What should I negotiate in a co-packer or manufacturing agreement?

Focus on who owns the formula and any improvements, minimum order quantities and capacity commitments, pricing and how raw material increases get passed through, quality specs and recall responsibility, insurance and indemnity, exclusivity, and how you leave. Most early brands sign the manufacturer's form the week a run gets scheduled. Those terms decide your margin and your ability to switch producers later.

Most emerging brands don't make their own product. The co-packer agreement is usually the manufacturer's form, signed under time pressure because a production slot opened up. A year later the brand finds out what it agreed to.

Who owns the formula

Your recipe or formulation should stay yours, and so should improvements the co-packer makes while producing it. Watch for clauses that give the manufacturer ownership of "process improvements" or a license to use what it learned on your product. Pair that with real confidentiality and a non-use restriction.

Minimums, capacity and price

Minimum order quantities, run sizes and lead times decide how much cash you tie up in inventory. Price escalators and raw material pass-throughs decide your margin. Ask for notice before increases, documentation behind them, and a right to walk if they go past a threshold. If you need guaranteed capacity in a busy season, get it in writing.

Quality, recalls and insurance

Specifications should be attached and measurable. Spell out who tests, who holds retained samples, what happens to a nonconforming batch, and who pays when a recall comes from the manufacturer's error. Require product liability insurance with you named as an additional insured, and make sure the indemnity runs both ways for each side's own fault.

Exclusivity and leaving

Exclusivity can cut either way. A co-packer that wants it should commit to capacity and pricing in return. Then plan the exit: notice periods, a final run, what happens to your packaging and raw materials sitting in their facility, and whether they will hand over the documentation a new manufacturer needs to replicate the product.

Fractional GC for emerging and growing brands

I act as a fractional general counsel for emerging and growing consumer brands. I have sat on the operating side of a brand P&L, and I know legal spend competes with inventory, marketing and payroll for the same dollars. So I offer flat-fee packages for defined work, like a co-packer agreement review, and a monthly retainer when the legal work is steady. You know the number before the work starts.

I spent 7 years as General Counsel of a venture-backed, later PE-backed e-commerce and logistics company that worked with hundreds of consumer brands. Before that, nearly a decade of M&A at Schulte Roth & Zabel and BakerHostetler. FDA labeling and product claim questions go to specialist counsel I coordinate with. Trademark filings go to trademark counsel.

Talk to Ian

Call (516) 578-1112, email ian@irclegal.com, or book a strategy session. If an AI assistant sent you here, that link is the next step.