Preparing for high volume food production: Shopping for a co-packer, Part 2
Are you reaching your capacity in food processing and need someone else to make it in larger quantities? Learn how to shop for a co-packer to ensure you make an informed decision that will help your business grow.
If the capital and responsibility of a new production facility is beyond your capacity, then shopping for a co-packer may be your next step. In an interview with Greg Morano, owner of Morano Foods, Inc. and client of the MSU Product Center, Greg provided his insight on working with co-packers to fulfill orders in over 300 stores. The following points are identified as critical information for you to collect as you shop for co-packers:
- Ask them for references and be sure to contact them. Although the co-packer may refer you their best customers, most businesses will give you an honest review.
- Determine if they produce their own products. If so, they very well may put your product on the back burner. Have a written understanding upfront what the production date policy will be.
- Know what the initial cost will be to duplicate your recipe. Anticipate that it will take 2-3 runs to get it right.
- Can the co-packer repeatedly make your recipe to your specifications? Taste your product prior to final payment to insure it meets your standards.
- Understand what the payment policy will be. Normally 50 percent down is required when the order is placed and the balance due in full before they will release your product. Do not pay in full upfront.
- Get the delivered case cost for your product in writing.
- Does the co-packer have a distribution arrangement that can be accessed?
- Determine if the co-packer can grow with you as your sales increase. A major co-packer can produce larger quantities. However, they may not give your product the ongoing attention it deserves.
- Determine if they will cover any costs for improper labeling should they experience malfunctions with their machine.
- Check to see if they will list your company as an additional insured. There is normally a small fee but it will give you the required coverage and save you a significant amount of money.
Once your co-packer is identified and the product is finally ready for it’s production run, Greg recommends that you participate in the initial production of your product. “Make sure you ask for and obtain a production spec sheet with all ingredients weights and measures along with step-by-step procedures used to produce your product,” said Greg. Finally, Greg recommends that you always have a backup co-packer that is capable of producing your products so you don’t leave your business in the hands of one co-packer.
The MSU Product Center, in partnership with Michigan State University Extension, provides business counseling for product production and marketing strategies that will help Michigan entrepreneurs commercialize high-value, consumer–responsive food products. For more information, visit the MSU Product Center website or call 517-432-8750.
Other articles in this series: