Some of us may not be aware that a lot of companies outsource their packaging needs to other businesses throughout the United States to other companies (there is a significant amount done outside of the United States as we all know). This allows organizations to focus on what they do best and cut costs in areas they may not have the expertise in. According to a report done by Mordor Intelligence the global contract packaging industry was valued at $40.65 billion and for 2023 it is expected to hit $78.14 billion. As you can see this is a huge number and big opportunity to tap into for companies involved not to mention a decent market share hold too!
Bringing on a new brand on top of your current product line can be very expensive and require you to hire more employees along with acquiring more machinery. This is where contract packaging companies come into play for these organizations. The businesses involved in co-packing specialize in this field and have the equipment to run these orders or they are willing to bring in assets for the customer in order to meet the needs of the client. There are so many things we can tie into why or what creates companies big and large to outsource their packaging needs. This can be related to consumer trends creating a fluctuation in product demand and the possible death of a brand or an organization wants to increase its product offering.
If a company is good with co-packing or contract manufacturing they are more than likely able to start a project as soon as possible. Whereas doing this in-house can take weeks or months just to get equipment and machinery in place or brought in. Not to mention help reduce labor costs which I know can be of an issue for many companies. Over time a lot of companies do not guarantee a long term contract with co-packing and custom manufacturing. The reason being is because eventually, they have the capital to do it themselves and make money from it. Knowing this, a good percentage of your clients may not have a huge customer retention rate and need to focus on bringing in more clients.
In the end, you may be asking yourself: “Why would a small business want to outsource?”:
• Relieve manufacturers from their infrequent or intensive workloads
• Bridge the gap from concept to full-scale production
• Assist with overflow volumes
• Increase speed to market