In the food and beverage industry outsourcing of production, most companies rely on third-party manufacturers also known as third-party food manufacturing. These partnerships typically fall into three categories: Contract Manufacturing, OEM (Original Equipment Manufacturer), and White Labeling. However, these terms appear to mean the same thing, but they are used differently based on a company’s requirements. Now, let’s get into these differences and how they affect businesses.
Contract Manufacturing
Contract manufacturing food & beverage industry means that the manufacturer of food or beverages does not manufacture the products on its own but sources it from other manufacturers. This relieves the brand of production responsibility so that it can concentrate on aspects such as marketing and product selling as well as product designing.
Characteristics:
Customization: The brand gives formulas or recipes to the manufacturer in the production of its products in a bid to meet the brand requirements in terms of quality and taste.
Flexibility: Companies can change the production capacity to higher or lower levels following the market demands.
Popular in FMCG Industry: Fast-moving consumer goods companies (FMCG) have challenges meeting their consumer’s demands, thus why they incorporate contract manufacturing.
Example: A beverage company that contracts the production of a homemade energy drink to a third-party beverage contract manufacturing company.
Why It’s Smart: Contract manufacturing services prove beneficial as they enable firms to cut expenses while getting a constant supply of products without having to seek the services of costly equipment for production.
OEM (Original Equipment Manufacturer)
An OEM produces goods according to a company’s design, but the products are marketed under the purchasing company’s brand name. In the food and beverage sector, this generally takes the form of the company that wants the product to specify the product design. At the same time, the manufacturer needs the product to undertake the design and the final manufacturing of the product.
Characteristics:
Brand Control: It remains with the branding, packaging, and marketing issues while the manufacturer concentrates on the actual creation of the product.
High Customization: OEMs cut their operations as per the standard set down by the company.
Common in Food and Beverage: Food and beverage OEM services make it easy for brands to manufacture large quantities but at the same time have control over the amount of customization they apply to the product.
Example: A food company working with an OEM food manufacturer to produce a proprietary recipe for a new snack.
Why It’s Smart: OEM offers the best of both worlds—companies maintain brand uniqueness while outsourcing the often costly manufacturing process
White Labeling
White-label beverage manufacturing or food manufacturing is when a manufacturer creates retailers’ goods that a variety of companies can buy and resell under their labels. While contracting and OEM are primarily manufacturing services, white-label products are typically ready-made products that are not as customizable as one may think.
Characteristics:
Quick to Market: Since products are already made, those companies involved in this form of venturing can easily brand and market the products and, therefore, be suitable for startup companies.
Low Investment: Due to the reduced level of customization that is required in White-Label Food and Beverage Manufacturing, the process is not very expensive.
Ideal for Small Businesses: Some of the ways that make many small businesses prefer white-label products include cost reduction and time-saving.
Example: A startup that needs to introduce a white-label beverage similar to a generic energy drink or something similar under their brand.
Why It’s Smart: White labeling is suitable for companies that may not have the time and resources to waste when designing, developing, and testing their products, yet they wish to market and brand them.
Comparison: Contract Manufacturing, OEM, and White Labeling
| Criteria | Contract Manufacturing | OEM (Original Equipment Manufacturer) | White Labeling |
|---|---|---|---|
| Product Customization | High – Product is made based on specific company recipes/formulas | High – Manufacturer creates products based on company designs | Low – Products are pre-made, and limited customization is available |
| Brand Ownership | Brand owns the product and recipe | Brand owns the design and branding | Brand rebrands an existing, generic product |
| Production Control | Shared between the brand and the manufacturer | Brand controls design; manufacturer handles production | The manufacturer controls the product; the brand focuses on rebranding |
| Cost | Moderate – Depends on the level of customization | Moderate to High – Depends on design complexity | Low – Affordable since products are pre-made |
| Speed to Market | Medium – Depends on the production process | Medium – Requires design and production time | Fast – Ready-made products can be rebranded quickly |
| Best For | Companies looking for unique, high-quality products | Companies needing full control over the product’s uniqueness | Startups or small businesses wanting quick, affordable products |
| Example | A company outsourcing a custom beverage production | A company providing specifications for a unique snack | A business selling a pre-made energy drink with its branding |
Conclusion
If you’re searching for contract manufacturing, OEM, or white labeling food contract manufacturing services, Foodsure can help you achieve the best results. We excel in all these services and have successfully worked with various clients like Flipkart, GM Foods, Gustora, Tharo, Mantap, and the list goes on to bring their products to market efficiently and effectively. To learn more, contact us at +91-8826311121.
