July 24, 2024
Contract Packaging

Contract Packaging: Outsourcing Strategies for Brand Growth and Expansion

In today’s competitive business landscape, brands are constantly looking for new ways to expand their product lines and enter new markets efficiently. One strategy that has gained popularity is contract packaging – partnering with specialized packaging companies to handle aspects of production like manufacturing, packaging, storage and distribution. By outsourcing these non-core functions, brands can focus on growth areas like marketing, sales and product development.

What is Contract Packaging?
Contract Packaging refers to outsourcing the packaging aspect of production to third-party manufacturers known as co-packers or contract packagers. These specialized companies own the necessary packaging equipment and facilities required for various packaging tasks. They produce, package and label products on behalf of brands based on agreed specifications and designs provided by the client brand. Contract packagers can handle the entire packaging process from receiving raw materials and components to final product warehousing and distribution.

Benefits of Contract Packaging
Some key advantages that brands realize through contract packaging include:

– Capital and Operational Cost Savings: Brands avoid the high upfront capital investments required for packaging machinery, warehousing facilities etc. Contract packagers already have the infrastructure in place. Operational costs like labor, utilities are also lower outsourced.

– Flexibility and Scalability: Contractors can flexibly scale up or down production based on fluctuating demand levels. Their specialized equipment also allows efficient production of varying batch sizes.

– Focus on Core Business: By outsourcing packaging, brands gain the time and resources to concentrate on sales, marketing and product innovation which are their core competencies.

– Rapid Market Entry: New markets and product lines can be entered faster by partnering with contractors located near those regions which reduces transportation costs as well.

– Risk Mitigation: Contractors assume responsibility for investments, regulatory compliance and product liability risks associated with the packaging stage of production.

Choosing the Right Partner
With the packaging industry crowded with many contractor options, carefully selecting the right partner is crucial for success. Some factors to consider include:

Packaging Capabilities

The contractor’s equipment park and facilities should match the packaging requirements of the product. Key factors are line speed, packaging formats supported like bottles, jars, pouches etc. automated or manual handling capabilities. Ensure they have ecxpertise in the specific category like food, cosmetics, pharmaceuticals etc.

Quality Systems
Opt for contractors adhering to top industry certifications like GMP, HACCP and who have a strong track record of product safety. Audit their SOPs and quality control protocols.

Capacity and Scale
Evaluate if the production capacity and warehousing space suits present and projected volume growth needs over the contract period.

Location and Logistics
Favorably located contractors near key supply chains or target markets optimize delivery timelines and transportation costs.

Price Competitiveness
Compare total costs factoring setup, run rates per unit and additional charges to get the optimal value. Negotiate discounts for long term commitments.

Contract Terms
Clearly define deliverables, payment schedules, liability clauses, compliance with brand guidelines in the agreement to avoid disputes.

People and Culture Fit
Build rapport and trust with management and operations teams to facilitate collaboration through the contract period.

Proof of Performance
Request client references within the same industry to validate service consistency and issues handling abilities.

With a strategic contract packaging partner selected based on the above criteria, brands can scale operations efficiently and focus energies on growth trajectories. Outsourcing non-core packaging widens the scope for innovation, time-to-market advantage and market share gain.

1. Source: Coherent Market Insights, Public sources, Desk research
2. We have leveraged AI tools to mine information and compile it