How much does a co-packer get paid 3 Ways Co-packers charge

Posted by Damian Roberti on

All right, it's Damian from Marketing Food Online. So in this video, I'm going to give you the three ways co-packers charge you. And if your question is how much do co-packers charge for food businesses, you're going to love sticking around for the rest of this video. I'm going to go over the three ways they do it. I'll provide you with some pricing.

 Co Packers charge 3 ways VIDEO on youtube 

We're going to jump into that right now. All right, so as I mentioned back in the introduction, this video is going to cover three different methods that co-packers for your food business will charge you in order for them to help scale your business, produce the product for you, and even ship it out to areas where you need it to be shipped. So we're going to dive into this question before we do. As always, this is the first video you're watching marketing food online. I am Damian Roberti, founder of Marketing Food Online.

Small Batch Co Packers Video FREE

I am an entrepreneur. My wife and I started our e-commerce food businesses over a decade ago. And that's what inspired me to start a YouTube channel to teach you guys what I've learned over the past 12 years. So first off, let's dive into it. So co-packers have three different methods of charging based upon the needs that you have, the services that they can actually provide you, and the duration of time it takes to make your product.

 When to use a co packer Video 

Before we get into those three, the first question is when should I use a co-packer? This is actually a question I get emailed through our Marketing Food Online Yahoo email quite often. When should I use a co-packer like Damian? So if you are creating a food product at home, and you're doing it under the cottage food law, and you've been very successful in doing it, You're making some money at it. And, obviously, you're staying within the confines of cottage food law, but you'd like to expand and branch out.You've already created a customer base locally, but now you want it to be available on a website, maybe potentially get into a retail store, maybe even local cafes, wherever it may be, but you've kind of maxed out your ability to produce the quantities that are needed to grow your business.

 Co Packer Q and A Youtube Video 

That is a good point in reference to starting to approach a co-packer. Now, definitely one time when you should not approach a co-packer is when you first start a business. You have an idea, you created packaging, you've got your label, you've got your logo, you've got your brand, but you don't have any proof of sale yet. You don't have any proof of idea or proof of concept. So nobody knows about your product. You don't want to approach a co-packer and ask them, hey, can you produce five, six, or 7,000 units of this product? Because then I want to try to sell it.

 

The idea is to kind of get some local buzz about your product or go online. And, if you have the ability to obtain a commercial space and ship the product via the internet, start by selling on Amazon, eBay, and Etsy.What you want to be at the point where you can generate additional sales, scale it, maybe even get it into retail stores, or maybe even a nationwide grocery chain. That is a great point. You need to start contacting a co-packer because they can produce a product for you in a very short period of time. But make more of it than you could possibly do by yourself. This is so because the first type of charge that a co-packer will charge you in order to produce the product is a per-unit charge. Now, this could be very unique to the type of product that you make, but we actually contacted 16 different co-packers.

 

And we got a variation of price points, anywhere from $0.30 up to $0.60 per unit, in order for them to produce the product on an individual basis. So that would be like, hey, you know, I contacted the co-packer and said, "Look, I'm going to get about 5,000 units or a thousand units of your product." I want you to produce it for me. The co-packer is going to give you a per unit cost. So that range between 20 and 20, anywhere between 0.20 and $0.60 per unit, is going to be the range per unit based on the size of an order.And then, that way, you'll get a quote and you'll know how much it is going to cost. Okay, So the first type is actually a per-unit charge. Okay, so the second type of way that a co-packer will charge you for their services is an hourly rate.

 

Now, this is kind of a little bit more of an expensive venture in some cases, because the range that we found was between $20 an hour and up to $70 an hour. Again, depending upon the type of product that you make, for instance, using it as an example, if you get a company to produce a trail mix for you, The idea of mixing a trail mix together and putting it into a bag and labeling it is obviously much different than if you go and you have a spaghetti sauce or a saucer, or you have a lot more labor-intensive product that has to be chopped, measured, cooked, cooled down, and then put into a process of canning, jarring, or something to that effect.

 

That's going to vary greatly. Okay, so don't get me wrong. Some of these may be inexpensive depending on the price per unit for the type of product that you're making and the way that it's going to be made. And then some are going to be much more labor-intensive, and that's going to be a little bit on the higher end. So when you calculate your wholesale pricing, you need to factor in the cost that the co-packers will use; either it'd be by unit or by hour. And you need to make sure that you're covering that cost when you pass that price point on as a wholesale price point to your retail store or if you're selling it to someone else who's going to resell it.

 

They're going to buy it at a wholesale price point. You want to make sure that you're factoring in those costs as well, okay? Third way: If you want to look for the average co-packer markup price point, you're going to look at a third way. And that third way is a flat day rate, okay. So a flat day rate works where they're going to charge you. The co-packer will charge you a set amount for the entire day. Now, normally that time span is between about eight to even 10 hours. We found a couple of co-packers that actually did spices that had a 10 hour day period between eight and ten hours in a single day. They're going to charge you a specific dollar amount.

 

This is really an interesting way to do it. And actually, one way where you can maximize the workday is by producing as much as possible, because it's not per unit. It's not broken down by hour. You get them the whole entire day. So if you can produce a certain amount within that day, this may be the most beneficial as far as your investment's going to be concerned. For the entire day, this range was between $500 and $1,000 for the entire day. Now again, this goes back to what I mentioned just a little while ago. You want to be careful because of the type of processing it takes to make your particular product, such as dry spice rubs, nut blends, or trail mixes.

 

Things that don't have to be cooked and cooled and measured to a point where you've got ingredients and a whole multitude of items going into it are going to be a lot less expensive, plus they're going to take a lot less time to make. So, the more intricate and involved the product, the more likely you'll have a tendency to have a little bit more on the higher end in terms of pricing when you use a co-packer.All right, so that's gon na be the rundown of the three main ways that co-packers will charge you, so you can understand how much co-packers charge. And you want to make sure you check it out. I've got a video that's coming out.

 

That's going to give you a list of actual secret expenses that a lot of people don't think about when you're dealing with co-packers. Not only are these three ways that they can actually charge you, but there are actually a handful of other fees that you may have never heard of. And on my next video, which I'm going to produce and put out for the co-packers. I'm going to list those different expenses and things that you need to be aware of, plus the things that you need to ask your co-packer about. So if that was helpful, as always, let me know down below. Those are the three different ways that you can actually get charged. And as I mentioned, I think the last one is one that can be really beneficial, especially when you're small and you're starting to expand or scale your business.

 

Getting a co-packer for the entire day at a set rate may be more beneficial. So if you have any comments or questions about this, let us know down below, and I'll see you guys on our next video. Thanks for watching Marketing Food Online. And if you are looking to create your own food truck, start a home-based food business under the cottage food law, franchise a food operation, start a packaged food business, private label your own food products, sell on Amazon, get your own online store, or sell food online, Take care. Remember to subscribe and check out these videos for more resources.

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