To illustrate to children the concept of metamorphosis within the animal community, educators often show the lifecycle of the frog as it evolves from the frog eggs, to tadpoles that live in the water, to a froglet with the growth of its legs and arms, and finally a frog as its tail shrinks and its lungs and back legs develop.
The beverage market is going through its own metamorphosis as brand owners are entering new categories and are turning to contract manufacturers to support these new endeavors.
“A lot of beverage production is moving into co-packing,” says Isaac Showaki, president of Octopi, Waunakee, Wis. “We have seen an increase in beverage innovation and traditional category players moving into categories they’ve never produced. The beverage market is going through a transformational phase where it is segmenting rapidly, and companies are trying to enter in as many categories as they can to get share. This year the winners have been non-alcoholic beer and ready-to-drink alcoholic cocktail beverages in cans (RTDs). Next year we will see what trends emerge rapidly.”
However, product mix is not the only metamorphosis impacting the beverage market. Packaging also is prompting a shift in manufacturing practices.
“In the last five years there has been a rapid change from glass to cans,” Showaki says. “Sleek cans emerged in the last few years and have taken most of the share of packaged beverage. Multipacks or variety packs seem the new standard for new beverage innovation. Companies have moved from 12-packs to eight-packs and six-packs variety packs. We still see a very strong can beverage market were the innovation will mostly take place in the product inside the can.”
In its October report titled “Private Label Beverages & Contract Packing in the U.S.,” Beverage Marketing Corporation (BMC) notes how integral contract manufacturers have become for the beverage market no matter what size operation a company might be.
“In particular, the birth and rapid growth of niche beverages as well as craft beers over the last several 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 report states.
“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.
Based on research from BMC’s report contract packing needs can vary on the category.
“The introduction of New Age beverages in the 1980s has proven to be a great boon to contract packing,” the report states. “Many of these products had hot-fill production requirements, and were contract packed because the brands were small and did not warrant their own production facilities.”
Excluding dairy products, BMC estimates that approximately 15% of all U.S. beverage product is contract packed.
Flexing for the future
To adapt to these category and packaging transitions, contract manufacturers are crafting facilities with flexibility in mind.
“Building a facility that is the most flexible and capable in the industry has allowed us to serve our clients and meet their needs,” Octopi’s Showaki says. “At Octopi we are product/category agnostic, and our goal is to produce high quality products for our clients that meet the new market trends.”
Flexibility and being able to move fast are a common requests from brand owners, particularly as these entrepreneurs have diverse portfolios with broad distribution, Showaki explains.
“Clients are looking to launch dozens of new products and they want to partner with a co-packer that can fulfil all their needs from small R&D production runs to large scale national launches,” he says. “It takes a lot of effort to validate and find the right partner so clients want assurances that they’ve made the right choice in choosing their co-packing partner.”
Featuring three main facilities in Wisconsin, Octopi’s main production facility is in Waunakee, which can produce as many as 14 million cases of product a year. It also has two distribution centers to support warehousing and logistic needs, Showaki explains.
“When we opened in 2015 we had 16,000 square feet of space and today we have 545,000 square feet of space ready for our clients’ growth,” he adds.
This $72 million expansion to its Waunakee headquarters ― with assistance from a grant from the Wisconsin Economic Development Corporation ― will aid the contract manufacturer in supporting the new innovations hitting the beverage market.
“We will always keep investing in new technology, capabilities and our team to make sure we are always ahead of the competition,” Showaki says. “There are some interesting new process and packaging technologies we are looking at and when they are ready for commercialization we will be ready to bring them to Octopi.”
At its production site, Octopi handles a variety of products. “We specialize in alcoholic and non-alcoholic beverage products and can produce beer, non-alcoholic beer, hard seltzers, carbonated soft drinks, energy drinks, spirits cocktails, adaptogens, tea, hemp beverages and other products,” Showaki says. “We like to tackle innovation projects.”
As the metamorphosis of beverages continues, contract manufacturers will be vital to supporting this future.