BD: Adomas – There are hundreds of contract bottlers out there, but assessing their capabilities can be a dark art for smaller brands. Who should you work with, and how important is it that they have expertise in filling your precise product?
AP: The decision can be a tough one, and can play a key role in the success or failure of a brand. You have to know what kind of product you want to produce before analyzing who can help you – this helps you ascertain your technological requirements and matching these to your financial situation before you begin.
Technology, Company Policy and Communications are the most important factors in my opinion.
Is a given contract manufacturer working with water-based beverages (energy drinks, sports drink, soft drinks), dairy drinks or alcohol drinks? You need to understand whether they are specialized enough to help you.
What type of filling technology do they use – hot fill, cold fill or another? At this point you should already know the requirements of filling for your product. Don’t go any further if the manufacturer is unable to offer you a right filling technology.
A linked question is concerns the type of packaging the bottler is offering? Is it PET, glass or cartons? How flexible might they be in terms of using your own packaging?
Some manufacturers only offer a few different packages and are not willing to cater for alternatives.
Does the manufacturer meet your technological requirements? Well, that’s a good start but you then need to analyze its company policy and ethos.
It’s vital to determine whether a contract manufacturer is interested in working with you. Some questions to ask: ‘Are they are working with entrepreneurs or SMEs?’ What are their minimum order quantities?’ N.B. These demonstrate their flexibility or lack thereof.
Sometimes you can negotiate a better deal, so it pays to be patient and seek for the opportunities.
Pricing structure and payment terms. Some manufacturers only show the final price. Personally, I avoid working with such bottlers, as it suggests a lack of transparency.
You need to know the precise cost of packaging, filling cost, labeling and ingredients cost. Crucially, you need to know their payment terms.
Production planning and queues. Some contract manufacturer have three to six month queues, I even know a few who have forward bookings for one to two years! So you must find out when your order can be fulfilled.
Product return policy. This is a tricky question. Product spoilage is a real possibility, and if it occurs you’ll see how transparent and how reliable your partner is. Discuss it in advance.
Certificates. Before starting production you need to know your certification requirements. Bear in mind that some retailers ask for specific certificates, so plan ahead to work out what you need from the bottler.
Raw materials. Sometimes contract manufacturers are not willing to work with other raw material suppliers. So find out if you’ll be able to supply them with your own raw materials for production.
Communication. It’s important to understand their quality of communication. English isn’t spoken everywhere in Europe, so a language barrier can spring up. Naturally, the speed of communication is very important as well.
Current clients and product. Sometimes contract manufacturers decline to fill products due to the fact that you intend to launch a beverage in direct completion with another client. With this in mind, it’s wise to check out their existing client list in advance.
International exhibitions. Is the contract manufacturer attending exhibitions? If so, it’s very useful to meet your partner at exhibitions to strengthen relations and discuss next steps.
Last but not least. You have to go and check the factory by yourself. We are always making visits and checking factories belong to the companies that we work with. It’s very important to assess the quality of facilities, meet their staff and to understand their motivation.
In conclusion, we always advise that you only work with reliable factories. A decision to choose a wrong contract manufacturer could be your last one. Don’t make this mistake!
Adomas Pranevicius is general manager of MyDrink Beverages, a beverage innovation company that also organizes beverage startup incubation event DrinkPreneur Live!
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