By: Kris Bohm, owner of Distillery Now Consulting
There is nearly a new beverage alcohol business opening every day in North America. Craft beer, wine and spirits are growing immensely in popularity and many people are entering the industry with hope to capitalize on this opportunity. Starting a new business and entering the beverage alcohol industry is challenging to do well and succeed at it. Many new entrants start by building a business that handles all aspects from manufacturing, branding, packaging, marketing, sales, and even distribution. For a new entrant to the business, learning all these aspects of business and succeeding at them is a huge challenge that requires a team of experts. There is an alternative way to get a new beverage alcohol business started without nearly as many challenges to overcome from day one. This alternative is called co packing. It is possible to work with a manufacturer who will make your product for you. By contracting out the production of your product you can focus on the two most critical aspects of a beverage business which is sales and marketing.
What is Co-packing
Co-packing comes in many shapes and sizes. In essence a co-packer is a facility that produces beverages that offers services to manufacture products for other brands. Essentially you can contract a manufacturer to make your product for you. This can be beer, wine, distilled spirits, ready to drink cocktails or nearly anything else.
Co-packers offer the opportunity to launch a brand for far less capital outlay than the common path which is building your own manufacturing facility. By removing the capital intensive aspects of manufacturing a product, the owners of a new product gain the freedom to focus on the marketing and sale of their product.
How Copacking Works
If one would like to create a brand new product and bring it to market the copacker does the manufacturing for you. You can bring an idea for a product to a manufacturer and they will create the product for you. Let’s explore the process step by step you would take to bring a new brand of vodka to market through a co-packer.
• The first step is to find a co-packer that is a good fit for you.
• Search for companies that offer co packaging services as not all manufacturers co-pack.
• Once you have found a company to work with, the next step is to find out the constraints of the copacker.
• Copackers will have constraints on certain sizes and shapes of bottles, corks and labels that they can work with, understanding these constraints is essential to the design phase.
• Determine what type of packaging will work with your co-packer.
• Select packaging the works and fits for your brand and your copacker.
• Design your brand, including logos, names and artwork.
• Take a break and have a drink.
• While you are stopping for a drink, now is a good time to consider the liquid in the bottle. You need to select what the product will taste like and where it will come from.
• Select the sources and recipes for the liquid that will become your product.
• Sign a contract with your co-packer and put the pieces together.
• Have your copacker manufacture the product.
• Launch your brand.
Just like that you now have your very own brand new shiny brand of vodka and in most cases now have several pallets of vodka to sell. These steps all sound quite simple, but there are many layers of work underneath this list. Beneath every step there are decisions and details that are critical to the product. Let’s explore some of these key steps and how to best make those decisions.
The liquid in the bottle is important but more important than the liquid is the brand itself. Putting in work to create a professional looking brand along with label artwork and selecting design elements are all crucial steps to creating a successful brand. Unless you have extensive experience in beverage branding and marketing the creation of a new brand is best handled by people who have experience in the industry. The look and feel of your new product is the biggest opportunity to get consumers to consider trying the product. If you take a minute and walk through your local liquor story you will likely find a few bottles that do not look professional or polished. These not so great looking products are often born out of someone starting a new product without any experience or professionals on their team with alcohol branding and design experience. Hiring a professional at this stage is a good investment to help your brand put its best foot forward. The next step is selecting the liquid that goes into your bottle. There is an abundance of distilleries that will sell spirits to you in bulk that can be packaged up into your own brand. Whether its Vodka, Gin, Rum or Whiskey, all types of spirits can be bought in bulk. Tasting a variety of bulk spirits and looking closely at cost is key to selecting your spirits.
At this point you should have all the pieces designed and selected including the bottle, label, cork, case, spirits and brand. With this all lined out your copacker can go to work and produce your product.
There are strong arguments that co-packing is the smart path to launch a brand and some folks will say that co-packing is not the best choice. Let’s compare and contrast the pros and cons of co-packing, as knowing the good and the bad can give you the knowledge needed to weigh your options and make the best choice possible.
The Case for Co-packing
It takes extensive time and financial resources to launch a brand. Much of the resources needed to launch successfully must be committed to marketing and sales to get a brand into the market and onto store shelves. Co-packing allows new brands to conserve money, time and energy that would be put into manufacturing and direct that energy into sales and marketing. This approach affords a new entrant into beverage alcohol the chance to learn the nuances of the business with much less overhead. Mistakes are expensive to make and outsourcing the production work of a new brand ensures that you will make less mistakes when it comes to producing the product. The strong advantage of not producing the product is you do not have to carry the high overhead of funding a manufacturing facility.
The Case Against Co-packing
Co-packing is expensive. If you are paying a company to manufacture your product, it will cost more per unit to produce a product than it would if you took the manufacturing process under your wing. Co-packers markup the cost of producing a product to cover their costs of overhead, labor and to turn a profit. Another argument against co-packing is control. When a co-packer is producing your product you will not have direct control over every aspect of the manufacturing process. It is easy to make mistakes that might not be made if the manufacturing is handled in house. A key step to mitigating this risk is working with your co-packer to define their quality control in the manufacturing process to protect against mistakes.
What Should a New Brand Do?
It is not an easy question to answer what is the best way for each individual business to create and launch a new product. Many factors must be considered to make an informed decision. While co-packing is perfect for some it can be a bad fit for others. A consultant or person with extensive industry experience is the best way to make an informed decision on how to launch.
Creating a new brand can be a challenging and also extremely rewarding business endeavor. Doing it the right way and finding success will make it that much more rewarding.