What is a CMO?
Words by Carlos Pichardo
yet2 recently shared some insights on the hottest trend in scouting: Contract Manufacturing Organizations. Given yet2’s experience connecting clients to suitable CMOs, we thought it helpful to put together a nuts and bolts guide.
What is a CMO?
A Contract Manufacturing Organization (CMO) is an outsourced manufacturer who manufactures a product for a brand. For example, a coffee shop has the recipe for a unique blend of coffee but does not have the manufacturing capability to produce it in high quantities; the coffee shop could outsource the blend’s manufacturing to a bean manufacturer. The coffee shop would be the brand, while the bean manufacturer would be the CMO. However, each business has unique needs corresponding to different types of CMOs. If you are confused, don’t worry! yet2 will help you wade the CMO waters.
Types of CMOs
A private-label CMO allows a brand to market its manufactured products under the brand’s company. It is “private” because only the brand can market the CMO’s product as its own. The brand details the product’s specifications and relies on the manufacturer to produce it. For example, in a recent yet2 project, a client sought an oral care manufacturer with specific manufacturing capabilities. Our client would go on to market the product under their brand, although the CMO manufactured it. Private-Label CMOs can help companies outsource large-quantity production without investing in a manufacturing plant.
A white-label CMO is a CMO whose products are sold to multiple brands in charge of branding the product. The products are often the same and only differentiated by branding. White-label CMOs differ from private-label CMOs in their willingness to let multiple clients use the same product. Brands using white-label CMOs have little say in the product’s specifications but have access to quick cost-efficient products. White-label products are often generics, but with increasing quality, they can be a worthwhile addition to a company’s line of products.
Individual Component CMOs:
An individual components CMO refers to a CMO who produces one part of a brand’s final product. For example, one yet2 client is looking for CMOs able to manufacture one component (or multiple components) of their gum disease treatment. yet2 often helps companies find CMOs able to target specific manufacturing pain points. For example, individual component manufacturing can help protect against supply chain shocks by diversifying manufacturing. It can also allow specialized manufacturers to focus on one step in the product’s manufacturing, ensuring quality.
Although Contract Research Organizations (CROs) are not technically CMOs, they are similar enough to be included in this guide. CROs, like CMOs, are outsourced services. The principal difference is that CROs focus on product development instead of manufacturing. For example, a pharmaceutical company is looking to bring to market an alternative insulin delivery method. They have a product design but need a partner to convert the concept into a product. The pharmaceutical company could contract a CRO to develop but not manufacture the initial product. The CRO may even have the infrastructure to run clinical trials needed for regulatory approval (which is necessary to market the product). Outsourcing research is a viable solution for companies working on diversifying product lines or start-ups seeking product development.
Contract Development and Manufacturing Organizations (CDMOs) are like a blend of CMOs and CROs. Brands contract CDMOs to manufacture products as well as innovate them. For example, one yet2 client is seeking a company able to manufacture home care products and willing to innovate new forms for these products. CDMOs are more comprehensive than CMOs, so companies seeking to develop and manufacture their products should consider CDMOs.
Toll manufacturing is similar to contract manufacturing but differs in terms of who is responsible for sourcing the raw materials. In toll manufacturing, the company hiring the toll manufacturer is responsible for providing all raw materials and inputs to the toll manufacturer, who then performs production, assembly, and delivery of the finished or semi-finished product back to the hiring company. In contract manufacturing, the CMO serves as a more complete supply chain partner and also handles sourcing and acquisition of the raw materials needed to manufacture the finished product or formulation. A key decision criterion in choosing between toll manufacturing and contract manufacturing is if you want to have control over raw material sourcing, quality, and cost of raw goods or would prefer the manufacturing partner to take that on as well.
CMOs can be a great tool for companies by providing cost-effective manufacturing that frees up resources. However, an inadequate CMO will result in low-quality products, high costs, and delayed supply chains. We can help you find a certified CMO who meets industry regulations, will save you money, and create quality products your customers will love.
yet2 has curated a proprietary database of global CMOs that continues to grow and has led several scouting projects helping our clients find and partner with the right CMO.
For any CMO questions or inquiries, contact yet2!
- A contractor who manufactures products for a client
- A contractor who manufactures products under the name of a brand.
- Nobody else can brand the product.
- A contractor who manufactures (generally) generic products for several brands.
- Individual Component
- A contractor who produces just one element of a final product.
- A contractor that works on product development instead of manufacturing.
- A contractor that both manufactures and develops a product.
- Toll Manufacturer
- A contractor that manufactures the product for a customer, but does not source the raw materials.
- The customer provides all raw materials to the manufacturer.
- Seeking: Confectionery Contract Manufacturers for Chocolate Bars and Blocks
- Seeking: Innovation Partners in Professional Oral Care in North America and Europe
- Seeking: LATAM Home Care and Personal Care Manufacturing Partners
- Seeking: LATAM Professional Oral Care Manufacturing Partners
- Seeking: CDMOs to Produce a Generic Version of a Professional Oral Care Product
- Seeking: Soap Sheet Suppliers