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ESG (Environmental Social Governmental) and Food Contract Manufacturing

In recent years, environmental, social, and governance (also known as ESG) considerations have become increasingly essential considerations for businesses that manufacture food. This is due to the fact that customers are becoming more aware of the environmental and social implications of the things they buy and are demanding that businesses take action to address these concerns as a result of this awareness.

The requirement for food contract manufacturing enterprises to decrease their environmental footprint is one of the most important effects that ESG has on these industries. This involves lowering emissions of greenhouse gases, as well as cutting down on water use and trash production. Additionally, it is required of businesses to acquire materials in a manner that does not affect the environment and use as few toxic chemicals and pesticides as possible.

  • Environmental considerations:
    • Reducing greenhouse gas emissions
    • Minimizing water usage
    • Reducing waste generation
    • Sourcing ingredients sustainably
    • Minimizing the use of harmful chemicals and pesticides
  • Social considerations:
    • Ensuring fair treatment of workers
    • Ensuring product safety for consumers
    • Supporting local communities
    • Promoting diversity and inclusion
  • Governance considerations:
    • Transparency in operations
    • Strong ethical and compliance systems
    • A diverse and independent board of directors
  • Reputational and financial risks for companies that fail to address ESG issues
  • Competitive advantage for companies that are proactive in addressing ESG issues
  • Increasing consumer demand for products that align with ESG values
  • Compliance with regulations and standards related to ESG, such as the Sustainability Accounting Standards Board (SASB) and the Global Reporting Initiative (GRI)

It’s also worth mentioning that due to the ESG integration in investment strategies, companies are also facing pressure from investors to report and improve their ESG performance, this can be a driver for companies to improve their ESG practices.

For businesses that manufacture f ood, social issues are rapidly becoming an increasingly essential factor. This involves ensuring that employees are treated in a just manner and that items are safe for customers to ingest in their food. Additionally, it is required of businesses to help the communities in which they operate and to encourage inclusiveness and diversity.

Last but not least, food contract manufacturing corporations are beginning to place a greater emphasis on governance issues. This involves making certain that businesses are open and honest about the ways in which they do business and that they have robust ethics and compliance management processes in place. Additionally, it is anticipated businesses that will have robust boards of directors that are both diverse and autonomous in their decision-making.

Overall, the influence of ESG criteria on food contract manufacturing enterprises is enormous, and businesses that fail to address these concerns may suffer threats to both their brand and their finances. However, businesses that take the initiative to address environmental, social, and governance (ESG) concerns may be able to obtain a competitive edge in the market.

TMG  helps contract manufacturers and contract packagers prepare for ESG inquiries from branded Food and CPG customers.

 

 

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FSMA and Food Contract Manufacturing Companies

The Food Safety Modernization Act (FSMA) is a key piece of legislation that was signed into law by President Obama in 2011. The law went into effect in 2011. By moving the focus from responding to outbreaks of foodborne disease to avoiding epidemics of such illnesses, the legislation intends to modernize and enhance the food safety system in the United States. The Food Safety Modernization Act (FSMA) has had a substantial effect on food contract manufacturing enterprises as a result of the additional regulatory standards that it has imposed and the heightened attention that it has enhanced.

The mandate that food facilities prepare and follow a food safety plan is one of the most important aspects of the Food Safety Modernization Act (FSMA). This plan is required to incorporate a hazard analysis and risk-based preventative controls (HARPC), which are aimed at mitigating the risks that may be posed by the facility’s activities and the goods it produces. Additionally, the facility is required to carry out a hazard analysis in order to determine and assess the potential risks that are associated with the food that it manufactures, and then it must put in place preventive controls in order to reduce or eliminate the possibility of those risks occurring.

The requirement that food facilities create a supply-chain policy that addresses dangers that may be introduced during the transportation of food is another essential component of the FSMA. This section mandates that food facilities must comply with the requirement. This comprises the implementation of steps to check the safety of food suppliers and ensuring that the food is not contaminated or misbranded while it is being transported. In addition, this includes ensuring that the food is not being sold under an incorrect brand name.

Additionally, the FSMA imposed additional mandates on facilities, requiring them to carry out environmental monitoring and testing in order to identify and eliminate the existence of germs that might be hazardous to the production environment.

In addition, the FSMA imposed additional obligations on facilities, such as the need that they keep records of their food safety operations, such as the outcomes of hazard analyses and preventative control measures, and that they make such data accessible to the FDA upon request.

The Food Safety Modernization Act (FSMA) also included additional mandates that establishments must comply with, such as registering with the FDA, providing advance notification before importing food into the United States, and allowing the FDA access to the facility for inspection purposes.

Additionally, the Food Safety Modernization Act (FSMA) mandated additional criteria for facilities to fulfill the standards for foreign supplier verification programs (FSVP) for importers of food for people and animals, in addition to mandating that third-party auditors be accredited.

In a nutshell, the Food Safety Modernization Act (FSMA) has resulted in the establishment of a variety of new regulatory standards and an increase in the level of scrutiny directed against food contract manufacturing companies. Now more than ever, businesses have an obligation to place a primary emphasis on the prevention of foodborne illnesses by putting into place food safety policies, supply-chain procedures, and environmental monitoring. In addition to this, they are required to keep records of the food safety activities they participate in, register with the FDA, and comply with the new standards for international supplier verification procedures as well as the accreditation of third-party auditors. In the event that these rules are not complied with, there may be hefty fines and penalties imposed.

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Top 12 Reasons Brands Say They Use Food Contract Manufacturers (based on 2022 research)

Why do global brands, legacy brands, and emerging brands use external manufacturing partners?

The use of food contract manufacturers (external manufacturing) by brands of all sizes is becoming more and more common. The overall size of the market, now approaching $100 billion, is growing much faster than the industry it serves.

Here are the top twelve reasons, based on 2022 polling results.

  1. Cost savings: Food contract manufacturers often have economies of scale and can produce goods at a lower cost than a company’s internal manufacturing operations.
  2. Flexibility: Food contract manufacturers can quickly adapt to changes in demand and can handle fluctuations in production volume.
  3. Expertise: Food contract manufacturers often specialize in specific types of manufacturing and can bring a high level of expertise to the production process.
  4. Equipment and technology: Food contract manufacturers may have access to more advanced equipment and technology than a company’s internal manufacturing operations.
  5. Quality control: Many food contract manufacturers have robust quality control systems in place, which can help ensure that products are of high quality.
  6. Scalability: Food contract manufacturers can quickly scale up or down production to meet changing demand.
  7. Speed-to-Market: Using a food contract manufacturer can help speed up the time it takes to bring a product to market.
  8. Risk Management: Food contract manufacturers can help manage the risks associated with manufacturing and supply chain disruptions.
  9. Access to global markets: Food contract manufacturers often have global supply chains and can help companies access new markets.
  10. Compliance: Food contract manufacturers can help ensure compliance with industry regulations and standards.
  11. Environmental sustainability: Many food contract manufacturers have implemented sustainable manufacturing practices, which can help companies reduce their environmental impact.
  12. Innovation: Food contract manufacturers can bring new ideas and technologies to the production process and can help companies stay competitive.

TMG is the leading industrial marketing agency serving the food contract manufacturing industry. We also help connect brands with the contract manufacturing resources they need to succeed. If you are a contract manufacturing or packaging firm seeking to move more powerfully in the market, find out how TMG can help you fulfill your mission.

 

 

 

 

 

 

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The Six Traits of Highly Effective Brand/Contract Manufacturing Relationships

If the era of Covid was challenging for the food and beverage production supply chain, then the era after Covid has been positively tense. Problems and challenges, such as bottlenecks in the supply chain, labor shortages, radical shifts in consumer preferences, and escalating cost structures across the board, including labor, ingredients, materials, and energy, have seriously impacted the capability of food and beverage manufacturers to meet the demands of the marketplace.

Contract producers of branded food and beverage items face a significant number of the same challenges as their in-house counterparts. Along the whole supply chain, new winners and losers are being created as a result of this climate. Companies that are successful will give faultless execution in addition to relationship management strategies that are suitable for our current era of fast change.

Working with several brands and contract manufacturers over the course of 25 years has shown me that the fundamentals seldom ever shift. Both in business and in personal relationships, individuals are people. If you are able to handle this situation properly, there is a good chance that you will be successful. The particulars are what end up being different. We are confronted with a variety of difficulties, complexity, and possibilities. In order to satisfy them and make the most of opportunities, the best practices for relationship management need to be improved. Many of these procedures are encapsulated in our Six Characteristics of Highly Effective Brand/Contract Manufacturing Relationships, which are described in further detail down below.

Transparency in Operational Procedures
In times past, both brands and contract manufacturers guarded their secrets carefully and maintained a culture of strict confidentiality. The companies did not want to provide an excessive amount of information. Contract manufacturers were wary about brands having an excessive amount of information about their company or margins. Because of this, connections were kept at a distance, which made it difficult or even impossible to achieve tight integration. Transparency rose to a higher level as the sector progressed.

It is crucial for all parties engaged in a business transaction to have the amount of operational transparency that allows them to improve their corporate decision-making. This degree of openness is not total; rather, it is the minimum amount required to achieve maximum commercial success while maintaining the confidentiality of information that must be guarded. There are many instances of successful brands and contract manufacturers that successfully traverse this landscape. Unfortuitously, there are also a great number of people who do not comply with the standards. The establishment of fruitful, long-term relationships between brands and contract manufacturers requires that this primary phase be completed successfully.

Functional Harmony and Coherence
The meaning of the word “alignment” usually shifts depending on the context of the discourse. When we talk about coordination at the level of day-to-day execution, which is what we mean by “Functional Alignment,” we mean the alignment of daily actions, coordination, communications, and tasks. Are the daily operating targets, production throughputs, benchmarks, changeovers, and other aspects of the relationship between the brand and the contract manufacturer unclear? When there is a lack of functional alignment between different parts of a system, it is not unusual for a fantastic strategy to fail spectacularly because it was devised in a remote conference room. In order to achieve functional alignment that is successful on a day-to-day basis, it is crucial to verify and recheck that all relevant parties are aligned and informed at the proper level, frequency, and intensity.

Capabilities That Complement One Another
There are situations when a contract manufacturer will have skills or capacities that a brand might not have. In these kinds of situations, having complementary qualities is a no-brainer. There are instances when they are not as readily apparent. There are a few things that large companies are unable to achieve on their own that contract manufacturers are able to accomplish, but they have the option to do so. Then, what are the benefits of using contract manufacturers? There are often competing demands placed on a brand’s time, talent, and financial resources. The successful outsourcing of manufacturing tasks to a third party that is competent releases valuable resources. These resources may take the form of capacity, cash, skill, time, or any number of other highly desirable assets. The process of recognizing and placing a value on complementary competencies is an essential component of the value proposition that contract manufacturing presents to companies.

Collaboration on the Structural Level
Although individuals come and go, systems continue to function. The scenario of a successful brand’s relationship with a contract manufacturer that deteriorated when key personnel from either the brand or the contract manufacturer departed their jobs is all too common. On occasion, this is something that cannot be helped; nonetheless, the majority of the time, it can be traced back to a lack of structural collaboration. The issue is that by the time it is discovered after the fact, the harm has often already been done, and secondary damage has ensued, which has the potential to ruin both the value offer and the whole relationship.

The basic components of structural cooperation are the systematization of interactions through the establishment of agreed-upon norms, expectations, resources, and reporting systems. This has been the case from the beginning. On the other hand, the amount, complexity, and level of sophistication of the structural collaboration that is required now are far higher than the standards that were necessary in the past. Relationships between brands and contract manufacturers that are successful commit time and resources upfront and over time to ensure that the structural partnerships remain even if there are shifts in leadership, personnel, or other critical positions.

Alignment of Strategic Goals and Objectives
Brands and contract manufacturers very seldom, if ever, have the same aims; yet, the primary goal of operating as an ongoing company is one that is shared by all businesses. On the other hand, the particulars are quite variable. The fact that they are in agreement on their strategic outcomes is something that is really necessary. This comprises a variety of traditional benchmarks such as quality standards, financial performance, production capacity, and others. However, it also contains ethical sourcing requirements, sustainability objectives, resource use, and environmental, social, and governance measures in an increasing number of cases. Regardless of whether they are operationally aligned, functionally aligned, or structurally aligned, effective partnerships between brands and contract manufacturers that have different perspectives on these essential goals will be tough to achieve and likely won’t last very long.

Common Value Metrics
When it comes to evaluating these characteristics, the proverbial adage that “in God we trust, but all others must present data” rings especially true. The output quantity, as well as the quality of the product, are essential but lagging indications of all the inputs that we went through. Even while they are necessary, having only them is not enough. In a similar vein, subjective criteria such as gut checks, feel-good anecdotes, and soft parameters are not suitable substitutes for quantitative KPIs (key performance indicators), real-time reporting, consistent updates, or data obtained directly from its source.

Data-driven collaborations between brands and their contract manufacturers are extremely effective. Establishing standards across all of these characteristics (and more), and then being rigorous in their evaluation and development, can generate relationships that are superior and more long-lasting, as well as enhanced value generation for both sides. Any approach that is serious about establishing or improving the connection between a brand and a contract manufacturer absolutely has to use common value measurements.

Conclusion
Contract manufacturers are at their most effective when they are able to function, as closely as is practically practicable, as a seamless extension of the production and supply chain network of their customers. To do so in the marketplace as it exists now calls for a level of focus, rigor, and preparation that was unheard of even ten years ago. The world is just going to become a more complicated place. To get an idea of how much more potential there is for value creation in the connection between a brand and a contract manufacturer, one need only look at the interconnected supply chains that exist in industries such as the automobile, semiconductor, and consumer electronics industries.

Carl Melville is the managing partner of The Melville Group, which is a company that works solely with private equity-owned contract manufacturing companies in the food and beverage as well as consumer packaged goods (CPG) market. Additionally, The Melville Group is the author of the Contract Packaging Association State of the Business report, which is the research study that has sold the most copies on the topic of the contract manufacturing industry. ContractPackagingReport.com is where further details may be discovered.

 

 

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Beginner’s Selection Guide to Hiring A Contract Manufacturer

Finding the right food or CPG contract manufacturer can be a daunting task for a new company. Here we will look at some of the basic criteria andWe’ve previously discussed the benefits of outsourcing your production to a contract manufacturer. But finding the right partner for your specific needs isn’t a walk in the park. So today, we will discuss some factors to consider when assessing a contract manufacturer / contract packager for your business:

Experience & Expertise

The right partner should have relevant industry experience and complementary expertise in your core competencies. Being aware of current market trends and occurrences is critical. They should also have the equipment, machinery, tools, and technology needed for production. Ideal contract manufacturers / contract packagers should have successfully established a reputation that inspires confidence among investors.

Quality Management & Certifications

It’s a good idea to look for a contract manufacturer with a certification showing proof of excellent services, like ISO 9001:2015, and other certifications specific to your industry, like those from the FDA. A third party should also conduct regular quality assurance inspections to ensure consistent product quality.

Costs & Savings

It may be tempting to go with the cheapest quote, but this may not be the whole picture. Instead, consider the total manufacturing cost, which includes shipping, assembly, inventory management, duties, insurance, and other expenses. According to Deloitte’s 2020 survey, cost savings was the top reason companies outsourced.

Workforce

The employees are at the core of the manufacturing process. Therefore, it is critical to assess the competence of the employees of the outsourced company to ensure they are qualified to complete the task.

Flexibility

If you anticipate the need to be prepared for fluctuating product demand, ensure that your contract manufacturer / contract packager can scale up or down. The ideal partner should be ready to grow with you.

Location

When selecting a contract manufacturing partner, the location matters; offshore is usually less expensive, but there could be language barriers, political problems, and longer delivery times. On the other hand, a local or regional partner can meet with you face-to-face and get things done more quickly. You can choose your preferred contract manufacturer’s location based on your needs.

Confidentiality

It is essential to inquire about intellectual property and non-disclosure agreements during the selection process. A well-crafted agreement covering all aspects of the contractual relationship, including confidentiality, are essential to protect both parties.

Here’s a quick tip: make a list containing all the qualities, features, and characteristics you are looking for in a contract manufacturer, and use it as a guide in selecting the best contract manufacturer / contract packager to partner with.

TMG has been helping emerging brands and companies of all sizes find and select the right contract manufacturer or contract packager for their current and future needs. Contact us for help or more information.

 

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How Can Contract Manufacturing Help Your Business?

Why use contract manufacturers?

It’s possible for a corporation to discover that it may save time and money by contracting out the manufacturing of either certain pieces or the full product rather than doing it in-house. Although the product is legally considered to belong to the customer or business who engaged the contract manufacturer, that manufacturer may take part in parts or all of the manufacturing and delivery operations. The following is a list of the six advantages of working with a contract manufacturer:

Costs that are lower
This is the most evident advantage that may be gained from using CMs. Contract manufacturers already possess the necessary equipment to make the required items at the agreed-upon price, saving their clients the money that would have been spent on acquiring, maintaining, and repairing equipment as well as the cost of recruiting trained workers. The decrease of overhead expenditures will result in an increase of the return on investment (ROI).

Reduced amount of time spent producing
Contract manufacturers possess the industry expertise required to produce superior goods in a shorter amount of time than traditional manufacturers. It is an indication that there will be fewer delays in manufacturing as a result of this. This enables fast delivery of items to clients, which increases both the attraction of the brand and their loyalty to it.

Easier market entrance
Businesses are able to bring new goods to market more quickly when they have an edge in terms of both their equipment and the expertise of their CMs. If a company is able to join a market before its competitors, it will have a competitive advantage since it will have more time to grow its share of the market. The biggest winners here are going to be start-ups and smaller businesses.

Enhanced understanding of the technicalities
Contract manufacturers are able to identify possible dangers and defects in the product at an early level in the manufacturing process. They are able to provide the recruiting organization with advice on how to reduce these risks in order to prevent spending additional fees for mistakes that may prove to be catastrophic in the long run.

Enhanced productivity of the labor force
Because CMs are already responsible for the manufacturing part of the organization, the employees of the company are free to concentrate on design, marketing, and advertising rather than production. This results in an improvement in production, which in turn makes it possible for the company to grow its operations.

Scalability
Contract manufacturers frequently engage in price negotiations with suppliers of bulk raw materials, which allows them to maintain low costs despite increases in output. Because of this, you are able to instantly scale up production without considerably increasing expenses.

Outsourcing naturally raises its fair share of problems to contend with as well. To prevent outsourcing to the incorrect firm, you need to do adequate research, just as you would for any other business venture. And after you have found the ideal CM for your business, it is crucial to keep clear and continuous contact with them in order to guarantee that your expectations will be satisfied and that the product quality will be preserved. When entering into a deal with a contract manufacturer, it is important for you to ensure the safety of your intellectual property by obtaining the appropriate legal protection.

TMG works with a national network of contract manufacturers and contract packagers. We can help you find the right contract manufacturer or packager in the right location with the right resources to help you bring your product to market faster. Contact us for more information.

“Master your strengths, outsource your weaknesses.” — Ryan Kahn.

 

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The Contract Manufacturer’s Song (in the style of Dr. Seuss)

(read in the style Dr. Seuss)

“The Food Contract Manufacturer’s song, It’s not right, it’s not wrong, It’s a clever way to get things done, with efficiency and speed, You’ll have fine products that you need, In less time and with less strife, That’s the beauty of a contract life!

You need not worry ’bout the cost, nor be concerned with through-put loss, A contract manufacturer will take care, of all the details, with skill and flair, They’ll produce your goods with precision and might, and make sure everything is done just right!

So if you want to save some time, And make your products really shine, Think about using a contract manufacturer, It’s the smart choice, like no other!

With the help of a contract manufacturer, You can focus on what matters, Like growing your brand and marketing thrive, While they take care of the manufacturing side!

So don’t delay, give it a try, And watch your product soar high, With a contract manufacturer by your side, Success is just a step away, you’ll find!”

 

 

 

 

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