Huge snack food brands have seen an increase in the outsourcing of production. At the same time, smaller players who are capitalizing on healthy snack trends have also outsourced production, employing contract packaging services in lieu of costs of installing and operating production lines. This was detailed in depth in the report “Snack Foods – Packaging and Processing Assessment and Trends 2018.”
Apparently, this has not been a loss for snack food companies, as the outsourcing of production has enabled brand owners to refocus their efforts on marketing. As the industry grows more and more competitive, and with health snack foods becoming more widespread, it has become a win-win situation for the manufacturers involved.
To be more specific, OEMs have indicated that the contract manufacturing facet of sales has gone up two to three times as much orders from the contract they have from brand owners.
As a result of activity increase, co-packers will be availing of more equipment than the brand owners themselves. This also stems from co-packers actually having lower overhead than the brand owners. In purchasing the equipment, co-packers take into consideration the ease of cleaning the material. This is because contract packaging cleaning costs remain the same, and is not tied down to volume or production time. In lieu of this, cleaning ease is a large factor for the contract manufacturers regarding the equipment.
The sanitary design and food safety facets take a more significant role when you take into account the Food Safety Modernization (FSMA)-based audit and brand owner customer auditing. The cost of cleaning, when matched against the number of units sold, increase when a small volume number is processed. Therefore, the ease of cleaning the equipment should be largely taken into consideration when contract manufacturers avail of the necessary equipment.
This situation becomes all the more complex for the snack food industry, an industry which largely relies on image and contract packaging as much as brand visibility to make the products marketable. Large and small players compete equally, and it gets more interesting with “healthy snack” options to entice a more fitness-oriented audience.
This would also serve to promote a harmonious co-existence between brand owners/marketers and co-packers, working to drive up profits and lessen costs for a burgeoning industry.
PepsiCo and Packaging
In fact, one of the more known snack-producing companies – Pepsico – is included in the list of the top 50 food packaging companies for this year (2018). While its most known product, Pepsi, is the number 2 soda in the world, it also owns the Lay’s brand, which produces world famous American snack brands such as Doritos, Stacy’s, Cheetos, Tostitos and Ruffles among others.
The packing of the Lay’s products have added to their appeal, along with a magnificent branding effort on the part of the company. And with the trend moving toward third-party and co-packers, profits could soar even more for the said brand.
The real test now would be to see how Pepsico fares against smaller players, with healthy snacks becoming all the rage. But as they say, in this tug-of-war of brands and profits, consumerism wins, eventually.