Executive summary
The U.S. food and beverage co-manufacturing sector is in a sustained growth cycle as brands and retailers shift production to outsourced partners. The thesis is straightforward: structural demand is moving toward asset-light operating models, and contract manufacturers sit directly in the path of that shift. About two-thirds of F&B brands plan to increase their use of contract manufacturers over the next three years, redirecting capital and management attention away from low-margin production and toward marketing, innovation, and brand building. For investors and operators, this is a sector where the secular tailwinds are clear and the deal activity is already validating the thesis.
Three demand drivers are reshaping who makes F&B products
The first driver is private label expansion. U.S. private label sales have posted strong growth and share gains over the past five to ten years, and roughly 65% of tracked food categories experienced private label volume share gains year-over-year. Retailers almost always outsource formulation and manufacturing because they lack in-house production expertise, which makes them reliable, high-volume customers for co-manufacturers. Private label share of the tracked categories has held in the roughly 19% to 21% range across 2021 to 2024, and retailers continue to build multi-tiered portfolios that span premium, mainstream, and commodity offerings. Consumer perception has moved with them: about 50% of consumers now believe private label products offer equal or greater quality relative to branded products.
The second driver is the rise of digitally native and specialty brands. The e-commerce channel for specialty F&B products has grown roughly 30% year-over-year since 2020, giving smaller brands a path to reach consumers and compete for share of stomach against established players. These brands prioritize speed, and co-manufacturers deliver it: production can be scaled in as fast as about three months through a co-man partner, whereas building vertical integration can take several years. The third driver is evolving consumer preference. Demand for better-for-you, clean label, plant-based, sustainable, and personalized products often requires specialized expertise, such as high-pressure processing or plant-based protein blending, that brands do not hold internally and co-manufacturers do.
Large CPGs are following the same playbook
Outsourcing is no longer confined to emerging brands. Established CPGs are deliberately moving away from asset-heavy production toward more agile co-manufacturing partnerships. Boston Beer produced approximately 79% of its packaged cans through third-party co-manufacturers or co-packers in 2024. Coca-Cola has leaned on contract manufacturers as it expands into adjacent categories, including alcoholic beverages produced through third parties. Kraft Heinz has expanded its contract manufacturing footprint to reduce capital expenditure, improve quality, and add innovation capabilities, with its Chief Procurement Officer pushing to treat external manufacturers as an extension of the company rather than a transactional supplier. Beyond Meat and Halo Top both used co-manufacturers to scale rapidly while protecting product consistency and concentrating on brand and innovation. The common thread is a decision to treat manufacturing as a capability to be sourced rather than owned.
M&A activity confirms investor conviction
Co-manufacturers with differentiated, scalable capabilities are attracting both strategic and financial buyers. Recent transactions include Monogram Capital Partners reacquiring Western Smokehouse Partners in July 2025 at approximately $500M, Nonantum Capital Partners acquiring national-scale co-manufacturer MSI Express in March 2025, and New Harbor Capital’s majority growth investment in R&D-focused FoodPharma in the first half of 2025. Strategics are equally active, with TreeHouse Foods acquiring Harris Tea for approximately $205M in January 2025 and Celsius acquiring its long-time co-packer Big Beverages for approximately $75M in November 2024. The pattern points to a market where capacity, certifications, and R&D depth command premium valuations.
Implications for investors and operators
For investors, co-manufacturing offers exposure to a demand base that is diversifying across private label, emerging brands, and large CPGs at once, which lowers concentration risk and supports durable volumes. Diligence should focus on customer mix, contract structure, switching costs, and the defensibility of specialized capabilities such as proprietary processing or formulation. Assets with genuine R&D depth and certification breadth are the ones drawing competitive bids. For operators, the message is that production scale is increasingly a service to be purchased rather than a moat to be built. The brands winning share are concentrating capital on innovation, marketing, and customer experience while partnering for speed, flexibility, and regulatory expertise. The firms that combine reliable capacity with innovation support will capture the most attractive customers.
Contact us for the full report, which adds detailed customer segmentation analysis, the complete private label sales and share dataset, the full co-manufacturing M&A transaction set, and our view on capability differentiation that drives valuation.