In the distilled spirits industry, collaboration between brand owners and contract producers (often called “co‑packers”) is common. Whether you are a brand owner looking to bring a new spirit to market without building your own facility, or a co‑packer producing spirits on behalf of others, one thing is critical: having a well‑drafted contract in place.
Why Contracts Matter
A handshake agreement may seem easier, especially when you have an established relationship. However, distilled spirits production involves significant financial investment, regulatory requirements, and brand reputation risk. A formal contract helps to:
- Define Roles and Responsibilities: It ensures clarity on who supplies raw materials, handles production schedules, manages compliance, and bears specific risks.
- Establish Quality Standards: Spirits are closely tied to brand identity. A contract can outline specifications for sourcing, production methods, testing, and packaging, protecting product integrity.
- Protect Intellectual Property: Proprietary recipes, trade secrets, and brand trademarks need contractual safeguards to prevent misuse or unauthorized disclosure.
- Clarify Pricing and Payment Terms: Contracts set clear expectations for costs, payment schedules, and price adjustments, reducing the risk of disputes.
- Address Regulatory Compliance: Distilled spirits are highly regulated. A contract may help allocate or clarify responsibility for TTB compliance, state permits, recordkeeping, and excise tax obligations.
- Provide Remedies for Breach: Without a contract, enforcing rights or seeking remedies in case of nonperformance or quality issues may become more complex and costly.
Key Contract Considerations
When drafting or reviewing a co‑packing or contract production agreement, consider including:
- Scope of services and production volumes
- Production specifications and quality control procedures
- Ownership of raw materials and finished products
- Intellectual property and confidentiality provisions
- Insurance requirements and liability allocations
- Dispute resolution mechanisms
- Termination rights and notice periods
Ultimately, a well-structured contract should clearly define expectations, responsibilities, and protections for both parties. Taking the time to address these details up front can help avoid costly disputes and ensure a strong, long-term partnership.
Bottom Line
For both brand owners and contract producers, a contract is not just a formality—it’s a business safeguard. It ensures mutual understanding, helps prevent costly disputes, and supports compliance in one of the most regulated industries in the U.S.
How Lindsey Zahn P.C. Can Help
At Lindsey Zahn P.C., we focus on alcohol beverage law and understand the unique challenges faced by distilled spirits brand owners and co‑packers. Our team can:
- Draft and negotiate co‑packing and contract production agreements tailored to your business needs.
- Review existing agreements to identify potential risk areas and strengthen protections.
- Ensure compliance with TTB and state regulatory requirements within the contract framework.
- Guide both brand owners and producers through structuring relationships that align with operational, financial, and compliance goals.
Whether you are a start‑up brand looking for your first co‑packer or an established distillery entering into multiple production partnerships, our firm can help protect your interests and set your business up for long‑term success.
If you’re unsure where to start—or confused about an agreement provided to you by another party—contact us today to schedule an initial consultation. We’ll walk you through and explain every step of the process.
📩 Email us at info@zahnlawpc.com
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