As part of your co-manufacturing strategy development, first, you should have evaluated your business objectives, production capabilities, risks and overall feasibility. As part of this development, a “playbook” called a Brand Technical Document (BTD) should also have been created. Next, your team should have qualified, evaluated and selected a co-manufacture partner based on criteria and requirements that are aligned to The Right Fit.
Moving forward, and as we say at First Key, a strategy is not a solution until it is implemented.
In this article we look at the best practices for implementation, to transform the theoretical co-manufacturing partnership into an action-focused, results driven and successful partnership.
Implementing the Co-Manufacturing Contract
So, you now have a co-manufacturing partner and a signed Contract – what is next? Most co-manufacturing relationships start with a “Production Trial”. This will validate the people, materials and processes that your co-manufacturer will use for your production and set the expectations for all future production. It is essential that the production trial is treated as good saleable production and is produced using all the people, material and processes that will be used for the routine production of your products. The Production Trial should identify key gaps that need to be addressed prior to Full Production. It is helpful to prioritize these issues as: Critical (for immediate resolution), Major, and Minor each with a pre-determined timeline. If the gaps are significant enough, a second Production Trial may be necessary. It is recommended that you do not proceed with Full Production until all Critical and most Major issues have been resolved.
“The Production Trial is a critical step in the process. Do not skip this step or rush through it. Clients who have rushed or missed this step, have lived to regret it” shares Russell Tabata, Senior Advisor, Technical Services at First Key.
While the contract is a central and pivotal document to any business partnership, the relationship management of this partnership requires much more nuance and time commitment throughout the life of the deal. A partnership that is too often focused on the contract language and less focused on the actual production of your product and developing a beneficial relationship is likely to be a challenging one.
Establishing Communication Routines & Data Flows
Since your selected co-manufacturer will act as an arm of your brewery, distillery or beverage company, it is important to understand how to integrate their production and quality teams and processes into your operations.
- How often should we talk?
- What information will be shared?
- How will data flow?
- What reports and data are available?
- How often should we get updates?
These are all important questions and below are some considerations on how to define and organize a great communication routine with your co-manufacturer:
- Defined Points of Contact: assign dedicated contacts for both parties to streamline communication.
- Co-manufacturer Point of View (POV): maintain an open dialogue and actively consider and listen to your co-manufacturing partner regarding feedback and opinions they may have.
- Reporting:
- What? establishing the specific production and quality information should be reported after your brands are produced is important to stay on the pulse of what is happening at the co-manufacturer.
- When? based on data availability, you may want to review quality results of every brew or distilling cycle or receive a monthly summary of your production. This will likely evolve over the life of the partnership as trust is built and credibility with your precious brands grows.
- How? Formats and types of data will need to be coordinated between your brewery, distillery or beverage company and the co-manufacturer. Finding system commonality and consistency can help reduce duplication of work or needless data entry/creation. Although a detailed, “in the weeds” item this is typically an important aspect to consider during co-manufacturer selection – do they have the system, data, and expertise to communicate the way you need?
- Escalation Protocols & Triggers: ensure process deviations or quality issues are escalated promptly for timely resolution. Pre-arranged Reaction Plans can be defined to minimize the need for more frequent escalations and helps to define the acceptable tolerances. This should have been already well defined within the Brand Technical Document (BTD).
- Regular Production & Quality Reviews: schedule periodic calls (e.g. weekly, monthly) to review production and quality data, discuss challenges, and implement process adjustments as needed.
- Real-Time Data Sharing: Consider using collaborative systems or platforms to share production and quality data in real time. For more established breweries or distilleries, a common Enterprise Resource Planning (ERP) system might be available to share data seamlessly. First Key has experience with these types of systems and can help with recommendations on selection and implementation for your size and scale.
- Sample shipment frequency: reports and data are one thing, but a critical frequency to define is how often you will get samples of your brands for your own in-house quality and sensory analysis.
- Partnership Reviews: less frequent than the production focused reviews but just as important is to stop from time to time to assess the longer-range plans and discuss the partnership and relationship in a holistic way at a strategic level. It is difficult at times to break “out of weeds” especially during peak production, so setting up routine high-level touch points (e.g. quarterly or annually) is beneficial to evaluate how the partnership is performing overall. Prior to these reviews, performing a similar but smaller scale assessment like you did when selecting the co-manufacture to define questions or feedback is a sign of a fair and transparent relationship.
Establishing a Monthly Co-Manufacturing Leadership Scorecard has proven to build a good relationship and contract management. The scorecard allows higher level management to keep track of critical contract performance and to react if required. The scorecard should have metrics that measure performance of both sides of the relationship and should cover key quality, customer service, operating performance, and contract management metrics.
For the Owner, the scorecard should measure:
- Quality metrics (e.g. % in-spec, sensory scores, consumer complaints frequency and severity, production hold frequency and severity)
- Customer Service metrics (e.g. SKU attainment, Purchase Order compliance, scheduling compliance)
- Performance metrics (e.g. material loss %, inventory accuracy)
For the Co-manufacturer, the scorecard should measure key metrics like:
- invoices paid on time
- total outstanding/past due invoice value
- forecast to fulfillment on time
- forecasting compliance
- storage level compliance
For each metric, it is helpful to identify limits for green (in-spec), yellow (warning), and red (alarm) performance. Any “red” items will need to have a defined corrective action plan to address, ideally before the next monthly review. It is important to establish a monthly review process to discuss and review the scorecard with participant from both the Owner and Co-manufacturer.
“Once the Monthly Scorecard Review Process is established, it is essential to involve higher level management from both the Owner and Co-manufacturer on a Quarterly, Semi-Annually or Yearly basis. This escalates the partner relationship and ensures that the right people are involved to deal with the issues”, says Russell Tabata, Senior Advisor, Technical Services at First Key.
Case Study – Importance of defining the right escalation triggers
After a co-manufacturer expanded a high-gravity beer brand to the target ABV, another parameter (e.g. bitterness or color) was still too high and Out Of Specification (OOS). After the escalation and discussion with the client, the beer was further expanded, thereby bringing the OOS parameter into specification while still maintaining the ABV within required limits. This event resulted in the creation of a reaction plan for future instances.
Supervision and Auditing
Effective supervision and auditing of your co-manufacturer are essential to maintaining product quality, ensuring compliance, and fostering a strong working relationship. Once production begins, ongoing communication and oversight help identify and address issues promptly while reinforcing trust.
An important aspect of relationship management is having a physical presence in the co-manufacturing facility (in an appropriate frequency) to develop the partnership and make the relationship more personal. Relationships solely based on phone and virtual based communication are harder to gauge and develop. This physical presence as part of your supervision and auditing approach can include many different techniques and is best formulated as a combination of: Site Visits, Practice Audits, and In-Person Sensory Reviews.
Tim Wolf, Senior Advisor, Engineering Services at First Key, shares “a robust qualification process minimizes risk, but only continuous auditing and collaborative supervision safeguard product integrity at scale.”
Below is a structured approach to supervising and auditing your co-manufacturer:
Site Visits
- Face-to-Face Communication: Site visits provide opportunities for direct interaction, strengthening trust and collaboration. Ideally, these would be done with key production personnel so there can be some relationship building and collegial best practice sharing (e.g. Brewmaster to Brewmaster, Master Distiller to Master Distiller).
- Timing: Schedule visits during the production or packaging of your product to observe processes firsthand.
- Training Opportunities: Use visits to provide on-site training for the co-manufacturer’s team on your product and processes.
- Demonstrating Commitment: Your presence shows that you care about the partnership and product quality.
- Follow the production process from raw material receipt to finished goods storage to ensure no steps are overlooked. A checklist will help. Keep records of your observations and compare those observations to those from previous visits.
- Assess cleanliness, organization, and adherence to safety protocols.
- Evaluate the co-manufacturer’s operational capabilities, including equipment functionality and staff expertise.
- In-Person Sensory Analysis: what is better relationship building than sharing a beer or drink together and talking about the process to make it? Site visits are a great way to complete sensory analysis together which is always helpful in further defining understanding of the brand profile or identifying a specific note and actively discussing process improvements to address it.
Practices & Procedure Auditing
Conducting formal audits ensures compliance with quality standards, regulatory requirements, and agreed-upon processes. Key steps include:
- Audit Planning:
- Develop a checklist tailored to your product’s requirements (e.g., process flow, quality control measures, compliance with GMPs, etc.).
- Schedule audits at regular intervals and those in response to specific concerns.
- Define mock recall audits to test the co-manufacturers documentation and blocking practices
- On-Site Audits:
- Verify adherence to agreed-upon processes and specifications.
- Inspect production lines, sanitation protocols, and equipment maintenance.
- Review documentation such as batch records, traceability logs, and corrective action reports.
- Reporting and Follow-Up:
- Document audit findings in a detailed report highlighting areas of concern and recommendations for improvement.
- Collaborate with the co-manufacturer to implement corrective actions within agreed timelines.
Case Study – Proactive auditing prevents future quality issue
In one audit First Key was involved in, a routine practice audit revealed a minor deviation in the cooling process. By addressing this issue promptly, a potential quality issue was prevented, and the integrity of the product was maintained.
Effective supervision is about building trust and ensuring accountability. By combining regular site visits, clear communication protocols, real-time data sharing, and structured audits, you can effectively supervise your co-manufacturer. This approach ensures reliable sourcing and consistent quality to your customers while fostering a collaborative partnership focused on continuous improvement.
Kayla Johnson, Senior Advisor, Engineering Services at First Key shares, “co-manufacturing isn’t just outsourcing – it’s a handshake deal where trust, quality, and collaboration brew success.”
Co-manufacturing can be a highly effective strategy for both emerging brands entering the market and established beverage companies seeking to expand without immediate capital investments. The success of this model hinges on thorough due diligence during partner selection, clear documentation, and ongoing relationship management.
This is the final article of the Co-Manufacturing Best Practices Series by First Key Consulting. If you have questions about how to approach Co-Manufacturing for your brewery, distillery, or beverage company please contact us.
