Chocolate, shampoo bottles, painkillers: when well-known manufacturers of confectionery, cosmetics, or pharmaceuticals refine, package, or distribute their products, they often leave this to specialized contract packagers.
The reason for co-packing is simple: In the face of increasing competition, outsourcing individual production steps creates additional flexibility as well as financial and organizational leeway, for example, if there are more orders or fewer staff due to seasonal factors or unforeseen sudden circumstances. The outsourcing company can concentrate on its core business, such as product development. Products sometimes need to be ready for market more quickly, and under rapidly changing market conditions. For example, some consumer product manufacturers suddenly found themselves needing to produce more or change packaging sizes due to the Coronavirus pandemic. In times of a shortage of skilled workers, service providers can defuse demand peaks or ensure the prerequisites for regular basic operation.
The customer saves costs primarily in administration and work preparation. Equipment, training, and personnel costs are also eliminated, as are investments in equipment and facilities.
Consumer goods manufacturers in particular also prefer to hand over promotional offers – such as special editions, Christmas gift packaging or individual packaging, which is a growth segment – to co-packers. The service provider takes care of secondary placement at retail. A display campaign and the special packaging at the point of sale help the brand manufacturer to stand out, especially when introducing new products, and thus to generate more sales.
Many companies specializing in contract packaging offer co-packing solutions for almost all shelf-stable products. The range of services includes, for example, the decanting and portioning of products, their professional preparation, as well as distribution and sales, including labeling, banding, and packaging. Most companies have realized, according to a survey by the European Co-Packers Association, that full service is essential for survival.
“Contract packaging is an invisible part of many companies”, explains one service provider, who provides staff for food producers on a contract for work or offers logistical support abroad – for example, by renting warehouses in Romania. The market for contract packers is confusing overall, and the term co-packing is not clearly defined. There are many ways to outsource seasonal packaging work and many large and small service providers ranging from corporate groups to start-ups with a wide variety of offerings. Logistics services such as fulfillment also fall under the umbrella of co-packing.
Well-positioned service providers can demonstrate their strengths such as comprehensive service – from consulting and raw material purchasing to quality assurance and distribution – In a wide range of industries. However, there are only a few companies that offer co-packing as a core service. One of these companies is the Packservice Group based in Karlsruhe, which has been working for pharmaceutical companies and brand manufacturers such as L’Oréal for years.
“To be able to play in the Champions League as a co-packer, you have to have a high level of stress resilience. Our brand customers expect maximum flexibility. In order to be able to process orders on schedule, capacities must be permanently available. Both in terms of space and personnel as well as in terms of machinery and capital”, explains Oliver Fischer, operational managing director of the Packservice Group for Germany and Switzerland. It requires not only a well-trained production team, but also a management team with experience in handling complex customer projects. This includes, for example, comprehensive know-how in logistics management and expertise in packaging development.
The first Corona wave can be used to show examples of special requirements to which experienced contract packagers had to react quickly. Products such as noodles or toilet paper were delivered directly to retailers and therefore also fell out of secondary placement. The Karlsruhe-based company has observed shifts in cosmetic products since Corona. Since the mask obligation more eye shadow and mascara, but less lipsticks are bought.
“For us as a service provider, it is important to be able to react quickly to the market. In the best case, this also allows us to open up new segments”, says Fischer. For example, the company’s subsidiary Flexpack, a specialist in packaging materials and outer packaging made of corrugated board, has greatly expanded its range and supplies customers with FFP2 masks, disinfectants, and rapid tests.
Application examples for sustainability
Currently, ecological issues are high on customers’ agendas. “We support our customers in achieving the goals of their sustainability strategy. In doing so, we also use new materials such as grass paper, for example. For a well-known cosmetics manufacturer, for example, we have successfully tested the first sleeves made of grass paper in retail. An alternative to the classic double pack with plastic sleeve”, says Fischer. Despite its rough surface, grass paper, for example, can be printed well, but it has a green cast and a coarse fiber structure. These characteristics must be taken into account to achieve a printed image that matches the company’s corporate design. “Brand manufacturers today are willing to pay the higher price compared to conventional packaging materials because it enjoys a high level of acceptance among consumers. They specifically advertise using grass paper for their packaging, for example, as sustainable packaging solutions are increasingly in demand among consumers”, Fischer says.
There are also contracting companies that occupy niches and are therefore leaders in certain segments. SternMaid from Wittenberg, for example, is the European leader in contract production of powdered food ingredients. Up to 15 different raw materials can be automatically weighed and dosed on the fully automated production lines, which are controlled by a central process control and visualization system. Specialization is a niche that would be too time-consuming or cost-intensive for medium-sized or smaller powdered food manufacturers. Therefore, they can rely on the expert knowledge of the contracting company.
CoBots instead of co-packing?
In the course of the rapid growth of the packaging industry, also driven by the e-commerce boom, the question of new technologies that can complement or even replace contract packaging has arisen. Will CoBots soon be able to take work away from contract packers? Not so far; until now they have been used in logistics only – In warehouses, for example.
Packservice has a clear position on this. “Until now, no robot has been able to reproduce the delicate and often complex activities faster and with the same quality,” explains Fischer. “We have been following developments in the field of CoBots for many years and are in exchange with universities and colleges. Some manufacturers have already been to our production areas to look at our processes.” In addition, he said, the economic benefits have not been proven. “In order to use a CoBot in an economically profitable way, one and the same process must be repeated millions of times. Of course, this is not the case with individual promotional campaigns, which we usually only handle for our customers over several days and weeks.” Nevertheless, the contract packer is pursuing the topic. Packservice is currently testing a palletizing CoBot at its site in Muggensturm.