Contract manufacturing for RTDs and seltzers: what to agree first

Why the agreement matters more than the price

A contract manufacturer, often called a co-packer, turns your recipe into a packaged drink on their line, under their licences. Founders tend to focus on the price per can. The bigger risk sits in everything the price assumes: who checks the drink, who decides a batch is fit to sell and who pays when it is not.

The same lessons apply as in beer. Our guide to the contract brewing quality agreement covers the parallel case. Most of it carries over to seltzers and RTDs.

Licences and who holds what

An alcoholic RTD or seltzer must be made at a site licensed for that category by the state excise department. The brand owner usually also needs its own registrations, including label or brand registration, in every state where it sells. Rules vary by state. Some categories such as seltzer are classified differently from one state to another. Work through it with a licensing consultant before you commit to a launch date.

Alcohol-free drinks fall under food regulation instead, so the manufacturer needs the right FSSAI licence for the product category.

The specification sheet

Write down exactly what the drink must be, with a target and a tolerance for each line. At a minimum:

• ABV, for example 5.0% plus or minus 0.2%.
• Carbonation in volumes of CO2.
• pH or titratable acidity.
• Sugar or Brix, if the drink is sweetened.
• Colour and clarity, with a reference sample.
• Dissolved oxygen in the package.
• Fill volume and seam or crown checks.
• Microbiological limits and the test method.

Without numbers, every disagreement becomes an argument about taste. With numbers, it becomes a lab result.

Agree the test method for each line as well as the number. Two labs measuring ABV or dissolved oxygen in different ways can give different answers on the same can. Name the method, the instrument where it matters and how often it is calibrated. Then attend the first run in person and taste from the start, middle and end of the fill.

Ingredients and the recipe

Decide who buys what. Flavours, sweeteners, acids, base alcohol and cans all affect the drink. A substitution can change it. Many brands buy their own flavours from a flavour house and supply them to the co-packer so the recipe stays theirs. Write in that no ingredient may be changed without your written approval.

Protect the recipe. Agree that the formula belongs to you, that the manufacturer keeps it confidential and that it cannot be used for anyone else's drink. A lawyer should draft or review this part.

Testing, release and retained samples

Agree which tests are run on every batch, by whom and when. Agree that the drink is held until it passes. Name the person who signs the release. Ask for a certificate of analysis with every batch.

Ask the manufacturer to keep retained samples from each batch, stored for the full shelf life, so any complaint can be checked against the original. Keep some yourself too. Agree a shelf life and how it was tested. RTDs with juice, dairy or low alcohol can spoil. Flavours fade in Indian heat. See our guide on new product development for drinks for how to plan those trials.

Minimums, scheduling and cost of change

Co-packers set minimum run sizes, because changeovers and cleaning cost them time. A minimum that sounds small in litres can be many months of sales for a new brand. Price the cash tied up in stock, excise paid in advance where the state requires it and warehouse space.

Ask how far ahead you must book line time, what happens if you cancel and how quickly they can do a second run if the first sells out. Agree who pays for wasted cans and labels when a design changes.

Complaints, recalls and walking away

Agree how complaints are investigated and who pays for product that fails because of a manufacturing fault. Make sure batch codes on every can trace back to a production record, so a recall can be limited to the affected batches.

Finally, plan the exit. Agree notice periods, what happens to your ingredients and packaging stock and how you take the recipe to another manufacturer if the relationship ends. Founders who skip this part often find that leaving costs more than staying.

Common questions

Who owns the recipe in a contract manufacturing deal?

It should be you, written into the agreement with confidentiality terms. Have a lawyer draft or review this clause.

What tests should every RTD batch have?

At least ABV, carbonation, pH or acidity, sugar if sweetened, dissolved oxygen, fill volume and microbiology, each against a written target and tolerance.

Do I need my own licence if a co-packer makes my drink?

Usually the brand owner needs its own brand or label registrations in each state of sale, even when the manufacturer holds the production licence. Check with a licensing consultant.

Why keep retained samples?

So any complaint or quality dispute can be checked against a sample from the original batch, stored for the full shelf life.