Copacker Brand Fit

Hey All,

I wanted to share with you how I have been helping a few brands determine whether or not they are a good fit to work with a prospective copacker.

You're aware of product market fit, but have you heard of copacker brand fit?

Copacker brand fit is a two-way street. It's not about happiness. It's not about innovation. It's not about responsiveness. It's not about problem-solving. It's not about forecasts.

Annual Purchase Order Value & Frequency

I'm a fan of simple.

You can simply ask your copacker for their Average Purchase Order Value (APOV) and Frequency of Purchases.

This is an extremely simplified way to understand whether or not you are going to align with this copacker.

If you are going to completely blow that number out of the water and purchase $300k per order, odds are, you'd be too big of an account for this copacker. They wouldn't be able to keep up with your production needs.

Alternatively, if you're comfortable with purchasing roughly $120k per year ($30k x 4), then you might be a good fit for this copacker's ideal customer profile.

The problem with this high-level view is that there are customers likely placing $100k PO's 4 times a year. So, this doesn't give you a good idea of just how well you align with a copacker. More importantly, it doesn't give you realistic expectations.

Money Talks

I suggest adding an additional layer here.

Ask your copacker for an ABC analysis, which will break down the APOV and Frequency in tiers.

That's right.

"A" is first class.

"B" is the middle-born child.

And "C" is the third row in a mid-size SUV.

Doing this will categorize the copacker's customers and will open your eyes to what they consider to be top-notch customers.

Doing this will also form your expectations.

So for all my stats lovers, n = population size. In other words, the number of customers within each tier.

APOV = Annual Purchase Order Value

Purchases / Year = how often the customer places a purchase order in one year

Annual Purchase Value = how many dollars the customer orders per year

That's more like it. This gives you clarity on the type of leverage you may or may not have if you were this copacker's customer. This will help you with your expectations.

Most of you will likely start as a tier "C" customer and that is totally fine. With that comes a certain level of service. This means you won't be prioritized until you can break into that tier "A" status.

No matter how bright your brand's future looks, a copacker doesn't deposit those projections into their bank account. The projections help give the copacker an idea of where your brand CAN go, but they won't give you price breaks or priority in production schedules.

Keep in mind that the copacker comes up with the categorization. You simply ask them to break down their customers in tiers based on APOV first, and frequency secondarily.

What I outlined above is the ideal scenario, but it's hard to come by. Some copackers won't share the number of customers with you. Some may not share the frequency with you, or it may be a bit tricky to calculate. But none of them should have a problem breaking down APOV into tiers. If they do, run!

Why This Works?

Think of it this way. Imagine all of the channels you are selling in. They are not all created equal. Some hold more weight than others. If you're in Walmart and Tony's (where are my Chicago founders at?), then there's no doubt that if both retailers place a PO at the same time, you're prioritizing Walmart.

Back to copackers. Things like innovation, low MOQs, quick lead times, communication, etc., are all great. Those criteria should be considered when wanting to partner with a copacker for your manufacturing needs; however, hundreds of copackers can offer that. If y'all aren't on the same page financially, it won't work. But if y'all are, those other criteria can be worked on.

So, understanding how a copacker categorizes their customers financially gives you perspective. And perspective is what we are all missing when it comes to managing expectations and our relationships with prospective and incumbent copackers.

It's a nicer way of saying, "Know your place."