Contract packaging is paying another company to pack your finished products: assembling gift boxes and variety packs, building store displays, repacking bulk into retail sizes, shrink-wrapping, labeling and case-packing. A co-packer makes the product; a contract packager packs products that are already made, often yours, sent to them, and often in a seasonal rush. They charge by the unit packed, with a setup fee and a minimum, and the decision comes down to whether your own hours are worth more than their fee in November. In the example below, a specialty food maker's 2,000 holiday gift boxes cost $10.98 each packed in its own kitchen, $11.05 with a local contract packager and $11.18 through a fulfillment center's kitting service. Below is what contract packagers do, how they charge, the three options side by side, and a free calculator.
The short version
- Contract packaging packs finished goods: kits, gift sets, variety packs, displays, repacks, labels.
- Fees: a price per unit packed, a setup per job, a minimum, plus freight and storage.
- You often supply the products and the packaging; they supply the hands and the line.
- Compare against packing it yourself with your hours paid, not free.
- Count the freight both ways and the storage while the boxes wait to ship.
- Repacking food into new retail packages is food packing, done in a registered, licensed facility.
- TaroStack treats each kit as a recipe of its parts, so packing a box takes them off stock. More below.
What contract packagers do
| Service | Example |
|---|---|
| Kitting and gift sets | A box of granola, jam and hot sauce with tissue and a card |
| Variety packs | Twelve snack bars, four of each flavor, in one carton for a club store |
| Displays | A shelf-ready display of 48 jars, built and shrink-wrapped |
| Repacking | Bulk spices into retail jars; a pallet of cases into mixed cases |
| Labeling | A new label or a sticker over the old one; price tags for a retailer |
| Case packing and shrink-wrap | Units into cases, cases onto pallets for a distributor |
Repacking food from bulk into new consumer packages is packing food, so it's done in a facility registered with FDA and licensed by the state; kitting sealed, labeled products into a gift box is simpler, but ask the packager what its license covers. How gift box parts and stock work, whoever packs them, is in what is kitting process.
How contract packagers charge
A price for each unit packed, set from how many touches it takes: picking three items, tissue, a card, closing and labeling the box. A setup for each job: laying out the line, training the crew, checking the first boxes. A minimum, because a job of 50 boxes takes as much setup as 2,000. Freight to send your products and packaging in, and to send the finished boxes out. Storage if the boxes wait in their warehouse to ship. Ask what happens to the leftovers: the extra cards, boxes and products come back, or are stored, at a price.
A gift box run, three ways
Pine Barrens Pantry, a made-up granola, jam and hot sauce maker in Hammonton, New Jersey, I use in these examples, sells 2,000 holiday gift boxes, about 800 a month through November and December. Each holds a bag of granola, a jar of jam and a bottle of hot sauce, $7.50 at Pine Barrens' cost, in a box with tissue, an insert and a label, $2.10:
| Pack it yourself | Local contract packager | Fulfillment center's kitting | |
|---|---|---|---|
| Boxes | 2,000 | 2,000 | 2,000 |
| Minimum | none | 500 | 1,000 |
| Good boxes, after damage | 1,990 | 1,995 | 1,995 |
| Setup | $0 | $150 | $250 |
| Packing, a box | $1.33 | $1.20 | $0.95 |
| Contents and packaging, a box | $9.60 | $9.60 | $9.60 |
| Freight | $0 | $300 | $450 |
| Storage while they sell | $0 | $0 | $499 |
| Cost a good box | $10.98 | $11.05 | $11.18 |
Packing it itself, Pine Barrens pays two people $20 an hour to pack 30 boxes an hour: $1.33 a box, about 67 hours for the two of them, in its busiest weeks. The local packager costs 7 cents a box more, about $135 on the run, and gives those hours back to the markets. The fulfillment center's packing is the cheapest per box, but the freight and two months of storage while the boxes wait make it the most expensive, unless it's also shipping the online orders, which would save Pine Barrens' own packing and postage. How to price the box itself is in gift box business plan.
When contract packaging pays
- A seasonal rush your own team can't absorb without stopping production.
- A retailer's format you don't have the equipment for: shelf-ready displays, club-store variety packs.
- Volume past your space: 2,000 boxes take a lot of floor while they're built.
- Fulfillment combined: when the same warehouse packs and ships, the freight and storage pay for themselves.
What a co-packer does, by contrast, is in what is a co-packer.
Get the calculator
Download the contract packaging calculator. One column for each quote and one for packing it yourself: type the units, the minimum, the damage allowance, the setup, the fee or your labor, the contents, the packaging, freight and storage, and the job's cost, the months the units take to sell, the storage while they sell, the cost of each good unit and the cash out before they sell fill in. It's an ordinary Excel file with no macros, and it works in Google Sheets, LibreOffice and Numbers.
Where this stops working
Two thousand boxes means 2,000 bags of granola, jars of jam and bottles of hot sauce leaving your shelf for the packager, and 2,000 boxes coming back or shipping from there. A spreadsheet can't say how much jam is left for the shops after the boxes, or how many finished boxes are at the packager on December 10.
How TaroStack does it
TaroStack treats each kit as a recipe of its parts, so packing a box takes them off stock.
A box as a recipe. A gift box is a recipe of a bag of granola, a jar of jam, a bottle of hot sauce, a box, tissue, an insert and a label, so recording 2,000 boxes packed takes each part off stock, and "what could I make right now" says how many boxes the parts on hand allow.
The packager as a site. The contract packager's premises can be a site, so the products and packaging you send are a transfer, shown in transit until they arrive, and the finished boxes are counted there. More than one site is on Standard at $99 a month.
Lots in every box. Each part keeps its lot, so the jam lot inside a gift box is on record, and a recall report shows which customers got it.
| The job | Spreadsheet | In TaroStack |
|---|---|---|
| Parts for 2,000 boxes | Count every shelf | What could I make right now |
| Jam left for the shops | A guess | Stock after the boxes are packed |
| Boxes at the packager | Ask them | Stock at their site |
| Which jam lot is in a box | Unknown | Lots kept through the kit |
Recipes and lots are on every plan, from $49 a month; more than one site is on Standard at $99. The first 30 days are free, with no credit card. If you'd like a hand setting up, ask, and we'll do it with you.