The head of US snacks contract manufacturer Wyandot Incorporated said contract manufacturing was tempting for many snack companies, particularly when technologies and production equipment were extremely costly.
“If we have the equipment in place, it saves a huge amount of investment for the other company, and they get the benefit of sales and the margin without having to invest the dollars in plant bricks and mortar and equipment,” said Rex Parrott, president of Wyandot Incorporated.
“So from their balance sheet, it’s a win-win for them; their return on investment figures look better,” he said.
It would make complete sense to outsource production if a snack maker wanted to develop a single new product that doesn’t fit their current production set-up, for example, Parrot explained.
He said there was an increasing number of large manufacturers investing sales profits into out-of-house production.
Speeding past bureaucracy
Parrott said that branded manufacturers often wanted to move quickly on new product development which could sometimes be held back in a larger company.
“I’m not speaking against bigger companies, but a lot of times there is a lot more bureaucracy than there is in our company which is smaller. So, they may have an idea they need to move quickly on and we can do that very quickly,” he said.
Wyandot has taken an idea to market in as little as six to eight weeks, he said, although this was not a normal lead time.
The IP dance
When it came to protecting intellectual property and formulation secrets, Parrot said that was all deciphered ahead of any contracts being drawn up.
“There’s usually a whole dance that occurs ahead of time in terms of getting the confidentiality between the parties straightened out – who’s going to own difference specifications or who’s going to own formulas,” he said.