Partnering with Others Offers Mutual Benefits
Partnering with others to make your product -- or theirs -- offers benefits to both partners.
By Bob Sperber, Plant Operations Editor | 11/04/2008
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In addition to running their own products on their own production lines, food companies of all types and sizes routinely pack products for customers who want their own label on the product, or don’t want any label at all. Then there are food companies who call on outside plants for a new product launch, a test market or in some cases: everything.
“I don’t know how to run a manufacturing facility, and I never wanted to run one,” says Patty Stewart, a former Chicago stock broker whose celiac disease -- and accompanying gluten sensitivity -- led her to develop yummy-healthy cookie recipes that in the past two years have landed her retail chain accounts, a web business and a small plant that her business would quickly outgrow.
“The little bakery we were working out of grew so fast, I had to make a decision,” she says. And this past summer, her company, Whole Bakers (www.wholebakers.com/) , gave all of its production to PacMoore (www.pacmoore.com), a contract mixing, blending and packaging specialist based in nearby Hammond, Ind.
The Whole Bakers line of gluten-free products is low-volume and labor-intensive, but it enabled contract manufacturer PacMoore to add retail capability to its portfolio.
“I just figured that I would focus on my strength and focus on media and distribution and getting our cookies in every grocery store all over the country,” she continues. “That’s where I’m strong. And where my weaknesses are, I can turn that over to the professionals.”
Working from her strengths, she’s made contacts with “so many different people on the customer side, and some very high profile media outlets, from TV shows and magazines to online outlets.” Freed of production chores, Stewart can now give full attention to sales and marketing, new cookie formulations and eventually line extensions, including muffins, bread crumbs, pizza crusts and, in the future, extruded snacks. She’ll have pretty much a full line of certified gluten-free baked goods.
But most of the dollars and products trading hands don’t involve start-ups. In fact, most of PacMoore’s business comes from Fortune 100 food companies, which generally call on the company for ingredient blends to be further processed. “That’s our bread and butter,” says Chris Bekermeier, vice president of sales and marketing, “but we’re moving to put more retail capability in our portfolio.” Whole Bakers is a step in that direction, as are other consumer brands now in talks with PacMoore. Beckermeier sees expanded retail capabilities as “an opportunity to offer more value.”
Contract manufacturers as well as food processors with their own brands and a little excess capacity will make products carrying other companies’ brands. Reasons include:
> To cover plant operating overhead for greater efficiency and 24/7 capital investment payback.
> To saturate category sales. “If you’re going to eat pasta, we’d prefer you eat ours,” regardless of the label, says Walt George, executive vice president of operations and supply chain at the nation's largest pasta-maker, American Italian Pasta Co. (www.aipc.com), Kansas City, Mo.
> To gain insight into market trends. That’s often the case when a larger marketer with its own manufacturing chooses to use a smaller one for a new product.
> To reduce transportation costs. Some East Coast or Midwestern customers ship fruit and soft-drink mixes and concentrates to the docks of Tree Top Inc.’s West Coast processing plants rather than shipping the final product, which has a high (and heavy) water content. Or to better manage fleets (or negotiate freight contracts) by having empty trucks pick up materials once a customer delivery is made. That’s something “not at all uncommon” in the private label industry, where in-house fleet utilization and carrier contracts alike are a major source of costs, or savings, says consultant Jim Wisner, president of Wisner Marketing Group (www.wisnermarketing.com), Libertyville, Ill.
Likewise, companies large and small turn to others to handle various manufacturing chores for many reasons. These include:
> To gain manufacturing expertise while minimizing capital investments.
> To reduce the costs of long-distance distribution by choosing partners in one or more local markets.
> To handle temporary spikes when demand exceeds production capacity. For example, AIPC in the summer calls on other pasta-makers to supplement its production of bow-tie pasta, which sometimes exceeds its capacity as summertime pasta salads grace many a picnic tablecloth.