A client of mine is creating a new salad dressing based on an old family recipe. He wants to use a copacker and also wanted my thoughts on the copackers Non disclosure Agreement (NDA). I gave him this path to developing a preliminary plan toward contracting with a food co-packer.
Critical Issues to Address with your Food CoPacker
Before you spend time dealing with the NDA and legal costs that do not have any return on investment for you, please ask yourself these questions:
Can they take your recipe, scale it and produce it in small runs for you to test the market during initial new product launch?
Can they do it at a price that allows you to sell the product at a price consistent with the category you will be positioned at the supermarket?
Eight Questions to Ask Yourself When Dealing with a Food CoPacker
The important issues to address with your copacker are beyond the NDA. So here are points to consider to move this along expeditiously and suggest we speak further.
- What information are you sending that is confidential? Insure that you mark all information sent to your copacker with "Confidential Information", usually the best place is the header or footer of each document. This will insure no confusion as to what is confidential.
- What is the minimal required information they need to give you the quote and specifically what you feel has the highest value in what is termed "trade secret". For example, the bottle, labels, caps, master carton are not proprietary. These are generic in nature.
- Did they confirm that they can pack your product in shelf stable format?[or whatever format you need for your product/category]
- Will you be preparing a document that follows steps 1, 2 and 3 in Steps to Success on their web site? Many copackers make it easy for you to get a quote so follow their submission process. If you copacker has one, then this tells me they do this frequently.
- What are the minimum production runs? These should be as low as possible since there is a high probability that the product will go through several modifications and you do not want to run the risk of having large inventories.
- Will they charge you for product formulation development beyond the free bench sample they articulate on their web site? How many iterations of this will they do? Your recipe will need to be scaled up and they may want to charge you an R&D charge to cover this.
- Do you have to provide up-front payments prior to production? The copacker will need to purchase raw materials for your product runs and may ask you to pay for materials up front.
- Upon production run completion, how long will they inventory your product before they need to ship to your storage facility?