The Evolution of Contract Manufacturing

Letting someone else deal with the “headaches” so you can focus on making your brand shine? That’s just one of the reasons experts say CMOs can help you get ahead.

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Whether you want to do something new and innovative, take something you do now to the next level, or just remove some of the stress from what you’re already doing, contract manufacturing could be your answer. The experts here certainly make a compelling case. “The true benefit of utilizing a contract manufacturer is that you have expertise at every level of your brand,” says Vincent Tricarico, VP, Contract Manufacturing at NutraScience Labs. “While you focus on sales, marketing, and customer experience, a qualified contract manufacturer can ensure that your products are being made to your exact specifications on time and on budget. In addition, partnering with the right company will ensure that your labels will be created and printed and that your products will be stored according to industry guidelines.”

While the decision to subcontract is a big one, Steve Holtby, president and CEO of Soft Gel Technologies, Inc., adds more reasons to do so: “Customers primarily want a contract manufacturer because they want the benefits of having a manufacturing operation without the overhead or the headache. By outsourcing manufacturing to a company who has the knowledge and expertise to produce a quality finished product, a customer can focus on other aspects of business, including branding, marketing, and selling of the finished goods.”

Contract manufacturers (CMOs) also serve as trendspotters. Robert Marsteller, director of business development, Makers Nutrition, explains, “We’ve noticed that new niche markets are developing every few months. Rather than marketing to the entire population, brand owners are becoming more focused on targeting specific demographics for new product launches. As it takes time to bring a product from conception to the shelf, we are able to see trends before the public does. We are able to pass these insights on to our clients, putting them in a position to compete in a growing and constantly changing market.”

That’s a whole lot of benefit, and Tricarico has more to add: “Aside from saving them time and aggravation, brand owners have to remember that they have an obligation to the people purchasing and ultimately ingesting their products. Cutting corners to save time and money could lead to the downfall of their brand. For these reasons, working with a knowledgeable and experienced contract manufacturer is advisable.”

Of course, we all take great care to avoid the downfall of our brands—and we know that often that means investing more money. But here’s another upside from Steffi Neth, marketing communications director at Lief Labs: “Working with a contract manufacturer, like Lief Labs, allows brands to focus valuable resources on their sales and marketing efforts rather than diverting them to a complex manufacturing operation. Interestingly, many organizations, including some of the less experienced CMOs, think that a CMO is just equipment and manufacturing. In reality, a solid CMO will provide valuable skills and talents beyond weighing and mixing powders.” By having one centralized CMO that controls product development, R&D, formulation, production processes, supply chain and packaging, Neth explains, brands can free up resources—and redistribute them to other vital areas.

As the industry grows, contract manufacturing will become more valuable. “The manufacturing of dietary supplements has become a much more complex process over the last 20 years as the FDA has developed and enforced stricter regulations,” maintains Ned Becker, CEO, Columbia Nutritional. “It requires a significant commitment of resources to effectively build out a manufacturing facility, develop processes and hire professionals that are experts in the regulatory and manufacturing areas of the business. In working with a contract manufacturer, a brand marketer can leverage the collective resources and experiences of the contract manufacturers from its many years and thousands of different products it has produced.”

There are many phases of bringing a product to market that needs to be considered prior to and in the manufacturing process, Becker continues. “From qualifying raw material vendors, to analyzing formulas for technical and engineering requirements to building finished product specifications as well as performing raw material and finished product testing, these and many more critical items are a part of the functions performed by a well-established contract manufacturer.”

Changes will just keep coming, too, and it goes without saying that the need to stay current is crucial. Matt Kaufman, business development manager for Paragon Laboratories, says, “The manufacturing process has become more sophisticated in terms of testing for quality and new specifications to manufacture products. As a result, contract manufacturers have had to invest in new technology and have had to educate themselves and their customers (own label distributors, or OLDs) to stay abreast of new developments within the dietary supplement industry.” What’s more, he adds, CMs gain valuable manufacturing experience given the various products that they manufacture, which can help brands manage the development costs of new formulations.

15 Qs to Ask Potential Partners

Not to dwell on the downfall of a brand, but choosing the wrong CMO could lead to just that. Brands that don’t verify their partner, says Holtby, could unknowingly have their products manufactured in an adulterated plant. “Thus, they will be affiliated with this subpar plant and could be subject to recalls—the FDA could take action against them for not qualifying their contract manufacturer.”

It’s key to vet—and vet well. “It’s helpful to have a face-to-face meeting to determine a good fit,” Marsteller says. “It’s important that your CM understands your goals, both short- and long-term. The CM should know your marketing and distribution plans, as well as anticipated sales volume, so they can assist the brand owner in meeting their targets.” And ask a lot of questions before signing a purchase order. Top Qs from our experts:

1. Is your company FDA cGMP compliant, and if so, who has certified you? Holtby puts this at the top of his “must ask” list. To that, Neth adds, Have you had an FDA inspection? And Tricarico suggests asking Have you or the facilities you work with ever received a 483 from the FDA? “The brand should look for GMP certificates from an accredited agency like NSF,” advises Neth. “Your CMO should be a member of at least one, if not all, trade organizations. Moreover, brands should make sure there is an SOP manual that is adopted by the organization and that it is controlled by dates and change control systems. Brands should look for an up-to-date Org Chart that houses quality and innovation-driven departments such as quality, regulatory, product development and engineering.”

2. Can I come today to visit your facility? If they say no, there’s a red flag.

3. How long have you been in business for? How experienced is your staff? What’s your training process like? Will a dedicated person or a team be on my account? “The amount of experience your CMO has should be the most important factor a brand owner should consider when selecting a partner,” advises Tricarico. “You want a team that has done this thousands of times before and can point to its track record of success.”

4. Can you outline your insurance policies? Neth says it is critical that your CMO is properly insured with policies that match their size and your brands’ needs as well.

5. What are your procedures to handle unexpected problems such as testing issues, raw material shortages, etc.? Holtby says everyone can make a good product when everything goes as planned…but what about when it doesn’t?

6. What types of facilities do you work with? What is the size of your facility?

7. Do you use third party labs? Can I see examples of these tests?

8. Can I speak with an existing client or read a case study in which you’ve documented prior success?

9. What are your typical lead times for capsules? Powders? Tablets?

10. What are your minimum order quantities (MOQs)?

11. Do you offer added value, like in-house innovation?

12. What do you do to improve the development process in terms of speed, efficiency, quality and cost?

13. What else can you do for me to grow my brand?

14. What is the name of your accounting firm?

15. What is your financial strength? Is your company profitable?

As a prospective client, you should also be prepared to answer questions. A fundamental one, Becker says: What level of sophistication does the brand owner possess and what level of support does the brand need from its CMO? The more the brand owner is willing to work with the CMO to have these things in place up front, he says, the stronger the relationship will be long-term.

Keep in mind, Holtby says: Selecting a partner is only an intermediary step. “Without a detailed, comprehensive transition plan and effective ongoing management of the partnership, even the best contract manufacturing relationship will fail to achieve its full potential. Effective management means fully documenting all processes in order to avoid ambiguity about who is responsible for what. It means putting in place a clear set of performance metrics to keep both parties focused on continuous improvement. It involves establishing open communications across all levels of the two organizations. Finally, it calls for both companies to treat the contractual relationship as a partnership, which requires trust and a willingness to share both risks and rewards.”

In these talks, it may not be a positive if both parties seem 100% in sync. “You want to work with a manufacturer that can identify problems and easily provide powerful solutions,” says Tricarico. “Poking holes or pushing back on certain requests should be seen as a strength of your manufacturer, not necessarily a weakness.”

It goes without saying that cost will also be a top question, but most of our experts echo a similar point to this one from Tricarico: “I cannot stress enough to new brand owners that you get what you pay for in this industry. You have a moral obligation to the people that are purchasing and ultimately consuming your products. If a manufacturer is quoting your product out at a price that’s significantly lower than the other vendors you spoke to, chances are they’re trying to cover up something, like lack of experience.” Do your homework, ask lots of questions. “This process might take time, but that’s OK. If there’s any aspect of the contract supplement manufacturing process that is worth investing time and effort into, it’s this.” WF

CMOs ID 10 Top Trends for 2020; The Latest in Independent Testing

In part two of this article, which is available exclusively here, experts weigh in on what will help fuel sales and grow your business as we head into the new year. Soft Gel’s Holtby discusses the latest in consumer interest in corporate environmental and social efforts, plus a focus on whole food supplements with increased bioavailability; Neth talks convenience and personalization; Kaufman and Becker cover trending categories, from nootropics to nutricosmetics—and more!

The latest in lab testing—including five steps to selecting a lab—is available here. Alkemist Labs’ Elan Sudberg discusses the consumer push for testing and certification, and discloses an insider secret regarding lab choice.

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