20 Dec Finding and Working With a Co-Copacker
How do you make your product stand out on the store shelf, when there are more than a quarter of a million food manufacturers and innumerable brands competing with you in the U.S. market? Consumers spend an average of 27 seconds looking at a product’s package, according to 2016 research by TetraPak, which makes shelf appeal a critical factor in product sales. Food and beverage manufacturers that understand the importance of product presentation to their bottom line will gain an edge on their competition.
However, it’s not a straightforward matter to simply change the design of a package. Product presentation decisions affect many other parts of the business, not least, production efficiency. Operational flexibility and creativity are necessary to cost-effectively turn an idea for improved package design into reality. The design, sourcing, procurement, and management of packaging can be improved through collaboration with a co-packer, enabling you to profitably get an edge on the competition during those 27 seconds of shopper attention, while simultaneously realizing internal supply chain and production efficiencies.
Great design, costly implementation
Paired products on an end-cap, eco-friendly packaging, a change in package quantity — all great marketing ideas that can appeal to consumers and bring new life to product sales, but at what cost? The experts in the marketing department have the ideas to make your product sell, but they typically don’t understand what it actually takes from an operational perspective to implement those ideas.
Without a realistic plan for implementation of marketing’s ideas, the expense of the original idea (payroll or fee paid to a design firm) could balloon into an operational nightmare of expense — or the idea might simply have to be abandoned, and thus those extra sales lost. And even if the idea is implementable, bad or improper package design can be costly in terms of shipping, materials, and product damage.
Partnering with a co-packer who understands your type of product and consumer base will enable you to surmount the operational difficulties while achieving the vision. Experienced co-packers work with a variety of industries and can also provide expert guidance on design and distribution to help ensure the design maximizes the competitive advantage without incurring avoidable costs or losing consumer goodwill.
Instant scaling, market expansion
If you want to do a trial expansion into a new market, or a customer wants to up their order of your product for the next two or three weeks, or you have the opportunity to fulfill a large, one-off project — how do you meet this sudden short-term increase in demand?
Investing in the infrastructure, hiring the extra employees, and acquiring the necessary certifications to scale production can cost hundreds of thousands of dollars and a considerable amount of time. In situations such as those above, or when profit margins are tight and delivery schedules are rigid, such as with baked goods, co-packing allows food and beverage companies to scale production without investing in extra equipment and staff, and also enables them to adjust production for seasonality.
The operational flexibility afforded by being able to ramp production up or down as needed also reduces lead times, allowing you to fill orders faster and more consistently. Co-packers offer a fixed manufacturing and packaging cost that allows for easier and more accurate budget planning. In one recent survey, almost two-thirds of respondents (65%) reported that co-packing had increased the flexibility of their business, and almost as many (62%) said it had helped cut costs.
Partnership with a co-packer can also open up opportunities in new markets and expansion in existing markets through avenues such as private labeling, which offers the capability to reach a larger potential audience through multiple brands. It also allows for selling a lower-cost product without affecting the recognition and association with quality of the primary brand.
Take advantage of shifting customer preferences
Trends and shifts in consumer preference are another important aspect affecting package design and product sales, especially in the current economic climate.
These days, consumers are increasingly sensitive to environmental issues and sustainability, and often make decisions based on whether a company uses eco-friendly packaging, as well as sustainable materials, products, and practices. There is also growing awareness of food sensitivities and allergies. According to the consumer data group Euromonitor, global sales of gluten-free food jumped 12.6 percent year on year in 2016 to $3.5bn, compared with overall packaged foods growth of just over 4 percent.
A co-packer can help you capitalize on environmental and food sensitivity awareness without having to retool your entire facility, going to the expense of meeting the requirements of OSHA, the FDA, and other regulatory bodies, or hiring staff who have the knowledge and training to maintain necessary certifications. A co-packer who is already set up for environmentally-friendly or nut-, dairy- or gluten-free production can enable you to cost-effectively capitalize on consumer preference and expand your customer base.
In addition to enabling the use of sustainable or recycled and recyclable materials and meeting regulatory requirements, co-packing can decrease your carbon footprint by moving production closer to the end consumers. While it can often make sense to work with a local co-packing partner, a co-packer with locations in other markets can also enable you to expand geographically into new markets. By bringing your product closer to consumers, using a co-packer with locations nationally reduces transport time and thus also shipping costs, which is a plus to the bottom line as well as to brand image.
However, when considering the location of the co-packer, the total supply chain costs need to be taken into account. Contracting with a co-packer that is 10 percent cheaper would be a false economy if it costs more to send the donor stock and collect the finished goods.
Other aspects to consider when choosing a co-packing partner are size — with a very large co-packer your orders might get low priority, while a very small operation might not be able to meet your needs — and the co-packer’s knowledge of and experience with your product and consumer base. Take the time to choose a co-packer that understands your needs and has the capacity to meet them.
For a food and beverage company, partnering with a co-packer creates operational flexibility and opportunities for product innovation, which can cost-effectively provide an important competitive advantage. An experienced co-packer can help you get your products into consumers’ hands to boost sales and grow your brand.