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Considerations for Hiring a Dairy Food Co-Packer

Hiring a co-packer can help farms launch value-added products without needing to invest in processing facilities and equipment. This guide outlines key benefits, questions to ask, and tips for building a successful partnership.

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Updated:

June 5, 2025

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Cheese rounds ready to pack. Image credit: Pixabay.com/AnthonyArnaud

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Are you interested in starting a value-added dairy foods business but reluctant to invest in equipment and facilities for manufacturing, or do you lack the time, technical expertise, and labor you need to make a product? A co-packer might be the solution. Navigating a co-packing relationship can be a complex process. First, what exactly is a co-packer? A co-packer is a food processor with additional manufacturing capacity and offers services such as manufacturing, packaging, and labeling for a fee.

Why Consider Hiring a Co-Packer?

Reasons for working with a co-packer may differ according to the management and mission of the dairy farm and personal situations. A Dairy Foods survey of users of co-packing services uncovered that the top four reasons for hiring a co-packer were a lack of in-house expertise with a product(s) (34%), testing the market for a new product (34%), inability to keep up with production demands (33%), and exiting product manufacturing to focus on brand marketing (10%) (Canning, 2017). Let's explore these and other reasons for using a co-packer.

Starting a new business. If you currently operate a dairy farm and are looking to diversify, this enterprise would be a separate endeavor. A co-packer is an option for those looking to venture into dairy manufacturing without incurring the costs, building space, additional equipment, labor, and skill set needed to do this independently. Specific benefits to working with a co-packer when starting a value-added dairy foods enterprise include:
- Reduced start-up capital. Hiring a co-packer allows you to avoid the high initial capital costs from facility construction and equipment purchase.
- Launch quickly. It takes significant time to build or retrofit existing facilities to where product manufacture can begin. Partnering with a co-packer shortens the time to have a product ready for sale.
- Time to analyze the feasibility of an on-farm creamery. Having a co-packer manufacture product for you gives you time to assess the feasibility of building an on-farm creamery with the added benefit of actual data on product demand through sales information.
- Reliance on established knowledge and contacts. If you are inexperienced, you may not know where to start to source other raw ingredients and packaging materials.
Business growth. Milk production on your farm or market demand may be outpacing your current processing capacity, you may have an idea for a new product, or maybe you have heard about innovative or unique technology offered by some processors. You might be looking to move into a new geographical market or meet the needs of a target population with a specialty product.
Exploration of a new product line or formulation. Being able to go to a co-packer to do product research and development with their procedures and facilities might offer you an opportunity to see if it's the right business for you and how you can grow that business. It is important to know what your specifications are and clearly state your ideas, so you can be clear about your expectations when working with a co-packer. There are a lot of great ideas out there, and you want to make sure that your product is distinct from your co-packer’s specialty as well as safe and wholesome.

Finding a Co-Packer

Where do I start to establish a partnership with a co-packer?

Seek a co-packer through available lists or search tools (including websites and social media). Your state department of agriculture or land-grant university may have a list of co-packers in your region. Gather information and contacts from others in the dairy manufacturing business.
Have an initial conversation about your needs, interests, and expectations. Have this information ready to share:
- A product description including intended consumers, standard of identity, and desired product attributes. Have precise, concise specifications for the product you desire.
- Anticipated product volume
- Goals for product scale-up (in 6 months, in 1 year)
If it sounds like a potential fit for your needs, arrange to visit the facility.

Choosing a Co-Packer

During or following a facility visit, you should have a more in-depth discussion with a potential co-packer addressing these questions:

What are the processing specifications for the product you want to manufacture?
Does the co-packer have expertise in manufacturing this product?
What products can the co-packer make? Sizes, packaging, labeling, ability to add equipment to make other products?
Can they assist with product research and development?
What equipment is needed to manufacture the product?
Who will supply the raw materials, packaging, and labels?
Will milk be segregated, allowing products to be manufactured from the milk you supply?
How will milk be transported to the co-packer? Who is responsible?
What raw milk storage is available? (size, type)
What is the processing capacity? How much (or min. amount required) for a run/batch? How often will the product be manufactured?
What type of laboratory testing needs to be performed? Can it be performed in-house? What are the additional fees for laboratory testing? Does the co-packer have an established relationship with a lab?
Do they have the capacity for product storage? Is there a timeframe for product storage? What are the added fees?
Do they have a food safety plan? What food safety certifications do they have? Can you review the results of their past third-party and regulatory food safety audits?
What additional services can the co-packer provide? Product development/recipe formulation, label development, packaging, conversion?
How will the finished product be transported to the farm or retail facility? Who is responsible?
Who will be responsible for marketing? Does the co-packer have contacts, or can they provide assistance?
Do they have established channels for product distribution?
What does the processing fee include? Added ingredients, packaging, labeling, storage, aging, labor, facility, equipment, etc.
Does the co-packer use a written legal contract/agreement?
What liability is covered?

Similarly, a co-packer will have questions for you as they consider working with you as a new client. There are numerous product variables to discuss, from flavor profile and texture of the product, to the use of specific cultures and preservatives, certifications such as organic or non-GMO, and milk attributes or components (solids, protein, and fat levels). When customers approach co-packers with requests for specific parameters, the prospective co-packer must determine if they can fulfill those specifications. For example,

A customer is seeking to manufacture single-serve yogurt using local fruit additions from another manufacturer. However, the potential co-packer currently only packs yogurt in 16-oz containers.
The customer plans to manufacture a high-protein sports beverage utilizing a specific type of protein. The manufacturer doesn’t currently have expertise in manufacturing this type of product.

These examples illustrate how co-packers will need to assess their capabilities, ability, and desire to modify equipment and/or operations. As a potential customer, you must understand the cost of buying or modifying special-use equipment. If the co-packer declines to alter their equipment, you will need to continue searching for another co-packer or reconsider your product description.

Co-packers will assess whether your needs align with their capabilities. Be prepared to provide some of the following information to them:

What quality tests are performed on your raw product (milk) before it leaves the farm? The co-packer may have stipulations on milk quality parameters for product manufacture.
Have you sourced ingredients from other suppliers? If so, do you have certificates of analysis (COA)? Who is responsible for recording and providing the documentation for the ingredients?
Will your product have a separate food safety plan, or will it comply with their plan?
Will you source the packaging materials? Where will they be stored?
With what frequency and in what quantity are you hoping to have the product manufactured?

The potential co-packer could have other questions for the potential customer. There is likely to be a considerable overlap of questions between the two parties for one another, which necessitates preparation for the conversation and clear communication prior to an agreement.

Other Considerations

Is the co-packer the right match for the brand you are building/have? For instance, is the co-packer more of a commodity mainstream co-packer, while your product goals are a better fit for a bespoke, artisan, small-batch cheesemaker?
Initial attempts may not yield the desired outcome. Artisan-style products require more experimentation early in the manufacturing process, resulting in the need to make several batches of product before meeting the defined specifications (flavor profile, consistency, etc.). It's important to understand the product development process and have appropriate expectations.
Product timeline. Understanding the product's processing timeline and the co-packer's capacity is essential, especially for cheese. Consider when the product is needed for market and sale. For example, you want to avoid making a lot of cheese and having it come to market at the wrong time, for instance, in mid-February, when consumer demand for cheese is lower than at other times of the year. For cheese, you must also account for the time required for aging prior to sales.
Labels. Will you or the co-packer be responsible for developing and obtaining label approval? Will labels need to include the ingredient list or nutrition statements? Or will you determine this information and ask the co-packer to work within those parameters? Accurate labels are necessary because people are counting on you: consumers and employees. Collaborating with your co-packer to generate some nutritional information may be possible. Co-packers may have someone on staff trained in nutrition guidance, requirements, and labeling. The manufacturing plant identification number (Plant ID) is where the regulatory authority will turn if the label is incorrect. Additional testing may be needed to comply with regulatory requirements.
Timeframe. When should you contact a co-packer? How far before you want or need a product should you begin your search? How long do you plan or foresee contracting with a co-packer? Think back to why you are considering hiring a co-packer. If your product is a unique artisan product or you are considering hiring a smaller co-packer, starting discussions earlier is advisable. Some co-packers like to work with clients for several months before they want to have the product manufactured. Alternatively, for instance, if you are already working with a different co-packer and have previous experience with the process, and want to change co-packers for whatever reason, the amount of lead time required may be less than what is needed if this is your first experience hiring a co-packer. A reputable co-packer will want to understand your goals and what they are able to make; this may require manufacturing test batches and additional time.
Third-party food safety audit. Consider the necessity for a food safety plan and whether the co-packer needs to be audited by a third party for your intended market requirements. Third-party audits are typical at large facilities. Smaller co-packing facilities may have food safety plans, but they may not be audited due to added expense or other more stringent requirements. If you think you may want to sell product(s) off-farm to a grocery retailer, for instance, you may find that retailers require a third-party audit or other regulatory requirements.

Contracts

When entering any business arrangement involving a fee, having a contract is advisable. A written contract agreement covers essential roles and responsibilities, liabilities, and any additional details based on the product type being made.

Responsibilities. Clarity of responsibilities at each step in the process is very important. In addition to product manufacture, Dairy Foods survey respondents indicated that they relied on co-packers for warehouse and distribution (46%), ingredient purchasing (43%), purchasing of packaging materials (41%), and product development (27%) (Canning, 2017).

Who is responsible for transporting milk to the plant consistent with regulatory requirements? Similarly, how will the manufactured product be received from the plant?
Cheese conversion. Who decides when a cheese is ripe or ready for market and proceeds with conversion or packing the bulk product into smaller portions for retail sales?
Materials and supplies. Who will be responsible for obtaining all necessary materials and supplies, including ingredients? As the Dairy Foods survey found, around 40% rely upon co-packers to purchase ingredients and packaging materials. Some supplies will be specific to a certain product and may not be of value to the co-packer if you decide to end your agreement for manufacturing.
Food safety decisions. For example, if a product is to be held until microbiological testing is completed after conversion, does the manufacturer have permission to release the product when satisfactory results are received?

Recourse for failed batch(es). What do you do if a batch doesn't meet the standards for food safety or product quality? Be prepared for this situation by discussing how it will be handled at the time of your co-packing agreement.

Non-disclosure agreement (NDA). Is your product innovative or manufactured from a formulation that is proprietary? Is a non-disclosure agreement between the parties necessary?

Communication. Clear communication is vital. A contract should outline the minimum communication requirements that are agreed upon. Poor communication can cause issues that can result in less than optimal quality or lost revenue opportunities.

Contract agreements can be as simple or complex as you and the co-packer feel is necessary for the circumstances. It will depend on the situation, the comfort level of each party, and the clarity on expectations. Written contracts help prevent frustration caused by unmet expectations.

Financial Considerations

Financial feasibility is important to assess when deciding whether to hire a co-packer to manufacture your value-added product(s). Therefore, it is critical to analyze the financial projections for product prices, both retail and wholesale.

When considering a co-packer, you need to understand:

Cost of production for your milk. All dairies, including those considering a co-processing/co-packing relationship, should understand the true value of your milk. It might not be the Class III price or the mailbox price, as the farm should calculate its true cost of production. Know your income over feed costs or conduct a cash flow analysis to understand what you are paying the farm business for each 100 pounds of milk.
Transportation costs. How much will it cost to get milk to the co-packer's plant and to get the finished product from the plant? Is additional equipment required?
Cost for product production/manufacture. What does it cost the co-packer to process milk into your product (cheese, yogurt, etc.)? In addition to overhead, costs may include:
- Conversion costs
- Aging fees
- Laboratory and test fees
- Cold storage fees
- Miscellaneous expenses
Marketing costs. Do you plan to sell direct-to-consumer or wholesale? This requires a detailed conversation because there are some product types or varieties that allow for a higher retail price point. For instance, special packaging for your market channel may result in an upcharge from the co-packer.

Getting Started

Working with a co-packer is an excellent option for dairy farms interested in developing and adding a value-added dairy enterprise to their farm business. There are several advantages, most notably, the opportunity to avoid large capital outlays and the need to have or acquire specialized dairy processing skills. However, you need to consider numerous factors when seeking to establish a relationship with a co-packer for manufacturing a dairy product. The four steps below will get you started in the right direction.

Understand what you want to make and what your market is.
Look for a co-packer that's going to match that product type and that type of market.
Start a conversation.
Formalize your working relationship.

Be sure to spend adequate time collecting information and organizing your thoughts and needs, as doing so will improve the likelihood of finding the right co-packer for your needs and developing a successful partnership.