by tapping into specialized databases and platforms, which pair brands with co-manufacturers based on compatibility and production needs.
Alternatively, food shows and community networking are invaluable. Engaging with other brand owners can provide firsthand accounts and referrals, helping you gather a list of potential co-packers familiar with your product type.
A fruitful partnership starts with checking that the co-manufacturer can meet your specific production requirements. Create a comprehensive questionnaire that covers your needs, such as equipment capabilities, whether they allow (or disallow) specific allergens, minimum order quantities, and R&D capabilities. This process helps shortlist co-manufacturers, narrowing your options down to 5-10 suitable co-packers.
Before you dive deep into discussions about your product specifics, ensure a non-disclosure agreement (NDA) is in place. This legal document ensures that the details of your product and production methods remain confidential. An NDA is crucial as it allows you to discuss your product while ensuring the co-manufacturer can indeed meet your needs without the risk of compromising your intellectual property.
Once you identify a co-manufacturer that fulfills your technical and capability requirements, congratulations! At this stage, it's time to draft contracts. It's crucial to thoroughly review and negotiate the contract to ensure both parties feel confident with the partnership.
Understanding and negotiating key elements of the contract when entering into an agreement with a co-manufacturer is essential to protecting your brand and ensuring a successful partnership. Here are some critical points to focus on:
Not all brands require a volume commitment, and not all manufacturers are willing to provide it, especially if your quantities are low in the beginning. Understanding what you are (and are not) agreeing to upfront helps you avoid any surprises later.
The term of the agreement specifies how long you’re signing up for the partnership. Typical terms can range from one to several years, depending on the investment in setup and the product type.
Termination rights safeguard against unforeseen issues. These rights determine under what conditions either party can exit the agreement prior to the end of the term. Common conditions include breach of contract, failure to meet production standards, or chronic delays. Ensuring clear, fair termination clauses helps protect your business from prolonged difficulties if things aren’t going well.
Clear terms around payment and invoicing help avoid conflicts over finances. Discuss whether payments will be made upon delivery, within 30 days of invoicing, or through another arrangement.
Deciding who buys the ingredients impacts control over product quality and cost management. If the co-manufacturer procures ingredients, they may get better prices due to bulk buying. However, procuring them yourself might be preferable if you wish to ensure specific suppliers or ingredient quality. This decision affects pricing, production timelines, and potentially the final product quality.
Warranties are promises by the manufacturer that the products are safe to consume and meet agreed-upon specifications. Co-manufacturers typically guarantee that products comply with relevant safety standards and certifications, such as FDA regulations for food products.
Liability clauses define who is responsible if something goes wrong, such as a consumer getting sick. It is critical to delineate responsibilities clearly, especially if the fault lies in production errors or ingredient quality. Ensure that liability insurance and indemnity clauses are in place to cover potential legal and financial repercussions.
Always consult with a legal professional who specializes in business and contract law before finalizing any agreements. A lawyer will help you understand the implications of the contract terms, suggest amendments, and help protect your company.
Choosing the right co-packer is akin to entering a long-term relationship. It requires careful consideration, with clear communication and agreements. With the right approach, this partnership can be a pivotal step in scaling your production and growing your brand. Remember, the goal is not just to meet current manufacturing needs but to build a foundation that supports future growth and success.
Looking for assistance with your co-packer? Contact Vdriven—our team is ready to help.