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A copacker is a company that manufactures, packages, and labels products on a contract basis for other companies. Usually copackers have several manufacturing agreements with a range of different companies in the same industry. A good example of this are copackers in the food industry that can manufacture food products for national or international food distributors down to local, home-kitchen-based businesses.
Contract manufacturing has become commonplace in factory settings. This is often due to the need to comply with complex manufacturing regulations imposed by government. Official production, labeling, and packaging regulations can be difficult to decipher and continually comply with by individual businesses, so they “farm out” the manufacturing process to a copacker that is well-versed in industrial standards across a range of related products.
Production and manufacturing by a copacker is also usually more cost-effective, as they have the capacity to produce large quantities of a product in many regional locations, at consistent quality, and a lower per-unit cost than an individual business can do on its own. These economies of scale make copacker agreements ideal for start-up firms that cannot compete with big competitors already in the market. Several industries such as food products, pharmaceuticals, and cosmetics also lend themselves naturally to copacker agreements. The originators of the intellectual property in these industries are usually not in the manufacturing business directly, but instead are focused on refining legacy products and researching and developing new ones.
Merging of production and manufacturing through the use of copackers is being taken to another level with the copacker companies themselves joining into large conglomerates. Several regional pharmaceutical copackers in the United States merged into one parent company in 2011 as an example of this. This allows pharmaceutical companies to deal with just one copacker for a variety of drugs they license, in a range of forms and dosages.
Problems with copackers can also arise when products in different yet related industries are manufactured in the same facility, as occurred in 2011 in Germany. A copacker in Schleswig Holstein initiated a chain of events that contaminated food meant for human consumption with the chemical carcinogen dioxin. The copacker factory makes oils meant for use as bio-fuels, but they were instead added to animal feed for chickens, pigs, and possibly cows at 4,700 farms in Germany. The extent of the problem was only discovered after at least 3,000 metric tons (3 million kilograms) of feed resulted in chicken meat and eggs, pork and possibly cow’s milk contamination in Germany, as well as in exports to the UK and Holland. The cause of this contract packer accident has been attributed to greed, with the copacker marketing its product to farmers when it was only legally allowed to sell it as bio-fuel.