Outsourcing Manufacture and Co-packing

5 August 2019

Manufacturers of many established household brands, including global conglomerates like Danone and Mars opt to sub-contract the production and packaging of some products to co-manufacturing and logistics partners. Conversely, small businesses and start-ups may simply not have the capital to build their own manufacturing facilities and outsource production to provide a dual cost and labour effective solution. If a newly formed company reduces its fixed manufacturing costs to focus on sales and marketing, it is likely to increase its profit margins as a result.

There are many vital factors for small companies to consider before agreeing to work with an outsourced manufacturer and Theodora Alexander, co-founder of Young Foodies, has produced a summary of essential guidelines for new companies taking this step. Theodora writes that the ‘absolute must-haves’ include a formal manufacturing agreement as the principal legal document, which governs the relationship and that product specifications, including packaging and barcodes, are clearly understood. First and foremost, she advises that a Non-Disclosure Agreement must be in place at the outset. This formalised relationship with the manufacturing partner should stipulate the required standards of quality control to ensure that the relevant hygiene accreditations and product compliance requirements are met.

Fledgling brands seeking the expertise and experience of how to succeed in the competitive world of food and drinks regard Young Foodies as an oracle of food and drink start-ups. Co-founder with Theodora, Chris Green, wrote in Food Navigator last year, ‘small brands are pushing the boundaries of manufacturing to create genuinely innovative products’. He predicted that in another ten years supermarket shelves will be home to many new names in food and drink, especially the crisps, nuts and snacks sector which has seen ‘an explosion’ of exciting new brands in recent years.

‘Your brand, our trusted expertise’ is the motto for March Foods Limited, one of the UK’s leading food contract manufacturers and packing businesses. A comprehensive range of services is provided for brand owning clients and includes customised production cells, warehousing, laboratory facilities and an extensive range of blending, filling and packing equipment. An emphasis on quality control is evident from the priority placed on recognised food and safety certifications, including KLBD and other quality marks. Clients include Britvic, Unilever, ASR Group, Weetabix, Asda, Morrison, Sainsbury’s and Tesco.

Small businesses and especially start-ups in the food and beverage sector require considerable technical support to create and commercialise a desired food or drink brand to their precise specification and readiness for the relevant market. If products are produced with perishable ingredients, specific automation processes may be required from their chosen manufacturing partner to ensure appropriate containers are prepared and sealed to guarantee maximum shelf life. Those companies with limited budgets will also need to assess the financial viability of minimum order requirements set by the manufacturing partner before considering the outsourced option.

A leader in the UK field of contract bottling requirements is Bottling UK, with its selection of production lines to handle a wide variety of still or carbonated drinks. The Bottling UK team has the expertise and capacity to produce preservative-free drinks in over 200 different bottles from its state of the art manufacturing plant, including glass and Hot Fill PET using a range of sizes from 10ml to 1 litre.

Another trusted bottling partner is the long established H&A Prestige Bottling Limited, based in Lancashire and specialising in the production of quality branded and own label spirits, liqueurs, wines, bag in box, syrups and related products for the licensed and multiple grocer markets. Providing bottling solutions for small producers as well as many prestigious brands, including Chivas and Pernod Ricard, the company promises ‘to get the job done efficiently and on time to the best quality’. Believing that ‘nothing conveys a brand like a well-designed can’, MD Engineering Solutions Ltd provides their clients in the brewery industry and other related markets with customised production, design and unique branding of canned drink products. They even supply mini-canning machines for start-ups.

Expansion plans for small and start-up companies can be greatly enhanced by choosing the right manufacturing partner, but it is important to recognise the complexities of each planning stage. A company must first assess how the intended process, or operation to be outsourced, fits with its existing business model and it must also ensure that any unique production, laboratory testing and packaging requirements can be adequately met by the partner(s) in question. Going forward, the costs of implementing transition to the outsourced operation, as well as the management costs once set up, are critical financial considerations to be borne in mind.

Such is the fast changing, highly competitive and volatile nature of the global food and drinks sector, it has become ever more susceptible to the unpredictable nature of consumer perception. Consumer standards and expectations are high and shared routinely on social media, so safeguarding the reputation of a brand is another key factor when it comes to choosing the ideal manufacturing partner.

Looking for more recommendations or advice? At KLBD, we have worked with many manufacturers (toll-processors) and co-packers and can give you the benefit of our insight. Another useful avenue, particularly for start-ups, is asking a question on the Food Hub Directory Facebook page. With nearly seven thousand members, there is a wealth of insight available.