Why contract manufacturers are a critical core of success and innovation for natural brands and marketers today.
The Participants Are:
• John Altenberg, Vice President of Sales and Client Services, Vit-Best Nutrition, Tustin, CA
• Emek Blair, PhD, Founder, Valimenta Labs, Fort Collins, CO
• Kenny Flores, Vice President of Sales, Reliance Private Label Supplements, Edison, NJ
• Sally Gagan, Vice President, Beehive Botanicals, Hayward, WI
• Dan Lifton, CEO, Quality of Life Labs, Purchase, NY
• Jan Thoele, Executive Vice President, SternMaid America, Aurora, IL
The question is not “Why are you engaging a contract manufacturer?” but “Why aren’t you?” With world-class plants, many outfits also boast their own range of proprietary technologies and processing methods, versatile pre-mixes and semi-finished formulas. We spoke with a group of natural products industry experts about what to consider when thinking about going with a contract manufacturer.
NIE: Aside from not having the huge capital expenses and high operating costs of building and running, respectively, one’s own manufacturing plant, what are the main advantages that finished product brands should consider when thinking about using contract manufacturers?
Flores: Focus—allows for [the] main concentration to be on the sales and marketing elements required to grow a brand. Expertise—the knowledge and experience gained over many years of manufacturing dietary supplements and in navigating in an increasingly difficult regulatory environment is invaluable to a brand. Economies of scale—raw materials and componentry can sometimes be difficult to obtain with the larger users getting preferential order, in terms of availability in cases of shortages.
Blair: The entire idea is that the brand owners are allowed to focus on their strengths, that is building a brand and sales and [letting] the majority of the product manufacturing responsibility be in the hands of a company that specializes in manufacturing.
Thoele: Outsourcing creates elbow room; contract manufacturers release capacity so that customers can focus on their own core competences—such as research and development or marketing and sales—and thus, ultimately, grow their brands. Other reasons for using contract manufacturers include cost-savings, rapid growth or better quality, as well as the additional know-how acquired through working with specialist partners. By outsourcing processes, customers also benefit from the technologies, project experience and expertise of the external service provider. In most cases, expertise in particular is difficult to build up or maintain at the required high level, and it takes a long time. Sometimes the production process also requires special technologies that are not available to a company or cannot be introduced quickly enough at its own facility.
By outsourcing, companies can make use of the latest technologies without having to invest in it themselves. The installation of [a] large, commercial-scale plant needs a lot of consideration these days. Faster innovation cycles are shortening the life of products: Who knows whether the production line for a particular dry beverage base or food supplement will still be working to capacity in a few years’ time? Specialization and the grouping of orders often enable contract manufacturers to produce at [a] lower cost than a company could achieve in-house.
Lifton: Finished product manufacturers should be focused on developing and marketing clinical science-backed, innovative formulas for consumers. Marketers should not be spending their time on being manufacturing plants. High-quality brands should be devoting their time and resources to identifying the channels in which their products will make the most sense. They should also actively think about a unique brand story to tell around each of their products, in addition to the niche and categories in which each of them belong. What challenge or problem does the product address? What retail need or consumer demand does the product satisfy? Brands need to be obsessively focused on their brands: the science, the quality and the value. Contract manufacturers need to take into consideration the marketer’s problems while also focusing on manufacturing.
NIE: That being said, brands cannot wholly shift their responsibilities for product quality to the contract manufacturers. Do you agree? If so, please explain.
Thoele: Correct. Today’s safety requirements in the food industry are stricter than ever before. Ultimately, the brand owner is responsible for selling a safe product to the market and it would also be the first party to be contacted in the case of a product claim or recall. This makes it even more important to work with reliable partners only: partners who have established and certified quality management systems of the highest level. We are aware of this responsibility, and with rigorous quality control and quality assurance, we take every precaution to ensure the greatest possible safety for our customers.
Altenberg: I would never advocate that brands can shift the quality entirely. Transparency is a two-way street. To draft a culture of quality, the brand must provide among other requirements detailed raw material specifications including preferred vendors. Clarity must also ensue that manufacturing and packaging specs are clear. Test requirements and methods, frequency of tests and lab location must also be vetted.
Flores: Yes, ultimately the contract manufacturer shoulders a certain responsibility to [ensure] that the regulatory and efficacy requirements for each product are met. However, the basic parameters with which each product is created are dictated by the companies who they service. Understanding the quality issues that affect our industry falls on both sides to [ensure] adherence.
Blair: Absolutely, brands must set specifications and ensure the finished products’ quality. These steps are straightforward and can include testing the product for identity, strength and purity and may include collecting some other information, which will vary according to the relationship with the manufacturer.
Lifton: Completely agree. It is the responsibility, both ethically and legally, for finished product brands to always do their due diligence to ensure that their contract manufacturers, labs and suppliers are adhering to cGMPs (current good manufacturing practices) and a variety of other quality, safety and efficacy benchmarks.
Gagan: I agree, but manufacturers [do] hold the majority of the responsibility of manufacturing, even the customer-supplied labels being applied to product.
NIE: What are the key questions finished product brands and house labels should ask a potential contract manufacturer? And what should acceptable answers be?
Altenberg: Ensure detailed correspondence and direct site visits to determine the transparency commitment of a prospective contract manufacturer. The brand owner should investigate the R&D capabilities, control of production processes, employee training on equipment and quality functions. How versed is senior management in the daily details of the business to effectively intervene when needed?
Gagan: Have you been inspected by the FDA (U.S. Food and Drug Administration) in the last three years? Do you have any third-party auditing? What specifically will you be testing my product for? Are you willing to provide batch production records? If they will not provide information I would find a new manufacturer.
Thoele: There is actually nothing you should not ask. Everything comes down to food safety and product quality and, ultimately, your company’s and your brand’s reputation. Above all, our customers must be able to trust us. So, all aspects of safety, quality and production should be discussed openly and 100 percent transparently.
Blair: The main questions are straightforward: What is the process for specifications to be set, how are those specifications guaranteed, and what is the timeline for manufacturing?
Flores: What quality certifications do you carry? (GMP, NSF?). Do the labels and marketing materials go through a review process to [ensure] regulatory compliance? (Yes). Can you accommodate all raw material and finished product testing required by our brand? (Yes) What are your lead times and what are your minimum order quantities? (This answer will vary from manufacturer to manufacturer. Ingredients, componentry, and scope of testing requirements will play a factor here).
NIE: Contract manufacturers must be cGMP compliant; should potential customers ask to see their certification documentation? If not, why not? What should potential customers ask to see? Should a same-day or unannounced site visit ever be done?
Thoele: Absolutely. Being GFSI (Global Food Safety Initiative) certified does not mean being compliant on audit days only. It means being compliant 24/7. Contract manufacturers who decline to share their documentation or certification or who do not allow unannounced or same day audits probably have something to hide.
Blair: On Valimenta.com, we post our third-party cGMP certification for review. Our assumption is that every company that wants to partner with us will want to see our certification. Same-day or unannounced site visits can be tricky; if none of the manufacturer’s staff are available for a tour, it will likely not occur. There are also some issues in regards to confidentiality; we don’t like to run brands that are not openly associated with our factory while tours are occurring.”
Lifton: Yes, GMP certification documents should be an integral part of mutual transparency in business dealings. The days of just trusting a photocopied COA are over.
Gagan: I think it’s hard to just show up to a contract manufacturing facility but you should always be welcome to a site visit. Yes, certification should be available: kosher, organic, NSF, NPA (Natural Products Asociation), etc.
Flores: Agreed. Contract manufacturing companies plan schedules out many days or even weeks in advance to meet the needs of their customers. A disruption such as an unannounced visit/audit causes delays to the manufacturing process. It is best to provide notice so the proper time can be allocated for such a visit.
NIE: Should finished product companies ask potential contract manufacturers how they deal with testing problems, raw material supply issues, FDA inspections, auditor inspections? Lifton: Yes, the best way to see how professional a contract outfit truly is to see how they handle contamination and adulteration problems, supply outages, FDA inquiries and auditor requests. If they are evasive or dismissive about cases or examples such as this, then you know you need a different contract manufacturer.
Gagan: Absolutely! We see many warning letters that continue to say identity testing not performed, as well as there not being [potency] and composition testing. You can’t compare contract manufacturers that are doing the appropriate testing against a manufacturer that is a cheap price but in the end not compliant.
Flores: Yes, all contract manufacturers deal with issues from time to time and it is important to know if such an event occurs, that they are capable of maneuvering through the issues and resolving them to the mutual satisfaction of everyone involved.
Altenberg: Both parties should answer these same questions. To formalize the relationship, a detailed quality agreement that clearly spells out roles and responsibilities is essential.
NIE: If developing a powered supplement to be dissolved in water, what steps should a contract manufacturer be willing to take sure until the customer is pleased with the taste, color and other properties of the product?
Flores: With all products that involve taste, color, etc., a thorough understanding of the goals the customer has for the product (such as sweetness, bitterness, color, serving size, and so forth) is established. Samples should then be provided and modified until the desired effect is achieved. However, it is also incumbent upon the manufacturer to indicate when a certain desired effect cannot be achieved based on raw material limitations or restrictions.
Blair: This has to do with a good development agreement and open communication. I do believe that the customer must be happy with the flavor, color and other properties; without compliance, the product will not benefit anyone. However, this is always a compromise between time and 100 percent approval of the flavor.
Thoele: Trial runs are an essential part of the development of new products. A pilot blender for small batches in order not to waste resources and materials should be standard equipment for contract manufacturers.
Altenberg: Organoleptic results can be subjective. It is reasonable that the contract manufacturer develop and modify formulations. The contract manufacturer should insist on written comments and ensure the target audience is also involved in tasting. It is also reasonable that the manufacturer recover its cost of development including labor and machine time.
NIE: Some so-called “testing” outfits that get a good deal of media play don’t actually have their own labs but get finished products tested by outside labs and reviewed. Often, the methods of analysis are chosen incorrectly and the tests conducted are otherwise not appropriate for the materials being tested. What role can contract manufacturers play in helping finished product brands with adversarial or “gotcha” testing done such as this?
Lifton: While nobody, including contract manufacturers, can predict all potential cases of adversarial attention such as this, they should have verifiable systems and processes in place that address and are responsive to ingredient and supply chain questions that could be raised.
Flores: A quality contract manufacturer will easily connect you with a quality lab to ensure [the] proper testing method is used and results are accurate.
Blair: This type of testing is unethical at best. Companies look for ways that the testing will make their brand look superior while avoiding actual quality markers. In this respect, contract manufacturers can provide the correct test methodology and data to show the product is manufactured to specifications. I firmly believe that brands need to stand on their strengths rather than “go negative.”
NIE: Transparency is all the rage, but for good reason. In the interests of full disclosure and transparency, what specific information and documentation should finished product marketers and contract manufacturers share with each other for their mutual benefit?
Gagan: If your contract manufacturer will not share production documentation I would question why. Are they not manufacturing to your specifications or are they not doing the required testing?
Thoele: Without exception, all information related to product quality and required to provide and sell a safe product should be shared. Contract manufacturing is a matter of trust. We have very close contacts with our customers right from the start. Our offer begins with consultancy, where we explain the most efficient ways of integrating our services into the customer’s production process. Activities should be regularly coordinated, even at the planning stage. This creates the basis for a good, long-term business relationship.
Blair: Testing results must obviously be shared, however, other documents depend on the brand and their level of sophistication. Here is a situation to consider: A brand has the manufacturing paperwork from the contract manufacturer and the brand is audited by the FDA. The brand must have the skill set to properly review the documents and be able to accept or reject them; If not, the FDA will view that as a serious issue. Even worse, if there are glaring mistakes on the manufacturing paperwork and the brand owner did not catch them, the brand owner has now taken on additional liability. This is not to say that ignorance is the answer; this is a simple example of how more paperwork is not necessarily better.”
Flores: Any claim substantiation needs to be shared between brands and contract manufacturers to ensure regulatory requirements are being met.
NIE: Should one primary (or master) contract manufacturer be chosen? On what basis? In what cases should testing or specialized manufacturing work be farmed out to sub-contractors? Lifton: Having one master manufacturer can make sense if they produce a wide variety of ingredients, complexes and pre-mixes, especially those associated with unique extraction or processing methods. Sub-contractors may focus on nano ingredients or other more specialized offerings.
Altenberg: If you are representing a contract manufacturer, of course exclusivity provides volume and overhead absorption. If a brand owner has multiple suppliers to protect the supply chain for large volume products it makes sense. If a sub-contractor is needed, the same qualifications should be conducted by the primary contract manufacturer with direct input from the brand owner.
Thoele: Small brands may not have the resources to be able to afford a second and/or multiple contract manufacturers, but they should at least have a plan B. Especially when growing a brand, a company doesn’t want to upset its customers by being on back order, for whatever reason. NIE