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Contract Manufacturing: The Challenges with Early Stage Companies

contract manufacturing is gaining importance
<p>A company must understand all aspects of its supply chain to be most effective in choosing the contract manufacturing elements of a successful product launch. </p>

Contract manufacturing—by definition, an outsourced solution to manufacturing a product based on the product’s manufacturing intricacies and the co-packer’s capabilities and capacity.

It is critical to understand from the start how we plan to launch our products, where our distribution is expected to be concentrated, and how much capacity we need to move our plan forward. Yet at the same time, the industry doesn’t offer solutions for those brands that start with a proof of concept market and need to start with lower minimums and the flexibility to launch and make adjustments according to consumer response. A new brand often has to produce 1500 to 2000 cases per stock keeping unit depending on the manufacturing process.

What are the solutions to co-packing? We can certainly start with our own manufacturing. Many brands start in commercial kitchens to efficiently produce start-up quantities. But a company’s limitations can be based on the processing method. For beverages as an example, there are several methods, certainly driven by the type of product being manufactured. Cold fill is the prevalent choice with items like bottled water, carbonated soft drinks, and products with preservatives (not a choice in today’s environment of clean packaging and labeling). Hot fill gives the ability to fill based on categories like juice, tea, and functional drinks and certainly the ability to be preservative free. For a protein drink, milk based and nut milks, aseptic is the best choice. However, aseptic can present high minimums and expensive processing and is nearly impossible to do in a commercial kitchen environment. Extended shelf life is our choice for milk and chilled dairy products. Fresh products, like cold pressed juices, are typically processed using the method of cold processing and high-pressure processing. This method adds additional costs and presenting a cold or fresh product increases our cost of goods thereby increasing our retail pricing. 

We must understand all aspects of our supply chain to be most effective in choosing our method and the contract manufacturing elements of a successful product launch. Evaluate all aspects of your brand including its processing method but also where it will be merchandised on the shelf. Consider your cost of goods and what it takes to bring your product to market, including geographic considerations.

Be prepared to insource or outsource based on these factors, your expertise, and your resources. Have a clear understanding of all aspects of your processes, ingredients, and ultimately sales projections.  

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