Co-mans chart success for private label

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Co-mans chart success for private label

18 Jul 2025

Joanie Spencer

Since 2008, Joanie Spencer has covered the retail and wholesale sides of the baking industry.
Serving associations such as the American Society of Baking (ASB) and BEMA, Joanie is also in demand as an industry presenter on bakery operations and trends. She holds a bachelor’s degree in communication from Rockhurst University and a master’s degree in journalism from the University of Missouri.

When she’s not running or playing soccer, Joanie spends her time with her husband and 11-year-old son.

KANSAS CITY, MO — In the world of commercial baking, contract manufacturing is among the most important relationships that exist. Whether it’s a matter of geographical distribution, speed-to-market or good old-fashioned capacity, companies are teaming up with contract manufacturers in ways that might not have been considered a decade or two ago.

“The need [for co-manufacturing] is higher than it’s ever been, and it’s growing at a pace faster than the industry it supports,” said Carl Melville, president and CEO of The Melville Group and founder of CoPack Connect. “There are near-term drivers such as inflation and the long-term growth of emerging brands, as well as the continued growth in outsourcing by legacy brands, all contributing to high levels of compound growth.”

Inflationary pressures and economic fears are driving more consumers toward private label products and the perception of their lower price points. According to the Private Label Manufacturers Association (PLMA), nearly one-fourth of US grocery products are private label or store brand items. This is well above the 17% peak that private labels saw in previous downturns, suggesting the tides are turning for this segment.

The state of private label

In many ways, private labels are brands themselves. Melville refers to them as “stealth brands,” and they’re gaining legitimacy in quality, especially when tied to popular retailers such as Trader Joe’s, Target or Costco. They have the consumer trust associated with brands, without the high costs traditional brands must often bear.

PLMA reported that in 2024, total sales of store brands reached a record high of $271 billion, and unit sales also hit a record 67.4 billion. While certain outlets have the resources to manufacture their own products, this increased demand for private label also creates a new need for contract manufacturing.

That need isn’t without its challenges, though — especially for manufacturers with capabilities to make both branded and private label products — when pandemic-related changes opened the door for more co-manufacturers to make a wider range of items.

One example is Legacy Bakehouse, a mid-size bakery that maintains a balance of manufacturing products ranging from large legacy brands to private labels.

“It used to be that CPGs typically wouldn’t bring branded products to those known as a private label supplier,” said Alain Vallet-Sandre, president of this Waukesha, WI-based bakery. “But I’ve seen that change significantly, especially during the pandemic, and it’s led to a more mature approach to private label business.”

“The need [for co-manufacturing] is higher than it’s ever been, and it’s growing at a pace faster than the industry it supports.” — Carl Melville | president and CEO | The Melville Group

Beyond a financially motivated demand for private label products, consumers are changing their expectations around quality. To meet those expectations, store brands have stepped up their game, and they’re relying on co-mans to get the job done.

“With the increased prevalence of private brands within retailers, consumers are now demanding a national brand equivalent,” Vallet-Sandre observed. “Historically, it’s been a value play. But now, to even be considered, a private label will compare its product to the national brand and others in the private label space.”

This changing landscape means that contract manufacturers are not only on the radar for what they can offer their customers; they’re also gaining visibility for what they need. Increased demand for their services requires optimizing productivity through automation upgrades that lead to more efficiency.

In terms of capacity, it all depends on the operation. For example, an order to run one million bars could be a game-changing piece of business for one operation, but for another, it looks more like a rounding error. This becomes high stakes for emerging brands that are just breaking into the market with more orders than a commercial kitchen can handle but still small enough to be a blip on the co-man radar.

“Many new brands that start in a commercial kitchen outstrip that very soon,” Melville said. “But then again, they can’t go straight to the big guys because chances are they just don’t have the volume.”

Picking the right partner

Finding a contract manufacturer with compatible capacity is the first step, but certainly not the last. New players in the market need resources that go beyond production.

“Emerging brands also look to their co-mans to be strategic partners,” Melville said. “They can provide essential functions, including food safety, product freshness, formulation, commercialization, regulatory requirements, clean label … all the things small brands worry about but can’t build a staff for. It’s about more than just stainless steel and space.”

Meanwhile, legacy brands — which likely already have those resources readily available — often rely on contract manufacturers for completely different reasons. For starters, large brands that have been household names for years usually have access to their own manufacturing, oftentimes relying on co-mans for product ideation and speed-to-market, especially for limited-time offers.

This story has been adapted from the 2025 New Products Annual of Commercial Baking. Read the full story in the digital edition here.

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