Nutrition Industry Executive September 2014 : Page 20
Considerations in Contract Manufacturing As brands focus their attention on product development and marketing, contract manufacturers fill in the gaps with facilities and expertise. By Melissa Kvidahl T here’s no question that sup-plements are in demand and the product landscape is grow-ing as fast as the audience base. “With the rising cost of health care, people are increasingly turning to natural alternatives for what ails them,” said John Kelly, vice presi-dent of sales and marketing at Florida-based Nature’s Products Inc., noting that it’s not just the aging Baby Boomers turning to supple-ments, but most consumers. So when a brand begins a new product line (or expands an existing one) to meet this growing demand, there are many questions to consider: What product should we develop? What ingredients 20 Nutrition Industry Executive should we use? What delivery form is best? And, today, many brands are also asking, who should manufacture it? The answer, increasingly, is con-tract manufacturers. “We’ve seen more and more com-panies utilize contract manufacturers,” explained Eugene Ung, CEO of Best Formulations in California. “Though some branded companies are going vertical and integrating manufacturing into their operations, many have divested from manufacturing, or are using contract manufacturers to increase overall product output.” Why? The answer is simple. “Contract manufacturers can add value by focusing on the supply chains of important brands, while allowing [the brands] to focus on mar-keting and product development,” explained Tee Noland, chairman and CEO of Pharma Tech Industries in Georgia. And, said Scott Ravech, CEO of Deerland Enzymes, also in Georgia, the intricacies, complexity and cost associated with manufacturing can be a distraction many brands hope to avoid. For Deerland Enzymes, which offers contract manufacturing services as a vehicle for the enzyme-based supplement technologies it works with customers to create, formula-tions can contain upwards of 20 ingredients. “This means that each www.niemagazine.com ■ September 2014
Considerations In Contract Manufacturing
As brands focus their attention on product development and marketing,
contract manufacturers fill in the gaps with facilities and expertise.
There’s no question that supplements are in demand and the product landscape is growing as fast as the audience base. “With the rising cost of health care, people are increasingly turning to natural alternatives for what ails them,” said John Kelly, vice president of sales and marketing at Florida-based Nature’s Products Inc., noting that it’s not just the aging Baby Boomers turning to supplements, but most consumers. So when a brand begins a new product line (or expands an existing one) to meet this growing demand, there are many questions to consider: What product should we develop? What ingredients should we use? What delivery form is best? And, today, many brands are also asking, who should manufacture it? The answer, increasingly, is contract manufacturers.
“We’ve seen more and more companies utilize contract manufacturers,” explained Eugene Ung, CEO of Best Formulations in California. “Though some branded companies are going vertical and integrating manufacturing into their operations, many have divested from manufacturing, or are using contract manufacturers to increase overall product output.”
Why? The answer is simple. “Contract manufacturers can add value by focusing on the supply chains of important brands, while allowing [the brands] to focus on marketing and product development,” explained Tee Noland, chairman and CEO of Pharma Tech Industries in Georgia.
And, said Scott Ravech, CEO of Deerland Enzymes, also in Georgia, the intricacies, complexity and cost associated with manufacturing can be a distraction many brands hope to avoid. For Deerland Enzymes, which offers contract manufacturing services as a vehicle for the enzyme-based supplement technologies it works with customers to create, formulations can contain upwards of 20 ingredients. “This means that each raw material and the corresponding vendor must be researched and tested for safety, efficacy and assurance that it will not negatively impact the other ingredients in the formulation,” he said. When a contract manufacturer steps in, it can then ensure that all ingredients also arrive on time and are tested according to good manufacturing practices (GMPs, more on this later) which can include identity, potency and microbiological testing, as well as other procedures like heavy metal and country-specific testing, and ensuring that the ingredients work in concert without negative interactions. “For a company looking to develop and market state-of-theart products, the entire aforementioned process is, in many cases, left to those who have credible expertise in contract manufacturing,” Ravech explained. Beyond mastering the complexities associated with manufacturing, contract manufacturers also offer brands a focused specialty, as in the case of Deerland Enzymes, which boasts specific expertise in probiotics and enzymes.
According to Wayne Gorsek, founder, chairman, and CEO at DrVitaLab.com, based in Nevada, even brands with in-house manufacturing can find themselves outgrowing their capacity capabilities as they become successful in the marketplace.
“It is clearly less capital intensive to contract out the excess requirements than to build new facilities,” he said. In addition, DrVitaLab offers brands a coveted “Made in the USA” assurance, sought after by both American and foreign companies. Additionally, the proliferation of online supplement companies is only increasing demand for contract manufacturing services, explained Sue Ritchie, director of marketing and sales at Pennsylvaniabased Delavau, since, unlike some conventional brands that may have started out with their own, small-scale manufacturing capabilities, online purveyors likely have limited or no manufacturing facilities to speak of.
For Jay Kaufman, president at Paragon Laboratories in California, brands’ use of contract manufacturers to avoid cost and capacity challenges works to strengthen both parties, especially when it comes to new product development. “A branded manufacturer who does some of their own manufacturing may not have the expertise to manufacture a particular product that is an extension to their existing line,” he said. “As a contract manufacturer, we see many different formulations which present challenges to their manufacture. We rise to that challenge and in so doing, increase our expertise level.”
GMPs in the Spotlight
As competition heats up among contract manufacturers, many are drawing attention to their GMP compliance to set themselves apart. In the supplement industry, where self-regulation is paramount, GMPs are all the more important.
“While this may be a strain to those who were not previously certified, it is the right thing to do,” said Ritchie, of GMP compliance. “The quality of products is important, now more than ever, as negative stories in the media about over the counter [medicines], supplements and even prescription drugs can cause doubt with consumers and ultimately damage all of our businesses and reputations.”
For Deerland Enzymes, GMP compliance goes beyond ensuring quality for its own customers and acts additionally as a checkpoint for companies missing the mark. Ravech, as a result, called Deerland’s peers to action: “It is Deerland’s position that quality-oriented contract manufacturers will possess a high sense of urgency around GMP compliance, and in doing so, will push those who lack the commitment to dietary supplement regulations out of the market.”
In the process, GMPs, while pricey to follow in many ways, can actually level the playing field for cost-conscious customers, said Ung. “In the past, there were often large pricing differences between manufacturers. The adage of ‘you get what you pay for’ certainly applied. The pricing delta was often attributed primarily to the quality overhead,” he said, since companies with a GMP-compliant structure in place often quoted much higher than companies that did not. Now that GMPs are more of a priority across the board, he said, pricing has come into a tighter range as companies without compliance are weeded out. “The increasing requirements have also increased requests for site audits and documentation,” Ung continued. “These certainly affect the costs associated with working with a contract manufacturer, but it can be seen as an investment to secure a quality supply chain.” According to Tim Gamble, president and CEO of Washington-based Nutraceutix, contract manufacturers need to be their own biggest critics and “be willing, and even welcoming, to third party audits and certifications to foster this focus on the quality of the finished product this industry puts out.” Those that are, like Nutraceutix, will contribute to enhanced merit and reputation of both mainstay and new supplements in the market. “Good manufacturing processes, written standard operating procedures, documentation, certifications, audits, third party testing,” he listed, “all of these things are the norm in our business and for our clients.”
Invest in the Best
GMP compliance is just one worthwhile investment reputable contract manufacturers make in time and funds. Customers are also looking for partners that can offer the most cutting- edge technology in testing, packaging and efficiency.
While potency testing is done by a third party at Nutritional Engineering, Inc. in California, the company has made investments to offer micro-testing in-house on active ingredients, heavy metals, salmonella, pesticides (if required) and staphaccol. According to Ginny Laoudis, the company’s CEO, Nutritional Engineering also recently purchased a Bartle machine that produces 1-oz. Serving sizes as well as 2-, 4-, 6-, 8-, 16- and 32-oz. Bottles.
According to Kelly, Nature’s Products is adding nutritional gummy manufacturing capabilities by the end of the year, and has invested in a new high-speed bottling line and stick pack line for customers’ varied packaging needs. “We have made several enhancements to equipment to enhance our overall throughput, as well,” he added.
Recent developments at Deerland Enzymes center around delivery and packaging innovations to increase shelf life of its enzyme and probiotic products. “Any technology that may work to decrease the product’s exposure to moisture, heat or oxygen is of particular interest,” said Ravech. Customers can choose from advanced packaging systems like glass bottles or foil packaging, adding an oxygen absorber packet in addition to desiccant, or even exploring desiccated bottles.
DrVitaLab recently equipped its facility with new Bosch encapsulators, patented Bohle bin blending technology, nitrogen flush packaging lines with metal detection for extended shelf life and safety, a Fette tablet press for chewables, sublinguals, and pet vitamins, and a powder packing line for weight-loss shakes, protein powders, and others. “The biggest item our customers are asking for beyond superior quality and value are unique formulations that provide superior benefits,” added Gorsek. To that end, the company’s biggest investment just might be in its team of executives, formulation scientists and lab technicians, boasting more than 120 years of combined experience, who can help customers develop their latest offerings.
But with all these advances, it’s no surprise that cost is an issue for many customers. “Much like consumers, everyone is shopping for the best price,” said Ritchie. “At the same time, the standards for quality are also important, as our products range from over-the-counters to vitamin and mineral supplements, and the requirements for those items are stringent. Being able to balance costs and quality is critical for any contract manufacturer in maintaining current and securing new business, and we have made a number of changes over the past few years to meet the demands of our customers.” Investments include a new software tool that is the “gold standard” in managing GMP compliance throughout Delavau’s manufacturing process, new tools to ensure accuracy in raw materials and installing continuous manufacturing equipment to reduce human error and variation. “The benefits to our customers have been measurable,” said Ritchie, “and they are even more pleased to learn that these improvements can often help reduce their pricing.”
On the horizon for contract manufacturers is the demand for clean labels, and many companies —like Nutritional Engineering, which is equipped to certify products as gluten free—are already setting the stage for this new wave. DrVitaLab recently added new Agilent 7900 ICP-MS technology that allows up to 10-times more accurate (“and far more rapid,” said Gorsek) testing for mercury, lead, cadmium, arsenic and tungsten. “Some brands we manufacture we have tested for GMOs (genetically modified organisms) and we have been able to certify 100 percent GMO-free,” he continued, adding that some of the company’s customers even prefer GMO-free over organic certification, as they perceive organic to be too expensive, but are understanding the value of a GMO-free claim and want to offer it to consumers.
Customer demands for clean labels are affecting Delavau’s supplement and food manufacturing business in terms of not just removing components, but also adding nutrients or substituting lesser-desired ingredients for alternatives like calcium, said Ritchie. “The clean labeling trend is having a direct effect on contract manufacturing,” she concluded. “We are constantly being asked for more ‘natural’ ingredients and ways to innovate products without certain additives. The movement is forcing all of us to take a different look at how we manufacture and develop products, which is a welcome challenge.”
How to Choose (and Keep) the Right Contract Manufacturer
In a booming market with so many qualified options, it can be difficult for brands to know where to turn. The key is to “be selective and do your homework,” said Kelly. “You want a partner that can deliver high quality and service.” Looking for direction? Contract manufacturers offer their tips for how to navigate the waters and find the right partner, as well as maintain a mutually beneficial relationship.
• Check for third party certification: NSF International or the Natural Products Association (NPA) are good places to start, advised Paragon Laboratories’ Jay Kaufman, because “companies who are third-party GMP certified are subject to the bar being raised ever higher for GMP compliance, as those third party certifiers look for continuous improvement, as well.”
• Take a tour and meet the people: By visiting the facility, it will become clear if the manufacturer can meet the needs of a particular brand. Visits will show “state-of-the-art equipment, if the facility is clean enough to use as a hospital operating room, if they have HEPA filtration,” listed Gorsek, as well as the “experience and success of the management team and the experience of the lab manager.”
• Consider a specialty manufacturer: It’s important for marketers to choose a partner that has specific experience with the types of products they are producing, said Ravech. “It’s wise to select a contract manufacturer that brings additional value to support your organization through formulation expertise and strong regulatory support,” he added.
• Keep them in the loop: Communication is key, especially during the research and development phase of a new product, explained Ung. “Even if we don’t get the job, we’re more than happy to look at the formula or give suggestions based on our experience,” he said. “Involving the contract manufacturer on the front end will help with the overall product development process and reduces lead time and chance for mistakes.”
• Tap into expertise: “Call on us for new product ideas and ways to expand your brand portfolio,” encouraged Ritchie. The best partner will offer not just technical qualifications, but also a full research and development team and pilot lab for idea generation and validation.
• Check in often: Deerland Enzymes encourages its customers to visit and/or audit its facility as often as they like. “From Deerland’s perspective, these visits allow us to showcase the value we can provide, but more importantly, we receive valuable feedback that can only serve to help us with our culture of continuous improvement,” Ravech said. “If you have not visited your contract manufacturer recently or at all, I would encourage you to do so.”
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