When launching a beverage brand, you’ll need to decide whether you want to outsource manufacturing or handle beverage product production yourself. Outsourcing beverage production has gained significant traction in recent years. By outsourcing beverage production, brands benefit from professional services while freeing time and capital for other aspects of their operation.
As beverage development experts, MyDrink Beverages understands the challenges companies face when balancing product quality, production costs and time-to-market. We’re here to help beverage brands understand what it means to outsource beverage production, the benefits it brings to the table and some things you’ll want to keep in mind if you are considering taking this step.
What Does It Mean to Outsource Beverage Production?
Outsourcing is the practice of contracting out specific business processes or tasks to external parties, typically specialists in their respective fields. When it comes to the beverage industry, outsourcing beverage production encompasses multiple processes, including:
- Raw materials and packaging procurement
- Co-packer identification
- Manufacturing the finished product
Overall, outsourcing beverage manufacturing can be a valuable strategy for businesses looking to improve efficiency, reduce costs and access specialized expertise.
Why Outsource Beverage Manufacturing?
Outsource beverage manufacturing to open opportunities for your business to:
- Focus on core competencies: Outsourcing beverage production allows your company to focus internal resources on the value-added activities it does best — innovation, branding and market strategy.
- Boost cost efficiency: Outsourcing allows businesses to avoid the high upfront costs associated with building and maintaining a production facility. Instead, they pay for production as needed.
- Increase scalability and flexibility: Outsourcing provides the flexibility to scale production up or down rapidly, ensuring you have the resources to meet evolving market demands without excess capacity. Some beverage brands outsource the production of new product types to see if they succeed before bringing production in-house.
- Access industry expertise: Beverage production outsourcing partners leverage years of experience, technical know-how, industry insights and a deep network of relationships to ensure high-quality products and production processes.
- Reduce risk: Outsourcing can help manage risk by reducing costly mistakes and mitigating supply chain disruptions, fluctuations in demand and production challenges.
- Improve speed to market: Outsourcing expedites production turnaround to capitalize on market trends as they occur.
Benefits of Outsourced Beverage Manufacturing
Outsourcing beverage manufacturing produces a few key advantages for brands. Your business can:
- Choose the partner with the most expertise: Outsourcing provides access to specialized knowledge and expertise in a variety of areas, including ingredient and packaging sourcing, production, logistics and even regulatory compliance.
- Save money to put toward other operational expenses: Outsourcing eliminates the need for upfront capital investments and reduces ongoing operational expenses associated with in-house production. By reducing overhead costs such as labor and equipment, you will free up capital to invest in other areas of your business. Additionally, you can leverage your partner’s economies of scale for a lower Cost of Goods Sold.
- Benefit from a proven process: Outsourcing beverage production helps beverage brands reach the market and efficiently and successfully by using an expert’s proven, scalable process.
How to Outsource Beverage Manufacturing
The goal of outsourcing beverage production is to find a partner who can meet your beverage’s specifications while aligning with your company’s brand, quality and goals. We’ve worked with hundreds of beverage brands to help them find and successfully partner with a contract beverage manufacturer. Here are some of the steps to take and items to remember if you’re considering outsourcing your beverage manufacturing.
Know Your Production Needs
It’s essential to start with a clear understanding of what your production needs are. Knowing your needs and how to meet them will help you choose the right third-party beverage producer. Here are the two most important aspects to consider:
- Production requirements: You should know what type of product you are making and the equipment that will be required to make it. Have your commercial formula prepared and a plan for sourcing your ingredients. You should also forecast sales potential and determine other requirements, such as the need for a Process Authority Letter. Identify a partner whose experience, capabilities and capacity align with your needs.
- Quantities and deadlines: Determine how much of your product you need to manufacture. You also need a well-planned projection of your timeline and the ingredients and packaging necessary for manufacturing before outsourcing your beverage production.
- Cost per good sold: Estimate your cost per good sold to assess how the beverage producer’s service will impact your profitability.
You should also make sure you and your team have at least a baseline understanding of industry terms and acronyms.
Use your connections to learn about other companies’ experiences with different co-packers. Asking around will give you information about a manufacturer’s reputation in the industry. Also, look for clues about the company on industry websites and within trade associations. Have they won external awards for quality? How long have employees been with the company?
When you’ve narrowed down your search, do a site visit to see the manufacturing environment and meet some of the people you would be working with in person.
Request Their Capabilities
Every outsourced beverage manufacturing provider has a different range of strengths and experience. Ask each potential beverage production partner about their capabilities to determine if they align with your needs.
Your exact list of requirements and specifications will depend on your product and brand, but here are a few areas to consider and some questions to get you started.
Technology & Capabilities
- What kind of beverages can the facility bottle?
- What type of packaging can they accommodate (PET, aluminum cans, tetra-pack, etc) and what size packaging (330mL, 355mL, 500mL, 1L)?
- What is their policy regarding unique packaging mold development?
- What preservation methods do they provide? Do they have aseptic filling?
Policies & Terms
- What is the minimum order quantity?
- What are their payment terms?
- What is the length of time required to contract?
- Do they provide product liability insurance?
- How tightly do they schedule projects?
- Are they able to accommodate quick-turn requests?
- What is their capacity for taking on shorter runs?
- What are their areas of certification (gluten-free, kosher, etc.)?
- What is the process for ensuring compliance?
- How quickly do they reply to emails or requests for information? Do they guarantee response time?
- What is their process for communicating problems or issues proactively?
- Where is the manufacturer based?
- What impact will that have on shipping and logistics costs?
- Can you afford to travel to their location if needed?
Filter for Compatibility and Evaluate the Options
After researching co-packers and discussing their capabilities, compare your findings to narrow down a group of potential partners. Analyze the capabilities and experience each company within that group offers to find the best fit for your business.
When multiple companies offer services that satisfy demand, prices become a crucial point of comparison. The pricing from manufacturers has many components and can be broken out in several ways. Make sure you understand all of the components that go into your product costs, including materials, yield loss, storage and waste disposal, so you can compare apples to apples when looking across various potential manufacturing partners.
Select the Best-Fitting Beverage Production Company as Your Partner
Think of your contract manufacturer as a strategic partner for your business. Imagine what a successful long-term, win-win relationship looks like and work towards that. Trust your instincts, communicate openly and continuously look for ways to enhance the partnership.
Beverage Manufacturing From MyDrink Beverages
These are just a few of the considerations in the decision to outsource your beverage manufacturing. The good news is that you don’t have to navigate the process alone. At MyDrink Beverage, our beverage manufacturing services cover five areas:
- Production set-up: We acquire and organize the ingredients and personnel needed for beverage production.
- Manufacturing and production management: Our experts will plan manufacturing processes, establish production benchmarks and schedule production operations.
- Co-packer identification: We research contract packagers and establish a partnership with the company that best fits your brand.
- Pilot production and small-scale bottling: Our teams will develop a small, low-risk test run of your beverage.
- Quality assurance and testing: We verify that your beverage adheres to its recipe and formula through full-service laboratory testing from The Lab by BevSource.
Consider Outsourcing With MyDrink Beverages
The team at MyDrink and BevSource has the largest and most up-to-date co-packer database in North America. Our specialists have been supporting brands in selecting the best facility for over 20 years. While beverage production is not incredibly challenging, it can be time-consuming. Let us save you time by providing a comprehensive co-packer list and helping select the best option. We encourage you to contact us online to learn more about our drink manufacturing capabilities and how they can benefit your brand.
Editor’s Note: This post was originally published by Adomas Pranevicius, founder of MyDrink Beverages, in 2012 and has been updated to provide more in-depth and accurate information.