Contract Packaging & Co-Packer Agreements: Managing the Risks

Co-Packer Agreements and Contract Packaging give food businesses access to large-scale production without building their own factories. As a company gains production advantages through co-packing, these partnerships also introduce significant legal, regulatory, and operational risks. Managing those risks—through a well-drafted Co-Packer Agreement—is critical to protecting your product, your intellectual property, and your business. This article outlines the key risks of Co-Packer Agreements and how to manage them effectively.

To begin with, co-packers, or contract packagers, are third-party food processors that agree to produce a product according to the recipe and requirements set by the Marketer. As a result, the Marketer remains distinct from the co-packer, who performs the actual manufacturing. This setup allows the Marketer to use advanced, inspected facilities without building one. Co-packers often guide food businesses on scaling recipes, developing products, improving shelf life, and designing packaging. Their trained teams and specialized equipment reduce production risks. Altogether, these benefits make co-packers essential partners in bringing food products to market.

Marketers that rely on co-packers need to be aware of special liabilities that can arise in contract manufacturing. Contract packaging carries four distinct buckets of risk for the Marketer:

• Regulatory. Food product marketing is governed by labeling regulations, and manufacturing is governed by federal Good Manufacturing Practices (GMPs). Marketers rely on co-packers to fulfill the promises they make on the package. The agreement needs to guarantee that the co-packer will put the properly formulated product into the Marketer’s bag or bottle. We do this with a clear and concise “Product Specification”—an objective description of the finished product. See our FDA food label compliance work for how labeling and manufacturing must align.
• Theft of Intellectual Property. Marketers need to share their product formulas with co-packers. Recipes are trade secrets, and sharing them needs to be done carefully. From the start of the relationship, the Marketer needs to clearly identify its intellectual property, and a co-packer’s rights to the trade secrets must terminate after the conclusion of the manufacturing relationship.
• Food Safety. Marketers are entirely responsible to their customers when it comes to product safety, whether or not they operate the machines that make the food. Marketers need crystal-clear oversight of all food-safety documentation related to their products, plus a trained in-house quality-control staff that can independently verify the manufacturer’s compliance with food-safety protocols.
• Commercial. Food manufacturing shares the commercial risks found in any other manufacturing relationship. Problems arise when deliveries are late, the wrong goods are shipped, or orders arrive incomplete. Most often, the biggest issue happens when the co-packer delivers a product that deviates from the Specification—whether the pretzels are too small, the juice’s pH is too high, or the jam turns out too runny. A crisply written specification is essential; it sets objectively clear expectations and serves as the basis for rejecting non-conforming goods.

Marketers can address these risks in a comprehensive manufacturing agreement. Consider including the following items in co-packer agreements:

• Set the Commercial Expectation. In co-packing, details set the commercial expectation for the co-packer and give the consumer a consistent sensory experience. Clear, concise legal writing should describe the product in as much detail as possible—in addition to common-sense details like cookie size and scone weight, we routinely describe products by color, pH, salinity, Brix, and even viscosity. Establishing crisp, objective criteria lets the Marketer reject goods that do not meet the terms of the Agreement.
• Coordination Between Labeling and Manufacturing. As we’ve covered on our food labeling page, any false or misleading information on a product label renders the product misbranded, exposing it to both FDA enforcement and private lawsuits. Marketers should include a copy of the product label in the co-packing agreement, and the co-packer must guarantee that the contents of the package match the claims on the label.
• Recalls. A food product recall is an intense experience, and regulators expect answers to manufacturing questions within hours—not days. Marketers must obligate their co-packers to immediately cooperate with information requests during a recall, and the parties must allocate financial responsibility for costs that a basic commercial liability policy typically will not cover.
• Intellectual Property. A good non-disclosure agreement can protect trade secrets at the outset. As production planning advances, product formulas often require adjustments to match the co-packer’s equipment; minor changes can be assigned to the Marketer, while substantial changes may warrant a separate product development agreement. Non-compete or non-circumvention clauses can supplement these protections.

The Food Law Firm will help you draft an air-tight contract packaging agreement that gets your product on shelves with minimal investment in equipment, capital, and technical knowledge. Turnaround time for one of our agreements is usually 3–4 business days. Get in touch for a free quote. This work pairs naturally with our food supplier agreements and private label agreements, and you can see a real-world example in our Open Range Beef case study.

Clients realize the greatest value from our services when they stack them together comprehensively. Our subscription-based service plans let clients weave our services into the fabric of their businesses at affordable, predictable rates.

Last reviewed: June 2026.

Jason Foscolo Founder of The Food Law Firm — fractional general counsel for food & beverage businesses nationwide.