CHICAGO — As food brands try to weather the perfect storm hammering the industry today, they’ve found shelter in the innovation co-manufacturers can deliver. That’s how Carl Melville, president of The Melville Group, characterized the changing role of co-manufacturers in the food industry during his session at ProFood Tech held in Chicago, March 26-28.

“No longer are brands coming to co-manufacturers saying ‘here’s my product, please make it,’” he said. “They’re coming to co-manufacturers and saying ‘help me co-develop this and get it to market faster.’”

Market trends, consumer demands and new technology are all components to this perfect storm that has major food brands reaching out to co-manufacturers for help with innovation. Where once major brands were leaders in innovation, today they find themselves lagging behind smaller companies that are more nimble to meet changing consumer demands.

“These big brands are innovation hungry,” Mr. Melville said.

Stock-keeping unit (s.k.u.) proliferation and short product lifecycles continue to batter brands while ascending store brands eat into these companies’ market shares. At the same time, major brands are cutting costs and sometimes in areas that would be critical to success.

Carl Melville, president of The Melville Group, spoke to attendees at ProFood Tech.
“They are limiting their R.&D. and innovation resources,” Mr. Melville explained. “They aren’t just cutting the fat; they are cutting the muscle and bone.”

In response, these brands have found and can find an innovation partner in co-manufacturers. This $60 billion industry continues to retool itself to not just produce for brands but also innovate for them. No longer do they simply provide capacity, Mr. Melville said, but also efficiency, innovation and, maybe most importantly, speed-to-market.

“When intellectual property is scarce, speed-to-market is everything,” he said.

Most co-manufacturers today have at least two facilities, if not more. These companies, many of which remain privately held, are investing in R.&D. resources, pilot lines, labs and commercialization teams to support big brands’ needs for co-development.

And these companies continue to invest in brownfield and greenfield facilities to support the industry’s growth.

“This pace of change is only accelerating,” Mr. Melville said.

As the food industry continues to shift and adapt to new buying spaces and consumer demands, the relationship between brands and co-manufacturers also will evolve to support the innovation necessary to weather the storm.