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| Do the advantages outweigh the disadvantages?? |
With this PART TWO post let’s
pick-up where we left off by looking at some of the advantages and
disadvantages associated with copacking.
Advantages
·
Have you started to research how expensive it is
to set up a food/bakery manufacturing facility?
The investment of capital is staggering.
Using a copacker will significantly reduce startup.
·
Because you will be under contract with the
copacker you will be able to better predict COGS. With a copacker your COGS will be a fixed
cost allowing you to more accurately predict margins.
·
It also helps in getting a product to
market. You will not need to put your
attention on sitting up a facility, sourcing ingredients, cost accounting,
etc. If you choose the right copacker
their company will already have processing lines, packaging and labeling in
place. You are simply placing an order
with the copacker for your product.
·
Oftentimes (if you pick the right copacker) the
copacker will have more experience than you do creating your product because
they have more practice and familiarity with creating your type of product
commercially.
·
The copacker will have the necessary regulatory
certifications and insurance. In some
states however you will need to hold a health department manufacturing license.
·
The copacker may be able to get better pricing
for purchasing supplies and ingredients and should have the proper facilities
for receiving and storing ingredients.
Disadvantages
·
The big disadvantage to using a copacker for
control-oriented entrepreneurs is loss of product control. With a copacker you
don’t have the headache of getting production finished or dealing with
employees. But at the same time you no
longer control the product and its manufacturing. It can take a while to get used to that. Many copackers will invite you to view the
first product run. After than not so
much.
·
In some cases the same copacker you’re using
could be creating a similar product for your competition. Where there’s nothing inherently wrong with
this, it’s just a little close for comfort.
·
How much does the copacker value your
business? Sometimes it can seem
(especially when your order is small to the copacker) that your production is
totally at the mercy of the copacker.
You’ll have to plan accordingly so you always have product.
·
Your product will need to conform to the
copacker’s equipment. If you're
currently using vintage jelly jars to pack your tangerine marmalade you may
have to rethink your packaging.
·
Some entrepreneurs can never get passed the
confidentiality issue no matter how many non-disclosure forms are signed. In some cases you may need to share customer
information, volume and suggested retail with your copacker. Confidentiality can be protected to some
degree but it is never completely assured.
I trust this information will at the very least get you
started. In the spirit of full disclosure
this discussion on copacking is incomplete.
I divided it into two parts when ten parts is probably what it
deserved.
I have so much info on copacking (what to look for, what
can go horribly wrong, secrets to successful copacking relationships, not to
mention how it impacts your margins) that I'm considering writing a little
eBook on the topic.
Would that be helpful??
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