Selecting the right manufacturing partner

Vitafoods Insights: 00:05

Welcome to the Vitafoods Insights Monthly Thematic Podcast, where each month we highlight a different topic within the nutraceutical industry. Today's host is Heather Granato, Vice President of content.

Heather: 00:21

Food supplement brands are looking to deliver the best possible product to consumers, one with a solid formulation, grounding and science, and efficacious delivery of nutrients. One of the key considerations to doing this is connecting with the right go to market partner. And selecting a contract manufacturer means assessing myriad considerations. Everything from capabilities and run sizes to regulatory compliance and certifications should be on the table. How to navigate selecting and managing manufacturing partners can make the difference between market success and failure. To talk through some of these considerations on go to market strategy, I connected in with Cory Carter, the CEO of Carter Regulatory Group. Cory has been advising companies on different matters regarding contract manufacturing, with a focus on regulatory compliance for 20 years. We started out talking about the biggest mistake many brands make when selecting their partner.

Cory Carter: 01:15

One of the most common mistakes that I see in the industry is that people don't want to be involved with their contract manufacturer. They come up with a product idea or they go to a contract manufacturer to help them come up with a product idea. And once that idea is set, they just let the contract manufacturer run. Well, in the United States, the regulations are set up so that the company who's using a contract manufacturer has to be involved in the process. They have to know how is their product made. They have to be able to prove and verify their product meets the label claims and specifications. And from a risk perspective, it's just extremely helpful to be able to understand what your manufacturer is doing with your product. Because when it comes down to it, a recall is based on a brand, not a company. So it will really hurt your brand. And it will give you a bigger black eye, if you get a recall or have a problem than it will your contract manufacturer.

Heather: 02:18

Sounds like something that you might see more often than you'd expect, given the number of brands on the market. And as many of them are using contract manufacturers.

Cory Carter: 02:29

Yes, it's very common. And that's one of the largest challenges that the companies we work with face is a lot of contract manufacturers are used to just taking over the reins. And so when you get a company who pushes back and says no, I want to be involved, I want to understand what you're doing with my product. Some contract manufacturers push back and say we're not going to do it. They don't understand their own regulatory responsibilities. And if that's the case then I always suggest to my clients, you need to find a new contract manufacturer because you need to be involved in your process.

Heather: 03:04

That certainly sounds like an important step considering this is a partnership; you're not just asking someone to, you know, take the dog out, you're looking for someone who's going to work with you, hopefully long term, in developing products that really are efficacious for human health.

Cory Carter: 03:19

That's right, Heather, and not only efficacious for human health, but ultimately we're all in this business to make money. We want to be able to help consumers but we're also trying to make a living. And so when it comes down to it, it really affects the bottom line in your business, if your contract manufacturer is not able to support you the way you need to be supported.

Heather: 03:41

Great. Any other common mistakes that you see in the market?

Cory Carter: 03:45

Another common mistake that I see in the market, it has to do with the way that companies engage their contract manufacturers from the beginning. It's very common for companies to never visit their contract manufacturer. And that's like going to China and ordering a product in China. You don't know if it's made in somebody's backyard, you don't know if it's a legitimate business. And in the United States, the same thing. I've seen companies where they say, Oh, well, I walk in to do an audit. And they'll tell me that they manufacture all these really great brands. And I'll walk in and I'll say where are the hand washing sinks and they'll say, Oh, we're we're still installing them. And I think Well, I wouldn't want to be eating the dietary supplement that you're manufacturing if your people aren't even washing their hands. That's a real life example that I actually had occur in one of my audits. So, going and visiting your manufacturer is extremely important. The second thing I would suggest, Heather, is making sure that you understand who is going to be responsible for what, who's going to do what in this process. What if you have a product that comes out and it's not in specification? Who's going to be responsible for the cost of the re-work? Who's going to be responsible for the cost of the labeling? What happens if something's not out of specification and the contract manufacturer elects to move forward and produce the product, or package the product without you knowing? And then you get a customer complaint? I've had customers who were sued because their label didn't match what was in the product, and they weren't aware of it. So, you need to clearly outline who's going to do what, when are you going to give your contract manufacturer authority to make decisions? When are you going to tell them, I want to be involved in this, I need to make the decisions about this so that you can protect your business.

Heather: 05:41

Those are pretty important considerations. So, let's take it back to the beginning. How should a brand marketer really assess and compare those types of issues and even the capabilities of different contract manufacturers they may be considering working with?

Cory Carter: 05:56

That's one of the most difficult things to do when you're getting into the industry especially. Because unless you really have expertise in contract manufacturing, you can be led by a contract manufacturer through their facility in a way that they want to show off their very best parts. And you may not notice the issues that are lying underneath the surface. You can, of course, hire a company like ours to go through and walk through with you or to do an audit of a contract manufacturer. That's always an option. And I always suggest that to companies who've never done it, so they can at least see it done once. But the first thing is just to go in there and just use your intuition. If something doesn't feel right, it's probably not right. If they're telling you that the FDA showed up and spent a week in their facility and never found a single thing wrong, that just doesn't happen. So, they're not telling you the truth. If you ask to see certain areas, or certain information related to your product, or the potential of your product, and they won't show it to you, that's something that should set off alarm bells. So, there are things that you can go in and just say, I'm really not sure about this facility. Whereas if you go into a facility that's very open, if they don't have something they explain to you, we don't have this, this is why, this is what our plan is to remediate this issue. That's the type of facility you want to work with.

Heather: 07:31

I think it comes down to that honest partnership that you're looking for; someone who actually will communicate on an ongoing basis.

Cory Carter: 07:39

Yes, communication is extremely important. Having a contract manufacturer who's willing to share information, and doesn't try to tell you that everything is proprietary. A lot of companies hide behind the concept of proprietary information. But, in all reality, there's not much that's proprietary when it comes to your product.

Heather: 08:00

Right. Now, certainly you can build a great relationship and you know, find someone you really trust. But yeah, trust and verify, and also probably get it in writing. So let's talk a little bit about why it's important to have a contract and even a quality agreement in place with your partner.

Cory Carter: 08:18

That's a great question, Heather. And if we go back to my earlier comment about defining roles and responsibilities, that's where that happens. You want to make sure that you've got an agreement in place that will establish who's going to do what and, in the industry, for those who have never heard of it, that is called a quality agreement. The quality agreement essentially outlines what responsibilities the contract manufacturer is going to have, what guarantees they're going to provide, when the customer is going to come into play, what they're going to share with the customer, how the customer is going to be involved in decision making. And one of the main points and most important aspects of these types of agreements are that the customer is notified when the contract manufacturer is audited by the FDA, or has another product for another client that ends up in a recall or in some type of a health concern, because that could influence or impact your own product. So, that's another extremely important part of this quality agreement.

Heather: 09:24

Now, you also mentioned on-site audits and the importance of this. We've just come through a couple of kind of crazy years and the on-site might have been challenging even now as you extend maybe into new geos. Visiting overseas could be difficult. What do you suggest for companies who might be in that position? Whether a constraint because of travel restrictions at their company or the manufacturer they're looking to partner in a new geography.

Cory Carter: 09:51

The travel restriction aspect is something that can easily be overcome because there are a lot of independent consulting firms, who are traveling. So, you can find a reliable consulting partner who can go over and conduct the audits on your behalf. One that you trust, one that explains to you what they're going to do. That can always happen. With the globalization of the industry, there is a very real challenge in understanding how we're going to audit and develop partnerships with international contract manufacturers. And what I've seen in the industry so far is that there's not really a perfect way to accomplish this. There are language barriers, there are cost barriers, there are regulatory barriers. Sometimes the regulations in one country differ than the United States,and implementing both can be very difficult to do. So, you have to take all of these into consideration and be able to understand what type of risk does this contract manufacturer from overseas? What type of risk do they introduce to your process, into your product? And then determine what you're going to do. Am I going to send them a questionnaire, because maybe the risk is low enough that I trust them filling something out and telling me about their business? Do I feel that the risk is substantial, and I need to go over and visit or hire someone to go visit them? These are all questions and all options to consider when you're working with an international contract manufacturer.

Heather: 11:27

Thank you for that. It's rather interesting to think how we have this globalization of our industry. And certainly there could be benefits as well to working with contract manufacturing partner who might be in a geo that you're looking to introduce your brand into.

Cory Carter: 11:42

That's right. As a matter of fact, some countries actually have incentives for companies who want to enter their market if they use local manufacturers. The regulatory process will be less stringent if they use local manufacturers. And I've worked with many companies all over the world who try to utilize these different benefits. So, you're absolutely correct. When it comes to regional distribution of products, there are definitely benefits to utilizing contract manufacturers in certain countries and certain regions. Because there are free trade agreements in place, there are regulatory incentives in place. And these can be utilized to be able to facilitate quicker or a more rapid expansion of the business to be able to get product to market more quickly.

Heather: 12:33

Any takeaways that you'd like to offer to our listening audience, if they're looking at working with a new contract manufacturing partner, or even reevaluating the ones that they're currently working with?

Cory Carter: 12:44

The most significant takeaway that I see on a regular basis is, you really need to make sure they're going to give you the information you need. We've had one-on-one conversations with the FDA, where the FDA believes that it is the responsibility of a contract manufacturer to share documents, like batch records, with their customers, so their customers can see and sign off on the product being produced properly. If you have companies who are not going to share the batch record are not going to share these documents with you. And they come up with some reason that it's not required because--whatever reason they've decided--they need to go to a different manufacturer. Don't stick with somebody just because some big name uses them. Do your own research, understand what your requirements are, speak with an expert to understand what your own requirements are. And then make sure that you're able to fulfill your obligations under the law so that the contract manufacturer doesn't put you at risk.

Heather: 13:49

Well, ultimately, it's the brand name on the bottle that consumer is going to pick up they're going to be calling you.

Cory Carter: 13:56

That's correct. That's right.

Heather: 13:58

Excellent. Well, Cory, thank you so much for joining me for this discussion on finding your right manufacturing partner.

Cory Carter: 14:04

It was a pleasure. Thank you for having me, Heather.

Heather: 14:06

Thanks, and to our listening audience. You'll find more on this topic including a panel discussion and report at vitafoodsinsights.com.

Vitafoods Insights: 14:15

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