A DYI ‘shroom farm. A fishtank herb garden. What next?

“That’s the most disgusting thing I’ve ever seen,” the Whole Foods buyer told Nikhil Arora, who opened a big & stanky bag-o-fungus in the buyer’s office. To the young innovator, that bagful was the crown jewel of a new product he’d liken to a “next iPhone” for natural products fans.

He was kinda right, as you’ll find out if you read the story — “Home mushroom farming, fish-gardening and other supply chain collaboration challenges,” — that I wrote when I saw Nikhil in my travels on the packaging beat. Over the next few years he found the right suppliers for his DIY mushroom kits and then a cool aquaponic fishtank-meets-herb-garden kit.

New product to bow end-February 2015.

New product to bow end-February 2015.

Now he Alejandro Velez, co-founders of Back to the Roots, are at it again; they’ll unveil a new product on February 26th.

What’s it gonna be? I don’t know, but I couldn’t be happier to see these folks start so small and gain national distribution so quickly with such simple, honest ideas.

Rock on, guys.

Redefining the outsourced supply chain

To state the obvious, contract packaging is rapidly evolving. The core outsourced-packaging function is easily understood, but the form and function of the contract packaging organization is a moving target. Decades ago, a co-packer was defined by the machines the company had on the floor.

By Bob Sperber; original post here.

Packaging-specific services remain a much needed, much in-demand core competency. Consumers want the benefits of the latest primary containers, pouches, blisters, pillows, stick packs, and/or the latest secondary innovations in POP, club packs, multi-packs and the like.

It’s why, to cite one of innumerable examples, Salt Lake City-based Northstar Labs has steadily upgraded its injection molding, liquid filling and four-color digital label printing capabilities. And it’s why Fairport, NY-based LiDestri Food & Beverage, for instance, leveraged its contract manufacturing and packaging smarts to develop a new multi-compartment flexible pouch format and expand into pharmaceuticals.

CPsummer13Brands, too, find themselves in the co-packing game. Toad-Ally Snax, Bristol-PA, which markets its own brand of chocolate-covered goodies, nets new business through additional contract and private label work—something even the largest brand marketer-manufacturers do whenever company-owned production assets sit idle for so much as a shift a week—just to keep capacity at 100% and feed the bottom line.

Those for whom co-packing is the core focus are doing much more these days to give a brand anything it can, from upstream package development and manufacturing to downstream warehousing, fulfillment and logistics.

Fave Juice, for example, outsourced just about everything but product development and marketing to The Scoular Company, which manages everything from ingredient and material procurement to manufacturing, logistics and contract packaging—even finding and managing day-to-day operations and growing a nationwide network of co-packers.

One day, it’ll be hard to define the very term “contract packager,” because the overarching industry trend isn’t on four-walls production, but on the supply chain. Whereas co-packers were once seen as a “stop-gap” solution, tomorrow’s contract packagers are “sophisticated logistical specialists,” says Chris Nutley, president of MSW Packaging Services and Contract Packaging Association president.

This reality is reinforced by Industry consolidation, notes Lisa Shambro, executive director of the Foundation for Strategic Sourcing, in her latest column. She points to private equity firm Wind Point Partners’ merger of Hearthside Food Solutions and co-packer Ryt-way Industries, which has created a $1-billion contract food and consumer goods manufacturer-packager with 19 facilities across seven states.

Likewise, Coregistics, itself a merger of co-pack and supply chain firms, just acquired Chicago’s Cano Packaging to offer food brands “increasing operational efficiency while significantly reducing their total supply chain costs,” according to CEO Eric Wilhelm.

As contract manufacturers and packagers broaden their horizons, large logistics firms are also deepening their packaging capabilities. GENCO, for instance, has formalized its contract packaging operations into a new, dedicated business unit. Dave Mabon, president of the business, says that brands are seeing savings into the millions of dollars due to tight partnerships aided by data visibility, or integration, across the “functional silos” present in large organizations.

The savings in purchasing, packaging, logistics and other “silos” need to be seen in cumulative form. Managers who ask, “What’s in it for my department?” need to recalibrate their attitudes and put on their cross-functional thinking caps.

Contractors need to maintain tight communication but also remember that big brands will continue to outsource as well as take work back in-house as the spreadsheet dictates. What should they do? “Enjoy the ride while you have it—and build other business for when you don’t,” advises Tom Bacon of Aaron Thomas Co., in the latest Personal Best profile.

Perhaps the hardest job in any co-pack relationship is finding the right fit in the first place. Online tools can help, from “Find a Contract Packager” link on the CPA’s homepage (www.contractpackaging.org) to Sealed Air’s Co-Packer Connection (www.copackerconnection.com), a matchmaking database service that now boasts more than 1,000 facilities indexed down to their machinery, financials, certifications, and more—as we’ve covered in the news.

Come to think of it, everyone and everything I’ve mentioned here, and more, is detailed in this July/August Contract Packaging, in print and online. Read on!

Store brands: Threat or opportunity?

In January, a Wall Street Journal story, “P&G Needs to Convince Thrifty to Splurge” said that the “real challenge” for Procter & Gamble in combatting poor sales and disappointing new-product launches was to get consumers “to spend more again on the company’s premium-priced products.”

By Bob Sperber; original post here.

TidePod-fromTideSite

Happy consumer Antonia demos innovative, easy-to-use (and tasty-looking) Tide Pods.

In January, a Wall Street Journal story, “P&G Needs to Convince Thrifty to Splurge” said that the “real challenge” for Procter & Gamble in combatting poor sales and disappointing new-product launches was to get consumers “to spend more again on the company’s premium-priced products.” But the reporter “missed the point,” Robert Hogan of Zip-Pak told attendees at the CPA 2013 Annual Meeting in late February because there’s no difference in product quality between private-labeled store brands and traditional, national brands. The real challenge, then, is coming-up with innovations that will resonate, like the next iPod… or Tide Pod, in the case of P&G.

Nielsen research cited 21% dollar growth in private label from the onset of recession until 2011, while in the same period, national brands logged only 3% growth. Brand loyalty and consumer satisfaction varies across categories, and NPD Group research partly refutes Nielsen’s findings, but everyone agrees that innovation is key. Will consumers care if the R&D behind that innovation comes from a manufacturer-owned brand or is the result of a retailer who decided to partner with an enterprising contract manufacturer/packer?

Today, I’m hearing that traditional co-pack growth is in the middling single-digit range at best. In contrast, Hogan presented research indicating that store brands account for 22% of all U.S. retailer goods, a number greater than 50% in the UK and Switzerland. As with other market trends, North America is likely to follow Europe’s lead.

If so, traditional brands’ power may well erode in the supply chain and at the outsourcing contract negotiating table. If you believe the co-pack industry will mature and consolidate (as I do), tomorrow’s larger outsource service providers will have more leverage to invest in their own capital equipment and innovate with their own R&D efforts. This in turn could mean that traditional brands have less power to negotiate non-compete terms, and co-packers have more power to work directly for retailers.

Thoughts? My inbox is open.