When you outsource packaging to a co-packer, the line between what they provide and what you supply can blur quickly—and that blur costs money if you don't clarify it upfront. Most contract packaging agreements fall somewhere on a spectrum from turnkey operations (they handle nearly everything) to labor-only arrangements (you supply materials, they assemble). Understanding where your deal sits prevents surprise invoices, delays, and quality mismatches.
The Typical Split: What Co-Packers Usually Supply
Contract packagers typically own and manage the equipment, labor, and facility overhead. That means you're paying for:
- Machinery and labor: Filling lines, capping machines, labeling equipment, and the trained staff to operate them.
- Packaging consumables (in many cases): Labels, tape, boxes, inserts, and desiccants—though this varies widely by agreement.
- Warehousing and logistics: Receiving your raw product, storing finished goods temporarily, and often arranging fulfillment.
- Quality control: In-process inspections, batch testing, and documentation.
- Waste disposal: Scrap material handling and recycling compliance.
The cost structure typically ranges from $0.15 to $2+ per unit, depending on complexity. A simple liquid fill-and-cap might run $0.30–$0.60 per unit; a multi-step assembly with custom labeling could hit $1.50–$3.00.
What You Must Supply: The Reality Check
This is where surprises happen. Most co-packers expect you to provide:
- Bulk product or concentrate: Your actual contents (liquid, powder, granules, etc.) in the quantities and specifications agreed upon.
- Primary packaging materials (sometimes): Bottles, jars, or containers—unless included in the contract. Clarify this explicitly.
- Labels and artwork: Print-ready files, pre-printed labels, or blank stock depending on the arrangement.
- Secondary packaging: Outer boxes, sleeves, cartons, or shipping containers—unless the co-packer negotiates these on your behalf.
- Documentation and compliance data: Ingredient lists, safety certifications, regulatory paperwork for your product.
- Tooling or molds (for specialized work): Custom caps, seals, or inserts may be your capital investment.
A critical step: ask your co-packer for a detailed bill of materials (BOM) during the proposal phase. It should list every component with a "supplied by" column. If it's vague, request specifics before signing.
Gray Areas That Trip Up Customers
Secondary Packaging Responsibility
Many customers assume the co-packer provides boxes. In reality, many co-packers source them on your behalf, but you pay. Others expect you to order and deliver. Get a written list of what they'll quote versus what's your responsibility.
Labeling
If you supply pre-printed labels, you bear the risk of reprinting if artwork needs changes mid-run. If the co-packer prints in-house, you pay a setup fee ($200–$500) plus per-unit costs. That's a big difference in flexibility and cost.
Minimum Order Quantities (MOQs)
Co-packers typically set MOQs on materials they source for you. A typical threshold: 5,000 units minimum. If you run smaller batches, you may need to supply materials yourself or negotiate a higher per-unit cost.
Ancillary Items
Inserts, dividers, tissue paper, anti-tamper seals—these aren't always obvious. Ask: "What's included in your base packaging fee?" Get the answer in writing.
How to Lock Down a Clear Agreement
Before committing, request a full proposal that explicitly states:
- Per-unit packaging cost and what it includes.
- Material sourcing responsibility for each component (BOM attachment).
- Setup and tooling fees for any custom work.
- Minimum run sizes and pricing tiers.
- Lead times for materials and production.
- Quality standards and who pays for rework.
Schedule a kickoff call to walk through the details with your account manager. Miscommunications at this stage are far cheaper to fix than disputes mid-production.
Platforms like Mercoly allow you to compare multiple co-packers side-by-side, request detailed proposals from several providers, and see how their material and labor terms actually differ—making it easier to spot which vendor's model fits your operation.
Frequently Asked Questions
Q: Can a co-packer source materials cheaper than I can? A: Often yes. Co-packers buy labels, boxes, and consumables in bulk across multiple clients, which nets them volume discounts of 10–30%. However, minimum order quantities may be higher than if you sourced them directly at smaller volumes.
Q: What happens if the co-packer damages or loses my product? A: Standard contracts include liability limits (often per-unit value or a capped amount). Review your co-packer's insurance and contract terms; many cover product loss up to a stated value, but not at 100% retail price.
Q: Should I lock in material prices long-term? A: Most co-packers quote materials at cost-plus-markup and adjust quarterly or semi-annually based on commodity prices. Fixed pricing is rare unless you commit to high volumes (10,000+ units annually) and accept slightly higher baseline rates.
Compare detailed proposals from trusted co-packers today to find the best material and labor split for your budget.