The Ultimate Guide to Contract Packaging and Contract Manufacturing

In a marketplace that moves faster than a Gen Z’er scrolling through TikTok reels, co-packaging and co-manufacturing have emerged as sound strategies for businesses eager to streamline production and optimize their supply chain.

But what do these buzzworthy terms entail, and how have they transformed over the years? In this guide, we’ll unravel their rich histories, dissect the key differences between them, and highlight the advantages they offer, whether you’re an emerging or established brand, all while exploring the diverse industries reaping the rewards of these innovative approaches. Buckle up for an insightful ride!

A Brief History

Co-packaging and co-manufacturing have roots dating back several decades, born from the need for businesses to streamline their operations without compromising quality. The rise of globalization in the late 20th century significantly contributed to this growth, allowing companies to tap into external resources and expertise to enhance their efficiencies.

Initially, these services were reserved for large brands looking to scale operations, but the evolution of the industry means smaller businesses can also leverage these options affordably and effectively. Today, nearly 80% of companies use some form of co-manufacturing or co-packing to support their supply chain needs, according to the 2021 “Pathway to Growth” report by the Contract Packagers Association.

What is the Difference between Contract Packaging and Contract Manufacturing?

While co-packaging and co-manufacturing are often used interchangeably, they refer to distinct services.

Co-packaging, short for contract packaging, involves outsourcing the packaging process. A co-packer takes a product from a manufacturer and manages the packing in various formats, including sachet packets, stick packets, blister packs, bulk powder options, and more.

Co-manufacturing, or contract manufacturing, on the other hand, extends beyond just packaging. It involves the production of goods where a manufacturer provides raw materials and expertise to create a finished product.

Understanding the differences can help businesses select the most beneficial partnership.

With the ability to choose what you need from Ryder’s full suite of services, including package or product design and display engineering, you get decades of expertise from a one-stop solution.

What are the Benefits of Co-packaging and Co-manufacturing?

Both co-packaging and co-manufacturing offer significant advantages to businesses of all sizes:

1. Cost Efficiency: Businesses can cut down on overhead costs associated with producing and packaging products in-house. According to a 2020 study by IBISWorld, companies that use contract manufacturing save an average of 25% in manufacturing costs.

2. Scalability: These services allow businesses to scale rapidly without the need for large capital investments in infrastructure. This is particularly beneficial for startups and growing brands needing flexibility.

3. Speed to Market: With established processes and expertise, co-packers and co-manufacturers can significantly reduce the time to market for new products, enabling businesses to capitalize on trends swiftly.

4. Access to Expertise: Partnering with seasoned professionals in packaging and manufacturing provides businesses with valuable insights and quality assurance for their product lines.

5. Focus on Core Competencies: Businesses can spend more time and resources on marketing and customer engagement while leaving the intricacies of production and packaging to the experts.

Why the Sharks Are Hooked

In the world of entrepreneurship, the Sharks on Shark Tank frequently emphasize the crucial role of co-packers and co-manufacturers for growing businesses. They highlight that partnering with these professionals can not only streamline production processes but also enhance product quality.

Mark Cuban once stated, “You need to focus on your strengths, and if manufacturing isn’t one of them, let a co-packer handle it.” This sentiment is echoed by Barbara Corcoran, who advises entrepreneurs to “scale quickly by leveraging the expertise of co-manufacturers.” Lori Greiner has often said that “getting into retail means you need to be ready to deliver thousands of units fast—home production won’t cut it.” Kevin O’Leary, also known as Mr. Wonderful, urges entrepreneurs to avoid the pitfalls of DIY production, noting with his signature direct delivery, “You have to do a commercial kitchen, not own it. You have to find one that already exists. You don't have enough time to build your own.”

By finding the right fit with experts in production, business owners can accelerate their growth while ensuring their product meets market demands. This allows them to concentrate on what they do best: building their brand. If you’re familiar with this long-running show, you’ll see that the Sharks consistently highlight that leveraging co-packers is not just about convenience—it’s a key strategic move toward building a scalable, investable business.

Industries Embracing Co-Packaging and Co-Manufacturing

The versatility of co-packaging and co-manufacturing has led to its adoption across numerous industries, including:

Food and Beverage: From snacks to drinks, many brands rely on co-packers to offer diverse packaging solutions that comply with strict regulatory standards.

Cosmetics and Personal Care: Many beauty brands use co-manufacturers for their formulations, ensuring product quality while managing costs.

Pharmaceuticals: Given the stringent regulations in this sector, co-manufacturers provide essential services in compliance and efficiency.

Consumer Electronics: Some electronics brands outsource assembly and packaging, helping them focus on innovation and design.

What Services Do Co-Packaging and Co-Manufacturing Provide?

Co-packaging and co-manufacturing encompass a wide range of offerings tailored to meet the needs of diverse industries:

Package Assembly and Fulfillment: This includes multiple packaging formats, such as sachet packets, stick packets, blister packs, bulk powder, rollstock, and more.

Kitting: Combining multiple products or components into a single package for convenience and marketing strategies.

Tailored Research and Product Development: Assisting brands in ideation and product formulation for a unique market presence.

Food Scientists: Providing expertise in food safety and quality assurance, ensuring products meet regulatory standards.

Turnkey or Tolling Solutions: Offering complete service, from sourcing and production to packaging and distribution.

Product Re-packing: Re-packaging products for specific markets, ensuring compliance with local regulations or consumer preferences.

Shipping and Warehousing: Managing logistics, storing inventory, and ensuring timely distribution to retailers or customers.

Final Thoughts

Co-packaging and co-manufacturing aren’t just trends; they’re strategic solutions that empower businesses of all sizes to enhance their operational efficiency and market reach. By understanding what these services offer, businesses can make informed decisions that drive growth and success in an ever-evolving marketplace.

Whether you're a small startup or an established brand, leveraging these services could be the key to unlocking your full potential.

Innovative partnerships and port-to-door solutions could shape the future of your business—are you ready to explore?