A Guide to Co-Packing Costs: Is It Worth It?

When you’re growing a product-based business, finding the right partners to help you scale can make all the difference. One of the most crucial partnerships is with a co-packer who can handle everything from filling and labeling to packaging and distribution. While co-packing offers many benefits, it’s important to understand the associated costs and determine whether outsourcing your packaging needs is truly worth it for your business.

In this guide, we break down the key factors that contribute to co-packing costs, examine the pros and cons, and help you assess whether co-packing is the right choice for your product and business’s bottom line.

What is Co-Packing?

Co-packing means outsourcing your packaging process to a co-packer (or contract packager), who manages the production, assembly, and packaging of your product according to your specifications.

Co-packing services can encompass a wide range of activities, from simple filling and labeling to more complex tasks such as product assembly, shrink-wrapping, bundling, and even warehousing. Co-packing companies are equipped with the necessary equipment, expertise, and experience to handle high-volume production, allowing businesses to scale their operations without the upfront investment required to build and maintain their own packaging facilities.

Understanding Co-Packing Costs

Co-packing costs can vary significantly depending on the type of product you’re packaging, the complexity of the packaging process, and the volume of your orders.

To help you understand what drives the price of co-packing, here are some of the key cost factors involved:

Setup Fees

Before production begins, a co-packer typically charges a setup fee to cover the costs of preparing for the packaging job. These fees can include:

Tooling or Equipment Setup: If your product requires specialized equipment or custom molds (for bottles, jars, or packaging materials), a co-packer will need to invest in or adjust their equipment to handle your product.
Design and Artwork: If you need customized labels or packaging designs, co-packers may charge a fee to work with your design team or to create artwork for your product.

Setup fees can range anywhere from a few hundred to several thousand dollars, depending on the complexity of the job. For simple packaging, this fee might be relatively low, but for highly specialized or custom packaging, the setup costs will increase.

Per-Unit Packaging Costs

Once setup is complete, the cost of packaging each individual unit is one of the most significant components of co-packing costs. This per-unit charge is usually based on the amount of time, labor, and materials required to package each product. Some common cost factors include:

Labor Costs: This includes the time needed to fill, assemble, seal, and label your products. The more complex the process, the higher the labor costs will be.
Materials: The packaging materials themselves (bottles, jars, boxes, labels, etc.) will be another key cost driver. Custom packaging or high-quality materials like glass or eco-friendly packaging will add to the cost per unit.
Size and Weight: Larger or heavier products will often require more materials or specialized packaging techniques, increasing the per-unit cost. Additionally, bulk packaging can reduce the per-unit price.

In some cases, a co-packer may offer tiered pricing with lower per-unit costs for higher order volumes. Larger production runs can result in reduced costs per unit due to economies of scale, but smaller runs may incur higher per-unit charges.

Minimum Order Quantities

Co-packers typically set a minimum order quantity (MOQ) that you must meet in order to receive their services. MOQs vary based on the product, the complexity of the packaging process, and the co-packer’s operational capacity.

For example:

Small-batch producers may offer low MOQs (a few hundred units), which is ideal for startups or niche products.
Larger, more established co-packers may require MOQs in the thousands, which could be a challenge for smaller businesses but could help reduce overall costs for large-scale operations.

MOQs can be one of the biggest barriers for smaller companies looking to scale up and may also affect your cash flow. If you need to purchase a large number of units upfront but don’t have the demand yet, it could be an expensive upfront investment.

Shipping and Logistics Costs

The cost of shipping your product to and from the co-packer is an often-overlooked component of co-packing expenses. Depending on where the co-packer is located relative to your manufacturing site, transportation costs can vary significantly.

You should account for:

Inbound Shipping: Getting raw materials or unfinished products to the co-packer’s facility.
Outbound Shipping: After packaging, your products will need to be sent to warehouses, fulfillment centers, or directly to customers.
Storage: If the co-packer offers warehousing services, storage fees may apply, especially if your products need to be stored for any length of time before they’re shipped out.

While some co-packers handle logistics and distribution, others may only focus on the packaging process, so it’s important to understand whether you will need to arrange separate logistics. Shipping costs will depend on volume, weight, and destination.

Quality Control and Compliance

In certain industries, such as food, cosmetics, or health products, there are strict regulations around packaging and labeling. A co-packer must ensure that your products meet these standards, which may involve additional costs for:

Regulatory Compliance: For example, if you’re in the food or supplement industry, your co-packer may need to ensure that packaging complies with FDA or USDA guidelines. This can include ensuring the correct nutritional labeling, health claims, and ingredient disclosure.
Product Testing: Some co-packing agreements may include costs related to testing for safety, quality, or regulatory compliance. If testing is required by law or desired to maintain high quality, it can add to your expenses.

Quality control costs should be built into your co-packing contract, and you should discuss in detail what steps the co-packer will take to meet your industry’s specific regulatory requirements.

Customization and Special Requests

If your product requires special attention or unique packaging requests, such as custom labeling, special inserts, or multi-pack configurations, expect to pay more. Customizations may require additional setup, labor, or materials, all of which can increase the overall cost of co-packing.

Custom packaging can also involve higher per-unit charges due to the complexity of the design, specialized materials, or the need for bespoke manufacturing equipment. This is particularly relevant for businesses looking to differentiate their products through unique branding or eco-friendly packaging solutions.

Learn about the complexities of choosing a co-packing services provider with our expert guide.

Learn More

Is Co-Packing Worth It?

Given the range of costs involved, you may be wondering if co-packing is the right decision for your business. To help you make an informed decision, consider the following advantages and challenges:

Advantages of Co-Packing

Reduced Capital Investment: You won’t need to invest in packaging equipment, warehouse space, or hire additional staff to handle packaging.
Expertise and Efficiency: Co-packers specialize in packaging and have the expertise to do it efficiently and professionally, ensuring high-quality standards.
Scalability: If you’re looking to scale quickly, co-packers can help you increase production volumes without the need for significant infrastructure investment.
Focus on Core Activities: By outsourcing packaging, you can focus on other aspects of your business, such as marketing, sales, and product development.

Challenges of Co-Packing

Upfront Costs: Co-packing can involve significant upfront costs, including setup fees, minimum order quantities, and materials, which can put a strain on your cash flow.
Loss of Control: Outsourcing packaging means relinquishing some control over the process, which can be a concern for businesses with very specific quality or production requirements.
Complexity of Relationships: Managing a relationship with a third-party co-packer can sometimes be challenging, especially if communication is unclear or deadlines are missed.

Is It Worth It?

If you’re a growing brand looking to scale production, improve efficiency, or outsource non-core activities to focus on other aspects of your business, co-packing is an excellent option. The potential to lower overhead costs, streamline production, and benefit from the expertise of a dedicated packaging partner can be a game-changer for many companies.

Offering the Best Possible Co-Packing Costs

At ChemRite CoPac, we believe in transparency when it comes to co-packing costs. We share the cost of goods with our clients, offering complete visibility throughout the process to ensure they get the most competitive pricing available. Based in Wisconsin, we offer flexible, end-to-end contract manufacturing solutions that help businesses scale production efficiently while maintaining high quality. Our co-packing services include formulation, blending, and packaging, all tailored to provide a customized experience. Whether you’re launching a new product or refining an existing one, our co-packing expertise ensures a smooth and seamless production process. Contact us today to get more details about our co-packing costs.