Co-Manufacturing & Private Label: Premium Foods Spark Growth 

As consumers seek healthier, more natural foods with functional benefits, many food and beverage categories are evolving. New brands are emerging, and retailers are expanding their private label offerings to capitalize on growth opportunities from changing consumer preferences. Third-party manufacturing partners are benefiting from these trends as both food brands and retailers increasingly rely on them for production capacity and innovation.

Below, senior professionals from our Consumer Group share what’s driving investor interest in private label products and co-manufacturers across the food and beverage space, as well as the key differentiators of recent client Patriot Pickle.

Greater Reliance on Private Label and Co-Manufactured Solutions

Rising consumer demand for premium and fresh food items is motivating many grocery retailers to reevaluate historically stable categories and find new brands or launch private brands of their own. Often, emerging brands or retailers turn to co-manufacturers for production. “Up-and-coming food brands typically lack the scale to manufacture efficiently, or they don't consider manufacturing to be a core competency. Instead, they focus more on brand building,” says Brant Cash, a managing director in our Consumer Group. “Because of this, they rely on co-manufacturing partners to help them get to market quickly with turnkey solutions and navigate their continued growth with ongoing innovation, capacity investments, and service.”

At the same time, retailers are looking to take advantage of shifting consumer preferences by expanding their suite of private label products. Retailers are focused on building their own differentiated brands that provide unique options to shoppers and increase consumer loyalty, while capturing additional profitability from selling their own products. “Many retailers now offer multiple levels of private label brands, each with distinct price points and packaging, to entice a wider demographic,” says Tim Alexander, a Consumer Group managing director. “These retailers rely on third-party manufacturers to provide turnkey solutions that often compare and compete well with national brands.” 

Richard Furseth, a Consumer Group vice president, points out that as private label and co-manufacturers offer solutions across various price points from value to premium, scale can be a key advantage. “Emerging brands and retailers are increasingly looking to third-party manufacturing partners that can support their existing footprint and grow alongside them,” he says. “That often means multiple manufacturing facilities across geographies, investments in capacity and capabilities, and in-house innovation capabilities.”

Rising demand for co-manufacturing signals investor opportunity, notes Ryan Freeman, a managing director in our Consumer Group. He highlights that many investors like the brand-agnostic appeal of co-manufacturing. “Within growing categories, investors can diversify their risk by investing in a manufacturer that supplies multiple brands. Rather than betting on a single brand and by operating further up the supply chain, they can benefit from broader category trends,” he explains.

“There are many food and beverage categories where changing consumer desires are likely to drive disruption and value-creation potential,” adds Cash. “The fermented foods category is a great example, with our client Patriot Pickle exemplifying the segment’s attractive growth opportunities.”

Patriot Pickle: A Leader in a Growing Category 

Patriot Pickle is one of the largest refrigerated pickle suppliers to the retail and foodservice channels, producing a diverse range of fresh pickle and fermented food products and offering branded, contract manufacturing, and private label solutions.

Scale provides meaningful benefits for Patriot Pickle, starting with its ability to support national programs, whether through emerging brands, private label programs, or large restaurant chains. “National retail and foodservice customers look for similarly scaled suppliers to streamline supply chains and achieve consistency. Patriot Pickle is capitalizing on this need with its ability to supply fresh pickles year-round from multiple geographic regions,” says Cash. “The company saw continued opportunity to further capitalize on this dynamic, steadily investing in capacity expansion and entering new geographic regions through M&A.”

Patriot Pickle’s expertise in managing its fresh food supply chain is a strong differentiator, according to Alexander. “The company can move cucumbers from farm to package in five days or less,” he says. “Strong grower relationships and scale help it to consistently and predictably provide products to customers that exceed quality expectations.”

The business also runs highly efficient operations with minimal waste. “Patriot Pickle finds the best use for its cucumbers across channels, whether that be spears, chips, or relish,” mentions Furseth. “This dynamic provides stability for the platform, drives manufacturing efficiency, and ensures reliability for its customers.”

Complementing Patriot Pickle’s streamlined manufacturing is its best-in-class customer service. “Patriot Pickle excels at on-time delivery for both branded and private label customers, while providing robust innovation and product customization capabilities,” explains Freeman. “These traits make it appealing to those seeking a partner that can reliably fill shelves and support new product development.”

Plentiful Platform-Building Opportunity

Like Patriot Pickle, leaders in co-manufacturing and private label are finding ways to expand organically and through M&A. To do so, they are partnering with strong food and beverage brands and retail partners to benefit from overall growth in the categories they supply.

“Across various sections of the grocery store, we have seen sleepy categories with clear incumbents get disrupted by emerging brands, then further impacted by private label solutions,” says Freeman. “These brands and retailers often need third-party manufacturing partners that can introduce innovative items to drive consumer interest in the category, while investing in scale and new capabilities alongside them.”

Cash summarizes that there are many ways to build a platform in the space. “Winning platforms seem to pick one or two categories that are growing and invest behind manufacturing capabilities and innovation—both organically and through M&A. Once a manufacturer has built expertise and scale, and established strong customer relationships, it is well positioned to expand into adjacent product categories for the same accounts.”

Given the food sector tailwinds at play, the future of third-party food manufacturing is bright. “The expansion potential within private label and co-manufacturing continues to draw investors to the sector,” says Alexander. “Appetite should remain healthy for those platforms that can differentiate in this growing market.”

To discuss M&A opportunities in private label and co-manufacturing, please contact our senior professionals.