How to Know When You’re Ready to Engage a Co-manufacturer (aka Coman)

by JPG

August 15, 2023

Ambitious food brands are always looking to expand their market presence and reach a new audience. Partnering with external production specialists offers an opportunity to scale and grow with less expenditure and risk than going it on your own.

Co-manufacturers, or comans, short for contract manufacturers, are experts in product manufacturing, with the right facilities, suppliers, and relationships in place to achieve efficiency and cost-effectiveness at larger scales.

Deciding when to start outsourcing your manufacturing is a big decision, so you must be sure and get your timing right. In this guide, we’ll explore the topic to help you find the perfect time to engage a coman. Consider the below factors to determine if your brand is ready to get the most out of a coman partnership.

Scale: what is your minimum order quantity (MOQ)?

Co-manufacturers must ensure a production run is cost-efficient for them and meets their production margin targets. Most comans expect minimum runs of at least one shift on their production line and a minimum of four to eight runs annually.

If your demand projections exceed your current ability to produce your product, it might be time to explore co-manufacturing options.

It’s a good idea to reach out to manufacturers to learn more about MOQs, run cadence, purchase order quantities, and volumes they need to attain for a successful partnership. . Scaling up your production unlocks new opportunities, giving you the potential to meet the demands of larger retailers, enter new markets, and potentially reduce your production costs.

Capital: can you pay upfront?

Co-manufacturers often require an upfront investment to cover trial runs and production costs. Before engaging with a coman, assess your financial readiness to ensure you have the necessary capital to perform plant trials and fulfil your first orders promptly.

This may involve considering your current cash flow and securing additional funding if necessary. It’s a good idea to formulate a projection to calculate the ROI you expect from the partnership. Not only will this help you assess the business opportunity, but it may help you secure capital from investors if you need to.

Product: do you have a scalable formula?

Ensure your product’s recipe and manufacturing processes are well-documented and can be easily replicated on a larger scale. A scalable formula will smoothen the transition to co-manufacturing and maintain consistency in taste and quality.

[Helpful Tip] It’s best practice to work with a product developer and pay the upfront cost to have your formula developed to ensure you own your formula. Alternatively, if your coman creates your formula, they own it which can be problematic if you outgrow them, they shut down, or if you need to expand to new regions. The cost to reverse engineer a formula can take many months and can be two to five times the cost of developing your own formula in the first place.

Document every aspect of your product, including ingredients, quantities, production methods, and quality control processes.

Test your recipes at larger scales to see if they need to be adjusted. Not all recipes scale in a linear way. And small errors and inaccuracies can be magnified into huge problems. But your coman should be able to help you adjust to the larger production volumes.

Cost of goods sold (COGS): can you control your production costs?

Don’t assume working with a coman will be more cost-efficient. It may well be, but it’s important to first evaluate the potential impact on your product’s COGS, which is the direct cost of producing it.

While economies of scale can drive down costs, it’s crucial to ensure that your pricing remains competitive in the market. Calculate the anticipated COGS with a co-manufacturer and compare it with your current production costs to understand the financial implications and viability of the partnership.

Logistics: how will you get your product to retailers and customers?

Working with a co-manufacturer involves a new set of logistical considerations. Evaluate their location, distribution capabilities, and supply chain efficiency to ensure seamless product delivery to your customers.

Efficient logistics are vital for timely and cost-effective delivery, which can positively impact your customer satisfaction and overall brand reputation. It’s vital to maintain your strong relationships with your customers and not let standards slip as you scale up.

Sales: can you prove your sales performance?

While a co-manufacturer can enhance production capabilities, it’s essential to have a track record of successful sales before exploring a partnership. Otherwise, you could be throwing money at a business that has no future.

Demonstrating consistent demand for your products will attract reliable coman partners who believe in your brand’s potential. Share sales data, customer feedback, and market performance metrics to showcase your brand’s viability and profitability.

Get support before you commit

Entering into a co-manufacturing partnership can be a game-changer for your food brand. By recognizing the signs of readiness and evaluating the critical factors involved, you can make an informed decision about engaging a coman and embrace the growth opportunities that co-manufacturing offers.

JPG Resources is a trusted partner for numerous successful brands, providing expert guidance and support throughout their operations journey – from finding the right co-manufacturer to running a successful supply chain. Our manufacturing advising program equips you with the knowledge and expertise needed to thrive in the industry. We provide a roadmap to help you refine your product formulation, streamline production processes, and optimize costs to prepare you for a successful co-manufacturing partnership.

Ready to explore your coman potential? Find out more about our manufacturing coaching program or if you’re ready to make a start, search for a reliable co-manufacturer today.

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