By Matt Diehl
“Taking on a food co-packer is literally like a marriage,” explains Brandon Mackie – co-founder of innovative snack-maker Keto Farms. A co-packer – aka “co-manufacturer,” “co-man,” or “contract manufacturer” – can be key to a food brand’s growth. But a bad co-packing relationship can also ruin a product’s reputation – and sometimes even destroy a brand.
Co-packing companies touch every stage of a product’s lifecycle – from formulation and production to packaging and labeling – all while maintaining safety protocols and meeting public health standards. But while copackers can provide helpful capacity and services, for every advantage they offer, there are pitfalls. Mackie learned this the hard way. “We made every mistake in the book until we got it right,” Mackie says.
To learn more, journalist Matt Diehl, on behalf of Amped Kitchens, spoke with Mackie as well as noted food scientist Ali Bouzari, co-founder of culinary innovation and product development firm Pilot R&D, and Rob Grysen, principal in food safety and quality for the regulatory and food safety managed services consultancy Foodwit.
Here’s what the experts say are the 14 most common mistakes brands make when scaling their products – and how you can avoid them.
Mistake #1: Engaging a Food Co-packer Too Soon
“We tried co-packing too early,” Mackie admits – crucially, he explains, before Keto Farms had dialed in its product and process and hit a stabilized order flow. “The first co-manufacturer we found was too small and didn’t give us the focus we were hoping for. The second one was too big, and their sales team made promises that ultimately weren’t kept because volumes were too low.”
Problems peaked when Mackie got a game-changing purchase order for 10,000 units. “Getting on the copacker’s schedule was impossible,” he explains. “They couldn’t commit to producing on any timeline. So we had to part ways – losing months of work and over $10,000 of ingredients as a result.”
Mackie’s solution was to take production in-house at Amped: “That allowed us to make sure we’d developed a bulletproof process for making our product before we went out to a co-manufacturer again.”
Mistake #2: Choosing the Wrong-Sized Co-packing Company
“If you’re a small company, you need to be working with a small batch co-packer,” Mackie advises. “Co-manufacturers vary wildly in terms of their volume minimums [also known as ‘minimum order quantities’ or ‘MOQs’]. Running 1,000 units on a giant machine designed for 100,000 creates so much inefficiency that it’s really just not worth it for you – or them.”
Another risk, according to Foodwit’s Rob Grysen, is choosing a co-packer that’s too small. “Does the co-packer have the space, capabilities, scaling equipment, and financial means for your growth needs?” Grysen asks. “If the answer is ‘no,’ at some point you’re going to have to go and find another co-packer with greater resources – an expensive and time-consuming move.”
Mistake #3: Your Co-packer is Too Far Away to Manage
Outsourcing production doesn’t mean giving up your oversight. “In the beginning, the best way to make a co-packer perform is if you stand there right next to them, making sure they know they can’t cut corners,” says Mackie.
Then again, your options here may be limited by geography: you may thus find yourself considering a long-distance manufacturing relationship. “There may be only a handful of co-packers across the globe who fit your product and business,” notes Pilot R&D’s Bouzari. Unless you decide to take your production in-house, he recommends making sure you have the budget and staff to provide intensive oversight of your co-manufacture. “People assume everything can be done by remote control, when it simply can’t,” Bouzari clarifies.
Mistake #4: Your Formulation Isn’t Ready for Scaling
“A benchtop recipe has zero value until you have a scalable blueprint for how to produce it at higher volumes,” says Bouzari of Pilot R&D. “Scaling-up a recipe might also bring up additional regulatory and safety issues – in addition to the risk that the finished product won’t taste very good,” Grysen adds.
Bouzari has found that firms who haven’t invested in R&D or self-manufacturing risk exhausting their entire runway on just a few unsuccessful trial runs. He recommends budgeting sufficient time and money to develop your process before scaling up. “You simply shouldn’t engage a co-packer if your formulation isn’t ready for showtime,” Bouzari recommends. “If you do R&D in a self-manufacturing environment up to a point where scaling-up makes sense, then you’ve eliminated a lot of these potential issues.”
Mistake #5: You Underestimate Co-packer Costs & Fees
Taking on a co-man can prove expensive in unexpected ways. “The co-packer might have to buy new equipment,” Grysen says. You’ll have to pay for some or all of that, he explains – and that’s on top of any other expensive mistakes. “You might lose thousands of dollars’ worth of product if something goes wrong in an early run,” he adds.
As such, scaling up at a co-packer can make sense when you have big POs or major efficiencies on the horizon. For Bouzari, the only reason to move to a co-packer is to reduce costs: “If you’re going to a co-packer and it’s costing you more – with no future promise of volume breaks beneficial to your cost model – you’re squeezing blood from a stone.”
Mistake #6: Your Food Co-packer Can’t Handle Your Ingredients
“If your ingredients are wheat and sugar, the co-packer is your best friend,” Mackie says. “But the second you start talking about novel ingredients that require a lot of understanding and relationships with suppliers to manage, it can become a problem.”
Mackie learned to manage his own supply chain when he was self-manufacturing – and he has continued to do so even after moving to a co-packer. “More novice operators might jump in with a co-packer and think, ‘Awesome, this guy can get us pecans,’” he says. “But the copacker’s off-the-shelf option might fail in terms of taste, texture or quality. Food brands need to do their own work to ensure what’s going into their products meet their standards.”
Mistake #7: Ignoring a Bad Culture Fit
Manufacturing relationships that start out badly often don’t get much better, Grysen says. So, before signing up with a co-packer, he recommends a culture audit: “What does each partner value in their business, and does it match up? How involved is the CEO within food safety and regulatory processes, and at what level? Are they accessible? Can you talk to them? Those things might or might not be a priority, no matter what they claim.” Let your experience and their reputation (see Mistake #8 below) be your guide.
Mistake #8: You Don’t Use Your Network to Suss Out Bad Actors
Keto Farms’ Mackie started his search for a co-packer the way we do so much these days: Google. But in an industry that’s still old-fashioned and relationship-based, there’s a lot you can’t learn online. Who can you trust? What is the copacker’s sales team not telling you in their pitches?
To this end, Mackie urges companies to query their personal and professional networks to get info on a potential manufacturing partner’s reputation. After all, your neighbors can be a great place to start your research.
“One major benefit to self-manufacturing was the community,” he says. “The network we developed had a huge depth of experience and relationships. No matter what question was on the table, someone in the building had either made that decision themselves or had access to someone who knew what we needed.”
Mistake #9: Getting Caught in the Epic Battle Between Food Scientists and Manufacturing Managers
There is famous friction between food scientists (who develop formulas and processes) and co-packing companies (who execute those processes). “A decision a food scientist makes to get a moister cookie might force the copacker to spend extra hours cleaning sticky gunk they’ve never seen before off their equipment,” Bouzari says. “When a foodie brand walks into this relationship, there can be a bit of a deer-in-headlights situation.”
Bouzari advises brand owners to understand and identify these dynamics early – while at the same time keeping their eyes on the prize of their product. Mackie found his time self-manufacturing put him in a great position to accomplish this.
“During our time at Amped, we’d truly become manufacturers,” Mackie notes. “This enabled us to engage with co-packers and other professionals as peers – allowing us to communicate in a way that we couldn’t have before.”
Mistake #10: You Don’t Seek Out Enough Professional Support
When budgets are tight, it can be hard to imagine paying for professional staff and consultants. But the cost of not having the right team can be even higher. “If you don’t have someone who knows how to develop products for wholesale, how to onboard those products for scale, and what options are feasible at scale, you’re not going to get very far,” says Pilot R&D’s Bouzari.
“After we failed a couple times, lots of people suggested Keto Farms take on a professional partner to help us transition into co-manufacturing,” Mackie adds. “We couldn’t afford to fail again, so we hired a consultant who knows the terrain and has a whole network of manufacturers he’s worked with in the past. It’s an additional business cost, but well worth it.”
Mistake #11: You Leave Too Much Up to The Co-packer
The business of co-packing is all about simplicity and efficiency. Most co-packing companies would easily choose to keep a line moving over stopping and retooling to get a flavor profile just right. So, unless you’re okay letting a manufacturer’s concept of efficiency drive important decisions about your product, you need to stay in the driver’s seat.
“If your expectation is that you’ll find a manufacturer, hand over your formula, and then let them do everything, then your chances of success are extraordinarily low,” Foodwit’s Grysen explains. “The process requires continuous improvement on both sides – but you need to maintain control of your product throughout.”
Keto Farms’ Mackie says that his time in self-manufacturing was empowering in this regard. “When we started work with our new co-manufacturer, we literally showed him a video that took him through our process from start-to-finish,” he says. “He then understood exactly how to make our product right from the beginning. This is your leverage in that relationship: the power dynamic changes when you stop being at the mercy of your copacker.”
Mistake #12: You Let a Co-packer Own Your Formula
“Having a co-packer do your R&D for free almost invariably comes with very major strings attached: they now own your formula, and have perfected how to produce it,” Bouzari says. “As a result, when copcaker relationships go south, brands often don’t actually know how to make their own product.”
Instead, he advises firms to do their own R&D, in a self-manufacturing or lab facility – making sure they aren’t dependent on any one contract manufacturer to make their products. “This is a very simple trade secret ownership issue,” Bouzari says.
Mistake #13: You Assume the Co-packer Cares as Much about Food Safety as You Do
Self-manufacturing means you own all the regulatory, safety and operations issues around your product – considerable responsibilities, indeed. But moving to a co-packer doesn’t let you off the hook.
Co-packers can be licensed and audit-approved, but some still cut corners from time to time, especially when deadlines are tight. “When you have a product launch, the first thought that comes to mind isn’t necessarily food safety,” Grysen says. “Instead, it’s oftentimes, ‘How do we get this done as fast as we possibly can?’ That can lead down many roads that you don’t want to go down.”
If and when a production problem leads to a recall, Grysen notes that it’s the brand, not the copacker, who’ll take the hit. He thus advises brands to engage quality and safety professionals even when they’ve outsourced manufacturing. “The consumer doesn’t care who manufactured that product,” he says. “At the end of the day, it’s the brand’s job to make sure that things are being done appropriately, and that includes things like food safety.”
Mistake #14: You Take on a Co-packer When Actually You Should Run Your Own Facility
“If your product is very innovative and extensive R&D is critical to brand identity, then scaling up in self-manufacturing might be the best way to go forward,” suggests Keto Farms’ Mackie.
“Indeed, sometimes you shouldn’t go with a co-packer at all,” Grysen concludes. “If you need to pivot with the market frequently and constantly innovate, then go all-in and develop your own manufacturing facilities. Ultimately, no matter how good your manufacturing partner is, you’re going to be hard-pressed to find somebody who cares as much as you do about your business and the quality of your food as you do.”
If you’ve found this helpful, want to share your thoughts or questions, or would like to learn more about Amped Kitchens, Pilot R&D or Foodwit, please reach out!
