Also called contract packing, co-packing is a business arrangement wherein a company has its products packaged by a third party firm, called co-packer (or contract packer or contract packager). In other words, the product is made fit to be shipped and placed on retail shelves. Co-packing services are usually sought by small manufacturers who cannot justify investing time and money into in-house packaging. Co-packers also do warehousing and shipping, but companies that can handle their logistics and supply chain would handover only packaging tasks to a co-packer.
Types of Co-Packing
Before discussing co-packing types, it’s important to understand packaging forms. Packaging can be broadly classified as primary and secondary. Primary packaging consists of boxes, bottles, tubes, shrink-wrapping, etc. that a product comes in direct contact with. Secondary packaging is basically using packaging items such as carton to pack a group of products that already have been primarily packaged. Pure co-packers usually do secondary packaging. They may also do labels, which the client may provide or the co-packer would have to source by itself.
At times, a co-packer may even produce products for the client based on the specific requirements, thereby blurring the lines between co-packing, contract manufacturing and private label manufacturing. Such co-packing services are common in the food business. This is usually the case when the co-packer is also an established manufacturer. Also, some companies may not promote themselves as co-packers but still would be willing to co-pack other businesses’ products, to fully utilize their facilities and make some extra money on the side.
Co-packing brings down packaging costs for a business. This is because the co-packer already has the resource, staff and expertise to offer packing services. And if the business doesn’t want to make its own products, co-packers may offer production services too. Businesses that are primarily into selling and don’t want to focus their resources on manufacturing and relating processes would benefit from co-packing, since they would have more time to spend on marketing and branding.
Things to Consider When Choosing a Co-Packer
Besides looking into a co-packer’s quality record, safety measures, business certifications and transparency levels, it’s important to choose a co-packer that is located physically close. This helps with trust-building, increased productivity and ease of operations. Also, sending goods for packaging to a distantly located co-packer could cost more money and time, defeating the whole point behind co-packing.
There is no dearth of co-packers. In fact, there are quite a handful of them – both large and small. It’s recommended businesses associate with co-packers that aren’t much bigger or smaller than them. A smaller co-packer could be overwhelmed by a large client and may have a hard time recovering if the business severs ties all of a sudden.
A larger co-packer, on the other hand, may be able to offer competitive rates, but it may have too many clients and may not provide the respect and attention each client deserves. Moreover, when such co-packers are cutting down resources or not able to accommodate all clients, they would likely cut out the smaller clients to lower the burden. The company on the receiving end of things, as a result, could be significantly impacted.
Ideally, the co-packer chosen should have a similar business size as its clients and must be willing and able to upscale with the client’s requirements.