8 Points to Think About Before Choosing A Supplement Manufacturer

 

I recently attended Supply Side West with the goal of scoping out new manufacturers for Health Kismet’s upcoming product Incredible Mood.

When people approach me about developing a supplement the question of what manufacturer to choose is the most frequent one that comes up.   And that makes a lot of sense since it’s an extremely important decision and THERE IS NO EASILY ACCESSIBLE DATA about supplement manufacturers out there.  None.

And for whatever reason most manufacturer’s suck at making themselves accessible.  And what’s worse is that the companies that ARE good at making themselves accessible are usually the ones you want to avoid.  I’ve found there’s an inverse relationship between the quality of a company’s advertising and their terms for startups.  The same things that make them shiny and polished make them expensive and out of range for the supplement startup.

If you’re new to the industry and have less than $10,000 in seed money the BEST manufacturers for you are living in between the cracks and outside your line of sight.  No big AdWords accounts, no large sales force, and few ways to find out about them other than knowing the ins and outs of the industry.

Which creates a catch-22 since it’s hard to get industry know-how without having a product that you can sell to put yourself in business.

So how do you find these companies, and what questions do you ask yourself to vet the ones that are going to be best for your needs?

Here’s my best attempt to answer this question for you.  We’re going to cover the set of focal points you need to have your sights on when choosing a manufacturer and we’ll finish up the post with some concrete recommendations about who to contact depending on your needs.

Let’s dig in, shall we?

When you’re looking for a manufacturer these are the points you need to consider:

1).  What Are Their Minimum Order Runs?

If you’re just starting out cash is usually in short supply.  Among entrepreneurs I’ve spoken to the most common starting budget is around $1,000-$5,000.  In the nutraceutical industry that’s a drop in the bucket.

If you’re a supplement manufacturer the easiest way to make money is to have a customer with a lot of distribution already in place and they just need to find someone to run 20,000 bottles for a formula they already make.  You load up the ingredients into the ribbon blenders and a few days later you close up shop with an extra $100,000 in your bank account.  It’s easy money.

Most of you reading this article  probably don’t fit into this category.  You can probably relate a lot to this e-mail I got from Terrence who had questions about finding a manufacturer:

I’ve looked into manufacturers but custom formulations require a minimum order of 2000 units. I’m still not financially able to go that route yet. I’m still in the beginning stages of designing a website, labels, getting a brand name and logo etc. I’m doing all of this while working full time. What do you think?

I’m sure a lot of you can relate, right?

The good news is that manufacturer’s vary widely in their minimum standards for product runs.  Most begin around 1,000 or 2,000 bottles.  Some don’t start unless you can go up to 10,000.  However, some go as low as 500 and there are a few who can start with as little as a few hundred and a few which have no order minimums at all.

(If you want specific names skip to the end of the article).

More importantly is there are ways you can engineer a lower minimum run if you understand how to source your ingredients.

Which brings us to our next point:

2).  What Ingredients Do They Already Stock?  

The more your ingredient list overlaps with what a manufacturer carries the easier your life will be.

If you want to use an ingredient they already stock that they’re using for other people’s products then it provides no additional friction or upfront costs to include in yours.  This is really important for keeping your order minimums as low as possible.  If they’re buying it themselves and allowing multiple customers to use it for their products and continually re-stocking it then there’s usually no minimum you’ll have to include in your product to make it worth their time, no increase to your minimum run necessary to use all the ingredients, and no upfront cost for you or the manufacturer to include it in your formula.

This means it’s a good idea to have a conversation with a rep upfront about what ingredients in your formula they already have and what they’ll have to go out and buy.

This is an extremely important detail to determine the feasibility of your project.

This is also a catch-22 because a product has to be unique for it to gain traction, and one of the best ways is to include very unique ingredients, which are usually difficult to source.

So there’s a natural trade-off between using common ingredients which are easy to find and esoteric ingredients which are expensive and offer unique benefits.

The best way to resolve this trade-off brings us to our next point:

3).  Will They Allow You To Buy Ingredients Yourself and Store Them in Their Facilities? 

This is a really important detail for bridging the gap between what a manufacturer would be willing to do for you if everything about your formula lined up with their capabilities and what they can do for you due to the logistics of sourcing your formula.

The best way to explain would be to use an example of a conversation I had with a company called cGMP manufacturing.  They cater to small businesses and are willing to do runs in the hundreds of bottles if your formula closely aligns with their capabilities.

However, if they do the sourcing for you and have to buy ingredients that aren’t going to be used elsewhere then they have the issue of having thousands of dollars of stuff lying around that won’t get used.  So I’d be faced with the issue of drastically increasing my order run in order to make use of the un-used ingredients to use it all up or have drastically higher per-bottle costs to recoup the costs of the inventory.

Probably the easiest way around this is to source the difficult ingredients yourself and have them shipped and stored at the manufacturing facility to be used at your discretion.

Doing it this way has the following benefits and drawbacks:

• To stay compliant with GMP guideliness they’ll have to do additional testing on the ingredients before they can accept them and you’ll probably have to foot the bill for this.  Either directly or through higher per-bottle costs.  I’d prefer just to pay for it directly and keep my per-bottle costs tightly tied to the price of the raw materials.  This’ll cost a few hundred bucks per ingredient.
• This allows you to have more flexibility in your runs despite using expensive and/or hard-to-find ingredients.  For example when I spoke with the manufacturing rep at cGMP we went over my formula and discussed how including certain ingredients would more than likely boost my minimum run up to 2500+ bottles in order to make use of certain ingredients if they were to do the sourcing.  However, they agreed that if I went ahead and bought the stuff for them they could stick to their typical flexible policies.  It’s also less work for them which always makes things easier.
• This gives you the benefit of being able to iterate faster since you’ll have shorter product cycles.  It’s unusual to get everything right on your first run so being able to tweak things on the run is a huge benefit and being able to do this while simultaneously having unique ingredients yields huge power to a small business that’s just getting started.
• They might charge you for storing the ingredients on your behalf.
• You’re required to use up the ingredients or dispose of them by the time of their expiration date.

In general I’m a fan of doing it this way and a good way to begin a relationship with a manufacturer is to find out which ingredients they can stock for you and which ones will be more advatnageous for you to source yourself to keep things loose.

4).  Are They Transparent With The Suppliers They Use?

Some manufacturers are an open book.  Others are a tad secretive and keep some or all of their processes behind a black door.  Obviously the latter is kind of annoying and you’d prefer everything as transparent as possible but this isn’t always the case and sometimes you’ll be forced to make some trade-offs you won’t like in order to optimize over your constrained resources.

As a rule of thumb the bigger “Everything-under-one-roof” type companies are more likely to keep their processes secret and smaller mom-and-pop types are more likely to tell you exactly what they’re doing.

Supplier transparency runs across two dimensions:

• The actual suppliers they use for their ingredients.
• The flavor combinations they use during product development.  This is a big one because flavors are usually that last little bit of *oomph* that either makes your product good or great and not knowing exactly what comprises them can make you beholden to your current manufacturer…..for better or worse.  To get around this you can contract with flavorologists independently but usually their minimum order is around $2,000.

5).  Are They A Certified Organic Facility?

There are organic ingredients and then there are organic facilities.  If you want to use the USDA organic seal on your label you have to find an organic facility, in addition to using organic ingredients.

A good example of this situation would be YouBar, which manufactures nutrition bars and stocks a lot of organic ingredients but can’t get you the seal because they’re not an organic facility.

(And FYI there’s more to being organic than just using an organic facility.  There’s a mountain of paperwork and additional costs).

6).  Do They Provide Access to a Formulator?

Most formula’s begin as a wish-list, but you’re not making progress until it turns into a to-do list.  When people conceive of formulas it’s usually done with a crude understanding of implementation and they’re just checking off a list of everything they they think it ought to have to make it shiny.

They usually run into the following problems:

• Their desired list of ingredients and certifications completely wrenches the cost curve into something that destroys their unit economics.
• There are serious physical hurdles to making the product work.  This could be an ingredient that isn’t very stable, a combination of ingredients which might react inside the container and create by-products, or unwanted side-effects due to the doses of particular ingredients in the mixture.

I had these same dilemmas when sourcing Incredible Mood.  I originally wanted it to contain an omega-3 fish oil powder.  Desperately, since I thought it’d make it different and go the extra mile.  However, this is a novel and expensive ingredient and using it produced the following problems:

• It’s expensive.  Depending on who you get it from it costs anywhere from $180 to $500/kilo.
• It requires a lot of carrier.  Most fish oil powders are about 15% essential fatty acids by weight, which means for every gram of the powder you’re getting 150mg of active ingredient and 850 mg of non-actives.  A clinically efficacious dose of omega-3 is somewhere in the range of 250-1000mg, which means you need about 6x that amount of actual raw material.  I also don’t want to sell it for more than $40/bottle.  That doesn’t add up.
• It’s not very stable.  It oxidizes easily and can’t sustain repeated exposure to air.  The only application of the ingredient right now is stick packs because they’re only used once.

So I eventually had to concede and exclude it from development.  It hurt, but it was the only way to make the project feasible.

The chances are good that there’s something in your formula that makes its feasibility a big heaping pile of %$^@, but without talking to a food scientist it might be hard to tell what it is.

Some of the larger manufacturers will have such a person on staff.  Others might contract themselves out with someone as a consultant and refer you to them.  I’m not sure it really matters one way or the other but it’s important to arrange some sort of meeting of the minds to see where you’re shooting yourself in the foot.

7).  What’s their R&D Cost Structure?  

Unless you’re incredible lucky you’ll probably have to go through a little bit of trial and error to get your product right.  This process is usually carried out with the manufacturer and it’s a good idea to know what their policies are before you begin.  If everything goes right then it probably won’t be a big deal, but when things go wrong it can be the difference between being solvent and having to call relatives to scrape together money to pay rent.

The basic R&D for a supplement usually includes the following:

• Some sort of feasibility study.  This means determining the shelf-life, how stable it is in your desired form, and possible analysis for potential side-effects or unwanted by-products.  (Note this is NOT the same thing as actually doing a human clinical trial which is much more expensive).
• Flavor development.  After you’ve determined if the product can actually be made a sample batch will typically be made for you to try, and modifications are continually made until everything’s copacetic.  Sometimes this can be done right away.  Other times it can take forever.  Most manufacturers will have some agreed-upon number of re-do’s they’ll allow you and if you want more you have to pay extra.  I’ve found the middle-of-the-road number is around $500 for an initial two batches, and $250-$300 for additional samples.  It’s always a little different but it seems to come to about that for run-of-the-mill stuff.  Other times they’ll give you a lump sum for testing and then put any extra money you have towards your order.
• Final batch testing.  This is especially important if you want your product to be soy-free, gluten-free, non-GMO, etc.  To be able to do that on your label you’ll often have to do some testing with the finished product to find how much of the latter ingredients are in the product to see if it means the legal standards for such claims.

You should expect to pay money for this, and if it’s “free” you should just assume it’s built into your costs in less-obvious ways.  Again, I’d rather just pay for it upfront so I can know exactly how much everything costs.  Good manufacturers will be clear about how this works and how much you can expect to pay at the outset, and be able to go over “what-if” scenarios when things go wrong.

8).  Are They Certified as GMP Compliant through NSF or NPA?  

The official law that dictates what standards supplement manufacturers have to follow is known as the Good Manufacturing Practices (GMP)standard.

It’s administered through the FDA and third-party verification of GMP compliance is provided through two organizations: NSF and NPA.

Note that being audited by  these guys is not the same thing as being audited by the FDA.  They’re certification programs that state “according to what we know about current GMP practices, these guys are on the up and up.”

I’ve written about this process before, and the list of current companies who are certified can be found here and here.

The benefits of using a certified manufacturer is that you have a transparent way of verifying their authenticity.  The downside is that it costs a lot of money to pay for the certification and that often gets recouped with higher order minimums and guidelines that might not be startup-friendly.

I wrote previously how almost all of the manufacturers with the best policies are not officially certified.  That doesn’t mean they’re not legitimate or run with integrity.  It just means you have to do the QA yourself.  You should do that anyways, but you’ll have to do without a guarantee from other people.

If you are able to start with runs of 1,000 bottles or more then you shouldn’t have problems because there are plenty of manufacturers who can start at that number and ARE independently certified.  But if you can’t go that high you’ll have to resign yourself to either starting via private-label or taking a chance with a smaller company that flies under the radar.

Final Points to Consider

If you’re looking for a manufacturer you should use this article as a check-list.  That’s actually how I got the material to write it because these questions were the basis of the checklist I used at Supply Side West.

However, if you’re demanding that every one of these be met before you proceed with someone you’re probably setting your standards too high.  You should use this list to assess your own priorities for what you need and then order these issues from most to least important.  Most of these qualities exist on a spectrum and there’s an inherent tradeoff between “Fully-certified-every-which-way-and-have-every-service-under-one-roof” type companies and “completely-willing-to-work-with-you-no-matter-your-situation-and-we’ll-do-what-we-need-to-make-it-work” type companies.

You have to figure out where you are and then target what’s most important to you.

Having everything would be nice, but at a certain point “high” priorities look more like insecurity about messing up than they do about actually having high priorities.  No company provides everything you want.  Get used to it.

You can either get everything served to you on a platter and pay for it or resign yourself to swimmin’ in the fish bowl to get what you need on a budget.

And Oh Yeah….

Label design and fulfillment are two frequent add-ons people frequently ask about and companies typically advertise about.

Manufacturers have a specialty in putting powders in bottles and tablets, not making pretty labels.  They’re entirely different.  If they “provide” it it’s usually outsourced to another company or it’s just not that good.

Most of the time “Label Design” literally translates to “Boring stock photos that look drab and pathetic and signal that you don’t have the money or creativity to hire a real designer.”

Most of the time you should just find someone else to make the label look pretty for you.  It doesn’t have to cost that much.  You need an artist to do that and there are plenty of those who are broke and looking to make an extra buck.

Time to Name Names

Okay.

For many of you this might be the best part of the article.

Here are specific names of manufacturers with some of the characteristics we talked about.  I’ve spoken directly with all these companies in one way or another but have directly worked with very few of them.  So don’t take this list as a personal endorsement.  It is however the same list I’d use when beginning to look for a manufacturer myself and should be a good starting point for you if you don’t know where else to look.

Manufacturers That Do Small Order Runs

Axiom Nutraceuticals.  Start at 500 bottles.

JW Nutritionals.  No order minimums.  Nice guys.

cGMP Inc.  Specialize in dealing with small businesses.

Uckele.  No order minimums.

Companies That Are Certified through NSF/NPA with 1,000 or so Order Minimums

Bactolac Pharmaceuticals.  Have good product development process for powders.

Natural Health Labs.  Responsive, good private label selection, and have been very helpful in my experience with them.

Best Formulations.

Companies That Have Expansive Capabilities

Robinson Pharmaceuticals.

Agropur.  Are both an ingredient supplier and manufacturer, providing nice synergy.

And If You’re Looking To Have Manufacturers Bid On Your Formula

You can go here, fill out the form, and we’ll have a discussion to get you on your way so you can save the hassle of fishing for manufacturers yourself.

Okay, hope this helps.

Now get to work!