While trademarks are vital to brand identity, they’re just one part of a much larger legal framework necessary to bring a food or beverage product to market. At Juris Law Group, P.C., we advise companies across every stage of their business—from brand creation and protection to formulation, production, distribution, and scaling. Among the most important, yet often underappreciated, contracts in this process is the manufacturing agreement.
At Juris Law Group, P.C., we’ve worked with clients across every stage of growth, from emerging CPG brands to global manufacturers. One of the most consequential documents in any brand’s legal toolkit is the manufacturing agreement—a contract that governs how, where, and by whom your product is made. When properly drafted, it can be the difference between operational efficiency and legal crisis.
In this article, we break down why manufacturing agreements are indispensable for food and beverage businesses, what key provisions they must include, and how your legal team can play a proactive role in safeguarding your client’s products, brand, and long-term success.
What is a Manufacturing Agreement?
A manufacturing agreement—sometimes referred to as a co-packing or private label agreement—is a legally binding contract between a brand owner (the “Customer”) and a manufacturer (the “Co-Packer”) who agrees to produce, assemble, and/or package products on the brand owner’s behalf. These agreements dictate everything from formulations and raw materials sourcing to pricing, liability, regulatory compliance, intellectual property, and termination rights.
Although these contracts may appear operational in nature, they are complex legal instruments that, if not handled correctly, can expose the brand to product liability, regulatory fines, reputational damage, and the loss of trade secrets.
Why They Matter: Legal, Operational, and Strategic Value
1. Product Consistency and Quality Control
Inconsistent quality from one batch to the next doesn’t just alienate consumers—it opens the door to lawsuits and regulatory recalls. A well-drafted agreement includes testing procedures, quality benchmarks, audit rights, and defined remedies for non-conforming products.
2. Preserving Intellectual Property
Your client’s recipe, packaging design, label artwork, and formulations are their crown jewels. Without contractual clarity, these assets may be inadvertently shared with other customers or even claimed by the manufacturer. A strong agreement should establish clear IP ownership, include non-disclosure obligations, and protect against reverse engineering.
3. Avoiding Regulatory Exposure
The food industry is governed by a tangled web of U.S. regulations: FDA, USDA, FTC, state health departments, and environmental regulations like California’s Proposition 65. A manufacturing agreement ensures each party knows its responsibilities and that liability falls on the appropriate party in the event of non-compliance.
4. Protecting Brand Equity
When issues arise—such as recalls, packaging errors, or missed deliveries—the fallout often hits the brand, not the manufacturer. Legal protections, such as indemnities and insurance requirements, are essential to preserve the brand’s public trust.
5. Supporting Scalability
Manufacturing agreements can help growing companies lock in pricing structures, secure production capacity, establish clear termination protocols, and transition to backup or additional manufacturers when needed. These forward-looking provisions are essential for any company targeting national or international expansion.
Key Legal Provisions to Include
Manufacturing agreements should be drafted specifically for the food and beverage industry, with attention to both federal and state regulatory frameworks, operational complexity, and brand-specific considerations. Below are essential provisions every agreement should include:
1. Product Description and Specifications
- Attach product specifications, tolerances, nutritional claims, and approved ingredients.
- Outline responsibilities for R&D and formulation assistance.
- Include procedures for formula updates or label changes due to new regulations (e.g., added sugars, allergens).
2. Volume Commitments and Minimums
- Define forecast obligations and minimum order quantities.
- Address manufacturer’s capacity and whether exclusivity applies by geography, channel (retail, e-commerce, foodservice), or product line.
3. Pricing and Adjustments
- Include base unit costs, handling fees, pallet or warehousing fees.
- Specify how pricing may adjust based on raw material market fluctuations or inflation indexes.
- Clarify tolling arrangements if brand supplies raw ingredients or packaging materials.
4. Intellectual Property Rights
- Define ownership of formulas, designs, confidential materials, and any improvements developed during the relationship.
- Include strict IP protections: no use for third parties, return/destruction of materials post-termination, and audit rights.
- For joint development, consider licensing or assignment provisions.
5. Regulatory Compliance
- Assign responsibility for ensuring compliance with:
- FDA food labeling requirements (21 CFR §101)
- FSMA (Food Safety Modernization Act) preventive controls
- USDA organic certification, where applicable
- Proposition 65 for products sold in California
- Require documentation (Certificates of Analysis, HACCP plans, allergen control plans).
6. Quality Assurance and Testing
- Set parameters for microbial, sensory, or chemical testing (third-party labs, frequency).
- Include batch retention and recall procedures.
- Outline nonconformance protocols: reject rights, credit/refund mechanisms, and dispute resolution for failed QA.
7. Insurance and Indemnification
- Require commercial general liability and product liability coverage naming the brand as additional insured.
- Include indemnities for third-party claims, product recalls, IP infringement, or regulatory violations.
- Define scope, limits, and survival period of indemnities.
8. Recalls and Crisis Management
- Establish who bears the cost of voluntary or mandatory recalls.
- Include step-by-step obligations for traceability, customer notifications, and FDA reporting.
- Address roles in PR response, media statements, and claim resolution.
9. Term, Termination, and Transition Rights
- Provide for early termination with and without cause.
- Include wind-down rights, raw material purchase obligations, and transfer of tooling or molds.
- Add cooperation clauses for transitioning to another co-packer.
10. Jurisdiction and Dispute Resolution
- Choose between arbitration (for confidentiality) or litigation (for injunctive relief).
- Specify governing law (U.S. state of brand’s HQ or co-packer’s location).
- For international agreements, consider language clauses, currency exchange mechanisms, and enforceability under the CISG or Hague Convention.
Special Considerations for U.S. Manufacturing
For both domestic and international attorneys advising food brands entering the U.S. market, it’s essential to navigate not just federal law, but state-specific nuances, such as:
- California’s Prop 65: Requires chemical-specific warning labels and imposes private enforcement risks.
- State Cottage Food or Local Health Laws: Vary widely and impact where and how food can be produced.
- Labeling Restrictions: Terms like “natural,” “clean,” or “healthy” have no uniform definitions and are subject to regulatory scrutiny and consumer litigation.
We frequently work with international companies looking to expand U.S. operations and address issues like:
- FDA food facility registration
- Labeling compliance and prior approval
- Import detentions and customs clearance delays
- Parallel language agreements for bilingual packaging
- Structuring U.S.-based manufacturing relationships for imported ingredients or finished products
At Juris Law Group, we don’t just advise on contracts—we help businesses grow strategically by aligning legal, operational, and regulatory strategies. Our attorneys understand the intricate needs of food and beverage companies and have represented:
- Startups negotiating their first co-packing deal
- Investors acquiring portfolio brands with multiple manufacturers
- Brands responding to recalls or packaging defects
- Large retailers managing private label relationships
Our clients rely on us to:
- Draft and negotiate customized manufacturing, tolling, and supply agreements
- Review quality assurance programs and regulatory plans
- Advise on cross-border supply chain structures
- Respond to crisis situations with speed and legal clarity
To learn more about our legal services across the food and beverage sector, including manufacturing, supply chain, and regulatory counsel, visit www.jurislawgroup.com or email us at [email protected].
