A contract packager or co-packer handles all labeling and packaging steps for your finished product. They are usually outsourced companies at the end of your supply chain. They don’t usually manufacture your product and only deliver the final goods to your warehouse (not directly to retailers).
Co-packers specialize in customizing packaging
However, as outsourcing is becoming more popular in the business world, co-packing is often confused with many other technical terms. In this article, we’ll discuss the most common terms used and the benefits of using a co-packer and other services.
Co-packing vs Co-Manufacturing vs Private label
3 things you need to remember when thinking about these terms are: (1) Who owns the products?; (2) Who owns the label (or brand), and (3) Who manufactures the products?.
|Owns the brand
|Owns the product
|Makes the product
Table: Differences between Co-packing, Co-manufacturing and Private Label
A co-packer doesn’t own the brand/label or the products, they also don’t manufacture them. Co-packers simply handle the packaging then ship the products back to their clients.
A co-manufacturer (contract manufacturer), similarly, doesn’t own the product or the label. But they have manufacturing capacity. Co-man will manufacture clients’ products (following their recipe/requirements) then also handle the labeling and packaging. Co-manufacturers are sometimes called OEM.
By contrast, a private label manufacturer owns the product and all relating recipes or patents. The client will provide the brand and the private labeler will package their own products with the clients’ labels. The client only owns the label, and not the products. This method is also sometimes called ODM.
You can also read our article on “What is a Beverage Co-packer?” to learn more about the industry.
Tan Do Beverage – Credible contract manufacturer of beverage
We have served hundreds of international customers in over 60 countries, including the US, the UK, Australia, Korea and China.
We can provide co-packing and co-manufacturing (OEM) services for many types of beverages, keeping the same perfect taste as your original recipe. Or you can choose from our 500+ portfolio of private label beverage recipes to minimize product launch time.
Benefits of using a co-packer
In general, a co packer allows companies to be more flexible in their planning and marketing strategies. They have the ability to scale production size based on clients’ needs and provide endless customization to suit specific product designs or marketing goals. Here are a few benefits that outsourcing to a co-packer can bring about.
Sometimes, large retailers or warehouse clubs demand specific packaging and sizes for products on their shelves. Or maybe, you want to create different product bundles (6 pack – 12 pack, etc) for differential pricing.
Instead of developing a separate production line for each of them, just book a co-packer to help brings your products to life.
Cost-saving on machineries and equipment
A contract packager will shoulder all the costs of facility, equipment and labor. For companies with a large portfolio of products, they can save money by not investing in different types of equipment for each packaging. This dramatically reduces the cost of goods sold for each product.
Flexible production capacity
Without serious investment into production facilities, your supply chain can be more flexible. If demands run low, you can scale back your order to the co-packer, without fears of wasting idle assets. And if demands suddenly explode, you can quickly scale up production without the risk of investing into more machineries.
Cost effective small-scale runs
Effective marketing campaigns sometimes need smaller orders for special, limited-time promotional events or market testing of new products. By booking a co-packer, you can effectively customize your products for these purposes. You don’t have to buy new machines for such small quantities.
Create products with special packaging
A co-packer can also provide sophisticated and specialized types of packaging that are too difficult to make by yourself. Let’s say you want to create a product with glass or metal packaging. But the machinery and material used for them are too expensive and hard to source.
Co-packers help companies scale production
That’s why you need a specialized co-packer. They already invested in these types of packaging. It’ll be much more cost effective, and faster, to outsource rather than develop the whole process by yourself.
The costs of using a Co-packer
On average, a customer using so-packing services can spend as little as $1000-$2000 for really small order of a few thousand products. But large-scale customers can spend to the hundreds of thousands. These costs can be charged in 3 different ways by the co-packer:
- Flat day rates – this is a set fee for an entire workday that allows hired labor workers to produce as many units as possible in the hours they operate.
- Per hour rates – this is the hardest to find but can accommodate more minor production requirements for smaller businesses.
- Per unit rates – it is as simple as it sounds; per-unit rates are paid based on the number of units.
Nonetheless, these costs are always put upfront and negotiated before signing the contract. So make sure that you research carefully and ask for a detailed quotation.
Co-packing for beverage
Do you know that Coca-cola uses co-packers all the time? They pre-mix their cola syrup at their headquarter, then ship them out to qualified co-packers internationally to fill them into bottles and cans.
This method allows them to customize their products and quickly distribute them across many different markets across the globe, while still maintaining a signature taste.
However, for smaller beverage companies, this is simply too costly and difficult. They still need to invest in their own manufacturing plant for the beverage mixture, and invest in a complex supply chain to ship such delicate beverages in bulk, without altering the flavor.
That’s why many companies choose to partner with a beverage OEM/contract manufacturer.
Tan Do Beverage – Credible contract manufacturer of beverage
Tan Do Beverage is a renowned and credible beverage OEM/ODM manufacturer. We have served hundreds of international customers in over 60 countries, including the US, the UK, Australia, Korea and China.
We can provide co-packing and co-manufacturing (OEM) services for many types of beverages, keeping the same perfect taste as your original recipe.
Or you can choose from our 500+ portfolio of private label beverage recipes to minimize product launch time.