Regional and local dairy manufacturing companies often offer their services to entrepreneurs and start-up companies that do not have the capital to invest in building their own plant. The majority of such dairies produce their own branded products in addition to co-packing for others. This allows them to more fully utilize their manufacturing capabilities by running longer production shifts and keeping employees busy.
There are also contract manufacturers who only produce and pack product for others companies to sell.
Both types of co-packers often have national and international dairy marketers as their customers. For some marketers, it makes economic sense to outsource, especially when producing highly perishable products such as dairy foods where distribution distance issues may arise with their own production facilities. Also, outsource manufacturing is seasonal for some marketers, when product demand is up and they are already running at capacity at their own facilities.
Some co-packers provide R&D assistance, for everything from formulating to troubleshooting to quality control and assurance. There are also independent product development companies that handle all aspects of commercializing a new dairy food concept…from formulation to production to packing to distribution.
I receive countless queries from such folks looking for these facilities and services. And, according to the readership survey of the 6,000-plus Daily Dose of Dairy subscribers conducted a few weeks ago, almost half of all respondents indicated they currently use or have used such services.
These folks no longer need to call or email me, because there is now a Co-Packers/Product Development Assistance tab on BerryOnDairy.com. It can be accessed by linking HERE. Please continue to visit this tab as your needs arise, as more companies will likely request listing in the near future.
Co-packers make sense for entrepreneurs and start-up companies
Identifying the right co-packer and partner for development and production of dairy foods should be taken seriously. It is particularly critical for a start-up looking to gets its dream product into the highly competitive dairy foods marketplace. There is no room for error when budgets are tight and you are introducing a new brand. You need a business partner that will be with you every step of the way.
Once you are off the ground, you need to focus on marketing and selling your innovation…not worrying about a pasteurizer breaking.
Here’s a great article published in Inc. magazine. It’s an interview with Stephen McDonnell, CEO of Applegate Farm, a natural and organic meat products company. Access the article HERE.
Applegate Farm works with 18 co-packing companies, 12 slaughterhouses and 1,000 farms. “We’re not farmers or processors or cookers or retailers,” he said. “What we do is create the recipes and manage the very complex variables to ensure that everything is done on time and with the highest quality.
“When you don’t own the manufacturing equipment, your only concern is what the customer wants,” he said. “And because we source from multiple factories, we are able to create a much wider range of products.”
Reasons to use a co-packer
In addition to those identified by McDonnell, here are a few others.
- Co-packers can help better predict costs and reduce investments, allowing the marketer to concentrate on selling product.
- Co-packers allow capital expenditure to be deferred and used elsewhere.
- Established co-packers have experience in manufacturing and packaging specific types of dairy foods.
- They can assist with scale-up, from bench-top to industrial manufacturing, in a timely manner.
- They have already been certified and have a HACCP plan in place.
The co-packer becomes your business partner and it is critical that you have mutual trust. These are topics to address:
- Confidentiality agreement
- Ingredient sourcing
- Segregation of ingredients
- Quality assurance
- Quality control
- Packaging sourcing
- Record keeping