Contract Manufacturing and Packaging Gain Mind-Share

Outsourcing processing and packaging provides flexibility for new product launches, promotions and more.

By Kate Bertrand

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Specialized technologies net business for some contract manufacturers. American Purpac Technologies, for example, has expertise in high-acid aseptic and hot-fill processes. The firm works with juice processors on both retail and bulk packaging projects.

Contract manufacturing and packaging are gaining mind-share among food processors as their companies strive to improve operational efficiency, shorten time to market and improve cost control.

For small companies and entrepreneurs, contract manufacturing and packaging provide the opportunity to commercialize a product even if they lack manufacturing resources. For large food processors, contract manufacturing is a cost-effective way to manufacture products in small lots for test marketing, seasonal sales or special promotions — without investing in production cells to handle these specialty runs. Outsourcing frees the processor to focus on its strength as a high-volume manufacturer.

In addition, using a contract packager, or copacker, gives large processors a way to present the same basic product in many packaging configurations. Working with a copacker, the food company can efficiently package the same product in sizes and assortments tailored to a variety of customer segments.

“The food companies’ core competency is to make their food products as efficiently as possible. They’re not going to invest in equipment to do a variety pack or a club pack, because it’s going to slow their equipment down,” says Jason Aymerich, sales manager at Diamond Contract Manufacturing (www.diamondpackaging.com), Rochester, N.Y.

Diamond provides contract manufacturing and packaging for foods, beverages, pharmaceuticals and other products. “It makes more sense for them to send that off-site than to retrofit their equipment to run a promotion once a quarter,” Aymerich adds.

“Move it, change over, go”

The same issue comes up as a manufacturing challenge for food processors that market numerous product formats. In the candy business, for example, the vast array of both product and packaging styles makes outsourcing desirable.

Troy and Brad van Dam, who run Marich Confectionery, show off their top Marich brand product, Chocolate Cherries. But they also provide private labeling, contract manufacturing and product development to other candy marketers. Photo by Vito Palmisano, Palmisano Photo Ltd.

“In our industry, there are so many different manufacturing techniques and product formats, finishes and styles. And the product could be in a vertical-form-fill pouch or a hand-packed bag or a gift tin or one of a million different types of packaging styles,” says Brad van Dam, president and CEO of Marich Confectionery (www.marich.com), Hollister, Calif.

Marich markets its own brand of confections and also provides private labeling, contract manufacturing and product development to other candy marketers.

Manufacturing a full range of confections — including panned chocolates, starch molded items such as jelly beans and open-kettle confections such as toffees — requires nimble operations. Marich’s equipment is designed for fast changeover, so the production team can quickly “change, shift, go on to the next thing, move it, change over, go,” van Dam says.

“Our production rooms are designed for flexibility,” he adds. “In the same production area, off the same chocolate supply, I can be making five or six different items at the same time. We use the magic of scheduling to work things side by side."

Even in categories where product formats are limited, the drive to meet constantly evolving consumer needs makes operational flexibility a core requirement. Changes in consumer tastes drive development of new products that must be formulated, processed and packaged. And all must be accomplished quickly, to beat competitors to market.

“There are tremendous changes in demand. Products and demand change from day to day and week to week,” says Mac McCampbell, chief operating officer at O-AT-KA Milk Products Cooperative Inc. (www.oatkamilk.com), Batavia, N.Y.

He adds, “You could make several million cases of a product in 2003, and it’s not even on the market in 2005.” O-AT-KA, which markets the Spring Farm brand, is also a private labeler and custom manufacturer.

For food processors, creating that level of production flexibility in-house can be cost-prohibitive. Outsourcing often is the most cost-effective way to create and quickly get to market with generation after generation of new products.

Menu of services

To keep up with the fast-changing market, some processors contract not only for manufacturing but also for a combination of services such as product formulation, ingredients procurement, package design, point-of-purchase display production, product inspection and distribution.

Diamond Contract Manufacturing packages this do-it-yourself sausage kit for Eastman Outdoors.

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