Ambitious food brands are always looking to expand their market presence and reach a new audience. Partnering with external production specialists offers an opportunity to scale and grow with less expenditure and risk than going it on your own.
Co-manufacturers, or comans, short for contract manufacturers, are experts in product manufacturing, with the right facilities, suppliers, and relationships in place to achieve efficiency and cost-effectiveness at larger scales.
Deciding when to start outsourcing your manufacturing is a big decision, so you must be sure and get your timing right. In this guide, we’ll explore the topic to help you find the perfect time to engage a coman, considering the most important factors.
Why use a coman?
Co-manufacturers offer numerous advantages to businesses looking to take the next step in scale, making them an essential consideration for ambitious brands looking to grow.
Let's delve into the key benefits:
● Expertise and Efficiency – Comans are specialists in food production. They can provide the knowledge, experience, and advanced technologies to manufacture your products at scale efficiently. By leveraging this expertise, you can focus on product development, marketing, and building your brand, knowing that manufacturing is in capable hands.
● Cost-Effectiveness – Co-manufacturing can be less expensive per unit due to economies of scale. As comans handle production for multiple brands, they can negotiate better deals with suppliers, leading to reduced production costs. This cost-effectiveness can be especially beneficial for startups and small businesses seeking quality production standards at competitive prices.
● Speed to Market – Working with a coman can significantly accelerate your time to market. Using their streamlined manufacturing processes and existing infrastructure you can achieve faster production and distribution, getting your products into your customer’s hands faster.
● Scalability – As your brand grows and demand increases, a coman should be able to adapt to your needs. Whether it's a surge in orders or an expanding product line, a reliable co-manufacturer can accommodate your evolving requirements as you grow.
● More Efficient CapitalUtilization – You don’t have to spend precious capital on setting up a factory and purchasing expensive machinery. Instead, you pay to ‘rent’ the coman’s existing production line for the hours or days you need to make your product.
Co-manufacturing – how to know you're ready
Before making the commitment to explore a co-manufacturing partnership, you want to know you’re ready. Consider the below factors to determine if your brand is ready to get the most out of a coman.
1. Scale: what is your minimum order quantity (MOQ)?
Co-manufacturers must ensure a production run is cost-efficient for them and meets their production margin targets. Most comans expect minimum runs of at least one shift on their production line and a minimum of four to eight runs annually.
If your demand projections exceed your current ability to produce your product, it might be time to explore co-manufacturing options.
It’s a good idea to reach out to manufacturers to learn more about MOQs, run cadence, purchase order quantities, and volumes they need to attain for a successful partnership. Scaling up your production unlocks new opportunities, giving you the potential to meet the demands of larger retailers, enter new markets, and potentially reduce your production costs.
2. Capital: can you pay upfront?
Co-manufacturers often require an upfront investment to cover trial runs and production costs. Before engaging with a coman, assess your financial readiness to ensure you have the necessary capital to perform plant trials and fulfill your first orders promptly.
This may involve considering your current cash flow and securing additional funding if necessary. It’s a good idea to formulate a projection to calculate the ROI you expect from the partnership. Not only will this help you assess the business opportunity, but it may help you secure capital from investors if you need to.
3. Product: do you have a scalable formula?
Ensure your product's recipe and manufacturing processes are well-documented and can be easily replicated on a larger scale. A scalable formula will smoothen the transition to co-manufacturing and maintain consistency in taste and quality.
[Helpful Tip] It’s best practice to work with a product developer and pay the upfront cost to have your formula developed to ensure you own your formula. Alternatively, if your coman creates your formula, they own it which can be problematic if you outgrow them, they shut down, or if you need to expand to new regions. The cost to reverse engineer a formula can take many months and can be two to five times the cost of developing your own formula in the first place.
Document every aspect of your product, including ingredients, quantities, production methods, and quality control processes.
Test your recipes at larger scales to see if they need to be adjusted. Not all recipes scale in a linear way. And small errors and inaccuracies can be magnified into huge problems. But your coman should be able to help you adjust to the larger production volumes.
4. Cost of goods sold (COGS): can you control your production costs?
Don’t assume working with a coman will be more cost-efficient. It may well be, but it’s important to first evaluate the potential impact on your product's COGS, which is the direct cost of producing it.
While economies of scale can drive down costs, it's crucial to ensure that your pricing remains competitive in the market. Calculate the anticipated COGS with a co-manufacturer and compare it with your current production costs to understand the financial implications and viability of the partnership.
5. Logistics: how will you get your product to retailers and customers?
Working with a co-manufacturer involves a new set of logistical considerations. Evaluate their location, distribution capabilities, and supply chain efficiency to ensure seamless product delivery to your customers.
Efficient logistics are vital for timely and cost-effective delivery, which can positively impact your customer satisfaction and overall brand reputation. It’s vital to maintain your strong relationships with your customers and not let standards slip as you scale up.
6. Sales: can you prove your sales performance?
While a co-manufacturer can enhance production capabilities, it's essential to have a track record of successful sales before exploring a partnership. Otherwise, you could be throwing money at a business that has no future.
Demonstrating consistent demand for your products will attract reliable coman partners who believe in your brand's potential. Share sales data, customer feedback, and market performance metrics to showcase your brand's viability and profitability.
Get support before you commit
Entering into a co-manufacturing partnership can be a game-changer for your food brand. By recognizing the signs of readiness and evaluating the critical factors involved, you can make an informed decision about engaging a coman and embrace the growth opportunities that co-manufacturing offers.
JPG Resources is a trusted partner for numerous successful brands, providing expert guidance and support throughout their operations journey - from finding the right co-manufacturer to running a successful supply chain. Our manufacturing advising program equips you with the knowledge and expertise needed to thrive in the industry. We provide a roadmap to help you refine your product formulation, streamline production processes, and optimize costs to prepare you for a successful co-manufacturing partnership.