What am I buying when I buy a co-packing business?

A co-packer fills and packs for other companies. Its customers usually own the recipes, formulas and brands, which separates it from the businesses it serves. Some co-packers also run a house brand or own formulas, so ask the seller to list any it owns. If you are used to thinking about buying a brand, set that picture aside. You are buying a plant that earns by being used, and the questions that matter are about how it runs and who keeps it busy.

The pieces of the purchase

There are four. The first is the lines and equipment. The second is the premises, including the lease and how the floor is laid out for receiving, production and shipping. The third is the crew, whose skill at running changeovers and keeping schedules is hard to copy. The fourth is the customer relationships. Each can be strong while another is weak, so look at them separately.

How it differs from buying a brand

A brand buyer pays for demand, recipes and a name, and relies on a co-packer to make the goods. A co-packer buyer depends on brands choosing to stay. The risks differ, and so do the questions. The guide to buying a private-label brand covers the brand side, which makes a useful comparison.

What to inspect on the lines

Ask for the age and make of each line, the maintenance records and any breakdowns in recent seasons. Watch how long a changeover takes between products, since that decides how many small customers the plant can serve. Ask how much spare capacity exists. Ask your accountant how idle lines are costed and what a full plant means for future orders. Have an independent technician look at the equipment.

Questions about food safety licences and plant approvals belong with the food regulator, so ask it directly rather than relying on the seller’s summary.