Co-manufacturing can be a valuable strategy for CPG companies of all sizes. For new CPG companies, it can help them get their products to market without having to make a large upfront investment. For CPG companies that are expanding into new markets, it can help them quickly and easily ramp up production. And for CPG companies that are launching new products or facing sudden increases in demand, it can help them meet the demand without having to invest in new equipment or facilities. No matter the reason, co-manufacturing is a widely known strategy in the CPG market. So, how to build an effective co-man contract?
One of the keys to success when partnering with a co-man is to have an effective contract in place. This document should outline the terms of your relationship, including pricing, intellectual property protection, and quality assurance.
Here are some crucial components to look for in a co-man contract:
- Transparent pricing:
The contract should clearly outline the pricing structure, including all costs associated with production, such as raw materials, labor, and overhead.
- Collaboration to optimize:
The contract should encourage both parties to work together to find ways to optimize production and reduce costs.
- Intellectual property protection: The contract should clearly state who owns the intellectual property (IP) associated with the products being produced. This includes formulas, processes, trademarks, trade secrets, and proprietary information.
- Appropriate access to facilities and records:
The contract should give you access to the co-man’s facilities and records as needed to ensure quality control and compliance with regulations.
- Regular communication: The contract should specify how often you and the co-man will communicate, and what topics will be discussed.
- Clear product specs and requirements:
The contract should clearly define the specifications for your products, including any certifications or claims that you make.
- Robust food safety/quality programs: The contract should require the co-man to adhere to industry-standard food safety and quality programs.
- Clearly defined responsibilities for investigating consumer complaints?
The contract should clearly define the co-man’s responsibilities for investigating and resolving consumer complaints.
- Articulated responsibilities in the event of a product recall
The contract should clearly define the roles and responsibilities of both parties in the event of a product recall.
- Termination for cause and notice requirements for termination without cause
The contract should specify the grounds for termination for cause, as well as the notice requirements for termination without cause.
In addition, there are a few other things to keep in mind when drafting a co-man contract:
- Get legal advice. A lawyer can help you ensure that your contract is fair and protects your interests.
- Be specific. The more specific you can be in your contract, the less room there will be for interpretation.
- Use clear language. Avoid jargon and legalese.
Get everything in writing. Verbal agreements are not enforceable. By following these tips, it’s easier can create an assertive co-man contract. A document that will help you grow your business and protect your interests.
At GrowinCo. we understand the importance of legal aspects involving partner companies. That’s our platform has a special feature where managing confidential content is safe and organized. That helps buyers and sellers to protect intelectual property, non-disclosure agreements and other documents related to the parternership. If you want to learn more about this and the other several handy features GrowinCo.’s platform offers to companies in the CPG sector, book a demo with our team!
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