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The Rise of Contract Manufacturers: Why Brands are Shifting from Skeptics to Advocates

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June 3, 2019
6.3.19
Monday
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It wasn’t long ago that brands were reluctant to use contract manufacturers (also known as co-manufacturers or co-mans). After all, the reasoning typically went, they would never “trust someone else to run their product!”

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Bringing together leaders in industry and technology to drive innovation.
Matthew Wright
Founder & CEO
About Matthew
Matthew Wright is the founder & CEO of Specright, the first cloud-based platform for Specification Management. Specright has been recognized as a Gartner Cool Vendor, received the Salesforce Innovation Award and was named one of the Top Places to Work by the OC Register and Built in LA. Wright is also a published author and his book, “The Evolution of Products and Packaging,”was named to the Amazon Hot New Release List for Industrial Relations Business and has a five star rating.

Prior to founding Specright, Wright spent more than 25 years in the packaging industry, holding leadership positions at International Paper, Temple Inland, and rightPAQ — a packaging company he co-founded. He has also been involved in leading multiple M&A deals in the packaging industry and sits on the Packaging Advisory Board at Cal-Poly San Luis Obispo.
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The Rise of Contract Manufacturers: Why Brands are Shifting from Skeptics to Advocates

It wasn’t long ago that brands were reluctant to use contract manufacturers (also known as co-manufacturers or co-mans). After all, the reasoning typically went, they would never “trust someone else to run their product!”

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Blog

The Rise of Contract Manufacturers: Why Brands are Shifting from Skeptics to Advocates

It wasn’t long ago that brands were reluctant to use contract manufacturers (also known as co-manufacturers or co-mans). After all, the reasoning typically went, they would never “trust someone else to run their product!”

Posted on 
June 3, 2019
6.3.2019
Monday
Laura Foti
SVP, Marketing & Investor Relations, Specright
RegisterRegister
Download Presentation

It wasn’t long ago that brands were reluctant to use contract manufacturers (also known as co-manufacturers or co-mans). After all, the reasoning typically went, they would never “trust someone else to run their product!”

Matt Lenzen[/caption]It wasn’t long ago that brands were reluctant to use contract manufacturers (also known as co-manufacturers or co-mans). After all, the reasoning typically went, they would never “trust someone else to run their product!”But brands are starting to change their views of co-manufacturers as a result of changing market dynamics.

Market Trends Driving Contract Manufacturing

In fact, according to the Contract Packaging Association’s 2018 State of the Industry report, “the market has been growing at an 11.9% CAGR for the past five years, an astonishing two- to four-times faster than the industries it supports. By 2020, the CPCM [Co-Packing, Co-Manufacturing] market is forecast to break the $75 billion mark—a conservative number, notes the report—rising from $53.6 billion at year-end 2017.”

Global cost pressures, the rise of private equity in the food and beverage industry, hyper growth direct-to-consumer brands, and retailers demanding product faster than ever has opened the door for co-manufacturers to play a pivotal role in bringing the next wave of products to market.

Fortune 500 companies and challenger brands alike are strategically aligning themselves with co-manufacturers for a variety of reasons.

The Benefits of Contract Manufacturing

Leveraging a co-manufacturer allows brands to hold onto precious capital and not have the fiscal burden of production and all the incremental costs that come along with it on their P&L. Instead, brands can repurpose dollars that would typically be tied up in production and apply them to marketing, sales, and customer acquisition. It’s not a coincidence that we’ve seen a rise in challenger brands coming to the market in a blaze of glory: co-manufacturers give them the needed flexibility and capacity to scale to market quickly. The rise of co-manufacturers certainly comes with challenges and tradeoffs. Historically, some of the main challenges stemmed from quality control. After all, companies that leverage co-manufacturers had to coordinate with departments across multiple companies and geographies, along with the FDA and the USDA. Not an easy task, especially if you’re a younger brand.

Enabling Brand Collaboration with Contract Manufacturers

The good news is, quality risks are being mitigated by software solutions that enable brands, suppliers, and co-manufacturers to better collaborate.At Specright, we’re enabling this collaboration through our Specification Data Management platform, which serves as the single-point-of-truth for customers and their co-manufacturers. Documents like certificates of compliance, quality control records, formulas, and packaging specs can be stored and shared on Specright’s globally accessible, cloud-based platform. Workflows are then layered on top of specifications to ensure that critical tasks and approvals aren’t missed in the process. Brand users can also see what changes have been made and proactively audit specifications.Not only is this beneficial for brands, but also for co-manufacturers - after all, it allows them to do what they do best: focus on production instead of managing specs.Creating traceability, visibility, and accountability between brands and co-manufacturers will help bridge the trust gap and ultimately make it easier for brands to explore the world of co-manufacturing. This will lead to better partnerships between brands and co-manufacturers, and also better, more innovative products for customers.

Specification Management Software eBook

Matt Lenzen spent over 20 years in the packaging space, working with global food & beverage companies including Nestlé, Kraft, and Pepsi to deliver innovative packaging solutions.

"In The Evolution of Products and Packaging, Specright CEO Matthew Wright provides a first-hand account of the trends that ushered in an explosion of SKUs and an increase in supply chain complexity that plagues manufacturers, brands, and retailers still today.Over the course of Wright’s journey, the answer to this complexity seemed simple: to keep up, the professionals would need to embrace data to make better, smarter, more sustainable products and packaging. You’ll recognize stories of the common pitfalls organizations slip into when it comes to managing their most important data and get a glimpse into the future of how data can drive the answers to some of our most pressing supply chain challenges."

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About 
Laura Foti

Laura currently leads marketing and investor relations at Specright. Prior to Specright, she led advertising and analytics at GE Digital, GE’s Industrial Internet software business. Before that, she was a consultant at Deloitte Digital working in enterprise digital transformation, where she helped clients design and deploy eCommerce experiences, develop revenue-driving mobile apps, and reimagine their global digital marketing strategy. Laura was named to the Forbes 30 Under 30 list for marketing and advertising and Brand Innovators 40 Under 40 and 100 Women to Watch lists. She graduated from the S.I. Newhouse School of Public Communications at Syracuse University. She resides in Newport Beach, CA.

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