Beverage co-packing is a full-stack beverage manufacturing service provided by a beverage co-packer. It is the most common method small-to-medium beverage brands use to scale their business.
But what exactly is a beverage co-packer? And how can you choose the best co-packer for your beverage business?
In this article, we’ll look at all the important facts and benefits of beverage co-packing. Then, we’ll provide a 4 step guide on how to partner with a beverage co-packer.
What is a beverage co-packer?
A beverage co-packer manufactures another company’s beverage formulation. The cost of using a beverage co-packer includes all input costs and additional service fees. The word “beverage co-packer” is short for “beverage contract packager”.
Usually, that client will have a commercial-ready beverage formulation. The beverage co-packer will have access to that formulation via a contract (hence the name). The co-packer then uses their own experts and machineries to mass-produce that beverage product for the client.
The term “beverage co-packer” is different from the “co-packer” in other industries. A traditional co-packer only handles the last packaging step. Whereas, the beverage co-packer will take over all manufacturing steps for the client’s beverage formulation.
For instance, a co-packer for battery products only receives the naked battery cells from the manufacturer. This co-packer then proceeds to package these batteries into different SKUs and display containers. They don’t play any part in producing that battery.
By contrast, a beverage product can only be produced and packaged on one production line. This is to meet sterilization requirements of different processing methods (like retort, or hot-fill). It’s impossible to have a beverage co-packer that handles only the packaging.
What are the benefits of a beverage co-packer?
The outsourced beverage manufacturing industry is booming in recent years. Beverage brands and other FMCG companies are realizing the enormous benefits of a beverage co-packer. Here, we’ll look at 5 most common advantages of using a beverage co-packer for companies.
1. Product diversity and uniqueness
By partnering with different beverage co-packers, a beverage company can expand their product portfolio to include many different varieties of beverages.
It’s not cheap to invest in a beverage production line. Investing in new machineries and labor for every single product launch is astronomically expensive. Thus, using existing resources of a beverage co-packer can allow companies to enter new beverage markets with lower costs.
In addition, they can help beverage brands create rare and exotic beverage recipes. Think of, for instance, exotic fruit juices or psychoactive herbal extracts. These are only available to specific geographical regions. And the only way to access them cheaply is through an existing beverage co-packer.
2. Supply chain and production flexibility
A beverage co-packer can effortlessly scale up or down their production to meet your required quantity. This is very important to maximizing your profit margin in the beverage industry.
Efficient supply chain and production management can lead to the best profits. You need to precisely adjust the production and supply capacity to meet market demand. You can easily run into shortages or surpluses if these aren’t managed properly.
3. Access to industry leading beverage experts and consultants
The salary of an industry expert (in any field) is enormous. Not every beverage company can afford to have one on the team. However, since a beverage co-packer operates at great economies-of-scale, they can afford to hire these beverage experts.
Their presence in the factory ensures high quality standards and efficient production methods. This benefit will trickle down to whichever client partnering with the co-packer.
4.Cost efficiency and economies of scale
With greater scale comes lower costs. This is especially true for the beverage manufacturing industry. With total capacities reaching hundreds of millions of units, beverage co-packers can easily minimize their costs and give the best price to your beverage business.
5. Qualification for export and major retail chains
You want to enter coveted markets like the EU, or reach the shelves of global retail chains like Costco or Walmart. But, these targets are highly demanding of their suppliers. For beverages, not only do you need to ensure good manufacturing and food safety standards, but you also need to have certified ingredient sources for Organic or Non-GMO requirements.
Meeting all these requirements will only add to the price and production time. That’s why partnering with a beverage co-packer is the shortest route to reach these targets.
Tan Do Beverage is a credible beverage manufacturer based in Vietnam.
We offer a turnkey beverage co-packing services (also called private label manufacturing).
We can provide one-stop services to your beverage brands:
- Formulation development: We have experience developing 600+ beverage recipes, across 9 product lines for over 200 companies.
- Diverse packaging: We offer many different sizes of aluminum cans, PET bottles and glass bottles.
- Exotic beverages: We specialize in producing many types of tropical fruit juices, as well as novelty functional drinks like basil seed drinks, aloe vera drinks and other sodas.
- Low MOQ: For each beverage flavor, we only require at most 1000 cases to start production.
- Global Qualification: We have a suite of global certifications to help beverage brands export to over 70+ countries, and enter global retail chains like Walmart, 7/11, and Target.
- Flexible pricing: Our production service can be priced based on the client brand’s needs. We offer affordable products up to the most premium options
How many types of beverage co-packer are there?
The beverage co-packing industry is a relatively new and niche category. There are still many confusions about all the terms and definitions regarding a beverage co-packer.
Here, we’ll look at 2 different definitions for a beverage co-packer, as advised by beverage experts at Tan Do Beverage.
By services provided
Usually beverage co-packers will offer 2 types of co-packing service: Toller or Turn-key.
A toller beverage co-packer will only rent out their machinery and personnels for a fee (or toll). They only handle production and delivery, but not ingredient sourcing and supplying. This service is suitable for large companies, who have an exclusive ingredient source, and want to maintain input quality themselves.
A turn-key beverage co-packer will offer full one-stop services to beverage brands. They handle everything from sourcing, designs, productions and delivery. This is suitable for smaller beverage brands who don’t want to invest too much into supplier management.
By types of packaging offered
In the current beverage landscape, there are 3 main types of beverage co-packers based on types of packaging used.
- Canning Co-packer: Aluminum can is the most popular packaging for fresh and organic beverages. They can easily maintain the freshness and flavor of organic juices and other products. A beverage co-packers specializing in canning will usually use retort processing.
- Bottling Co-packer: Bottling is the most common type of soft drink packaging. Depending on the product, the bottle can be either plastic or glass. The co-packers specializing in bottling will usually employ either a hot-fill or cold-fill method.
- Paper box Co-packer: Paper boxes are used for beverages that can’t be processed at high heat (usually dairy based). These co-packers utilize UHT or HTST processing methods to pack them into paper cartons.
Normally, a beverage co-packer will only specialize in one type. But it’s not rare to see a co-packer offering 2 or 3 different types of packaging.
What are the most common types of co-packed beverages?
Beverage co-packers are commonly used by beverage brands to reduce overheads and product development time. Usually, beverage co-packers help brands deliver trendy products that are capturing consumers’ interests, or to create exotic and unique products that haven’t been introduced to the market before.
Here are 7 popular types of co-packed beverages.
1. Juices
Juices are commonly produced through a beverage co-packer. In order to preserve the freshness and flavor of the juice, they need to be processed via retort processing or UHT pasteurization. The machinery and production expertise required for these methods are really expensive. Most start-up juice brands usually choose a juice co-packer.
In addition, for exotic juices like passion fruit or guava, only a beverage co-packer located in the tropics can have access to fresh ingredients. So this is the only method to get affordable, high quality tropical juices.
2. Carbonated soda
Coca cola is probably the most famous co-packed carbonated soda. Their global supply chain employs over 200 co-packers to ensure consistent quality across all markets. And that has led to the establishment of numerous soda co-packers globally. It’s really easy for beverage companies in any country to find a good co-packer for carbonated soda near them.
3. Tea Drinks
Tea drinks are some of the most popular packaged beverages in China and many other Eastern countries. It is unsurprising that many beverage brands are now developing newer categories of packaged tea drinks to gain more market share.
But with the difficulties of tea leaf sourcing and brewing, many brands have turned to beverage co-packers to help turn them into reality. Tea drinks co-packer can offer many varieties of bottled and canned tea drinks
4. Kombucha
Packaged kombucha is a hot trend in recent years. They represent a new niche of health-focused, functional beverages. Many younger customers nowadays are drinking kombucha as a supplement to their healthy diet.
However, since kombucha is a fermented beverage, their manufacturing process is complicated and costly. Furthermore, it also requires a special process to remove all the alcohol accumulated from the fermentation process. This is necessary for kombucha to count as a “non-alcoholic beverage”.
All these factors mean new kombucha products are often co-packed and contracted from a third party to avoid high prices.
5. Energy drinks
The energy drinks market is among the fastest growing categories of beverage products. They are used for performance boosting during work-outs or sports matches. Not only that, many celebrity endorsed energy drink brands are now hitting the market, and receiving many fans.
Many energy drink brands are sprouting up as a result of this trend. And almost all of them partner with a co-packer to quickly develop their products.
6. Seltzers
During and after the COVID pandemic, many seltzers have exploded in popularity. Lockdowns mean that drinking culture moved towards in-house purchases. And customers have developed a taste for take-away alcoholic drinks.
Even after lockdowns ended, these brands are still quickly selling out. New seltzers and other mocktail brands are still launched regularly, creating high demands for seltzers co-packing services.
7. Ready-to-drink (RTD) coffee
Similarly to seltzers, RTD coffees are an alternative experience to a traditional coffee shop. However, this product targets more towards convenience and quick on-the-go drinks for workers.
And since competition is relatively sparse, many brands are still trying to capture market share for canned coffee. Starbucks, Nestle and many other coffee-related brands have partnered with beverage co-packers to develop RTD coffee products.
What are the risks of working with a beverage co-packer?
When working with a beverage co-packer, you must be aware of the various risks involved in the process. Crucial insights are needed to build contingency plans and quality control procedures. This helps you to take advantage of all the benefits while still protecting your company from potential damages.
Here, we’ll outline all the risks that may arise when working with a beverage co-packer.
1. Lack of R&D capacity
Not all beverage formulations are the same. A commercial formulation needs to be carefully researched and tested before going into production. For complex beverages that require special processing, many average co-packers simply aren’t able to produce them.
2. Inconsistent quality
Quality control is something that experienced beverage manufacturers do best. Good quality control ensures every batch of your beverage has the same taste as the control formulation.
However, if a co-packer doesn’t have much experience with your beverage, they won’t be able to cover all important checkpoints during QC and QA. This may lead to inconsistent quality, affecting your overall brand image.
3. Long lead time
You must also consider the manufacturing time when working with a co-packer. Since they are contracted by many other beverage brands, your order could be queued up behind many others.
In this case, your order may take a few months to be fulfilled. This is inevitable when you are working with an external contractor. So be advised and plan your business plans accordingly.
4. Regulatory compliance risks
The global certification system for food and beverage is extremely stringent and dynamic. New regulations can pop up and take effect at any time. Sometimes, it’s hard to keep up with all the changes and new certification systems.
If your beverage co-packer isn’t experienced, they risk becoming outdated and noncompliant with new regulations. Your beverage products will be grounded in the warehouse, raising inventory costs. Worst case scenario, these products aren’t qualified for sales and must be destroyed.
5. Price hikes and supply chain disruptions
Raw material costs can fluctuate at any time for several factors. It could be international conflicts, traffic jams at major trade routes, or any other supply chain disruption events. The material costs for your beverage will skyrocket, raising the beverage’s price.
Though these types of events have an industry-wide effect, you can still have some safeguard. Clearly define and calculate your prices with the co-packer, and determine your price and payment terms beforehand in the contract. That way, you won’t be surprised by any incidents during the length of your agreement with the co-packer
What is the process of working with a beverage co-packer?
Above are all the important knowledge points to understand beverage co-packing. Now, we’ll guide you through the 4 steps needed to successfully partner with a beverage co-packer.
Step 1: Prepare your requirements beforehand
Usually, beverage co-packers do not concern themselves with developing your commercial beverage formulation. But, some turnkey beverage co-packers do offer small scale pilot runs to test your beverage’s commercial viability.
Thus, it’s important that you carefully research your desired beverage formulation first. You can read here to learn more about beverage formulation development. Then, you will proceed to finding a co-packer with the capacity to deliver your beverage.
Step 2: Conduct market research and understand industry standards
Finding a new business partner is not a quick and easy task. Your beverage formulation is unique and important to your company. And every aspect of its production must be thoroughly considered.
A few factors to help you choose the best beverage co-packer:
- Packaging: Does your beverage use PET bottles, aluminum cans, or paper boxes?
- Ingredients: What are the raw materials required in your formulation? How can you get the best prices and best quality?
- Processing technology: Does the beverage need cold-filling, retort processing, UHT, or some other method?
- Labels: Do you want printed cans/bottles or shrink sleeving?
- Location: Is the co-packer’s location suitable to your supply chain? Or does the location provide the best product price?
Step 3: Shortlisting and signing agreements
It’s never wise to just choose one supplier from the start. You must scrape through all the available options, get as many quotations as possible. This, however, is not just to find the best price. It is to understand what are the industry standards, how the price points are divided (from low, mid-tier to high-tier co-packers).
Sometimes the cheapest isn’t the most suitable option. You must truly understand what your beverage formulation needs, and what type of co-packers can deliver these requirements. For example, if you truly need to sell tropical beverages like coconut water or pina colada, then your only access to fresh ingredients is through co-packers located in the tropics.
Then, you need to immediately enter into a contract with the copacker. Be sure to clearly define your costs, payment terms, delivery terms, NDA, force majeure, quality control and other liability clauses.
Step 4: Production and delivery
The final step is to wait for production and delivery. During this final step, you need to be vigilant about quality control procedures, both at the co-packer and when you receive the goods. Have a realistic threshold for faulty products (for things like discoloration, label inaccuracies, or flavor differences). Then, you need to engage with both the co-packer’s and your in-house quality control team to make sure all retail goods meet the requirements.
Tan Do Beverage is a credible beverage manufacturer based in Vietnam.
We offer a turnkey beverage co-packing services (also called private label manufacturing).
We can provide one-stop services to your beverage brands:
- Formulation development: We have experience developing 600+ beverage recipes, across 9 product lines for over 200 companies.
- Diverse packaging: We offer many different sizes of aluminum cans, PET bottles and glass bottles.
- Exotic beverages: We specialize in producing many types of tropical fruit juices, as well as novelty functional drinks like basil seed drinks, aloe vera drinks and other sodas.
- Low MOQ: For each beverage flavor, we only require at most 1000 cases to start production.
- Global Qualification: We have a suite of global certifications to help beverage brands export to over 70+ countries, and enter global retail chains like Walmart, 7/11, and Target.
- Flexible pricing: Our production service can be priced based on the client brand’s needs. We offer affordable products up to the most premium options
