Have you ever thought about how YoPro, a high-protein yogurt brand by Danone, achieved a great introduction to Brazilian market at an impressive pace? They used co-manufacturing to bring new flavors to the market faster. This manufacturing practice is already very common, and mature in the USA. So which co-manufacturing lessons Brazil can take from USA?

Co-manufacturing, a collaborative manufacturing process where companies share resources and facilities to produce goods, has become a strategic advantage in today’s globalized economy.

Before delving into the comparisons, it’s essential to understand what co-manufacturing entails. It involves partnerships between businesses to manufacture products, allowing for shared costs, expertise, and risk. This model can lead to enhanced innovation, efficiency, and market reach. This practice is common in industries such as food and drink, cosmetics, personal care products, and other consumer goods.

The co-manufacturing business has many benefits as we already talked about it, but not only this, it’s also a growing and highly profitable market. The F&B CPG players are aiming to triple their revenue coming from Co-manufacturing in the next five years; different models for co-manufacturing structure are being tested: by category, geography, making procurement driven or multifunctional; and 3.5 millions of dollars are the average annual revenue for a co-manufacturing deal.

This seems to be reason enough for the Brazilian market to learn from practices already widespread in the US in order to grow its manufacturing capacity, doesn’t it?

An overview of co-manufacturing in the USA

Although there is no specific date for the beginning of the practice of co-manufacturing in the US, the convergence of certain economic, technological and market trends during the 1980s and 1990s established this practice as common in the US.

Factors such as the growth of globalization and increased competitiveness meant that fast-moving consumer goods companies began looking for ways to reduce costs and increase the efficiency of operations in order to launch new products. In addition, the introduction of new technologies and production methods has allowed new partnerships to be made by offering specialized manufacturing services. Finally, consumer preferences began to change at a rapid pace, which led to changes in market behavior, requiring greater flexibility and scalability in operations and strategies.

Co-manufacturing in the USA is a highly developed sector and fundamental to the supply chain of many industries. The USA has an advanced transportation infrastructure, which includes an extensive network of highways, railroads, ports and airports. It facilitates the fast and efficient movement of goods, which is crucial for co-manufacturing, as it helps to optimize distribution and reduce costs.

The adoption of advanced technologies and automation are also fundamental pillars, including the use of integrated management system, robotics and IoT. In the US, strategic partnerships between manufacturers and co-manufacturers are common. These collaborations allow for the sharing of resources, knowledge and best practices, creating synergies that benefit both parties.

Sustainability is a growing priority for co-manufacturing in the USA. Many companies are adopting greener and more socially responsible production practices. This includes reducing energy consumption, using recyclable materials and implementing production processes that minimize environmental impact.

All that being said, faced with the challenge of meeting the growing demand for health-focused products, Danone partnered with specialized co-manufacturers to scale production quickly and efficiently. This collaboration enabled YoPRO to maintain high standards of quality while introducing new flavors and formats to the market at an impressive pace. It resulted in months of exclusivity on supermarket shelves.

It is estimate that between 30% and 40% of fast-moving consumer goods (FMCG) products in the United States are produced through co-manufacturing based on various industry sources. This percentage reflects the common practice of outsourcing production to specialized co-manufacturers, who help optimize costs and increase production capacity.

Also, between 2020 and 2022, 48.65% of the new product developments in Americas have been launched by the USA using co-manufacturing and private label. At the same period, only 13% have been launched by Brazil.

Brazil is emerging in co-manufacturing product launches

In Brazil, co-manufacturing is growing, although it is still at a development stage when compared to countries like the United States.

The food and beverage sector is one of the most active in co-manufacturing in Brazil. Many companies, especially start-ups and small producers, use co-manufacturers to produce and package their products. Another significant area is cosmetics and personal care products, where companies outsource production to specialized manufacturers. Some examples of CPG Brazilian companies that practice co-manufacturing are Ambev, Natura, BRF, O Boticário and Pepsico.

Comparing the co-manufacturing markets between Brazil and EUA, there are some gaps related to infrastructure, in logistics and production efficiency; the slower technological integration; the regulatory complexity, as Brazil’s regulatory environment is often seen as tricky, with bureaucratic barriers that can impede business operations. On this topic, we can also talk about the cost of quality certifications, which are indispensable for acquiring the trust of partners and also of the end user for the production of new products.

Although the obstacles exist, imagine the different outcome Danone could have if hey didn’t used co-manufacturing as a benefit to scale production quickly and efficiently? Well, for starters, it would lose the time-to-market and its exclusivity in the supermarket shelves, as launch delays could’ve happened.

By not using co-manufacturing, YoPRO would have less flexibility to quickly adjust production according to market demand or to introduce new product variants. Co-manufacturers generally have the ability to quickly adapt their production lines, offering a significant advantage.The high initial cost could have led to a higher price for the end consumer, making the product less competitive in a price-sensitive market.

What can Brazil learn from USA?

Here we gathered some co-manufacturing lessons Brazil can take from USA, the major co-manufacturing market:

1. Infrastructure and Logistics: the companies who’d like to reduce logistics costs and improve transportation network can achieve it through co-manufacturing processes. With collaboration business, a brand can distribute the manufacturing in different locations by using local partners.
2. Embrace technological advancements: through co-manufacturing, companies can seek new technologies knowledge with partners and they can share the cost and risk of implementing them. By collaborating with co-manufacturers who already have cutting-edge technology, brands can accelerate the adoption of these innovations without the need for high initial investments.
3. Innovation in flavors and trends: researching and developing innovative solutions are essencial for success in CPG companies, as the consumer preferences change in fast paces. Using co-manufacturing, the brands can search for specific ingredients suppliers and seek for new capacities, achieving innovation.
4. Sustainability is a must: 69% of Brazilian adults expect brands to take the lead on addressing environmental issues. Through co-manufacturing, brands can use productive resources already available instead of investing in new ones.

While Brazil’s co-manufacturing sector is still developing, it has significant potential to grow by learning from the mature practices in the USA. By investing in infrastructure, embracing technological advancements and innovating in the processes, Brazilian brands can create a more robust and competitive co-manufacturing landscape. This will not only drive economic growth but also position Brazilian companies to better compete on the global stage.

The strategic advantages of co-manufacturing, including cost reduction, increased production capacity, and improved flexibility, are key to achieving these goals. As the market continues to evolve, adopting these best practices will be essential for Brazil to fully leverage the benefits of co-manufacturing.

GrowinCo: The co-manufacturing and sourcing platform of the CPG industry.

GrowinCo, is a co-manufacturing specialized platform. With extensive expertise in both international and Brazilian markets, it already serves the world’s biggest FMCG companies, and has a great suppliers data base. If you’re planning on kick-starting a co-manufacturing strategy, we can help you!