Co-packers Charge in Three Different Ways: Co-packers charge in three different ways to fulfill the needs of any producer. Although rates are sometimes decided on a case-by-case basis, many co-packers keep their fees consistent solely to keep their sanity.
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1. One-day flat rate
This is straightforward. There is a single cost for the entire day. Each day you generate, for example, costs $600. To lower your perunit labor cost, you must manufacture as many units as feasible in that 8-hour day.
2. Cost per unit
It's also really straightforward. You are charged based on the number of units produced. This is usually between $0.25 and $0.50. Any higher than that, and you're unlikely to make any money.
3. Hourly Rate
If your production takes less than a half-day or you require further assistance, you may be offered an hourly cost. Rates range from $25 to $80 per hour, depending on the equipment you utilize.
The most frequent rates are per unit and fixed day charge. Unless you're merely doing prep work for production and there's not much to finished items, you're unlikely to receive a per hour rate.
It's worth noting that you can also lock in a fixed rate. If you're new and can't predict demand (as many small food producers can), you'll be trapped with a day rate that won't fall any lower.
Most Co-Packers Won't Tell You About These Hidden Fees...
But now that you've seen this film, you'll know who to question about these!
1st Hidden Fee for Small Batch Copackers Getting paid
Even if you source and transport your components to the copacker, you may be charged for receiving your product. When I originally shipped glass jars to my first copacker, they charged me $20 to receive them. It turned out that I was charged that amount for anything they received. With the exception of glass, I delivered everything by hand from then on. For each delivery, expect to pay roughly $25 in receiving costs.
2. Small Batch Food Co's Unknown Fee 2. "Preparation expenses for ingredients"
It's possible you've never heard of it. Preparation of ingredients is usually billed by the hour. Let's pretend you're using fresh peppers. Your copacker isn't going to allow you free time to prepare them, is he? This may encourage you to choose products that require less preparation (or none at all), or you may decide to raise your rates to account for the additional cost. Prep fees often range from $25 to $50 per hour because the facility must not only cover labor costs but also earn a profit.
3. Storage expenses for pallets
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In copacking, space is a valuable commodity. Copackers, too, charge for it. Specifically, many food entrepreneurs (including yourself) lack the space to keep 50# bags of sugar, a pallet of glass, and thousands of units of completed product. How much does it usually cost? Expect to pay between $25 and $100 per month for each pallet. When you need refrigerated or frozen storage, the price increases up.
4. Consultation period
Unfortunately, you won't be able to pick your co-brain packer's indefinitely (wouldn't that be fantastic?) That means you might see a consulting line item on your next invoice. Whether you're discussing pH, HACCP, or distribution strategy, consultation costs a lot of money. Food consultants charge between and 0 per hour.
5. Fees Paid to Third Parties
Third-party audits, which are necessary for shelf space at many large supermarket chains, are extremely expensive, costing upwards of $2,000. If you're the only one seeking certification, you'll almost certainly be the one bearing the bill. If two or three producers want certification, you're in luck since you may split the cost.
Other certifications, such as gluten-free, non-gmo, and kosher, are also costly. Not only should you budget for this, but you should also keep an eye out for it on your co-invoices. packer's
Fees for Order Fulfillment
Sending an email with a purchase order is simple simply hit send. However, it takes time for your copacker to process your order, pack it, and load it onto the truck. Furthermore, it diverts their attention away from other pursuits (like making more product). If your copacker provides order fulfillment, expect to pay a set charge of additional .30 cents to .75 cents per case.
7. Fees for sourcing ingredients
There are co-packers who will assist you with the complete manufacturing process, including ordering all of your ingredients. They do exist, to be sure. Ordering all of your components is a time-consuming process that can take hours if you have a large number of items. It's possible to outsource this to your co-packer.
There will very certainly be a delivery rate (see above) as well as a percentage markup of 1020 percent. The major question is whether you're ready to accept a 10%20% rise in your raw material costs in exchange for someone else picking up the phone or placing an order online. I personally declined the cost, but other businesses are willing to pay the hefty sum.
8. Disposal Fees
Is your product causing the kitchen to resemble a disaster? Then there's the possibility of having to pay cleanup expenses to restore the kitchen back to normal before the following production. I haven't seen it much with copackers, but it happens frequently in shared commercial kitchens.
9. Make a Case for Your Product
Many food firms that order bottles and jars to package their goods (many of you) find that a case box does not always come with the glass. That means each of the 12 or 6 units must be placed in its own box, labeled, and taped. You'll have to pay for that as well. Typically, $0.50 per case.
While many of them are operational charges and not directly tied to the manufacturing of your product (with the exception of ingredient prep and ordering fees), they should be considered.
If you're hit with all of these "hidden" fees, you're looking at an extra $300 – $500 a month in costs. It's an investment if you're growing. If you're just getting started, though, search for ways to save money and avoid paying these fees.