5 Tips for Working with Co-Packers
as a CPG Startup Founder
Leslie Danford is the Founder of Vitaminis, a branded food and beverage company that aims to provide better, easy nutrition for families.
I spent the first six months of my entrepreneurial journey coming up with an idea, including the brand, the formula and the problem we were setting out to solve. Once I had landed on something, I felt like I was so close! That phase was fun, but really, it was nothing more than ideas on paper. One of the hardest and most important parts of was going from idea to actual product, and many companies don’t even make it that far. Although I had some experience working with co-manufacturing and co-packing partners in my pre-startup life, there was a huge difference when setting up these relationships on my own. I wanted to share my top five tips for working with co-packers based on what I’ve learned so far:
1. Contracts and confidentiality
Coming from a larger corporate background, I was all about contracts. How would I protect my idea? I needed to cover my downside risk! Ha! The reality was, as a startup brand, I was not in a position of leverage. It was hard enough to find a reputable co-packer with the right capabilities and get them to agree to run a small quantity for me at a reasonable price. Asking for a signature on a formal agreement with a bunch of favorable terms just wasn’t a reasonable expectation. And as for confidentiality, it was so unlikely that any co-packer would take my formula and attempt to copy an unproven idea (anyway, they can read my ingredients right on the label). It’s just too much work outside of their day to day. At the end of the day, the most important thing was that I had pricing and quantity terms in writing (even if just in an email) and kept quantities small enough to manage risk and make the run affordable. Which brings me to my next point…
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2. Get references or go through a referral
Because you likely won’t be able to manage risk with written agreements at a very early stage, go with a partner that comes referred through another partner or entrepreneur. I have had the best luck with vendors that come referred by someone else in the industry, and the same holds true for co-packers. You can manage downside risk by going with a partner with a good working relationship with another brand in your space or even a formulator or supplier. You know that if another entrepreneur recommends someone, they are likely affordable, reliable, and good to work with. I read Google business reviews to get an idea of questions I should ask or areas I should dig into in our initial conversations.
3. Relationships matter
Producing a new product with a co-packer is a big investment, on both sides. Your co-packer is likely taking on a small, unprofitable project with the hope that it will grow into a larger future business. They are taking a bet on you! Likewise, you are trusting the expertise of your manufacturing partner to ensure product quality and safety. Take the time to get to know your co-packing partners, whether that is the owner or the floor manager, to understand how they run their business and what it’s like to work with them. Get to know them as if they were members of your team, since they are! I found these relationships really paid off when I ran into any hiccups or needed advice or time outside of a formal scope of work. Also, don’t burn bridges. Even if you decide not to work with a particular company, or if things didn’t go as planned, keep the door open and don’t burn bridges. It’s a small world in CPG co-manufacturing, and you never know when you might need to go back to a former co-packing partner for additional capacity or in a pinch.
4. Play the long game on costs
Getting a startup off the ground is an expensive endeavor, and while product profitability is extremely important, the reality is that you will likely not be able to get the best pricing from your copacker in a first product run, particularly if you are looking to run a smaller quantity than what your co-packer would ideally be looking for. I viewed my first production of each of my products as more of a test, where I would gather learnings about product market fit. As long as the quantity was small and I was making some money or breakeven, I considered that a win. I was willing to pay a higher rate on a small first run to make up for the inefficiencies of setting up a new product and doing a small run on the co-packers side, setting the expectation that we would revisit when quantities were larger. As long as there is a path to profitable pricing and your first run is a manageable size, this is an investment worth making.
5. Think big picture
If you build your co-packing relationship correctly, you never know what it could develop into! I know brands that have been acquired by co-packers, adjusted formulations or approach based on co-packer input or capabilities, or even partnered with co-packer owned sales or marketing resources. One of my co-packers introduced me to retail contacts that he made through his own brand, and the other has given me advice on scaling my Amazon business. Invest in the relationship, get to know the team, agree on mutually beneficial terms, and see where the relationship takes you. Ideally, your business will be a success driver for you both over time.
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