Production Operations: Contract Manufacturing and Packaging Gain Mind-Share

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 servicesTo 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.

For each processor, the range of services required is somewhat different. Eastman Outdoors (www.eastmanoutdoors.com), Flushing, Mich., had the straightforward goal of finding “a co-packer with high efficiency and capacity and with the ability to produce high-resolution packaging with extensive versatility in package design,” says Bud Gardner, senior product manager with Eastman Outdoors. The company ultimately chose Diamond to package its spices and seasonings.Other food companies need a more comprehensive combination of services to commercialize their new products and line extensions.“The innovation departments at consumer product goods companies are approaching us with some very good concepts, but the concept developers are not necessarily in tune with the entire supply chain as it relates to their concepts,” says Matt Ingemi, vice president of contract operations with Jel Sert Co. (www.jelsert.com), West Chicago, Ill. Jel Sert owns brands such as Wyler’s, My*T*Fine and Mondo Fruit Squeezers in addition to providing contract manufacturing services for other processors.“We pool our resources from formulation to fulfillment to help them create their business plan, formulate the product, spec packaging, trial the item, commercialize the item and set up distribution,” he adds.Ingemi estimates that only about 20 percent of the food processors that approach his firm come with a complete concept-commercialization business plan. The other 80 percent come bearing only a product concept.Specialized technologyIn some cases, the contract manufacturer’s specialized technology is the key attraction for processors. By finding a contractor that has made the investment in equipment and processes for aseptic filling, ultrafiltration, high-speed processing, fruit dehydration, freeze drying, organic processing or whatever the need may be, a food processor can simplify its operations and save on equipment and training costs.Juice processors, for example, may prefer to contract out aseptic filling of their brands. And some take the arrangement a step further, using a contract provider to package juice ingredients in shelf-stable bulk packs.American Purpac Technologies LLC (www.purpac.com), Beloit, Wis., a contract manufacturer with expertise in high-acid aseptic and hot fill processes, works with juice processors on both retail and bulk packaging projects.For bulk packaging, the juice processors send tanker trucks of apple, orange and other flavors of concentrate to American Purpac’s plant. The contract manufacturer aseptically processes and fills the concentrate into shelf-stable 340-gallon totes. The juice processors then distribute the bulk packs to other plants for conversion into juice.The benefit to these processors and the many others that outsource manufacturing and packaging is apparent: They gain the freedom to focus on product development and innovation, promotional marketing, dedicated mass-production or whatever else they do best.

NOTE TO R&D

The product you develop in the lab may look, feel, smell and taste terrific. But that doesn’t mean it will run well at production speeds at even your plant, much less at a contract manufacturer’s plant. And it may not be as appetizing when it comes off the production line as it was in the lab.

One solution to the difficulty of scaling up from bench-top samples to full-scale production is pilot plant testing. Pilot plants give processors the chance to identify and address scale-up issues before going to a contract manufacturer.

“If you went to a snack company to run a new product for the first time, it may take a few hundred or even 1,000 pounds of material to get the extruder up to temperature and speed, and be running a consistent product that would meet quality standards to go to the dryer,” says Laurie Keeler, general manager-pilot plants at the Food Processing Center at the University of Nebraska (www.fpc.unl.edu), Lincoln, Neb.

In contrast, pilot plant testing enables processors to set the running conditions on small-scale equipment, using perhaps 100 pounds of material and testing 10 to 15 different formulations in a single day.

Keeler says scale-up problems typically fall in the following categories:

Ingredient-driven:
Equipment-driven:
Environment-driven:
Human element:

Chemical and physical interactions between complex ingredients and the problem of functionality (such as starch bloom) occurring at the wrong place and time. Issues with ingredient quality also can emerge in the move from lab samples to bulk packages of ingredients.

Trouble with process uniformity, fouling, aeration, evaporation rates and more.

Differences in the lab’s environment versus the production environment, including relative humidity, elevation and climate. Water quality varies widely, as well, with differences occurring in flavor, odor, mineral content, temperature and quality/pH.

Fatigue or lack of focus on Monday and on the Friday before a holiday weekend, for example.