What is tolling in manufacturing for a beverage brand?
Suppose you're producing a sparkling drink in 12-ounce cans. Your brand buys the flavor, sweetener, cans, can ends (lids), and trays from its suppliers. The co-packer receives those materials, batches the beverage, runs the agreed production process, fills and seals the cans, and packs the finished cases. The tolling fee pays for that production work.
Your team is also responsible for coordinating the materials it buys. That means placing orders, paying suppliers, arranging deliveries, and following up when a shipment or document is missing. The co-packer still needs to approve those materials for its process and equipment before they can be used.
Tolling versus turnkey beverage manufacturing
Co-packers vary in the services they offer, including ingredient sourcing and other support. Confirm what each facility will handle.
With turnkey production, the co-packer purchases the agreed ingredients and packaging for your run. Its quote includes those materials and the production fee. Your team still approves the formula, packaging, and finished-product requirements, but has fewer supplier orders to manage. Freight, storage, testing, or other charges may still be separate.
You can also divide purchasing between your team and the co-packer. For example, you might buy a custom flavor from your flavor supplier while the co-packer buys standard cans and cases. This is often called a hybrid arrangement. Agree on who orders each item before either side starts purchasing.
| Decision | Tolling | Turnkey | Hybrid |
|---|---|---|---|
| Who orders materials | You order the agreed ingredients and packaging | The co-packer orders the materials included in its quote | You and the co-packer each order specific items |
| What you pay the plant for | Production and any additional charges | The agreed materials, production, and any additional charges | Production, plant-purchased materials, and any additional charges |
| What your team manages | Orders, supplier payments, and deliveries for the materials you buy | Product approvals and purchasing that the co-packer does not cover | Your supplier orders and coordination with the co-packer's purchasing team |
| What to confirm | The plant's material requirements and delivery deadlines | Which materials the co-packer will purchase and what its quote excludes | Who orders each ingredient and packaging item |
Under any of these arrangements, supplier minimums can leave you with unused ingredients or packaging. Confirm who pays for that inventory, where it will be stored, and whether it can be used on the next run. Having the co-packer place an order does not necessarily mean it will absorb the cost of what is left over.
What a tolling fee includes
A tolling fee covers the production services listed in the co-packer's quote. Confirm whether that includes batching, processing, filling, sealing, lot coding, case packing, cleaning, and routine quality checks. Label application or a particular case configuration may need to be quoted separately.
Setup, changeovers, outside laboratory testing, material receiving, storage, and freight may also carry separate charges. Get these listed in the quote so you know what is included in the production fee and what will appear elsewhere on the invoice.
Co-packers may quote per can, case, gallon, or production hour. Convert quotes to the same basis before comparing them, using the same pack size and included services. For an hourly quote, ask what production speed the estimate assumes. Confirm whether billing is based on units filled, cases packed, or finished units released for sale, and how additional line time is charged.
Ask about minimum order quantities (MOQs), including whether they apply per stock keeping unit (SKU), packaging format, or production run. Ingredient and packaging suppliers may have their own minimums.
In a tolling arrangement, your brand typically pays suppliers directly as well as paying the co-packer. Map out when supplier payments, production deposits, and balances are due so you understand the cash needed before, during, and after the run.
There is no standard tolling rate for beverages. Formula complexity, processing requirements, packaging, and run size all affect the work involved. A rate from another brand's soda run may tell you very little about what it will cost to produce your protein drink.
For a complete run budget, add your ingredient and packaging purchases, freight, and any separate fees. Our contract bottling cost and quote breakdown explains that calculation, including how production losses affect cost per finished unit. Formulation is a separate development expense unless it is included in the co-packer's scope.
Getting ingredients and packaging ready for the run
With tolling, your supplier orders need to match the co-packer's production schedule. Before placing them, confirm which ingredients and packaging the plant has approved, how much it needs, and when everything must arrive. The plant may require extra quantities to cover expected production losses; agree on those quantities rather than ordering only enough for the planned finished-unit count.
Get the plant's documentation requirements before ordering. Depending on the ingredient and product, it may need specifications, allergen statements, certificates of analysis (COAs), or certification documents. Supplier approval may require additional food safety documentation, such as audit reports or relevant food safety plans. Confirm what is required and allow time for review before the materials are needed.
Confirm the packaging specifications as well, including the container, closure, label, and case or tray.
Track shipments through receipt at the co-packer, not just dispatch from the supplier. A flavor can arrive on time and still be held because its required COA is missing. Have someone confirm that the plant has received the correct quantities and cleared the materials for use before treating the run as ready.
Also settle what happens if a supplier misses the delivery deadline. Can the plant hold your production slot? Will rescheduling trigger a fee? Those answers matter when your brand is coordinating several suppliers for one run.
What a toll manufacturing agreement should clarify
A toll manufacturing agreement establishes the responsibilities between your brand and the co-packer. It may be structured as a master services agreement (MSA), with run-specific quantities, schedules, and pricing documented separately in production quotes, purchase orders, or schedules.
Review these documents together. They should make clear who supplies materials, which specifications apply, what production services are included, and how payment, losses, and additional charges are handled. For tolling, pay particular attention to what happens if your materials arrive late, damaged, or unsuitable for production.
| Area | Question to settle |
|---|---|
| Production instructions | Which approved formula, batch sheet, process, and packaging specifications will the plant use |
| Materials ownership | Who owns ingredients, packaging, batched beverage, and finished goods while they are at the plant |
| Orders and leftover stock | Who orders and pays for materials, and what happens to stock left after the run |
| Payment and extra charges | When deposits and balances are due, how rescheduling is handled, and who approves additional charges |
| Losses and rejected product | How losses are counted, who pays, and what happens to product that fails specification |
| Approval to ship | Who reviews test results and any problems with the batch before authorizing shipment |
| Production records | Which batch records, test results, and inventory counts will your brand receive |
| Moving to another plant | How your formula documents, ingredients, and packaging can be transferred |
Agree on how the plant will record material usage and losses, who pays for damaged materials or rejected product, and how remaining inventory will be accounted for after the run.
Formula ownership is a separate issue. If your brand owns the formula, the agreement should preserve that ownership and your right to take it to another manufacturer. If you are using a formula supplied or licensed by the plant, confirm the restrictions on producing it elsewhere.
Have your attorney review the agreement before signing. [1] Review the purchasing, scheduling, and quality responsibilities with the people handling the run.
Our guide to choosing a co-packer covers the facility evaluation in more detail. Confirm the plant's experience with your product and its ability to run your process and packaging before negotiating the tolling fee.
When tolling is a good fit for your brand
Tolling can be a good fit when you have established suppliers and someone on your team who can manage the orders. It gives you direct visibility into ingredient and packaging prices and lets you keep supplier relationships as you grow or change manufacturers. Plan for supplier payments as well as the production deposit, and confirm when each is due. Your team also needs time to coordinate the deliveries.
Turnkey can be useful when the plant already buys the materials you need and your team would otherwise struggle to manage purchasing. Check that its suppliers can meet your specifications, that substitutions need your approval, and that you understand any commitment to unused inventory.
You do not have to hand over every supplier relationship to get purchasing help. A hybrid arrangement can let you retain a specialty ingredient supplier while the plant handles standard packaging. The purchasing list should make that division explicit.
Choose based on the full cost, the work your team can reliably handle, and the co-packer's overall fit. Production capabilities, quality standards, capacity, location, communication, and reliability all matter. A plant that offers only toll manufacturing may still be your best production partner, provided your team or an operations partner can manage the purchasing responsibilities.
A strong co-packer relationship depends on clear specifications, realistic forecasts, timely payments, and prompt decisions. Agree on who communicates changes, approves additional costs, and handles problems before production begins. JAI helps coordinate that work between your brand, suppliers, and the plant.
What to prepare before requesting a tolling quote
Give each candidate the same formula and batch instructions, finished-product specification, processing requirements, packaging details, and run quantity by flavor or SKU. Include the target production date, quality and certification requirements, and any storage or freight needs. List the ingredients and packaging you will supply and anything you want the plant to purchase. If the formula, package, or process is still being finalized, say so; those changes can affect the quote.
If you are still defining the product, start with the product requirements document (PRD) in our beverage formulation guide. It captures the requirements for formulation. By the production handoff, the plant needs the final formula, batch sheet, and approved finished-product specifications. Our guide to starting a beverage company explains where those steps fit in the launch.
Use JAI's free Co-Packer Evaluation Scorecard to compare capability, capacity, certifications, equipment, geography, and performance. Its commercial-terms worksheet records quoted production fees and other listed charges alongside the facility score. Add any materials, freight, or other costs you pay separately when preparing the full run budget.