How co-packing can open up opportunities and boost profitability
Food labels and brand owners need to be able to react and respond to market trends and demands. Whether that’s through adopting new, more sustainable packaging or entering the market with plant-based products, this process can be costly and time-consuming. However, with co-packing, it doesn’t have to be.
Around the world, food brands and producers rely on co-packers to meet market demands and production obligations, and even to test new products and packaging options. They are the unseen link between the fields and factories and the supermarket shelves. But what exactly do co-packers do, and how can brands and label owners use them in the most effective way?
Co-packers are businesses that pack products on behalf of a producer that don’t have the capacity or ability to pack for themselves,” explains Mattias Glimbrand, Solution Manager for Tetra Pak. “We see a lot of co-packing with canned foods, since many categories here benefit from large volume efficiencies. It can look very different depending on the industry, though, and it can also be based on trends and being able to help brands and label-owners get to market quicker.”
Faster foods
One increasingly important success factor in the food industry is the ability to capitalise on market trends. These trends can be more temporary in nature, like seeing an upswing in demand for emergency foods during the COVID-19 pandemic, or they can mark a more significant, long-term shift in consumer behaviour, such as the move towards plant-based, organic foods that are healthier and more sustainable.
“Producers need to be able bring new products to market at a faster pace,” adds Mattias. “Co-packing can be a quicker way to get these new products to market. There’s also a greater pressure from brand owners and multi-national businesses to free up that balance sheet, and this can be done by divesting assets and building strategic relationships with co-packers.”
Co-packers are often the faster, more efficient option as they already have all of the equipment required, and have the partnerships with the right farmers or raw material suppliers. As opposed to setting up a new production line, the label owner or brand just needs to provide the recipe, negotiate the terms, and give the packaging and branding guidelines. This means the time-to-market is significantly shorter, and with a fraction of the capital investment.
Driving innovation
The food industry is not only based on reacting to trends, but also creating them. Co-packers can be used to try new products in the market without having to commit to a full production line, which means brands and label owners can test new innovations without any major risks.
“Private labels for retail brands have been using co-packers for the traditional products for a long time, but they are, in many ways, also the ones leading in terms of innovation,” says Mattias. “It’s also easier for new brands to enter the market using co-packers and co-manufacturers. This means we see more new, innovative products within shorter time frames.”
Innovation in the food industry can take almost any form. It wasn’t long ago that oat milk exploded in popularity, which in turn led to significant growth in a number of dairy alternatives. Healthier ready meals are also in demand, which leaves a lot of scope for new recipes, ingredients and even collaborations with well-known chefs. Alternative packaging is also on the agenda for many brands, as they look to shift to more sustainable alternatives. The right co-packers can help leverage all of these opportunities, and more.
Finding the right partner
There are a number of things to consider when looking for a co-packing partner. Everything from geographic location to existing product lines must be taken into account, but above everything else, the product quality is essential.
“Some co-packers work with seasonal products, like tomatoes,” explains Mattias, “and then work with other products for the rest of the year. Others might work with materials where seasonality is not critical, so will provide the same products all year around. Location is also important, as the co-packers are typically located close to the crops or raw materials. The role of location varies, as with fruit and vegetables it will impact product quality and flavour, but with something like pet food, it will mainly impact the price. Every co-packer will have a different area of expertise, so it’s essential to find the one most relevant to your needs.”
Once potential co-packers have been shortlisted, you also need to find out whether they are able to produce your line without impacting any existing exclusivity deals with other retailers. Some co-packers even have their own brands which they may wish to sell in a label owner’s store as part of a deal.
“The most important thing is great product quality, as you need to be proud of it,” says Mattias. “Then of course, being able to negotiate the right price is important, and to be able to do that you need to know your market and the potential of your product. You also need to consider marketing, especially if you put a carton in a category which is traditionally cans, but this is very category specific.”
Co-packers are essential partners for brands and label owners in the food industry, and can have a positive impact whether you are a new player just making an entry to the market, or a long-established brand looking to innovate and attract new buyers. The food industry is always changing, and utilising co-packing in the right way can help ensure that you stand out from the competition while improving your bottom line.
