One thing we love about our position in the food and beverage industry is that we get to work with many different types of businesses. Whether it be grocery stores, distilleries, food producers, or raw material suppliers, we get to see the industry from many points of view, and often on both sides of a working relationship. This is most true when it comes to contract manufacturing, and there are plenty of lessons we have learned along the way.

What is Contract Manufacturing

Simply put, contract manufacturing (or co-manufacturing) is a form of collaboration where two companies work together to produce a product. In the right situation, it allows these businesses to streamline expertise, equipment, and resources to ultimately solve each other’s problems.

For brands, they get the benefit of:

• Reduced Capital Expenditure: Avoid costly/risky investments in facilities and equipment.
• Access to Expertise: Leverage specialized knowledge and technology.
• Scalability: Easily adjust production to meet demand fluctuations.

Whereas co-manufacturers get the benefit of:

• Increased Revenue Streams: Diversifying income by offering manufacturing services.
• Optimized Facility Utilization: Maximizing the use of existing equipment and space.
• Economies of Scale: Increasing production volume to reduce per-unit costs.

The Challenges of Contract Manufacturing

As is true with many relationships, you need to be aligned to be successful. Both parties typically feel good at the start when contracts are being negotiated, but the two sides can start to drift afterwards.

The biggest source of variability… the product itself. Brands create variability by tweaking product requirements, while manufacturers need to meet flavor specifications and maintain consistent product quality over the duration of a contract.

These are all normal issues that need to be handled, but if you don’t have strong alignment and good communication, it can lead to much bigger issues down the road.

Tips for Contracting Manufacturing Success

Every co-manufacturing situation is a little bit different, but there are a few things that we look at to try and diagnose problems:

• Production Fit: Each co-manufacturer possesses unique strengths, and different products have different needs. When these two things are not aligned, you may see unexpected issues come up.
• Establish Clear Flavor Targets and Success Criteria: This is a good time to be precise and well documented with your flavor profiles. Collaborative tasting sessions with tangible examples can go a long way towards mending communication gaps.
• Implement QC Checks: Establish a clear process for verifying product quality and consistency throughout production. This may involve initial batch tastings, spot checks, and ongoing QC monitoring by the contract facility.
• Proactive Reaction Plans: Outline procedures for addressing out-of-spec batches and establish decision-making guidelines up front if you can. Issues can be resolved quickly and effectively when everyone already knows the plan.

DraughtLab offers practical and approachable Sensory Analysis Solutions that deliver real-world value to food and beverage companies. Visit our website or reach out to us at info@draughtlab.com to learn more!