We wrote last month about how co-packing provides flexibility for baked goods companies before and during economic downturns — an important thing to remember as tariffs push the yield curve (a key recession indicator) into the danger zone.
Now that a new front in the trade war may be opening, this time with Mexico, we thought we would share another advantage to co-packing: It can serve as an effective tariff protection, especially for food and baked goods companies with complicated or threatened supply chains.
Co-Packing as Tariff Protection
Traditionally, food companies have used co-packing partners like Baker’s Pride to accomplish large seasonal project, to move into large-scale production, to expand distribution and to free up capital that can be used for growth.
Flexibility, in other words, was the primary motivation. Now, security and stability are likely to be the key motivators.
The trade war is escalating. If it continues, new costs associated with the tariffs will work their way into every level of the supply chain. Faced with the prospect of rising costs, many food companies may find a co-packing arrangement ideal in order to reduce their labor costs and protect their margins.
Companies with complicated supply chains will also be more motivated than before to offload the complexity of managing their supply chains to a third party — especially if they import goods that are under tariff now or that may be subject to future tariffs.
Co-packing with the right partner can also allow food and baked goods companies to significantly reduce their freight costs — an important consideration as costs rise in other areas of the business.
Simplify Your Supply Chain with Baker’s Pride
Baker’s Pride is a trusted co-packing and private labeling partner to midsize and multinational baked goods companies across the country.
Our delicious products are trusted by some of the largest baked goods companies in the United States. We rigorously maintain product quality and consistency, help expand our customers’ production capacity and distribution, and simplify their logistics.
For more information about co-packing as tariff protection, check out our products or visit our homepage today!