Contract packagers invest to meet beverage-makers’ needs
Evolving beverage trends challenge contract packagers
As beverage-makers develop new offerings to meet a growing number of consumer need states and drinking occasions, contract packaging and manufacturing is becoming a go-to solution for many brand owners. According to industry experts, contract packaging and manufacturing operations provide a solution for a plethora of beverage categories and have been challenged to evolve their offerings to include even more types of beverages and packaging styles.
While noting that it is difficult to measure the amount of products that are contract packaged each year, New York-based Beverage Marketing Corporation (BMC) estimates that approximately 15 percent of all U.S. beverage production, excluding dairy, is contract packed in its October 2016 report titled “Private Label Beverages & Contract Packing in the U.S.”
“The changing landscape of the U.S. beverage industry has made contract packing more important today than ever,” the report states. “In particular, the birth and rapid growth of new age beverages as well as craft beers over the last two decades has moved contract packing from an activity of only occasional economic interest for most beverage plant owners to one that provides the essential foundation of a number of beverage segments.
“The expanding spectrum of beverage introductions and packaging innovations has caused the contract packaging industry to evolve from a last resort capacity alternative to a highly specialized essential resource for brand owners,” it continues.
Experts note that as a result of the growth of these beverage categories, the contract packaging industry has experienced some challenges. Because of these changes, experts say that they receive a variety of requests from beverage-makers. Brooklyn, N.Y.-based Brooklyn Bottling Co.’s Chief Operating Officer Eric Miller says that companies most frequently ask what the minimum run requirement is for a product.
Bill Foley, president of Southeast Bottling and Beverage, Dade City, Fla., notes that the requests from beverage-makers can vary depending on the priorities of the brand. “If they are startups, then they need formulation development help,” he explains. “If they are mature marketers, then quality and on-time delivery are their most important issues.
“For startups, we have developed a network of product formulators that we recommend,” he continues. “For mature marketers, we have invested in highly skilled personnel in quality and manufacturing to address their needs and concerns.”
Various categories within the beverage market have impacted contract packaging operations, experts say. “We have seen, in the sports nutrition space, a move toward developing [ready-to-drink] RTD and dairy supplements in liquid versions of the customer’s most-popular powdered products,” Foley says.
Offering a solution to its customers’ needs, the company has developed an expertise for manufacturing these products and has acquired certifications in dietary supplement manufacturing and a higher level of safe quality food (SQF) certification, he explains.
He notes that the growth from this area likely will further drive sales in the new year. “From my perspective, growth has been strong the last nine months after a slow first quarter driven by mature marketers adding beverage for the first time into their lineups. I see this as a continuing and successful trend into 2017,” Foley says.
Brooklyn Bottling’s Miller highlights that the company has experienced an increase in requests for organic and coconut-based beverage products, which offer their own unique production challenges that the company has the ability to accommodate.
Although new age beverages are gaining ground, BMC’s report notes that the premium, RTD iced tea segment has the largest percentage of volume contract packed. “Beverage Marketing estimates about three-quarters of the RTD tea business is produced through contract-packing arrangements,” the report states. “In 2015, Beverage Marketing estimates that over 550 million 288-ounce cases were contract packed, including both chilled and shelf-stable [products].”
According to the market research firm, fruit drinks and fruit juice follow RTD tea, with approximately 29 and 28 percent of volume produced through contract packing operations, respectively. A large portion of the contract packaging for this category is done through dairy facilities, BMC notes in the report.
“Most of the fruit beverages that are processed and packaged aseptically in paper are done through dairies, which offer a significant level of contract packing for this type of production,” the report states. “The demand for aseptically packaged products has not grown much in recent years because they are generally regarded as children’s packages. Some packaging innovations may be changing this perception of aseptic packaging, such as resealability and the move to aseptic plastic bottles.”
Also utilizing contract packaging for more than a quarter of its volume production is the sports drinks category, with 26 percent of its volume production being contract packed, BMC’s report states.
Bottled water — one of the fastest growing categories in the beverage industry — shows promise for contract packagers, BMC’s report notes. It estimates that approximately 20 percent of production volume in the category was contract packaged.
“The category’s relative lack of brand development, especially compared to some other categories (such as CSDs), provides an opportunity for sizeable private label business built around bargain prices,” the report states. “And this is increasingly the case as private label continues to grow.”
Contract packaging also is essential for the beer market, despite the small percentage of contract packaged beer, according to BMC. The market research firm notes that the emergence of specialty and craft beers has increased the amount of contract packaged beer in the United States.
“Beverage Marketing estimates that approximately 11 percent of the U.S. beer market is contract packed,” the report states. “For while a significant quantity of specialty beer is contracted out, the major brands from the big brewers constitute a large majority of total beer volume. In 2015, the contract-packed volume equated to just over 300 million 288-ounce size cases, Beverage Marketing estimates.”
It adds that some larger brewers, like Los Angeles-based Pabst Brewing Co., have utilized contract packaging for their products.
Beverage-makers are utilizing contract packagers and manufacturers for a variety of benefits. “The strongest advantage is the manufacturer’s ability to offer turnkey services,” Southeast Bottling and Beverage’s Foley says.
Brooklyn Bottling’s Eddy Saldana, executive assistant to the chief executive officer, also notes benefits for beverage-makers. “They do not need to make a large investment in a factory and worry about quality control or further investments to accommodate new consumer trends,” he says.
Foley notes that when searching for a contract packager, a beverage-maker should look for a variety of factors. “[Look for] a perfect fit for facilities/capabilities, strong quality and manufacturing personnel [and] top-tier certifications,” he says.
As the contract packing and manufacturing market continues to evolve, so, too, do the suppliers of contract packing solutions. Brooklyn Bottling’s Miller says that trends in beverage formulation and packaging have caused contract packaging and manufacturing operations to make large investments in their batching equipment, personnel and alternative packaging solutions.
Foley adds that innovation in the beverage industry also has created a need in the contract packaging industry for personnel with specific skill sets as well as specific packaging equipment.
Running four lines at 400-700 bottles a minute, Brooklyn Bottling Co. serves the sports drinks, juice cocktails, energy drinks, sparkling waters, juices, teas, CSDs and organic beverage categories, Miller says. The company offers hot fill and cold fill for cans, plastic and glass in various container sizes, he adds.
Saldana highlights that the company is increasing its capacities in order to fulfill its customers’ needs. “We are investing to satisfy our customer and potential customer needs,” he says, adding that the company has invested in new labeling machines, proof water filtrations and more.
In addition to the company’s investments, Miller says that it will continue to invest in the technology and infrastructure to boost its competitiveness. “We have grown in size and efficiency to accommodate both internal growth and that of new customers, but we will never grow so much to disappoint any one,” he says.
Also serving the beverage market, Andover, N.J.-based NVE Pharmaceuticals has a focus on the diet and energy supplement market. The company manufactures a range of supplements, including liquid products in 8.4-ounce cans for carbonated products, and 1.5- to 10-ounce PET bottles, the company says.
With five high-speed, cold-fill energy and vitamin shot lines, NVE has the ability to produce
30 million shots a month, it says. With six plastic blow molding machines, the company also offers various package shapes and sizes, in addition to custom packaging solutions, it adds.
In its 40,000-square-foot state-of-the-art canning facility, NVE runs 800 cans a minute of carbonated, cold-fill beverages and has the ability to custom pack 8.4-ounce cans into both four- and six-packs, it adds.
Additionally, NVE provides a variety of services to help beverage-makers formulate new products. It also helps beverage-makers source raw materials, promotional refrigerators and custom racks and provides warehousing services to its customers as well.
Running three lines and producing as many as 120,000 bottles a day, Southeast Bottling and Beverage provides hot and ambient fill solutions for 2- to 32-ounce plastic beverage containers, according to Foley. He adds that the company has invested in carton packaging equipment, registered film capability and variety packing capability.
“We have hired experienced personnel and made the investment in specialty packaging equipment,” Foley says.
He notes that the need for continuing capital investment is a challenge for the contract packing market as a whole as a result of the increasing variety of requests made by beverage-makers. “We can’t purchase everything, so we try to make the wisest decision that can benefit the most customers,” he says. BI