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What are your thoughts on a proposed contract product?


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I have a company that has requested a new product specifically for them.

R&D fee's for new flavored product?

we will handle TTB, MFG of product, Filling/boxing.

Customer is supplying there own packaging. we will just MFG product, Fill and Box. 

start project will be 3,000-3,500 cases.

i was thinking of 

R&D fee, TTB fee, then an ongoing filling fee. filling fee to incorporate raw goods and any taxes due by me. 

any and all help would be much appreciated. 

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If the price is right and it will generate cash flow, while not overwhelming your production, it may be worth doing. Many factors to consider in such a decision

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We're doing a similar contract now.

You're the DSP so your name is on the label as the distillery and bottler, so you might as well take a percentage of the distribution as you will have to mess with bottling and shipping and taxes.  

Charge for R/D. (pre paid)

Charge per batch/barrel. (net 15)

Charge for COLA submission (net 15) - minor stuff, but it's a cost to you to mess with it.

Charge for bottling and warehousing (net 30) - man-hours and sq ft rent.

Charge a % on sale to distributor(s). (net 30). If you sell the bottles in your tasting room you will need to also have an agreed to price per bottle you will pay them.

Excise tax (COD)

Make sure your attorney and CPA are involve from day one.  Track everything.

Don't sell your services cheap.  You built your distillery, studied and sweated to get to where you are. They need to pay a fair price for your time, equipment and expertise.

And make sure like CaptnKB said, make sure the loss of production for your business is worth it overall or walk away.

Just my opinion. Best of luck

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