Partnering with a co-packer is an efficient and very popular way to run and grow your food business. Contract manufacturing and packaging is the backbone of the food industry. A co-packer is an outside party who will produce your food product based on your instructions and specified ingredients. Food businesses specify packaging terms, quality standards, and all other critical criteria that make up the final food product. Using a co-packer streamlines the production and often increases the scale and scope by which you do business. If you’re curious about how effective this is, know that 80% of food is produced with or by co-packers.
That last statistic can be falsely reassuring. If 80% of food by contract manufacturing, it is easy to be misled that it’s an easy and risk-free. The bad news is that most co-packing agreements written between the producer and supplier are terrible. In truth, there are existential risks involved in partnering with a co-packer. For starters, the food business’s name is on the final product, not necessarily the co-packer’s name. In the event of a recall or food-born illness crisis, the food business is primarily liable for the consequences. A food business can address these and other risks in a thorough co-packer agreement to outline expectations, requirements, and ultimately, a final product you’re happy to put your name on.
We’ve helped many of our clients with contract manufacturing agreements. Our co-packer agreements generally address the following terms:
- Incorrect Labels and Marketing – Generally, co-packers manufacture and package the product.
- Make sure the co-packer knows any specific marketing claims you make and have them warranty these claims if possible (i.e. – “gluten-free”). If the co-packer is aware of the claim and how important it is to the marketing of the product, they share the commercial pressure for ensuring the claim is true and accurate.
- Undeclared allergens – Undeclared allergens are the leading cause of FDA recall. Source every ingredient carefully, then delegate approved users to the co-packer.
- The food business gets the final word on ingredient sourcing and require the co-packer to get written approval first for any changes.
- Recalls – these have a cost component and a management component. The obligation for paying for a recall is different from the risk of managing a recall.
- Delegating the cost of funding a recall is easy. It is a singular obligation which can be put onto either party. Managing a recall is trickier. Running a smooth recall requires close and fast coordination between the food business and the co-packer. The framework for such work needs to first be addressed in the co-packer agreement.
- Intellectual Property is what you’re giving your co-packer. Make sure that they can’t take your recipe and duplicate it for a competitor.
- The co-packer’s use of the recipe should not survive the business relationship. Solid non-compete and nondisclosure agreements need to be incorporated into every co-packer agreement, without exception.
- Commercial – just like any other contract, your agreement will need to specify quantities for purchasing, ingredients, delivery locations, and a cost breakdown.
- This is contracts 101. We identify exactly what your product characteristics are, how much you’re buying, where it gets delivered, and cost for the entire process. Detailed writing is crucial in squaring-away product basics.
Don’t trust your business to the fate of a terribly written co-packer agreement. Stand out and protect yourself from the potential risks we have outlined above. With our help, your co-packer agreement will cover everything you need to succeed. Contact us today, and we can get started.
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