How Much Does a Co-Packer Cost?

Operating a food business and thriving in the market is quite a challenge, given the competitive scenario of the food manufacturing sector. 

Producing quality products isn’t the only key to success for a food company. Cutting costs of manufacturing, while maintaining quality is the eminent rule of thumb today to succeed in the industry. It is especially true when the demand for your product is growing, causing a surge in the scale of production and subsequently, the costs.

For food businesses looking to curb their costs, outsourcing essential related services like packaging and distribution is a rewarding solution! 

By that means, partnering with a co-packer is undeniably an effective way to reduce your costs without compromising quality, packaging, and customer services.

Moreover, with the assistance of a third-party co-packing agency, you can focus on chief production operations, specialization, R&D, and marketing. Saving up costs on packaging and distribution means you can spend more on other productive areas, benefitting the bottom line of your business. 

While hiring a co-packing company is the correct decision for cost optimization, it leaves you with the most inevitable question– what are co-packer costs? 

Before hiring co-packing services, you need to understand the cost figures straight! It shouldn’t be the case that you are spending more on co-packing services than packaging the products on your own. 
You need to know whether you are going to make extra profits by outsourcing services to a trusted co-packing company! 

This blog offers detailed insights into co-packer costs, what factors influence the costs, and what could be the hidden fees behind the costs. Give it a read to understand whether partnering with a co-packer will turn out to be a worthwhile decision for your food business. 

How Much Does Co-Packer Cost?

Food co-packers offer packaging services, often along with distribution and warehousing services. They complement the manufacturing processes of food and beverages with their turnkey services and help manufacturers focus on branding through specialized packaging. 

It’s really hard to say how much a co-packer services will cost since there are multiple factors at play. There are different types of co-packers depending on the size, types, and forms of packaging. 

Co-packers that offer the same set of services are still different from each other in technology, type of food packaging, food handling processes, expertise, and materials used for packaging.

With numerous mysteries surrounding the packaging of food and beverages, we feel it is safe to say that the cost of co-packing service depends! 

As a successful co-packing expert, we have standardized the fees of our services based on three vital aspects – type of food, kind of packaging, and labor. 

Typically, co-packers make money off their services’ profit margins just like any usual business. It means determining the fees over the cost of raw materials and labor. Since co-packers offer services on a large scale to a limited number of customers, they source a vast amount of raw materials. 

In other words, they enjoy economies of scale and can source raw materials in bulk at cheaper prices. It assures that a co-packer enjoys a considerable profit margin from its operation and can offer a reasonable price for its services to food businesses. 

However, a co-packer will always review the type of your products, the packaging materials required, and the expertise or infrastructure needed to handle the products before charging a price for its co-packing services. After evaluation of all these major factors, it will provide you with per unit cost to pack the product and distribute it.   

6 Chief Factors to Consider For Determining Your Co-Packer Cost

If you are considering hiring a co-packing service provider due to the overwhelming costs of your food manufacturing business, you are headed right! 

But, to feel confident about your decision, you should figure out your co-packer costs based on the factors underlying your food production and packaging needs. Have a look!

1. Type of Services

Co-packing or contract-packing companies operate with a flexible service model i.e., provide services catering to the exact needs of businesses.

On an obvious note, your co-packer costs will depend on what kind of packaging services you are hiring. You may only need the packing techniques and labor and supply the co-packer with the raw materials necessary for packaging. 

This is especially the case for small-scale businesses or startups that prefer using specific packaging supplies. 

In another case, you may need help with comprehensive co-packing services, starting from procuring the raw materials to packaging the products and distributing them in the market.

Co-packing costs in the former case are always lesser.

2. Raw Materials

Co-packer costs largely depend on the basic raw materials and additional elements required for failsafe packaging of the food or beverage. It includes everything needed to package a food product and transform it into a finished product, making it ready for sale in the market.

The expenses incurred on procuring these raw materials directly influence the co-packing costs as they differ in price. For instance, if you use affordable and commonly used packaging materials like foil, paper boxes, or plastic pouches will make the co-packing costs cheaper. On the other hand, packages made of glass bottles or tin cans are costlier and result in higher food co-packer costs.

3. Production Volume

The co-packing costs of your food business are directly proportionate to the quantity or scale of your food production.

If you are engaged in mass production, such as a thousand products per day, not only do you need more materials for packaging but also technology and expertise for packaging such a huge number of items faster in a day. Certainly, in this case, expect your co-packing company to charge higher for this!

4. Complexity in the Packaging Process

Another reason for food businesses to hire co-packer companies besides streamlining their operation is complementing their food products with superior quality packaging.

Co-packers having specialization in the field ensure the use of the best type of packaging no matter how complex it gets to keep your foods fresh and safe from spills or food packaging fails.

Depending on the food type and its storage conditions, usually there are three types of packaging:

• Primary packaging

Packages of biscuits, chocolate bars, and cereals come under this category where the packaging materials are in direct contact with the food materials inside.

• Secondary packaging

These are packages used for a bundle or handful of products. Smaller food particles or wholesale units of food items need this packaging.

• Tertiary packaging

This is required for bulk packaging i.e., packing groups or stocks of items together to transport them from the production facility to the storage facility and then to the point of sale.

Since each type needs specific materials, techniques, and labor, your co-packer costs will depend on the type of packaging needed for your particular food products.

5. Production Process

The processing of different type of food products vary widely. Some pass through simple processes like chopping, mincing, mixing, baking, and cooking. Whereas, many foods or beverage items are produced through complex processes involving fermentation, pasteurization, or liquefaction.

Based on the process of production and ingredients used, the conditions for storage, handling, and preservation of the food products vary too! They will have different packaging requirements. So, co-packers charge the costs depending on the specific packing materials, techniques, and equipment used for packaging.

6. Logistics and transportation

How your food is carried and transported from the manufacturing facility to the markets again decides what type of packages they need and what could be the co-packer costs.

Many foods and beverages need an added layer of protection to prevent them from being spoiled or damaged during transit. This is a prerequisite that food businesses need to take care of to eliminate loss of sales due to faulty packing and subsequent product damage.

Aside from using sturdy packaging materials, correct indicative labeling on the food packages is important, too!

Right labels such as ‘Liquid substance’, ‘Keep dry’, ‘Don’t shake’ etc. will help the logistic company’s executives to handle your products accordingly and prevent shipping damages! A food co-packing company knows about the basics and will provide you with packages with appropriate labels.

This is another vital reason why many food manufacturers outsource the services of co-packers. It takes care of this aspect by using superior-quality packaging materials or the highest-grade tertiary packaging technique that guarantees no damage to your products during transportation.

Co-Packers Pricing Model: How Do Co-Packers Charge?

Food manufacturers or businesses demand co-packing services depending on the type of products, specific packaging requirements, and their handling and storage conditions.

While the costs of packaging vary with these factors, food co-packing companies charge fees to businesses based on a standard pricing structure. The structure comprises three pricing models to cater well to the varying needs of different types of food businesses.

1. Flat Day Rate

This one is a simple model under which the co-packing company charges a flat fee or price for the entire day (i.e., 8 hours of operation). The number of packaging units to be produced in a day could be anything – 100, 500, or more than that, depending on how much the co-packer can manufacture within 8 hours of the day.

Usually, the food business decides whether to go for this pricing model depending on its daily production size. The co-packer sets a flat day rate based on the expected co-packing costs for the particular food products and the number of packages they can produce.

While this one seems a favorable pricing model for food businesses as they can get more packages delivered in a day, there are a few downsides to this model.

Price per unit may fluctuate due to spikes in packaging materials, cost, or any other unfavorable market scenarios. Businesses are paying hundreds of dollars per day, and with that add the cost of additional packing items like caps, labels, and transportation. This might result in tight cash flow for food businesses!

2. Per Unit Rate

The most commonly used pricing model that results in favorable co-packer costs for food businesses is per unit rate. Under this pricing model, the co-packer sets a specific price for packaging a unit of the food product, which depends on factors like the type of the product, specific packaging materials required, and handling and transportation conditions.

For food producers, determining their total co-packer costs is pretty easy! For instance, the co-packing company asks a $0.50 per unit of packaging. It simply means if you order 500 units, the total payment to the company is $250.

This model is used by many co-packing companies because it allows flexibility. It also helps food businesses to have cost-effective investments in their food packaging.

However, a major drawback of this pricing model is that you have to meet the minimum order requirement of the co-packer because it is not going to produce one or two packages for you.

3. Per Hourly Rate

Many co-packers also work on the basis of a per-hour rate, which is usually suitable for startup food businesses and small-scale production companies.

Expert co-packers also charge based on this pricing model when they are confident that producing a definite number of packages within a couple of hours.

Normally, per hourly rate varies anywhere between $25 and $100, and a co-packer determines that based on the type of product, quantity, packaging materials, and techniques required.

Hidden Fees That Co-Packers Can Charge and You Must Be Aware Of!

Even if the co-packing food companies have a specific pricing structure, there might be a certain hidden cost that will unfold later. Such costs depend on the type of services you demand from the co-packer of foods and the complexities involved in packaging your products.

1. Receiving fees

Even if you source and supply all your food products or ingredients to the co-packing team, they may charge some additional fee for receiving your products. It turns out that they charge that extra fee for transporting the products or ingredients to their facility.

Ask about this hidden charge to your co-packer before entering into the contract and if that seems higher, you can decide to supply everything yourself to their co-packing facility.

2. Pallet storage fees

Space is a necessity while you are dealing with packing hundreds of items in one place. The co-pack manufacturing facility must be able to provide that! However, many co-packers charge extra for offering space and may not reveal it in their pricing structure.

When the packaging of the food products is complete, co-packers have to manage ample space to keep or store them until they are dispatched. For instance, there must be enough room to keep several pallets of milk cans or cartons of biscuit packets.

Either the co-packer can charge for the pallets or the space that is needed to store them all. If your specific food product has to be refrigerated like butter or cheese, this related cost can go up drastically!

After all, this cost makes sense and whatever extra fee a co-packer charges that is legitimate. You just need to know whether your co-packer charges the fee directly or has included it within other costs.

3. Order fulfillments fees

Placing an order to a co-packing company is no big deal to you! But, preparing that order and fulfilling it for you will take time and effort. The co-packing executives will first process your order by using suitable packaging materials and incorporating all your specific packing requirements. Once done, they will label and arrange the packaged items and transfer them to the storage or distribution fleets.

Needless to say, a co-packing company offers resources, labor, and time to fulfill every order! Naturally, if there is complexity involved in the packaging of your food item, more labor or time will be needed.

All these make co-packers charge a flat fee for order fulfillment, which can vary anywhere between $0.25 and $0.5 per product. Thus, be prepared to come across this additional fee, which may be hidden when you hire the services of a co-packing company.

4. Clean-up fees

Processing and packaging of food items, especially when it is done on a mass scale will result in clutter and spills in the packing zone. Inevitably, the mess has to be cleaned up before the co-packing workers start working on the next lot or order batch.

As a specialized co-packer, we deal with this cleaning issue, which again needs time and major cleaning supplies. This is the main reason many co-packing companies charge an additional fee referred to as clean-up fees, which may be hidden in their total cost structure.

5. Third-party fees

There are some other valid fees that co-packers might not charge you explicitly! It is the third-party fees required by a co-packer to meet certain packaging standards or certification compliance. Let’s just break this for your understanding.

You might need your snacks to have premium quality packages with badges or labels such as ‘Gluten-free” and “GMO-free” that show that your snacks meet certain regulatory food safety standards.

Naturally, this involves the inspection of the food processing as well as package manufacturing by a third party, called third-party audits.

While you have to pay for the inspection fees, you should also keep an eye out on your co-packer, who helps pack your snacks. Maintaining good quality of your snacks, of course, means packaging them with worthy materials and pouches that keep them fresh and maintain their hygiene standards. As a result, a co-packer might ask for an extra fee, leading to a rise in your co-packing costs.

Partner with Fresh Ideas LLC for Lower Co-packer Costs of Your Food Business!

Hiring a contract packer or co-packer will bring your food business several assured benefits, failsafe and quality packaging being the number one benefit! A co-packer also caters to the packaging needs of your large-scale production most efficiently.

In addition, you can optimize your packaging costs by partnering with a reliable co-packing agency as it uses packaging materials efficiently, minimizes waste, recycles food-safe materials, and implements technology expertise.

We have discussed the potential total co-packer costs and factors affecting the same to help you decide on whether to hire one. Regardless of all the major costs, outsourcing the services of food co-packing companies will help your food business thrive in the competitive market!

It downsizes your operations by eliminating packaging and storage operations and helps meet the growing demand for your products smoothly!

All in all, collaborating with a co-packer makes you save up expenses and channel that to productive areas of your food business to boost profitability and growth in the long run.

At Fresh Ideas,a butter co packer company in USA, we are a specialized team offering butter co-packing services in the USA to small and large businesses at reasonable costs. Maintaining freshness and quality of the butter is our prime concern in every package and we ensure that with top-notch quality packaging materials built by innovative techniques.

We strive to lower your co-packer costs by using sustainable co-packing solutions, utilizing economies of scale, and deploying technology expertise as much as possible.

Partner with Fresh Ideas to get quality and innovative butter co-packing options that not only keep your product unspoiled but also add to your branding. So, expand your brand’s exposure by allowing us to provide custom packages for your butter products.