The Inside Scoop on Co-packing
We hope you are enjoying the start of autumn, it’s always a spectacular time of year in nature with the leaves turning colour and the seasons shifting gear. Of course, this is no ordinary September, as with Brexit on the horizon at the end of next month, so much is still unclear.
Over the last three or so years, many EU brands have been asking themselves what the right approach should be to optimise their supply chains in light of Brexit. Part of this analysis involves exchange rate modelling, but firms are also looking at options for onshoring production and third-party manufacturing, either to improve the cost position, reduce food miles or as a hedge against potential taxes, tariffs or delays at the border.
UK manufacturers have never had so many ‘knocks on the door’ and find it increasingly hard to differentiate between the genuine prospects and those just having a look. Capacity is tightening up in many categories although not as fast and as far as many manufacturers hoped. In many categories there is still substantial excess capacity, with retailers doing much to usher in that new capacity to keep margins supple.
Weighing up the costs and benefits of co-packing is always a judgement call. There will be a unique combination of ‘push’ and ‘pull’ factors that are specific to each company in each category. If there is one thing that we have learned from working in and around the area of co-packing for the last 20 years, it’s that these decisions are as much about the ‘heart’ as the ‘head’. Moving manufacturing is one of the most foundational decisions a company can make and involve a complex matric of supply chain data, financials, consumer considerations and ultimately gut feel.
Counting up the projects, we’ve been part of over 40 co-packing deals: sometimes as the co-packing MD keen to win new volume, sometimes as the customer brand looking for new capability to manufacture a unique format or flavour, and more recently as business introducer and trusted friend putting together win:win arrangements for both parties. In doing this, the key element that stands out as a precondition for success is trust.
Without trust, it all falls apart. There are bound to be times during the contract negotiation when both parties will need to bend a little and take a leap of faith. When the deal is up and running, both unexpected events and unintended consequences will kick in and it will be trust that keeps the parties on track.
If this is an area you are interested in or are already engaged with then perhaps, we should have a conversation. We’d be happy to talk through your plans in confidence to see if we can help you move forward quicker or with more confidence.
We look forward to hearing from you.
Hamish and Kim
Click here to download our Co-packing brochure.