The phrase “cost-efficient” is used a lot in the beverage industry, especially these days when every cost seems magnified. Contract manufacturers are particularly attuned to cost efficiencies as they offer services to beverage companies and use excess capacity to make the most of their plants.
Tree Top Inc., Selah, Wash., ventured into contract manufacturing a few years ago when its packaging lines were not being used.
“In our constant effort to reduce costs on everything and anything, we looked at our packaging assets in our plants and realized we had some that were under- utilized,” says Terry Morgan, director of contract packaging for Tree Top Inc. “We thought if we could better utilize those packaging assets, we could lower the overhead cost associated with them.”
Tree Top has two processing facilities, the “Selah” plant, which is used for packaging juice products, and the “Ross” plant, used for evaporting and drying apples and other fruits. The company also has a bottling facility in Rialto, Calif. In addition, three processing facilities exist in Cashmere, Wenatchee and Prosser, all cities in Washington.
The plant in Selah has seven packaging lines, and the plant in Rialto has two. Each line has its own filler and packaging capabilities. The company has a complete set of change parts to accommodate different size bottles.
Tree Top, known for its apple juice and apple sauce, produces hot-fill PET juice-type products for other companies in 46-ounce to 96-ounce bottles. The company also has aluminum can capabilities in 5.5-ounce, 8-ounce and 11.5-ounce sizes, and tin can capabilities in a 46-ounce size, Morgan says.
The lines can run all sizes, but finding the right time to change packages is important.
“Because the changeover time is likely three or four hours, you don’t want to do that in the middle of the day,” Morgan says. “Typically, we’ll set the line up to run 64-ounce, and prefer to run that for two or three days.”
How much contract packaging the company does fluctuates all the time, but right now about 15 to 20 percent of the facilities are used for contract packaging, and managing that business is a full-time job, Morgan says.
“Somebody was always kind of dabbling in contract packaging, but it was a second or third duty they had,” he says. “Since a couple of years ago, when this decision was made, this has become my entire life. That’s what I do all the time.”
Product development assistance
Tree Top can provide fruit to companies who use it as a contract packager, and it can provide formulation assistance for customers. The resources are available at the plant, so if a customer needs assistance for product development, process engineering or package design, Morgan says he taps into those assets.
“I get phone calls from people who know exactly what they want; they can even provide the product,” Morgan says. “They just want you to put it in a package, a bottle or can or something. Then I get other calls from people who just say, ‘I have an idea.’ And that’s about all they have, and they don’t have any clue how to proceed. So for those people, we can help fill in the blanks a bit.”
Most of the time, it is the smaller companies that need formulation help, he says.
“They bring us their formulation and we review everything to make sure they don’t have some ingredient in there that’s not something we want in our plant, like an allergen,” Morgan adds. “Some of them are pretty straightforward and some of them are different, with all kinds of weird things in them, and those are the ones we especially look out for. We look at everything prior to committing to [production].”
The fact that Tree Top is already a branded product may be a benefit to some customers as well.
“Tree Top has its brand name on some of the very same type packages that contract packaging customers are asking for,” Morgan says. “Customers can rest assured we know how to package their products because we do it every day with our own products. Our expertise is therefore shared and sound.”
Face-to-face contracts
Brian Dworkin, president of Castle Co-Packers, New Kensington, Pa., knew he wanted to build a career around beverages because his family had been involved in the industry since 1904.
When Three River Bottling plant went bankrupt, Dworkin asked investment groups if they would finance him to take over the plant. In 2005, Castle Co-Packers came to life.
Dworkin says he feels a lot of pride in being a contract packager.
“You get to walk into the marketplace and see your brand,” he says. “It’s a good feeling when you walk into a store and get to say, ‘I made that.’”
Honest Tea was Dworkin’s first customer, but the company now packages for companies such as Herbal Mist, Sweet Leaf Tea, Hint, and Target’s Archer Farms brand.
In the beginning, Castle Co-Packer’s warehouse was 75,000 square feet with one line for production. Now the company is 500,000 square feet and is in the process of building its fourth line.
Two lines, one for glass and one for plastic, run continuously, and its third line, typically used for kids’ beverages, runs 8-ounce bottles as needed. The fourth line, when completed, will be dedicated to PowerFlex bottles, which are made by Amcor Ltd.’s plastics.
The glass line runs 400 bottles per minute; the plastic line fills 500 bottles per minute; the kids’ line produces 200 bottles a minute and the new line will have capabilities of 420 bottles per minute.
Although the lines operate with specific bottles on each, the company has change parts so any bottle can run on any line, Dworkin says.
“Whenever something happens on a line and we’re down, we can always convert our glass line over to get product out for somebody,” he says. “We always have two lines that can run the same package if we needed to. Every line in the plant can be interchanged. It’s a huge advantage because, of course, things do break in manufacturing.”
Everything Castle Co-Packers manufacturers is hot-fill, from 10-ounces to 32-ounces in glass bottles, and 8-ounces to 32-ounces in plastic bottles.
“We are one-stop shopping,” Dworkin says. “We can do sleeve label, pressure-sensitive, cut-and-stack, neck banding, variety packing and printing shrink film over the cases.”
Dworkin adds that his company contract packages for 70 companies, and in October four new brands opened contracts.
As much as Dworkin loves opening new contracts, he always makes sure to meet customers before signing any agreement.
“The first thing I do is insist they get a tour of the plant,” he says. “I say, ‘Look, we won’t pack your product until you come out and sit face-to-face with us.’”
In addition, Dworkin explains why making money is not as important in the short-run as the long-run. “It’s time vs. efficiency,” he says. “Our belief is that it’s all about long-term relationships. It’s better to have a loyal customer for years and years then have a one-shot deal go wrong.”
He adds that contract packaging previously was not such a friendly business, but a mutual understanding has grown between co-packers and customers.
“The plant, just to keep their people employed and their lines running, would accept these ridiculously low packaging fees,” Dworkin says. “People managing these plants have realized that we are like any other company; we need to make profits. We are better off saying no to somebody at that price and not even turning our line on rather than breaking even at the end of the year.”
One advancement on Dworkin’s priority list is setting up cameras around the warehouse and allowing companies to check up on production via the Web.
“We have 52 cameras in the plant, all infrared,” he says. “Customers will be able to log into the Web site and watch their product being made, even at night.”
Investing in a contract packager is not cheap, and Dworkin says he wants to keep customers as up-to-date on their products as possible.
“The first thing I say is, ‘I know how much this costs you because this is a big risk,’” he says. “If your product doesn’t sell, we don’t grow.”
One line at a time
Century Foods International, Sparta, Wis., was founded in 1991 and started out as a dairy commodity supplier. In 2003, the company joined the Hormel Foods family and became a part of the Specialty Foods Group.
“We have four plants in Sparta, and we are a full-service turnkey provider of contract manufacturing services for the food, sports, health and nutritional supplement industries,” says Kevin Meyer, vice president of sales and marketing for Century Foods International.
“Plant 3” is the ready-to-drink facility that runs one line capable of handling speeds of 400 bottles per minute. The annual capacity for the line is 100 million bottles.
The line is hot-fill and high acid, so customers can produce fruit-based products, Meyer says. The company can package PET bottles from 8 ounces to 32 ounces, and offers both glue-on wraparound labels or full shrink sleeves.
When the city water comes into the facility, it goes through a triple-filtered reverse-osmosis process. After the hot-fill process, the company cools the beverage up to 100 degree F, which can be done in 30 minutes.
The RTD line in Plant 3 currently runs at 60 percent capacity. When the company sells out the line, it has the footprint available to add lines, Meyer says.
In addition to the RTD process, Century Food offers blending, agglomeration, dry powder micronizing, dry-powder consumer packaging, tablet pressing and cheese processing.
“We offer state-of-the-art labs, with an R&D team with backgrounds in chemistry, microbiology, nutrition, food science and chemical engineering,” Meyer says.
To make sure everything is being processed in an efficient manner, the company has a quality assurance team that can do high-performance chromatography for vitamin analysis, gas chromatography for cholesterol and fatty acid analysis, atomic absorption spectroscopy for mineral analysis, combustion nitrogen analysis for protein analysis and near infrared reflectance spectroscopy for rapid compositional analysis.
Meyer says the greatest benefit throughout all the processes is the ability to work with customers, create valuable products and have success for both parties in the end.
“We get to work with some of the largest consumer packaged goods companies in the United States and Canada, manufacturing their brands for the end user,” he says. “In the end, our success is dependent on our ability to deliver on all counts to our customer, which in turn, allows our customer to focus their efforts on marketing the product to the consumer.”
Press the fruits
H.A. Rider & Sons, Watsonville, Calif., has been processing apples into juice and cider since 1948.
The company operates on its original 26-acre site and has the equipment necessary to press fruits such as apples, pears, strawberries, peaches, cranberries and watermelon into blends for private label beverages.
H.A. Rider & Sons ventured into contract manufacturing because the private label business was changing due to competition from packers using concentrate, says Thomas A. Rider, a partner of H.A. Rider & Sons. It also had the equipment necessary to co-pack various products, he says.
The company has two main processing lines, one for glass and one for PET. Both lines can brew tea, press fruits into juice, produce flavored waters and blend items in accordance with customers’ specifications. The beverages can be packaged in 10-ounce to 128-ounce glass bottles or in heat-set PET 8-ounce to 128-ounce bottles.
Organic and kosher ingredients also can be accommodated, Rider says. The organic certification is provided by Oregon Tilth and kosher products are processed under the supervision of the customers’ rabbi, he says.
Rider says he enjoys contract packaging, and at one point thought about the possibility of his own brand, but he decided to stick with what he knows best.
“We considered developing our own label, but we were told by one of our major private label customers that they would pull their business because they did not want to subsidize our development,” Rider says. “We opted to remain a private label packer. When we saw that that was not going to continue to be a viable direction, we started to transition to co-packing. We are able to provide a service for customers that are too small to have their own packing line or do not wish to be in the production business.” BI