Perks and benefits of Co-Manufacturing and Co-Packing for food manufacturers

production of burgers

Frequent changes in consumer preferences and lifestyle choices means that firms need to continue to innovate. New products must be developed, refined, tested and taken to market as quickly and as safely as possible to satisfy demand as it comes. To facilitate this, processes need to be streamlined and operations must be efficient.

In the current economic climate, contract manufacturing and contract packaging have become increasingly popular in the food industry, especially if it comes to produce products internationally. Close cooperation within a supply chain can be considered as an essential competitive advantage.

Let us see in details the outsourcing forms most commonly used in food industry.

CONTRACT MANUFACTURING

A contract manufacturer (co-manufacture or co-man) is a manufacturer that is contracted to produce a company’s product line. Contract manufacturers usually have multiple customers that they produce for. Because they are servicing various customers, they can offer reduced costs in acquiring raw materials by benefiting from economies of scale.

CONSUMER CONTRACT PACKAGING

A contract packer (co-packer) is a company that receives finished goods in bulk and packages it for their clients. Secondary packaging refers to the next layer of packaging or the packaging used to group various pre-packaged products.

CONTRACT MIXING AND BLENDING

One of the first steps to manufacturing quality food products is ingredient blending. Contract blender possesses an art equipment. Highly experienced technicians of contract blenders will blend all forms of dry ingredients and create masterful blends.

Other food processing capabilities, such as extrusion, spray drying, re-packaging, and sifting can be outsourced as well.

CONTRACT EXTRUSION

The food extrusion process involves forcing mixed ingredients through a perforated plate to cut the end product into a specific size and shape. A food extruder typically is used for such products as bread, confectionery, cookies, cereals and even pet foods.

CONTRACT SPRAY DRYING

Spray drying is one of the most effective ways to dry foods and other products that are typically heat sensitive.

CONTRACT RE-PACKAGING

The supply chain for food products is long and winding. Sometimes customers need ingredients packaged in different sizes or packaging formats than a company can provide, and this is where re-packaging becomes valuable. A food packaging manufacturer can leverage comprehensive packaging services and flexible equipment to offer re-packaging services that help meet their customers’ needs and keep costs down for the end consumer.

CONTRACT SIFTING

Some companies specialize just in sifting. Their innovative vibratory sifter equipment will help to protect ingredients from unwanted contaminants and ensure particle sizes align with the spec a company desires.

 

Companies are finding many reasons why they should outsource their production to other companies. Here are some perks and benefits of outsourcing for food manufacturers:

  • Cost savings

Companies save on their cost of capital because they do not have to pay for a facility and the equipment needed for production. They can also save on labor costs such as wages, training, and benefits. Some companies look for outsourcing so they can cut out there overhead expense and bring up their profit margins so they can focus more on marketing.

  • Increased business’ flexibility

Greater product visibility, increased management of costs, flexibility and environmental benefits are also some of the benefits food manufacturers can derive from the process.

  • High quality of products

With co-manufacturing and co-packing, companies can take advantage of skills that they may not possess, but the contract manufacturer or the co-packer does. The contract manufacturer is likely to have relationships formed with raw material suppliers or methods of efficiency within their production. Contract manufacturers are likely to have their own methods of quality control in place that helps them to detect counterfeit or damaged materials early. With co-manufacturing and co-packing, companies can focus on their core competencies better if they can hand off base production to an outside company.

ARE YOU PLANNING TO BRING AN EXCEPTIONAL PRODUCT TO KAZAKHSTAN WITH POSSIBLE SALES IN THE CIS COUNTRIES AND ASIA? PLEASE CONSIDER A CLOSE COOPERATION WITH THE INITIATIVE “MADE IN KAZAKHSTAN.”

 

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Halal sales forecasts in Kazakhstan

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The following points are also for your consideration of a strategic collaboration in the halal food sector with a group of Kazakh companies lead by “Raspredbaza” LLC in Kazakhstan.

Sales forecasts 

The sales forecasts for the Kazakh halal meat segment represents a market of 18 million Muslim people consuming at least 30 kg of all types of meat per person annually which gives roughly more than 2 billion USD in sales.

Baby puree market equals to 778 million USD.

 What is potential licensee willing to pay?

“Raspredbaza” LLC is open to discuss with a licensor the desired royalty, advance or guarantees depending on the given segment, the support provided in technology transfer, brand popularity in the granted territory, sales forecasts in Kazakhstan and export volume to other countries.

Personnel

Employees at “Raspredbaza” LLC are open to developing a close relationship with the staff of the licensor, which should help a partnership to succeed. Employees at “Raspredbaza” LLC will treat the licensor’s assets with care.

System and tracking

At “Raspredbaza” LLC, there are systems in place to track the success of the licensed line by channel and geographical regions. This will help to respond to the marketplace quickly, devote resources adequately and also elaborate detailed distribution and sales reports to make the collaboration more efficient.

Ethical issues

“Raspredbaza” LLC conducts transparent business processes, does not get involved in corruption and follows a social corporate responsibility program.

Why is the Kostanay regional infrastructure ideal for halal industry

Kostanay

The Kostanay district is situated in the North part of the Kazakhstan and borders with Russia. The area represents a consumer market of more than 25 million people. The region profits from a favorable geographical position due to its proximity to such developed industrial regions as the Russian Urals in the west and Central Kazakhstan in the southeast. The Kostanay region borders with four regions of the Republic of Kazakhstan (Aktyubinsk, Karaganda, Akmola, and North-Kazakhstan) and three regions of the Russian Federation (Orenburg, Chelyabinsk, Kurgan).

Transportation and distribution

Roads connect Kostanay with the following cities in Russia: Chelyabinsk, Magnitogorsk, Troitsk, Yekaterinburg, Kurgan, and Tyumen. It is also connected by road to Astana and Almaty in Kazakhstan. Fifty-three railway stations carry cargo from Kostanay, the principal city of the region.

Kostanay International Airport handles common and charter flights to many cities in Kazakhstan, former Soviet Republics, Germany, the United Arab Emirates, Turkey, and other countries. The airport also functions as a local port of entry and customs checkpoint.

Local resources for halal sector

Agriculture accounts for approximately 6% of Kazakhstan’s economic production.  More than 74% of the country’s territory is suitable for agricultural production, but only 25% of the land is arable.

Farmers raise sheep and cattle, and livestock products include dairy goods, leather, meat, and wool.  Average consumption of meat collectively grows at a rate of 7.7%. Poultry is amongst the fastest growing sectors in the nation, showing a CAGR of 13.5% over recent years. Consumption of chicken meat now peaks at around 20 kg per person annually.

Across the board, Kazakhs consume between 50-60 kg of meat per capita a year on average. This only goes to show the prevalence of meat in Kazakh cooking, which takes in any number of traditional meat dishes.

Beef dominates. As much as 80% of all meat consumed throughout Central Asia’s largest economy is beef. Kazakhstan is a top ten nation when it comes to beef consumption, with nearly 30 kg consumed annually per capita.

Even so, domestic production has failed to cover domestic demand for meat products of all varieties. Kazakhstan falls flat in meeting its population’s desire for meat. Total domestic output amounts to about 900 thousand tons. Total consumption comes to 1.08 million tons, leaving a deficit. Imports from the US and Russia covered the deficit– but imports have dropped off.

The country’s major crops are wheat, barley, cotton, and rice, with wheat exports a major source of hard currency.  The sown area of vegetables is about 133.1 thousand hectares, melons (any of various plants of the family Cucurbitacease sweet edible, fleshy fruit) – 82.3 thousand hectares. Gross harvest of vegetables is about 3 million tons, melons – 2 million tons.

The largest share in vegetable production (3,061.5 thousand tons) is presented by tomatoes – 650.7 thousand tons (21.25%); onions -573.4 thousand tons (18.7%); cabbage – 442.4 thousand tons (14.45%); carrots – 445.8 thousand tons (14.6%); cucumbers – 362.8 thousand tons (11.85%). Thus, the volume of production of vegetable and tobacco crops in the Republic exceeds the demand of the population in accordance with the national consumption rate by 2.1 times.

Gross harvest of fruit and berry crops amounts to about 214.7 thousand tons. Thus, the volume of production of fruit and berry crops meet the country’s domestic demand for these products by only 60%.

The Kostanay region’s climate is continental, with strongly pronounced alternation of four seasons. Average temperatures: January: -18 to -19 °С, July: 19 to 22 °С. In the winter, the temperature can be as cold as -25 to -30 °C. In summer, the temperature can reach 30 °C. The annual amount of precipitation is 300–350 mm in the northern areas and 240 to 280 mm in the south. The growing season is about 150 to 175 days in the north and 180 days in the south.

The Kostanay region has had the status of the primary granaries of the country for decades. But at the same time, it is actively developing the other sectors of agriculture. Local farmers have also begun to create livestock and grow lots of vegetables. 7 feedlots and 13 breeding farms are open in the region. Another 36 enterprises are engaged in the processing of meat. More than 13,500 hectares of land is planted with fruits and vegetables. In 2016, the Kostanay region produced 2,200 tons of meat for export.

Kazakhstan as a strategic production and distribution place for halal food

the future of the global muslim population

10 largest muslim countries

 

Kazakhstan is widely known as a transportation and distribution hub situated between Europe and Asia. By now the Kazakh government has already built necessary international road and rail-transportation corridors for a smooth transfer of goods. As such, “Raspredbaza” LLC is strategically located in the Kostanay region in Kazakhstan opening access to the huge market of the former USSR (Russia, Belarus, Kazakhstan, Tajikistan and Kyrgyzstan), to the free trade market of the Eurasian Economic Community (Kazakhstan, Russia, Belarus, Armenia and Kyrgyzstan) consisting of 182, 7 million Muslims.

Nearly three-in-ten people living in the Asia-Pacific region in 2030 (27.3%) will be Muslim, up from about a quarter in 2010 (24.8%) and roughly a fifth in 1990 (21.6%). Top-countries with the largest projected number of Muslims in 2030 in the Asia-Pacific region are Pakistan (256,117,000) Indonesia (238, 833,000), India (236, 182,000), Bangladesh (187,506,000), Iran (88,626,000), Turkey (89, 127,000), Afghanistan (50,527,000), and Iraq (48,350,000).

Certification and infrastructure are essential to cater to Muslim-targeting businesses

halal certification

Certification plays an important role in ensuring compliance to Islamic law and in assuring consumers of the reliability of halal products. The enforcement of Islamic jurisprudence providing businesses with clear guidelines and support greatly eases the process of halal certification. Developed infrastructure and standardized certifying processes run by The Khalal Industry Association of Kazakhstan (AKHIK) have already started to boost Kazakhstan’s recognition in the CIS halal network.

The multiple country-specific laws and certifying bodies, however, pose a challenge to multinational companies that wish to expand into the niche Muslim consumer base. With different certifying bodies and processes across various countries, MNCs have to comply with varying sets of rules, and in some countries, the guidelines are still unclear. Global halal certification bodies such as Jakim in Malaysia and ESMA in UAE simplify the trade of halal products worldwide. The presence of global hubs results in a smoother production chain, where the whole halal supply chain is transparent and standardized. Other parts of the production chain in the global halal industry like logistics and transport are also certified.

Halal baby food market trends in Kazakhstan

How-Much-Baby-Food-Purees-Cost

With global baby food and formula sales estimated at $30 billion in 2015, according to Nielsen, the halal baby food segment could become a $5.1 billion sector if it follows similar (17 percent) growth and spending as global Food and Beverages. The global baby food market is expected to reach USD 46 billion by 2022, growing at a CAGR of 7.5% during the period.

Baby foods are considered to be the most essential and the first alternative to breast milk for the babies. Purees of natural fruits and vegetables are initially fed to the baby, as a part of the nutritional food. With the growth of the baby, the kind of foods available would significantly vary from infant formula to solid dried baby foods.

With the rapid urbanization around the world, and due to changing lifestyles, the demand for packaged baby foods has grown significantly. These foods are fed to babies between the ages of four to six months and up to two years. Increasing awareness about nutrition, a rise in organized retail marketing, urbanization and significant growth in the count of working women population have been the factors that have led to the growth of the market. Concerns related to food safety, falling birth rates, and the practice of feeding home cooked food to babies are the critical restraints in this market.

Awareness of nutrition in Baby food products is increasing day by day. People are getting more concerned about the health of their babies. Food guidelines have guided many people towards the adequate adoption of healthy and organic food for babies and toddlers as well.

Kazakh women are increasingly joining the workforce in the large towns, leading to less time for breastfeeding and preparing home-made food for their babies. Besides, baby food profited from parents’ desire to purchase the best products for their babies which are safe regarding ingredients and have added-value benefits such as vitamins and minerals, as well as organic and hypoallergenic properties. Even so, baby food remained a product for consumers with high- and mid-purchasing power in Kazakhstan. However, for consumers with moderate and high disposable incomes, expensive baby food is justified by its beneficial qualities.

Nestlé and Detskoye Pitaniye-Istra-Nutricia led the Kazakh baby food industry in 2017 with retail value shares of 41% and a 29%, respectively. The leading position of Nestlé with its Nestlé, Nan, Nestogen and Gerber brands can be attributed to the long-term presence of the company in baby food. Nestlé has a broad product portfolio and well-established distribution network which contribute to the steady availability of its products across the country and its positive sales performance. Also, Nestlé is active in new product launches and promotion. Detskoye Pitaniye-Istra-Nutricia with its Malyutka, Nutrilon, Nutricia and Malysh brands, benefited from its broad portfolio of products.

However, none of these brands currently produce halal baby meat, vegetable or fruit puree for Muslim babies. Annually 200 000 babies are born in Kazakhstan.

Baby food is expected to continue to develop in Kazakhstan due to the ongoing desires of consumers to provide only the best products for their children and an improvement in the economy of the country with the consequently increased standards of living and purchasing power. In addition, it is expected that a growing number of women will participate in the workforce and their busier lifestyles will increase demand for ready to eat products for babies.

Growth of Muslim population is instrumental for halal market development

halal market

The world’s Muslim population is expected to increase by about 35% in the next 10 years, rising to 2.2 billion by 2030, according to population projections by the Pew Research Center’s Forum on Religion & Public Life.

Globally, the Muslim population is forecast to grow at about twice the rate of the non-Muslim people over the next two decades – an average annual growth rate of 1.5% for Muslims, compared with 0.7% for non-Muslims. If current trends continue, Muslims will make up 26.4% of the world’s total projected population of 8.3 billion in 2030.

If current trends continue, 79 countries will have a million or more Muslim inhabitants in 2030, up from 72 countries today. A majority of the world’s Muslims (about 60%) will continue to live in the Asia-Pacific region, while about 20% will live in the Middle East and North Africa, as is the case today. But Pakistan is expected to surpass Indonesia as the country with the single most significant Muslim population. The portion of the world’s Muslims living in Sub-Saharan Africa is projected to rise; in the next 10 years. For example, more Muslims are likely to live in Nigeria than in Egypt. Muslims will remain relatively small minorities in Europe and the Americas, but they are expected to constitute a growing share of the total population in these regions.

While certification within the halal sector is essential for businesses to gain trust from consumers, many companies fail to develop their sales of halal products due to their focus just on certification. As such, the maintenance of processes, new product development and marketing strategies are less prioritized. The company automatically caters to a niche group of consumers and likely fails to reach out to other groups. Hence, awareness plays an equally important role for businesses to maintain an expanding pool of consumers. Many consumers are unaware of what constitutes a halal product and may avoid it due to an apprehension.