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Now's a good time for consumer brands to consider white label arrangements to get their products out via diff. channels. New revenue stream when stores/restos are closed. Be it #food, #beverage or #cannabis, here are some thoughts on what goes into a white label / co-pack deal /1
Exclusivity – is the producer being appointed as the exclusive producer of this product? Exclusive producer of all products? Is the business big enough that the producer can’t produce any competitive products? /2
Sales – while one party is the brand owner and the other the producer, who is responsible for distribution, shipping logistics and sales? This takes on added weight if the product is a #cannabis one and there is an exclusive provincial wholesaler /3
Branding – if producer is making use of branding content on packaging, products or sale, brand owner should have specific guidelines that are clearly communicated in writing /4
IP ownership – any IP (be it branding or product specifications) should remain the property of the brand owner, under license to producer /5
Forecast – parties should meet at regular intervals to arrive at monthly or quarterly production forecast and, once agreed, consider if those details should be binding on the producer to meet /6
Shortfall – consider what remedies are available to brand owner if producer becomes aware that it is unable to produce the agreed product quantity. How much notice? What contingency plans? Can third parties be engaged? Can damages be quantified? /7
Unsold product – what happens to produced products that go unsold? Does brand owner have obligation to pay for product costs? Can unsold product be directed to be sold elsewhere? /8
Approvals – agreement should set out acceptance testing of products so it is clear how and when products are sampled, reviewed, rejected or approved for distribution and sale /9
Quality assurance – define how and when brand owner can access facility and test products. Brand owner must have clearly communicated quality control details and access to assurance data, as well as right to be notified of any government action /10
Packaging – who is responsible for design? Who is responsible for selection of materials and supplier? Who is responsible for cost? /11
Pricing – is retail price mutually agreed, or exclusively up to the brand owner to decide? With #cannabis products being sold by producer to wholesaler, brand owner will want approval rights to extent permitted /12
Fees – how does producer get paid? A fixed fee per unit? A percentage of sales? /13
Reporting – what kind of sales and products reports does brand owner want, and how often? What audit and access right are appropriate? /14
Recalled products – need to provide for process steps in the event of a product recall. How and when does notice get delivered? How is fault allocated? How are fees adjusted? Who has say over recall procedure with wholesaler or retailer? /15
Marketing – ordinarily, entirely within the purview of brand owner, but takes on new weight with #cannabis products. Producer may want approval rights given high risk of exposure to liability with their name on the package. Indemnification may be flashpoint for negotiation /16
Term – what’s the duration of the agreement? Renewal terms? Termination rights? For cause? For convenience? On how many days’ notice? /17
These are the big-ticket items, but there are always other business and legal details to negotiate. Hopefully this helps some businesses with exploring new sales channels and product offerings to get the brand out there when brick-and -mortar sales are suspended /END
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