What to look for in a co-packer

When selecting a co-packer, seek one that has experience in manufacturing a particular food product.  Find out the co-packer’s capabilities in quality control, minimum and maximum size manufacturing runs, receiving and storing facilities, packing and shipping as well as product development services such as product stability testing, nutritional labeling, formulation assistance and ingredient substitution. Inquire if the co-packer uses similar raw ingredients to the desired food product in order to take advantage of the co-packer’s buying power with bulk ingredients pricing and other other supplies. Another important question to ask is the required lead time to manufacture.

Prepare a co-packer checklist to address special needs

Do a lot of homework before visiting a co-packer. Have a business and marketing plan in place which outlines product needs, size, container, minimum quantities and target pricing. Get technical help from a university, a consultant or a testing laboratory to determine the requirements for product stability and safety. Write preparation and process instructions as well as specifications for ingredients, packaging materials, regulatory compliance, and finished product.

• Can the co-packer provide product development assistance such as safety determinations, coloring, stabilizers and emulsifiers, or preservatives?
• Can the co-packer address special product concerns such as; acidity, thermal process, refrigerated ingredients, refrigerated product storage?
• Can the co-packer accommodate specialized ingredients in terms of variety, function, or piece size?
• Can ingredients be purchased ready-to-use?
• Are there alternative sources for specialized ingredients?
• Can the co-packer maintain an inventory of finished product?
• Will the co-packer help with shipping as well as special shipping requirements such as carton labeling, palletizing and routing instructions?

Beware of the disadvantages when using a co-packer

Using a co-packer,  has its disadvantages such as the loss of control over the food product. An entrepreneur is at the mercy of the co-packer’s production schedule, their fixed costs, their vendors and their method of doing business. The entrepreneur does not have much flexibility and the product must conform to the co-packer’s equipment and facility limitations.

The food entrepreneur should research and get recommendations on the prospective co-packer. Confidentiality may be an obstacle as formulations, ingredients and product specifications must be shared with the co-packer.  The co-packer will have access to sensitive information such as sales, volumes and price. This information can be protected somewhat with agreements, but confidentiality can never be assured.

Resolving disagreements between customers and co-packers are not easy. Disputes and litigation may tie up ingredients, supplies and finished product for extended periods of time. Finding an alternative co-packer who can produce the same product may be difficult.

Using a copacker can be expensive as a copacker must also make a profit. Consequently, the costs associated with co-packed product may be high.

Co-packer Resources

SpecialtyFoodResources.com

GourmetCopackers.com

Here are some symbols you can trust when reading labels.

Fair Trade: Fair Trade Certification empowers farmers and farm workers to lift themselves out of poverty by investing in their farms and communities, protecting the environment, and developing the business skills necessary to compete in the globalmarketplace. (transfairusa.org)

Certified organic: For any product sold in the United States – regardless of where it was grown or produced – to carry the USDA Organic logo, it must have been inspected by a certified agent of the USDA certification program.

Kosher: The most common symbols of kosher certification, from the Union of Orthodox Jewish Congregations, New York, NY.

Gluten-free certification benifits consumers by giving them confidence that a product is gluten-free. This not only reassures the consumer that the product has been tested and the site inspected, but it also saves the consumer time that would have been spent calling the manufacturer for the gluten-free status of the product

The success of your product remains in the hands of those that are responsible for marketing and selling it.  In your sales management strategy, you might consider:

The folks at cummingsdesign.com have a really nice article on getting a UPC bar code and how to get it on a retail package. Below is their article.

How retail suppliers get a UPC bar code and how they get the UPC bar code number on a retail product package.

To get the UPC bar code number for a retail package, suppliers first get a UPC bar code prefix from a private organization called GS1 (formerly the UCC).

GS1 is the umbrella organization with operations in many countries.

Each UPC barcode has a country code with the UPC barcode.

Suppliers seeking UPC barcodes must go to their own GS1 member organization located in their own specific country.

In the United States, suppliers seeking a bar code visit GS1 US, gs1us.org, become a member, and receive their barcode prefix.

Suppliers in other countries seeking a bar code should first visit gs1.org to find the GS1 member country web site in the specific country of the supplier.

More about UPC bar codes

While others sell UPC barcode numbers, there is no guarantee other bar code providers will keep the supplier’s number unique, no support from GS1, and no way to grow a business with GLN assignments (the global data synchronization network), or for product recalls, or RFID using an electronic product code. In an interesting way, GS1 is the only valid source to obtain UPC barcode numbers.

With a bar code prefix assigned by GS1, the supplier then assigns and adds a unique product number to the UPC bar code prefix.

The complete UPC bar code number consists of the UPC bar code prefix plus the unique product ID number that the supplier randomly assigns.

To create the UPC bar code symbol, the UPC bar code number is input into UPC bar code software. The UPC bar code software will then generate the UPC bar code symbol that is printed on the retail product packaging.

The retail packaging graphic designer or packaging printer then takes this UPC bar code symbol artwork and adds it to the artwork of the retail product packaging at the proper size and in the proper format.

The UPC-A bar code symbol is shown above.

The UPC-A bar code number (and associated bar code symbol) consists of the manufacturer number (also known as the GS1 company prefix) which is combined with a product number (assigned by the manufacturer), and a check digit (assigned by a mathematical equation found in most bar code software).

The GS1 Company Prefix is provided by the specific country’s GS1 member organization, and, with it as the prefix, the manufacturer creates the individual product number. In most software, when the prefix # and the product # are entered, the software automatically generates the check digit.

The GS1 Company Prefix is a 10, 9, 8, 7 or 6 digit number assigned to you by the GS1 member organization in your country when you become a member and pay the membership fee.

The number of digits in the UPC bar code is determined typically by how many products you will need to assign numbers to.

If you have 50 products that require unique numbers, you would probably be assigned a 9 digit GS1 Company Prefix (leaving 2 digits to represent your items).

The U.P.C. symbol is composed of a row of 59 black and white bars. Printed beneath the bars (on a UPC-A) is a series of 12 numbers. The bars are scanner readable while the numbers are human readable and can be input manually.
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In the barcode sample above, a 6 digit number, “012345″ has been assigned (leaving 5 digits to represent items – plus one ‘check digit’). This initial number “012345″ represents the manufacturer on all of their products as well as in any EDI (Electronic Data Interchange) applications.

For example, in a 12 digit UPC bar code there are three main parts, the prefix, the product identifying code, and a last number which is the ‘check digit’.

The UPC prefix code for the Coca-Cola Company is 049000. Therefore, this 049000 number will appear in the first 6 digits of all of the Coca-Cola Company’s product UPC bar codes.

This 049000 prefix was assigned and licensed to the Coca-Cola Company from GS1 US, and Coca Cola, as a member of GS1 US, pays an annual fee to GS1 US (currently based on its gross sales) to license this unique UPC bar code number from GS1 US.

The 6 digit UPC prefix identifies the Coca-Cola Company while the 5 numbers that follow identify the specific product, and its size, color, flavor, etc. (depending on type of product).

The last number, in the example above a 5, is called the ‘check digit’ and is used to guard against errors (when numbers are manually keyed in) and fraud. There is a mathematical formula that, when applied, produces the proper check digit.

How do companies get a retail product bar code?

The retail product seller, manufacturer or distributor with the retail package (the supplier) does not actually get or buy the UPC barcode symbol you see in the retail product package design.

Instead, to get the UPC bar code on its retail packaging, the supplier must first get its own UPC bar code prefix by becoming a member of an organization that licenses the UPC bar code prefix to them. This UPC bar code prefix identifies the seller, manufacturer or distributor (the supplier).

Once the retail supplier/vendor is able to get the UPC bar code prefix, it is the supplier (or a UPC coordinator working for the supplier) who actually assigns the numbers following the UPC bar code prefix.

If you are a supplier based in the US and need a UPC bar code, click here.

If you are a supplier based outside the US and need a UPC bar code, click here.

Does every supplier need to get a UPC bar code?

To sell products, most retailers require sellers or suppliers to get a UPC bar code.

Does a company just starting out need a bar code?

I’m often asked this question. The answer is yes and no. Click here.

What a seller must do to get a bar code number.

A supplier must first obtain a Universal Product Code Identification Number to use with your UPC bar code symbol.

A US company can obtain this unique six digit UPC company identification number (UPC company prefix) by becoming a member of GS1 US.

Outside the United States, a company can obtain the unique UPC company identification number (UPC company prefix) by becoming a member of their own country-specfic GS1 member organization.

GS1 does not sell the U.P.C. barcode prefix to the supplier, it licenses this UPC barcode prefix number to the supplier.

To obtain a prefix, a supplier must become a GS1 member.

Even if all the supplier needs is one UPC bar code, according to the current rules of GS1, to get that one UPC bar code, the seller must become a member of the G1 member organization in their own country.

Without becoming a member, the supplier will not have the necessary UPC bar code prefix, and therefore cannot create the UPC bar code to place on the retail package. So to get a bar code symbol, the supplier needs to become a GS1 member.

A seller needs a UPC prefix in order to create a UPC symbol and bar code. The prefix is actually just the first set of numbers from the left (not the symbol). The remaining numbers describe the product except the last number to the right, which is the check digit. It is used to increase reliability.

Sellers/suppliers pay an initial fee and then an annual renewal fee to keep their GS1 membership and license this UPC company prefix that identifies the company (since the seller is not buying the UPC code but instead becomes a licensee of the UPC).

The only place to get an authentic GTIN (or UPC bar code) in the US that is accepted by retailers everywhere is GS1 US, (formerly the Uniform Code Council), a privately owned and operated not-for-profit tax-exempt organization that assigns all bar code prefixes necessary to have a bar code, and has done so for over 30 years.

GS1 has an interesting history which all began with a request of grocers involved in the National Association of Food Chains, a trade group of supermarket owners and others.

Today GS1, the parent organization of GS1 US, administers the Universal Product Code (U.P.C.) for over 108 local country GS1 member companies doing business in 150 countries worldwide

The address and phone of GS1 US is Princeton Pike Corporate Center, 1009 Lenox Dr., Suite 202, Lawrenceville, New Jersey 08648, Telephone: 609-620-0200, Fax: 609.620.1200.

Whether you as a seller need only one bar code or many (each and every product variation must have its own unique bar code), GS1 charges a fee to become a member, plus an additional annual membership fee based on your company’s annual revenues.

Most retailers require bar codes and therefore you must become a member of the GS1 to get a bar code.

Can a supplier buy the UPC bar code number anywhere else?

Only GS1 US offers unique and authentic barcodes which are accepted by retailers everywhere.. According to GS1 US, a UPC number cannot be rented, leased, or further sub-divided.

To obtain a bar code, you will need to become a member of GS1 US (or GS1 in your own country), pay the membership fee, plus a fee based on your company’s revenue, and wait for an information packet to be sent to you.

According to the GS1 US site (at the time of this writing), you should allow up to 14 business days from the time they receive your completed application and payment.

This UPC identification number can then be encoded into a UPC-A or EAN-12 bar code symbol and be printed on your retail product packaging.

The retail bar code format is currently referred to as UPC-A. There are also many other types of bar codes and uses for a bar code, though this page discusses those used for retail.

Today most retail stores in North America will only stock retail packaging with a UPC-A or UPC-E bar code symbol. The UPC-A bar code is 12 digits long. The UPC-E bar code is a special shortened version of the UPC-A bar code and is 6 digits long. The UPC-E bar code is primarily for small retail packaging where a UPC-A code would not fit.

The U.P.C. (Universal Product Code) number itself may also be referred to as theGTIN - Global Trade Item Number. The GTIN is made up of the GS1 Company Prefix and the number that the seller, manufacturer or distributor has assigned to that unique product, however the GTIN numbers are 14 digits while the UPC-A bar code format is12 digits long.

The assignment of the numbers following the GS1 company prefix on the bar code is normally sequential, though can be random, and is determined by the seller, manufacturer or distributor who then lets the retailer know which specific retail product is associated with which specific UPC bar code number. The only real trick is for the seller, manufacturer or distributor to keep track of its own UPC bar code numbers and to be sure it doesn’t assign duplicate UPC bar code numbers.

When developing a pricing strategy take into account your branding, marketing and packaging decisions. Understand who is involved in getting your product into the marketplace and consider the cost associated before the consumer buys your product. One method to develop your price strategy, is to start with a suggested retail price the consumer is willing to pay for your food product and then work backwards.  If you end up with a negative figure then you will need to examine areas to cut costs and arrive at an acceptable profit margin.

First, know your COGS (cost of goods sold) or the direct expenses related to the cost of producing your product. This involves the cost to manufacture, labor, packaging materials cost and ingredients or raw materials.

Next you need to know the cost to get your product to the stores or the distribution channel costs. Factors that also play a role in the pricing strategy are the costs associated with distributors, freight carriers and distribution centers fees, broker fees and sales, marketing, and promotions. Additionally, other “hidden charges” exists that affect the price include slotting fees (the cost a retailer asks just to put your product on the shelf), demo fees, merchandisers, temporary price reduction requirements from the retailer, shrinkage, advertising, various retail ‘fees’, taxes, and more. If you are planning to sell your product in other countries, don’t forget costs associated with special packaging, customs and duties, and currency fluctuations outside the US.

Lastly, you must also understand the ins and outs of margin, mark-up and commissions associated with distributors, brokers and retailers.  Study the market to determine what works and what doesn’t, and how to price your product for profits while giving your consumers a good value, without losing it all in the process. With careful research and a complete understanding of the marketplace, your goal is to try get your product priced right the first time.

Green products that attend to social and environmental issues have also seen a big surge in sales. Terms such as “biodegradable”, “locally grown”, “eco-friendly”, “sustainable”, “fair trade”, and “cage-free” are popular product descriptions and market positioning that are influencing consumer purchases. Packaged Facts projects that food products with these ethical claims will see a growth rate up to 57% through 2014.

Designing and developing new food products with “natural” of “green” claims can make a difference in your product success. However, make sure that consumer expectations are met, and the perceived value, especially for more-expensive products, encourages them to spend on the new product.

• Who is the consumer?
• How, When, Where will the consumer buy, then consume the product?
• How can product packaging be designed to drive the consumer’s purchase impulse?
• How much will they buy at one time? How often?
• How much are they willing to pay? (How are competitive products priced?)
• What is the right product size for the consumer? How will the merchandisers, retailers, distributors and freight carriers expect the product to be packaged? Remember to consider legal and industry standards.
• Create packaging that takes advantage of shipping master packs and pallet configurations to maximize freight and sales
• Look at materials and production methods to efficiently achieve the best protection of the product during shipping and handling as well as to extend shelf-life. Consider eco-friendly packaging.
• Can the package show added value?
• What are the legal requirements that must be followed?

Look at products that are already successful in the marketplace and make an assessment on the features.  Check out any competitive products and see what works as well as determine new designs and packaging that may put your product ahead of the competition.

Designing your brand identity and packaging materials is very important.  Look to professionals to help in this area.  A relatively small investment up front can save tens of thousands of dollars in the long run, not only in costly redesigns, new packaging, printing and inventories but also in lost revenue.

Specialty/Gourmet Foods Distributors: Mainly dry groceries.

• Stores Served: Specialty / Gourmet, Health / Natural, Supermarkets, Convenience Stores (C-Stores)

Health/Natural Foods Distributors: Mainly dry foods some frozen and refrigerated foods

• Stores Served: Health/Natural, Specialty / Gourmet, Supermarkets

Rack Jobbers: Dry groceries, usually high volume items

• Stores Served: All types, including food service accounts.

Wholesalers: These supply supermarkets with most of their inventory. Huge variety of groceries, dry, frozen, refrigerated, frozen, plus HBA, and sundries

• Stores Served: Mainly Super and C-Stores, but some Specialty and Natural.

Warehouse Distributors: Anything and everything in pallet quantities.

• Stores Served: Usually Their Own; Clubs, Drug, Department Stores

Food Service Distributors: Anything and everything a food service operation uses.

• Stores Served: Supermarkets, Restaurants, Hotels, Delis, Schools, Hospitals…

Before You Start Read Consider the Following Questions

Entrepreneurship: Are you the type?

An entrepreneur is a builder—one who sees an opportunity, sizes up its value, and finds the resources to make the most of it. Entrepreneurs are innovators introducing something new to the marketplace, putting a different spin on a product or a process.

Where will you make your product?

• You can prepare your product in someone else’s certified kitchen. This alleviates you from being responsible for meeting kitchen standards. However, you will have to pay for the space and you may have to work around someone else’s schedule.

• You can hire a co-packer. A co-packer is an established food company that you hire to process and package your product according to your specifications. You are out of the kitchen and can take advantage of their expertise. You also have more time to promote and distribute your product. However, costs are higher and there are a limited number of co-packers.

How will you preserve your product?

If your product contains ingredients that spoil quickly at room temperature, how do you intend to maintain quality and prevent growth of disease-causing microorganisms and spoilage? The amount of time your product can be expected to stay wholesome under a given set of storage conditions is called the “shelf life.” Here are some of most common ways to extend the shelf life of commercial food products:

• Canning, or thermal processing, is perhaps the most common method for preserving fruits and vegetables, pickles, salsas, and sauces. But, you can’t rely on an old family recipe once you enter the commercial market. Regulations require your process to be evaluated by an expert in food technology, and you must use specialized equipment to produce high-quality, safe products.

• Refrigeration and freezing extends shelf life by slowing or stopping microbial and chemical changes in food. How would you keep your product cold or frozen until it gets to the consumer?

• Chemical preservatives are typically used in combination with other techniques to extend shelf life. Are you aware that the type and amount of preservatives are strictly controlled by government regulations?

Many other technologies are available for extending product shelf life, including pasteurizing, controlling pH and moisture, smoking, and curing. You’ll need to do some research on which methods are most appropriate for your product and your budget.

Who will do the work?

• Start out small and keep your “day job.” You can feel your way while there is still money coming in, but you may be working long hours for six or seven days a week.

• Get your family or friends to help out for a while. This may be the right solution for those on a small budget, but the arrangement might put a strain on your family life and your relationship with friends.

• Hire people to do the work. You are free to manage the business, or to work at another job. But employees mean higher costs for wages, training, insurance, etc.

How will you pay expenses before the money starts coming in?

• Personal resources. Use savings, credit cards, or a credit line on your house. You maintain complete financial and operational control over your business and there are no co-owners to pay off if the company hits it big. But if the business fails, you will still have the personal debt, and credit card debt carries high interest rates.

• Friends and family. You could raise money from people you know well, either in exchange for a share of your business or as a loan to be repaid. The money is available quickly, but it’s usually a one-time source. A contract to protect your friends’ or family members’ investments is a good idea. Are you ready to deal with the consequences if your business does not succeed?

• Bank financing. Borrowing money from a bank keeps home and business finances separate. The relationship you create with your bank will be useful as you expand and need additional capital. However, start-up businesses with no track record often find getting a loan difficult. You may have to provide personal collateral, such as your home, to secure the loan.

• Grants. There may be special programs designed to support determining the feasibility of an enterprise or demonstrating an innovative process. Not all grants require payback and you don’t pay interest to the funding source, so grants are essentially “free money.” Most grants have “deliverables”—things you promise to do in exchange for the funds—and report schedules you must follow. Also, grants usually are available during a specific window each year, rather than responding to your schedule. Keep in mind that competition for grants is stiff, so you may need help writing the application.

Eliminating all the unknowns associated with starting a small food business is simply impossible, but good planning, preparation, and insight greatly improve your chances of success. Don’t do it alone—reach out to experts in business and technology who are there to help.