Part 3 - To Self-Produce or Co-Pack?
In Part 2, we prepared you for the transition from your kitchen to the CPG market, by offering a broad overview of the regulatory environment you will have to navigate, and discussing the differences between recipes and formulas. Now that you have a good handle on the regulations with which you will have to comply, you can begin to take a look at the trade-offs between self-producing your product, or contracting with a co-packer.
Initial Product Quantity
The first questions you should ask yourself are:
- How many SKUs (flavors/product variations) do I want to launch with?
- How much product do I think I can sell in my initial run?
Make sure you are taking into account any volume you may way to use for promotional opportunities (more on this in Part 6). It can be helpful to meet with local/regional distributors and inquire about their interest and a ballpark volume for an initial purchase. I would suggest starting with smaller specialty foods distributors, as they are more likely to distribute a local product, and may have more time to answer your questions.
Identifying Suppliers and Minimum Purchase Orders
Next, you’ll want to identify your ingredient suppliers. Depending on your product and the regulations in play, this may be a fair bit more complicated than when you were making small batches in your private kitchen. For example, if you are making ice cream, you will likely need to get a document called a Certificate of Analysis for listeria for every ingredient you intend to use. That means that for any ingredient you are looking to source, you will have to ask the supplier if they can provide a COA for listeria, otherwise that particular brand is off the table. Consult with your sanitarian or other health regulator for more direction on this.
Once you know the ingredients you’ll be planning to source, you’ll want to compare prices and volumes. You may also have to consider the packaging they are shipped in, and whether or not they are refrigerated. Using an IQF (pureed and chilled) fruit for your jams? You’ll want to know if that ingredient will arrive frozen or refrigerated, and if it will be in a bag, tub, or other. This could have implications as you get further into the production process.
Co-Packing: Taking Advantage Of Another’s Resources
Unless your product requires very little prep, or you have access to serious capital (think seven figures plus), I strongly encourage you to consider co-packing your product through a third party as you prepare to enter the market. The boom in food startups means there are many production facilities out there that are not fulfilling their production lines’ capacities. There are numerous articles out there that lay out the benefits of co-packing, and this list is a great place to start to identify a co-packer for your product (and yet is not even remotely exhaustive).
Another tried-and-true way to identify a good co-packer is simply to contact a company that is already making a product similar to yours. While you may see them as a direct competitor, they may in fact be thrilled to take on the extra work. That was certainly my experience; I was fortunate to find a GREAT ice cream co-packer who entertained all my requests for high-end ingredients and custom formulations, with the only stipulation being that they were not willing to offer their Certified Organic labeling to my product as they viewed that as a distinct advantage for their product on the shelf.
In the next installment, I’ll show you how to write a co-packer query letter that is sure to get a detailed response! Or download the whole guide now!
Topics: Consumer Packaged Good