After the pandemic hit, major consumer packaged goods companies turned to their co-packers to meet the unanticipated surge in demand as stay-at-home households stocked up on their core products.
That’s made it challenging for incubators who are turning to outside manufacturers to help bring their product to market.
“There is a risk to small brands that when it’s time to reach out to co-manufacturers, they won’t actually have any capacity,” said Jessica Cristadoro partner, Food Business Consulting.
Identifying the right co-packer has always been one of the biggest challenges that incubators face. It has just become more difficult since the coronavirus (COVID-19) struck.
“With so many new companies started over the last 10 years, finding capacity can be daunting,” said Linsey Herman, vice president, product development for Factory LLC. “Some co-packers want equity for the effort along with tolling.”
Tolling, she said, is the cost per unit produced on a production line — similar to what cars pay on a tollway. Some co-manufacturers are turnkey and charge more because their services include everything, including providing ingredients and packaging. Others allow their customers to control the ingredients used in their products. Typically, co-packers require payment about 15 days after the products are made.
“There’s no single model out there, so research is vital,” Ms. Herman said. “The best co-packer relationships are ones where both sides have realistic expectations for the other and are willing to grow together.”
This article is an excerpt from the September 2020 issue of Baking & Snack. To read the entire feature on incubators, click here.