North Carolina State University
Department of Food Science
Food Processing FSE98(10-99)
Choosing and Using a Co-packer
John E. Rushing, Ph.D.
What is a co-packer?
Co-packers manufacture and package foods for other companies to sell. These
products range from nationally-known brands to private labels.
Entrepreneurs choose to use the services of co-packers for many reasons.
Co-packers can provide entrepreneurs with a variety of services in addition to
manufacturing and packaging products. They can often help in the formulation of the
The co-packer may function only as a packer of other peoples’ products or may be in
business with his/her own product line.
They may be, in fact, manufacturing several competing products. The range of
services available from a co-packer will vary depending on the size and experience
of the co-packer and the type of facilities and the capacity of their plant.
What are the advantages to using a co-packer?
There are many advantages to using a co-packer. The most obvious is to reduce
startup costs for the food entrepreneur.
Capital costs of equipment and facilities can be enormous. Using a co-packer allows
one to more accurately predict overhead costs due to manufacturing. Using a
co-packer can also reduce lead-time in getting a product to market. Choosing a
co-packer who already has processing lines in place almost makes
manufacturing, packaging, and labeling a food product a matter of placing an order.
The co-packer may have experience with similar products that is transferable to
the product you wish to have copacked.
With established business, the co-packer will usually have the proper regulatory
certifications, lines of credit for purchasing supplies and ingredients,
insurance, food industry contacts and sources to get the job done efficiently.
They should be familiar with quality parameters, food safety requirements, and
shipping needs. They will have the proper facilities for receiving and storing
ingredients and can arrange storage of finished product. Some co-packers will
offer other services for entrepreneurs such as product stability testing,
nutritional labeling, formulation assistance, ingredient substitution, and
other product development services. In addition, they can offer suggestions on
packaging and labeling the product, usually based on the types of filling,
capping and labeling equipment in their facilities. They can direct you to
professionals who can assist you in the design and marketing of your product.
They usually offer the advantage of buying supplies and ingredients in bulk. They can
arrange palleting and shipping to meet the needs of the buyer.
What types of obstacles might an entrepreneur face?
In addition to the above advantages for using a co-packer, food entrepreneurs may face a
variety of obstacles to manufacturing their own product. They may not possess the
experience and expertise necessary to manufacture a food product. There may be
zoning laws, which restrict certain business activities on the entrepreneur’s property.
Loss of economies of scale for the entrepreneur may be such that the cost of the
ingredients and packaging may be prohibitive.
What are some disadvantages to using a co-packer?
An obvious disadvantage to using a co-packer is a loss of control over the product and its
manufacture. Many co-packers will request the entrepreneur be available in the plant the
first time the product is run so they can ensure it is made to the customer’s
satisfaction. However, the presence of the customer is usually not requested for
An entrepreneur is at the mercy of the co-packer’s production schedule, their fixed
costs and their method of doing business. The product must conform to the co-packer’s
equipment and facility limitations. In some cases, the co-packer may be producing a
Confidentiality may be a problem as formulations, ingredients and product
specifications must be shared with the co-packer. Oftentimes it is necessary to share
customer and sales information. The co-packer has access to other information
such as sales, volumes and price. This information can be protected to some degree
with agreements, but confidentiality can never be assured.
Disagreements between customers and co-packers are not easily resolved. Disputes
and litigation may tie up ingredients, supplies and finished product for extended
periods of time. Finding an alternative co-packer who can produce the same product
may prove difficult.
Using a co-packer can be expensive. A co-packer must recover direct and indirect
overhead and costs. Additionally, a co-packer must also make a profit.
Consequently, the costs associated with copacked product may be high.
Before you visit the co-packer
Before choosing a co-packer, do your homework. You should have business and
marketing plans in place which outline your product needs in terms of size and type of
container, number of units per given period, price to the buyer and sales price. Small
Business Technology and Development Center can be of assistance. Get technical
help from a university, a consultant or a testing laboratory to determine needs for
product stability and safety.
Once you have established the product information, write preparation and process
instructions. Write specifications for ingredients, packaging materials, regulatory
compliance, and finished product.
Prepare a checklist of needs you have from the co-packer
Will you require product development assistance such as safety determinations,
coloring, stabilizers and emulsifiers, or preservatives?
What are special product concerns such as; acidity, thermal process, refrigerated
ingredients, refrigerated product storage?
Are there special ingredient concerns?
Will the product require specialized ingredients in terms of variety, function,
or piece size?
Will ingredient preparation such as onsite chopping, peeling, coring, or sugaring be
Can ingredients be purchased ready-to-use?
Are there alternative sources for specialized ingredients?
Consult with your attorney and insurance carrier. What do they feel you should
require of your co-packer? Will a site visit be necessary for them?
Remember, scale-up of production from the home kitchen to the first plant trial may
produce unsaleable or unusable product.
Factors such as rate of heating, agitation during incorporation of ingredients, holding
at high temperatures and pumping can affect ingredient functionality and product
appearance. Adequate product development prior to the pilot run will minimize this, but
unforeseen factors may still cause differences in product.
How will the final product be distributed? If it is to be shipped to a central warehouse,
what requirements will you have for the co-packer? Many companies are under
mandatory solid waste reduction. Will the product be shipped in boxes or overwrapped
trays? On which kind of pallet shall they be furnished? Should the boxes be
overwrapped or glued to keep them on the pallet?
Will you need storage of ingredients, supplies, or finished products? Will you
need the co-packer to order or ship these materials? How much inventory will you
need to have on hand?
Will the potential buyers of your product require that the food be manufactured under
particular quality, safety, or certification systems such as HACCP, ISO 9000, Kosher
or Halal? Do regulations require USDA compliance, or certification for low-acid
canned foods or acidified foods? Is there mandatory HACCP compliance required? Is
a third party audit required?
How do I find the right co-packer?
For the entrepreneur, the best source of information about co-packers, their abilities
and how they work with entrepreneurs is often other entrepreneurs. Meet other
entrepreneurs at state association meetings, food shows, and trade shows. More
specialized co-packers will often advertise in food industry trade periodicals and
directories. State directories of manufacturers will provide information about manufacturing companies. Those who list private-label products are usually co-packers. University extension services and state food and drug or agricultural marketing agencies can also be of help.
Bring your specifications and checklist to your first meeting with the co-packer. You
may wish to consult your attorney for instructions on protecting the confidentiality
of your documents and conversation. Some co-packers will restrict confidentiality
agreements only to written specifications, formulations, pricing and customer
information. Most will not agree to noncompete arrangements, as that would restrict
their livelihood and their business interests.
You may be able to use a model confidentiality contract furnished by the
The costs of all services at a co-packer must be recovered. Be sure to have an agreedupon
price for each of these. Once an agreement is reached, be sure you will need a
contract for services. Be sure to get a guaranteed price for at least a year.
Some co-packers have an in-house R&D department. This can produce a considerable
savings in time and development costs.
Ask to tour the co-packer’s facilities. Note the state of cleanliness and order. Look at
the most recent inspection report. Is the co-packer operating under a quality control or
food safety system such as HACCP? Do they have the equipment needed to process,
label, and package your product correctly?
Request from the co-packer the names of others he has copacked for. It is a good idea
to speak with them about what it’s like to work with the co-packer; ask about his
commitment to schedules and to quality.
Ask about concerns they might have.
Share both your present and future needs with the co-packer. Early in the relationship,
you may need small production runs, later you may wish to have more volume. Can
the co-packer deliver on production? What about peak seasons? In the specialty foods
business, there are often seasonal needs, such as, the Christmas holidays, when turn-around time for resupply of stores may be short.
Can the co-packer accommodate this?
Usually, early in the process, it will be necessary to produce product for
storage/stability testing. You may wish to produce samples in alternate sizes or
different containers. Check to make sure these can be processed.
The contract with the co-packer
Obviously, written orders should be placed with the co-packer. Specifications should be
furnished for supplies, ingredients, processing and finished products. A written
contract can help you avoid a lot of problems later on. Be sure you understand what you’re
contracting for. Check with your attorney.
Below are items which should, at a minimum, be addressed in the contract:
What are the services you are contracting for? Who will handle raw product
testing? Where are records to be kept? How will final product quality be checked?
What ingredients and supplies are you responsible for purchasing or providing?
What is the disposal for excess ingredients or supplies which you purchase or furnish? Where will they be stored between processing runs?
What processing manipulations will be required for ingredients such as slicing,
dicing, or blanching? Are piece sizes specified?
Will there be samples furnished for your approval prior to the first production run?
Will there be storage/stability or finished product tests?
Are you to be present and consulted during processing plant runs? If so, are
you covered under insurance or Workmen’s Compensation?
Will you have any coverage under the manufacturer’s product liability
insurance? If so, what will it be? Note that it will be necessary for you to
furnish your own liability insurance to sell your product to stores.
What are the critical factors which must be met in processing, such as pH,
packing temperatures, or heat processing? Require documentation that
these have been measured and met.
Are ingredient substitutions accepted? What are the limits? Are these covered
in your ingredient specifications? Note that manipulation of ingredients may
render your ingredient statement or nutritional information on your label
The contract should note scheduled processes which must be filed and
certifications which must be obtained. If the product is listed under a marketing
program such as “Goodness Grows in North Carolina” there must be
certification of use of required ingredients.
What is the delivery date of the finished product? Must it be immediately
removed from the premises?
What are the payment terms? Usually these are 10% down and the remainder
What will render the product unacceptable? What are the appearance
factors such as color, separation, piece size, and texture? Who will judge
adequacy of flavor and taste?
What are the appearance factors for the container, such as label placement,
closure gasket materials and closure color, or neckband placement, size and
color? How tight is the closure to be?
Who is responsible for disposal and disposal costs or rework of unacceptable
The entrepreneur should furnish labels, what size are they to be, what style and
orientation, and how are they to be wound? (It is recommended you have
the co-packer specify the labels in writing to be sure they will run on the co-packer’s
How much lead-time is necessary for the next and subsequent production runs to
Will the co-packer be required to furnish grade certifications, third party audits or
other certifications of lots and batches? The co-packer should certify that the label
statements are accurate.
What lot or batch coding is to be used? Where will it be placed on the container
and how will ingredient processing and testing records be filed to correlate with
What is the manufacturer’s recall plan? Be sure you have a copy. How are you
to be notified?
Is there a noncompete agreement with the co-packer? Are confidentiality and
privacy issues covered?
What finished product testing will be provided?
While there may be many other points to be covered in the contract, the above represents
those points for which many disagreements occur. While we recommend an attorney’s
advice on contracts, the small entrepreneur may find the cost prohibitive.
Make the Relationship Good
A good working relationship with your co-packer and an agreement which covers
what he is expected to provide will make your venture more pleasant, and hopefully,