A better understanding of co-packing and private label in a market as competitive as food manufacturing is crucial. In particular, your private label food manufacturing agreement is fundamental to securing your options and rights to the products you own and your proprietary formula. This is different than a co-packing agreement, although the two are closely related. So what’s the difference?
Co-packing and private label food manufacturers
Here are the basic differences between co-packing and private label. As always, read all the fine print, consult with all involved parties and ideally get an attorney to review.
- Co-packing — Under a co-packing agreement, the customer owns the rights to a proprietary formulation, even though the food manufacturer creates the product. Under this type of agreement, the manufacturer usually signs a non-disclosure agreement that prevents it from sharing that information or creating any additional product outside of the agreement.
- Private labeling — The food manufacturer often will produce and package its own formulation under the customer’s label. Under this type of agreement, the food manufacturer retains proprietary rights. In some cases, the manufacturer will work exclusively with a single customer to produce a formulation specific to that private label.
Ultimately, the primary difference is who owns the formula after the transaction is fulfilled.
How to decide which is better for your business
Thus, on the surface, formula ownership is the primary consideration of co-packing vs. private label. But there are other factors:
- Cost — A co-packing agreement can save the customer money depending on the contract negotiated.
- Responsibility — For some companies, navigating proprietary laws is a burden they would prefer to do without. Under a co-packing agreement, all rights-handling responsibilities fall to the manufacturer.
- Logistics — Manufacturer capacity and capability, or lack thereof, sometimes don’t align for a co-packing agreement. While it can pay off to secure a co-packing arrangement, this is something to consider when shopping around.
- Marketing — Exclusivity can be a boon to marketing efforts. When the customer owns the rights via a co-packing agreement, or if the manufacturer agrees to exclusive production under a private label agreement, the customer has a powerful marketing tool at its disposal.
PacMoore is a privately held food contract manufacturer with over 25 years of experience in food processing and packaging. Their services include dry blending, extrusion, spray drying, re-packaging, and consumer packaging. We offer both tolling or turnkey execution as well as product development support with pilot equipment and process expertise. PacMoore’s vision is to be passionately focused on growing people so they can be exceptionally good at feeding the world.
Fieldcraft is the first digital ingredient marketplace for all ingredients from farm to foodtech. Thousands of buyers have now joined Fieldcraft from emerging brands to global food and beverage companies. Suppliers on the platform range from a 7 acre orchard to a 40,000 acre Organic operation, and from local processors to the largest ingredient supplier in the world. Fieldcraft is modernizing ingredient sourcing from farm to foodtech.