co-packer Copacking Cost?

T

tnorwood

Hi, first time poster here.
 
I am trying to figure out if packaging and selling my homemade salsa is a viable business, but I am having a tough time estimating my COGS. I realize that this depends on ingredients, prep/cooking requirements and quantities, but I have no idea at a ballpark figure of what this would even cost. 
 
Assuming that I would provide all raw materials and packaging, what unit price would I be looking at for a 16 oz jar of salsa? I want to at least have a vague idea of what number to look for once I start talking to copackers.
 
Thanks in advance.
 
Sort by date Sort by votes
Hi tnorwood - welcome to THP!  You'll find some great resources here.  Just some general info:
 
Copackers have relationships with distributors, and usually the copacker provides all the ingredients.  Normally they'll set up the containers too because their processing lines don't fit every possible container.  Individual unit pricing is also going to vary widely according to what size batch you'll be making at any given time.  
 
Before you approach a copacker have some solid numbers to discuss with them; a couple seasons' worth of data on sales at surrounding stores and/or farmer's markets, what size batch you're used to doing, etc.  <-- The answers to those questions will help them ballpark the batch size - and ultimately unit price. 
 
So!  You know what is costs when you make a batch: you're using 10lbs of tomatoes, 2lbs of onions, 2 lbs of peppers and 8oz of garlic, plus a couple cups of herbs.  Chances are copacking is going to cost 85%  of what you're paying to make and process now unless you're stepping up into huge batches - and larger batches could easily be 50% of your current costs.  Size matters after all lol!  
 
Other factors like fresh versus cooked and hot fill or cold pack can also impact costs per unit pretty significantly.  For the time being I'd suggest you keep on making salsa and getting the product out there.  About the time when you can't keep up with demand and everyone around you is sick of helping make salsa is when the copacker makes the most sense.  Best of luck, and please continue to post back so we can share in your success!  :) 
 
Upvote 0 Downvote
SmokenFire said:
Hi tnorwood - welcome to THP!  You'll find some great resources here.  Just some general info:
 
Copackers have relationships with distributors, and usually the copacker provides all the ingredients.  Normally they'll set up the containers too because their processing lines don't fit every possible container.  Individual unit pricing is also going to vary widely according to what size batch you'll be making at any given time.  
 
Before you approach a copacker have some solid numbers to discuss with them; a couple seasons' worth of data on sales at surrounding stores and/or farmer's markets, what size batch you're used to doing, etc.  <-- The answers to those questions will help them ballpark the batch size - and ultimately unit price. 
 
So!  You know what is costs when you make a batch: you're using 10lbs of tomatoes, 2lbs of onions, 2 lbs of peppers and 8oz of garlic, plus a couple cups of herbs.  Chances are copacking is going to cost 85%  of what you're paying to make and process now unless you're stepping up into huge batches - and larger batches could easily be 50% of your current costs.  Size matters after all lol!  
 
Other factors like fresh versus cooked and hot fill or cold pack can also impact costs per unit pretty significantly.  For the time being I'd suggest you keep on making salsa and getting the product out there.  About the time when you can't keep up with demand and everyone around you is sick of helping make salsa is when the copacker makes the most sense.  Best of luck, and please continue to post back so we can share in your success!   :)
Click to expand...
 
Awesome, thank you for your reply.
 
I look forward to contacting some copackers in order to get more concrete numbers. I guess I was looking for some sort of estimation since I have no idea how much a copacker would charge. So, if we were to say that it costs me $1.00 per unit for a 200 gallon batch, I should not expect by cost per unit to be less than $1.00 if I were to copack a 200 gallon batch? I assumed that copacking was supposed to be more expensive assuming we are comparing equal sized production batches. Are you saying that I should expect my variable cost to actually go down?
 
Upvote 0 Downvote
tnorwood said:
 
Awesome, thank you for your reply.
 
I look forward to contacting some copackers in order to get more concrete numbers. I guess I was looking for some sort of estimation since I have no idea how much a copacker would charge. So, if we were to say that it costs me $1.00 per unit for a 200 gallon batch, I should not expect by cost per unit to be less than $1.00 if I were to copack a 200 gallon batch? I assumed that copacking was supposed to be more expensive assuming we are comparing equal sized production batches. Are you saying that I should expect my variable cost to actually go down?
Click to expand...
 
That depends on a lot of different factors, but yes your per unit cost should go down due to stepping up in terms of batch size.  Since copackers are dealing with distributors, they pay a lot less for ingredients.  What might cost you $4.99 a pound at the grocery store is going to cost them significantly less because they are buying large lots of ingredients at any given time.  How you're marketing the sauce is also going to effect costs - do you cook and can your salsa or is it a fresh refrigerated product?  Cold pack is expensive, hot fill and process isn't so expensive.  
 
EDIT:  So let's say right now you're making small batches and per unit is $2.50.  Stepping up into copacking should get your per unit down, but you'll be paying it all out front - so that 200 gallon batch becomes a 2,000 gallon batch - and you're on the spot for the dough to get it made.  Keep in mind storage and transportation as well:  Copackers can't give you warehouse space for free till you come pick up two pallets worth of salsa.  :)
 
Upvote 0 Downvote
When talking about economies of scale, you really do need to consider the numbers. When you're making up to about 10,000 cases of product, you're not going to see any discount with a copacker.

Again, just based on my experience. You may have different results in your area with the copackers you speak with .

But nobody on this forum will really be able to answer that question. Based on my experience, I would consider it a poor assumption

Additionally, I have yet to meet a copacker who would allow me to source all of my ingredients and provide them to them. I do source several of the more exotic ingredients that I use, however, I bring them on board and the copacker still has to add them as an approved vendor.

That said, I am in California and the chain of custody requirements for ingredients in food safety are a bit more stringent in this state.

That all said, if you are able to source your own ingredients and provide them to the Copacker when you start purchasing more and more, you should theoretically pay less for those ingredients.

But since we don't know if you're talking about going from 5 pounds of dried peppers to 50, or from 50 to 5000, it would be impossible to know what sorts of discounts you'll get.

In general, I found the trend with copackers to be that they will quote you a single bottle price for your sauce regardless of whether you're making 10 cases or 10,000 cases. If there is profit to be realized through economies of scale that profit goes to the Copacker not to you.
tnorwood said:
 
Awesome, thank you for your reply.
 
I look forward to contacting some copackers in order to get more concrete numbers. I guess I was looking for some sort of estimation since I have no idea how much a copacker would charge. So, if we were to say that it costs me $1.00 per unit for a 200 gallon batch, I should not expect by cost per unit to be less than $1.00 if I were to copack a 200 gallon batch? I assumed that copacking was supposed to be more expensive assuming we are comparing equal sized production batches. Are you saying that I should expect my variable cost to actually go down?
Click to expand...
200 gallons is quite a bit of sauce. Especially for a start up company who doesn't yet have a customer base.

However, it's nowhere near enough sauce to realize any sort of economies of scale.
 
Upvote 0 Downvote
From your discussion of using a copacker, I'm assuming your recipe calls for pressure canning or at least boiling water bath.  It is difficult but not impossible to do this type of processing yourself.  Start by contacting your local health district and find out what they require.  Just for the asking, they can prolly tell you who could be a copacker, or other kitchens that may be available for use.
 
If your sauce is fresh-packed/refrigerated, it's usually simpler than getting licensed as a packer or using a copacker.  My fresh salsa has a 30-day shelf life, so it doesn't need all those shelf life regulations, It's refrigerated (might be an issue, but not for me.  I sell it through local stores I maintain weekly).  You just need to find a comminity kitchen or public kitchen to use for processing.  There are several threads already listing possible kitchen available for use including community kitchens, grange hall, elks lodge, church, private school...
 
Think outside the (kitchen) box.  :welcome: and keep us posted!
 
Best Of Luck!
 
Upvote 0 Downvote
You must log in or register to reply here.
Back
Top