Co-Man as Partner, Not Vendor
Co-manufacturing is how 95% of new CPG founders produce their goods. They have neither the capital nor the patience to finance and operate their own production facilities. It’s a lot to take on, so I get it, even if you can find an expert plant operator to work for you.
There are many, many potential pitfalls when hiring a co-man. Not appreciating your business’ utter dependence on them is the foundation of most of these mistakes. It’s literally the oxygen of your CPG business. Product.
If you approach and begin the relationship as if the co-man is an annoying reality of getting your original kitchen recipe industrially scaled, you are off to a bad start. You will not vet them properly.
If you let them steer you away from your gold standard sensory and nutritional criteria, you might as well close up shop. You need a partner willing to produce non-standard formulations with market potential. Yet, I see and hear of intimidated founders diluting and bastardizing their products through co-man bullying.
Although technically a vendor, run-rate for startups is in higher demand than the manufacturing ecosystem can supply. This became even worse when the pandemic struck as private label manufacturing volumes went up…a lot. Private label production is still elevated, and plant space hasn’t really grown. Fast-growing startups who had NOT done adequate operational planning (i.e., plan for exponential growth, not failure) ran out of run rate. Gulp.
Here is where I advocate strongly with all my clients one simple idea: treat your co-man as your business partner. In fact, I would go so far as to say as you should get them literally excited about partnering with you on a unique formulation, with unique technical requirements. This is NOT what any co-man initially wants to do with a tiny startup. So, you may have to wait until you’re big enough to switch co-mans to pull this off.
Partnering on a unique, difficult-to-copy formulation or manufacturing process is a best-in-class strategic move in hyper-competitive categories. Giving your co-man equity in your efforts is another way to test/select a new one.
Ultimately, you want to create a relationship where the co-man, despite your small scale, actually believes in you and your product and the potential. This is not much different than seducing a buyer. It has been done again and again. That’s why I bring it up.
Stop thinking of co-mans as mere vendors to put up with. As you get past the Death Funnel, you need to find a co-manufacturing partner who is simply part of the team. Get them committed emotionally and anchored to the long-term with equity (if possible).