1. Introduction

In today’s competitive healthcare and consumer product landscape, building a product brand no longer requires owning a full-fledged manufacturing facility. Thanks to the growing ecosystem of third party manufacturing, businesses can bring products to market quickly, cost-effectively, and at scale—without managing the complexities of in-house production.

Third party manufacturing, also known as contract manufacturing, allows a company to outsource the production of its products to a certified manufacturer. While the manufacturing partner handles the formulation, machinery, and quality checks, the brand owner focuses on marketing, sales, and customer experience. This model is widely used in the pharmaceutical, ayurvedic, nutraceutical, personal care, and cosmetic sectors.

Whether you’re a startup planning to launch your first line of products or an established brand looking to expand your offerings, third party manufacturing offers unmatched flexibility, low capital investment, and access to GMP-compliant production expertise.

In this guide, we’ll cover everything you need to know about third party manufacturing—how it works, who can use it, what documents are required, and how to find the right manufacturing partner to grow your business.

2. How Third Party Manufacturing Works

At its core, third party manufacturing is a business arrangement where a brand owner outsources the production of their goods—such as pharmaceuticals, supplements, or cosmetics—to a specialized manufacturer. This model allows companies to focus on marketing, distribution, and branding, while the production process is managed externally by a certified manufacturing partner.

Here’s a simple breakdown of how the process typically works:

 

2.1 The Business Relationship

• Brand Owner: The company or entrepreneur that owns the product brand. They handle market research, product positioning, packaging design, and customer engagement.
   
• Manufacturer: A certified third-party facility that has the required licenses, equipment, and manpower to manufacture products according to the client’s specifications.

 

2.2 Workflow of Third Party Manufacturing

1. Product Finalization
   
   The brand owner decides the type of product they want to sell—this could be a tablet, capsule, syrup, cream, or wellness formulation.
    
2. Manufacturer Selection
   
   A manufacturing partner is selected based on capability, certifications (GMP, WHO-GMP, ISO), product range, and cost structure.
    
3. Agreement & Documentation
   
   A formal contract is signed between the parties, outlining product specs, batch size, rates, delivery timelines, and confidentiality clauses.
    
4. Packaging Customization
   
   The brand submits its packaging design and labeling for approval. The manufacturer prints it as per regulatory norms.
    
5. Production & Quality Control
   
   The manufacturing partner produces the batch, performs quality checks, and provides certificates like CoA (Certificate of Analysis).
    
6. Dispatch & Delivery
   
   Once approved, the products are packaged and shipped to the brand owner’s warehouse or distribution network.

 

2.3 Use Cases by Industry

• Pharmaceutical companies: Use contract manufacturers to launch new formulations or manage overflow production.
   
• Ayurvedic and herbal brands: Rely on third-party units for GMP-compliant production.
   
• D2C wellness brands: Outsource supplements, immunity boosters, and skincare lines to avoid factory overhead.
   
• Exporters: Use India-based third party manufacturers to produce products for regulated and semi-regulated markets.
   

This efficient model enables brands to enter the market faster, save on capital costs, and scale production without expanding infrastructure. In the next section, we’ll explore the key benefits of third party manufacturing for your business.

3. Benefits of Third Party Manufacturing

The third party manufacturing model is a proven growth strategy for companies that want to build or scale product lines without investing in their own production facilities. Whether you’re a pharma marketer, a D2C wellness startup, or an exporter, this model offers several compelling advantages:

3.1 Low Investment, High Scalability

Setting up a compliant pharma or wellness manufacturing unit requires massive investment in infrastructure, machinery, staff, and compliance. With third party manufacturing:

• You avoid capital expenditure
   
• Focus your funds on branding and distribution
   
• Scale production as demand grows—without scaling your infrastructure
   

 

3.2 Faster Time to Market

Launching a new product can take months with in-house R&D and production setup. Third party partners:

• Have ready-to-use formulations
   
• Provide faster product development and turnaround
   
• Enable quicker launches with minimal delays

 

3.3 Access to GMP and WHO-GMP Certified Facilities

Most reputable manufacturers operate GMP-certified plants, ensuring:

• Regulatory-compliant production
   
• High standards of hygiene, batch traceability, and documentation
   
• Easier product registration for export or tenders

 

3.4 No Regulatory Burden on Manufacturing

When you outsource production, the manufacturer manages:

• Plant inspections and compliance
   
• Environmental clearances
   
• Manufacturing licenses and SOPs
   

This reduces your burden of staying updated with factory-level compliance laws.

 

3.5 Flexibility to Offer Multiple Products

Working with third party manufacturers allows you to:

• Introduce diverse product ranges (tablets, capsules, syrups, topicals, etc.)
   
• Test the market with limited batches
   
• Drop or scale products based on real-time performance—without production risk

 

3.6 Ideal for Startups, Marketers, and Exporters

Whether you’re a:

• Pharma marketing company building a new brand
   
• Exporter fulfilling bulk orders
   
• Online business launching custom supplement kits
   

Third party manufacturing gives you the speed, cost-efficiency, and legal backing to operate as a lean, asset-light brand.

4. Who Can Use Third Party Manufacturing?

One of the most powerful aspects of third party manufacturing is its accessibility. You don’t need to own a factory, hire a production team, or invest crores in infrastructure to launch a high-quality product. As long as you have a valid drug license and a clear product plan, you can use third party manufacturing to build your brand and grow your business.

Here’s a look at who typically benefits from this model:

 

4.1 Pharma Marketing Companies

Pharma marketing companies that don’t manufacture in-house often use third party manufacturers to:

• Launch branded generics or specialty drugs
   
• Expand product lines quickly
   
• Fulfill government or institutional orders
   
• Reduce fixed operating costs
   

This is especially common in cardiology, dermatology, pediatrics, and gastroenterology segments.

 

4.2 Ayurvedic and Herbal Product Brands

The Ayurvedic and natural health market in India is booming. Many ayurvedic and herbal brands:

• Work with licensed GMP-certified ayurvedic manufacturers
   
• Get ready-to-launch products like churnas, syrups, tablets, and balms
   
• Focus entirely on packaging, branding, and retail presence

 

4.3 Wellness and Nutraceutical Startups

Startups selling vitamins, health supplements, or functional foods often:

• Use FSSAI-licensed third party manufacturers
   
• Launch their products on Amazon, Flipkart, and health e-commerce platforms
   
• Create premium branding without owning a plant
   

Examples include protein powders, effervescent tablets, collagen boosters, etc.

 

4.4 D2C (Direct-to-Consumer) Brands

Modern wellness and skincare brands prefer to stay asset-light. Third party manufacturing helps them:

• Launch fast, iterate quickly
   
• Maintain quality with ISO/GMP-certified partners
   
• Focus on influencer marketing, digital ads, and customer service
   

This is common in skincare, haircare, and intimate wellness categories.

 

4.5 Exporters and International Traders

Companies that supply to Africa, Southeast Asia, Latin America, and CIS countries:

• Use Indian third party units for low-cost, high-volume production
   
• Ensure compliance with WHO-GMP or country-specific certifications
   
• Brand the product according to local language and labeling rules

 

4.6 Hospitals, Clinics, and Retail Chains

Large healthcare institutions and pharmacy chains may use third party manufacturing to:

• Develop private-label medications or supplements
   
• Maintain cost control and exclusivity
   
• Build loyalty with branded in-house products
   

5. Third Party Manufacturing Process (Step-by-Step)

The success of any third party manufacturing partnership depends on how well you manage the process—from selecting the right products to ensuring quality control and timely delivery. Here’s a step-by-step breakdown of how third party manufacturing typically works in the pharmaceutical and wellness sectors:

 

Step 1: Finalize Your Product List

Start by deciding:

• What kind of products you want to manufacture (e.g., tablets, capsules, syrups, creams, powders)
   
• The composition, dosage, and packaging requirements
   
• Whether you want a custom formulation or a standard one already approved by the manufacturer

 

Step 2: Select the Right Manufacturing Partner

Choose a third party manufacturer based on:

• Product capability (dosage forms, therapeutic segments, etc.)
   
• Certifications (GMP, WHO-GMP, ISO, FSSAI)
   
• Batch size flexibility and cost structure
   
• Reputation, quality track record, and delivery timelines
   

Shortlist 2–3 options and request price quotes and product samples before committing.

 

Step 3: Negotiate Terms and MOQs

Discuss:

• Minimum Order Quantities (MOQs) per product
   
• Rate per unit (inclusive of formulation, packaging, taxes, etc.)
   
• Payment terms (advance %, balance at delivery)
   
• Turnaround time for first and repeat batches
   

Get a written quotation and agreement with terms clearly stated.

 

Step 4: Sign Agreement and Share Required Documents

You’ll need to:

• Submit a signed Product Order (PO) with product specs
   
• Share your drug license, GST certificate, and company profile
   
• Finalize a Non-Disclosure Agreement (NDA) if required
   
• Approve the manufacturer’s packaging design and labeling draft

 

Step 5: Packaging Material Procurement and Approval

• Packaging (cartons, labels, bottles, inserts) is usually done by the brand owner or approved jointly
   
• Ensure the design meets regulatory labeling requirements
   
• Submit artwork to the printer and manufacturer for coordination

 

Step 6: Product Manufacturing & Quality Testing

Once packaging material is ready:

• The manufacturer starts production as per your batch size
   
• Quality testing is conducted on raw material, in-process, and final products
   
• A Certificate of Analysis (CoA) and batch report is generated

 

Step 7: Dispatch and Delivery

• Goods are packed in ship-ready boxes and dispatched to your delivery address
   
• You’ll receive final invoices, test reports, and transport documents
   
• Balance payment is settled (if applicable) at or before dispatch
   

6. Documents Required for Third Party Manufacturing

While third party manufacturing simplifies the production side of your business, it still requires essential documentation to ensure compliance with Indian drug laws and manufacturing protocols. Submitting complete and accurate documents is crucial to avoid delays and ensure smooth operations.

Here’s a list of the key documents typically required:

6.1 Drug License (Retail or Wholesale)

This is the most important document.

• Issued by the State Drug Control Authority
   
• Must be valid and applicable to the category of product you want to manufacture (allopathic, ayurvedic, nutraceutical, etc.)
   
• Required in the name of the marketing company or individual responsible for selling the product
   

6.2 GST Registration Certificate

• Mandatory for tax compliance
   
• Must match the name and address mentioned in the drug license
   
• Helps the manufacturer issue invoices with proper tax classification

 

6.3 Company Profile

A brief document with:

• Company name and contact details
   
• Nature of business
   
• Key stakeholders or directors
   
• Website (if applicable)
   

Often requested by the manufacturer before entering a long-term contract.

 

6.4 PAN Card of the Business or Proprietor

• Acts as the official tax identity of the brand owner
   
• Must match the GST and drug license records

 

6.5 Signed Purchase Order (PO)

• Formal confirmation of product order
   
• Includes product names, quantities, specifications, and pricing
   
• Usually signed by both parties to initiate batch planning

 

6.6 Label and Packaging Material Approval

• Regulatory compliance requires that labels include details like:
   
  • Manufacturer’s name and license number
     
  • MRP, batch number, expiry date, manufacturing date
     
  • Drug composition and warning labels
     
• You must approve all packaging materials (or provide your own if agreed)

 

6.7 Marketing Authorization or Brand Ownership Letter

• Confirms that you are the legal owner or authorized marketer of the product
   
• Prevents disputes over labeling, promotion, or distribution rights

 

Optional (Depending on Product Type or Export Requirements):

• Non-Disclosure Agreement (NDA)
   
• Product stability data (for new formulations)
   
• FSSAI License (for nutraceutical or food supplements)
   
• Trademark certificate (if using a registered brand)
   

7. How to Choose the Right Third Party Manufacturer

Choosing the right partner is the most important decision in the third party manufacturing process. A good manufacturer ensures consistent product quality, compliance with regulatory standards, and timely delivery—while a poor choice can lead to delays, quality issues, and loss of brand reputation.

Here’s a checklist to help you make the right decision:

7.1 Certifications and Regulatory Compliance

Start by verifying:

• GMP / WHO-GMP Certification (mandatory for pharmaceuticals)
   
• FSSAI license (for nutraceuticals and supplements)
   
• ISO certification for quality systems
   
• Valid manufacturing drug license issued by State FDA or CDSCO
   

Why it matters: These ensure the manufacturer follows legal and international quality standards.

7.2 Product Range and Specialization

Check if the manufacturer:

• Has experience in your desired product category (e.g., tablets, capsules, syrups, ointments, injectables, etc.)
   
• Offers a wide formulation catalog or supports custom formulation
   
• Can handle batch size flexibility (good for new or small brands)
   

Tip: Ask for a product list or manufacturing brochure.

7.3 Manufacturing Capacity and Turnaround Time

• How many batches can they produce per month?
   
• What is their minimum order quantity (MOQ)?
   
• Average lead time for new and repeat orders
   
• Capacity for scaling up production if demand increases

7.4 Transparency in Pricing and Terms

Ensure the manufacturer provides:

• A clear breakdown of per unit cost (including packaging, freight, and taxes)
   
• Details on advance payment terms and balance settlement
   
• Return/refund policies (in case of defects)
   
• Inclusion of test reports (e.g., CoA, stability data)

7.5 Quality Control and Batch Testing

Ask about:

• In-house QC lab facilities
   
• Use of pharma-grade raw materials
   
• Process for stability testing and recordkeeping
   
• How often they face regulatory audits or rejections
   

Request: Sample Certificate of Analysis (CoA) from past batches.

7.6 Packaging and Labeling Support

A good manufacturer should assist with:

• Label design compliance (based on Drug & Cosmetics Act or FSSAI guidelines)
   
• Access to custom printing (cartons, foils, bottles, etc.)
   
• Packaging that meets your brand aesthetics and legal requirements

 

7.7 Client References and Reputation

• Check online reviews or pharma B2B platforms
   
• Ask for existing client references
   
• Visit the facility (if possible) to inspect hygiene, storage, and SOPs
   
• Avoid companies with repeated complaints of delayed dispatch or poor communication

By choosing a reliable and transparent third party manufacturer, you lay the foundation for a product that performs well in the market—and earns long-term customer trust.

8. Cost Structure and Profit Margins

One of the biggest advantages of third party manufacturing is that it offers strong profit potential without requiring heavy infrastructure investment. However, understanding the cost breakdown is key to pricing your products right and ensuring a sustainable business model.

Here’s how the cost and margin structure generally works:

8.1 What’s Included in Manufacturing Cost per Unit?

The per-unit manufacturing cost you pay to a third party manufacturer usually includes:

Cost Component	What It Covers
Raw Material	API, excipients, flavoring, preservatives
Processing Charges	Labor, equipment use, overheads
Packaging Material	Foils, cartons, labels, bottles, outer boxes
Label Printing	Logo, ingredients, MRP, batch number, etc.
Quality Testing & CoA	In-process checks, final product testing
Transport (if included)	Freight to your delivery address

This cost typically ranges from ₹2 to ₹25 per unit, depending on dosage form, product complexity, and batch size.

 

8.2 Additional Costs to Consider

• GST on billing (usually 12% to 18%)
   
• Design and packaging development (one-time or per SKU)
   
• Stability testing and dossier preparation (if needed for export)
   
• Cold chain logistics (for temperature-sensitive products)
   
• Warehousing and last-mile delivery (if outsourced)

 

8.3 How Profit Margins Are Structured

Product Type	Typical Profit Margin Range
Branded Generics	30% – 60%
Nutraceuticals/Supplements	40% – 70%
Cosmetics/OTC Topicals	50% – 80%
Ayurvedic Products	40% – 75%
Export Products (bulk)	20% – 40%

Margins depend on:

• Batch size (larger batches reduce per-unit cost)
   
• Brand positioning (premium vs budget)
   
• Direct-to-consumer vs wholesale pricing model
   
• Marketing and distribution overheads

 

8.4 Tips to Maximize Your Margins

• Order in larger batches to negotiate better per-unit rates
   
• Use generic formulations to reduce R&D costs
   
• Optimize packaging design to minimize waste and expense
   
• Leverage digital marketing to sell D2C with better markups
   
• Consider private labeling for multiple resellers under one production lot
   

9. Legal & Regulatory Compliance

While third party manufacturing allows brand owners to outsource production, regulatory compliance remains a shared responsibility. Whether you’re launching pharmaceuticals, supplements, or ayurvedic products, ensuring full compliance with Indian drug laws is critical for business continuity, customer safety, and long-term credibility.

9.1 Key Regulatory Bodies Involved

• CDSCO (Central Drugs Standard Control Organization): Regulates drug licensing and approval processes at the national level
   
• State Drug Control Authorities: Issue and monitor retail/wholesale/manufacturing licenses within each state
   
• FSSAI: Regulates food supplements, nutraceuticals, and functional foods
   
• AYUSH Ministry: Governs ayurvedic, unani, siddha, and homeopathic medicines
   

9.2 License and Documentation Compliance

Product Type	Typical Profit Margin Range
Branded Generics	30% – 60%
Nutraceuticals/Supplements	40% – 70%
Cosmetics/OTC Topicals	50% – 80%
Ayurvedic Products	40% – 75%
Export Products (bulk)	20% – 40%

 

9.3 Product Labeling Laws

Your packaging must comply with the respective category’s labeling rules. This includes:

• Generic name and composition
   
• Manufacturer’s name and license number
   
• Batch number, manufacturing & expiry dates
   
• MRP and dosage instructions
   
• Warning labels for Schedule H, H1, or X drugs
   
• FSSAI logo (for supplements)
   
• AYUSH compliance (for herbal products)
   

Tip: Always get your label artwork approved by the manufacturer before printing.

 

9.4 Ownership & Legal Agreements

You should have the following agreements in place:

• Third Party Manufacturing Agreement: Defines roles, product specs, terms, IP ownership, liabilities
   
• Confidentiality Agreement (NDA): Protects proprietary formulations or trade secrets
   
• Marketing Authorization Letter: Confirms you are the legal brand owner for promotional and distribution rights

 

9.5 Batch Documentation & Testing

Every batch produced must come with:

• Certificate of Analysis (CoA)
   
• Test reports for active ingredients and contaminants
   
• Stability study data (especially for long shelf-life or export-bound products)
   

In case of an audit or product recall, these documents must be readily accessible.

 

9.6 Regulatory Risk if You Don’t Comply

• License suspension or cancellation
   
• Seizure of stock during drug inspections
   
• Legal penalties or blacklisting
   
• Damage to brand trust and business relationships
   

By ensuring all licenses are valid and documentation is complete, you protect your business from costly delays and legal issues—while building a professional reputation in the third party manufacturing ecosystem.

10. Challenges and How to Avoid Them

While third party manufacturing offers significant advantages in speed, scale, and cost-efficiency, it also comes with operational and regulatory challenges. Being aware of these risks—and preparing for them in advance—can help you avoid production delays, quality issues, and compliance setbacks.

Let’s explore the most common challenges and how to overcome them:

 

10.1 Delays in Production or Delivery

The Problem:

Manufacturers may delay batch production due to capacity issues, packaging delays, or raw material shortages.

How to Avoid It:

• Confirm turnaround time in your written agreement
   
• Place orders well in advance, especially during high-demand seasons
   
• Work with manufacturers who have buffer capacity and multiple production lines

 

10.2 Inconsistent Product Quality

The Problem:

Variations in raw material quality or poor process control can affect your product’s safety, stability, and brand reputation.

How to Avoid It:

• Choose manufacturers with in-house quality control labs
   
• Ask for Certificate of Analysis (CoA) for each batch
   
• Conduct third-party testing periodically, especially if selling D2C or for export

 

10.3 Communication Gaps

The Problem:

Lack of updates on batch status, documentation, or delivery schedules can cause operational bottlenecks.

How to Avoid It:

• Assign a dedicated point of contact for follow-ups
   
• Maintain a communication tracker (email + WhatsApp/log sheet)
   
• Use written documentation for all approvals and change requests

 

10.4 Hidden Costs and Misaligned Pricing

The Problem:

Some manufacturers may not clearly disclose costs for testing, packaging, or transport—leading to unexpected expenses.

How to Avoid It:

• Ask for an all-inclusive price quote before order confirmation
   
• Clarify terms like:
   
  • Who prints and supplies packaging?
     
  • Who bears freight charges?
     
  • What are rework or batch recall charges?

 

10.5 MOQ Barriers for Small Businesses

The Problem:

New brands may find high minimum order quantities (MOQs) unaffordable or risky.

How to Avoid It:

• Look for flexible MOQ partners who support pilot batches
   
• Start with 2–3 products and scale based on response
   
• Negotiate for shared production slots or lower initial batches at a premium rate

 

10.6 Lack of Legal Safeguards

The Problem:

Without a formal agreement, you risk disputes over product ownership, delays, or substandard production.

How to Avoid It:

• Always sign a manufacturing and confidentiality agreement
   
• Define ownership of brand, label, and design in writing
   
• Keep digital records of all payments and signed purchase orders

 

Addressing these challenges early on ensures that your third party manufacturing experience remains smooth, efficient, and profitable—allowing you to focus on growing your brand.

11. Trends and Opportunities in 2025

As the pharmaceutical and wellness sectors evolve, third party manufacturing is becoming more strategic than ever. With increased demand for health products, regulatory tightening, and digital-first consumer behavior, businesses have new opportunities to scale through contract manufacturing.

Here are the top trends reshaping third party manufacturing in 2025:

 

11.1 Surge in Nutraceutical and Wellness Product Outsourcing

India’s nutraceutical market is projected to surpass $18 billion by 2025. Demand for:

• Herbal supplements
   
• Immunity boosters
   
• Functional foods and beverages
  
  is fueling massive growth in contract manufacturing across FSSAI-licensed facilities.
   

Opportunity: Launching private-label wellness products has never been easier or more profitable.

 

11.2 Export-Focused Third Party Manufacturing

Countries across Africa, Southeast Asia, and the Middle East increasingly source low-cost, high-quality pharma products from India.

Opportunity: Tie up with WHO-GMP certified manufacturers to produce:

• Antimalarials, antibiotics, generics for export
   
• Custom formulations with multilingual packaging

 

11.3 Digital Platforms for Manufacturer Discovery

New platforms are emerging to connect brand owners with verified manufacturers, allowing:

• Comparison of quotes, certifications, and MOQs
   
• Online contract and artwork approval
   
• Transparent batch tracking and logistics integration
   

Examples: IndiaMART B2B, PharmaHopers, TradeIndia, Pharmarack

 

11.4 Sustainable and Clean Label Manufacturing

Consumers are demanding:

• Paraben-free, preservative-free, sugar-free formulations
   
• Eco-friendly packaging and cruelty-free processes
   
• “Made with clean ingredients” certifications
   

Opportunity: Manufacturers with eco-conscious processes and ayurvedic capabilities are in high demand.

 

11.5 Low MOQ and Fast-Move Models for D2C Startups

Manufacturers are increasingly offering:

• Small batch production with flexible MOQs
   
• Pre-formulated products that allow for faster go-to-market
   
• End-to-end support for packaging, design, and labeling
   

This empowers D2C startups to launch custom supplement, skincare, and OTC brands with minimal upfront cost.

 

11.6 Regulatory Alignment for Global Certifications

Facilities are upgrading to meet:

• USFDA, UK MHRA, EU GMP standards
   
• Better documentation for dossier submission and product registration
   
• Global supply chain traceability and serialization
   

Opportunity: Collaborate with such facilities to build export-ready and B2B pharma pipelines.

12. Conclusion

Third party manufacturing has revolutionized how pharmaceutical, nutraceutical, and wellness products are brought to market. It gives brand owners the power to scale without the burden of owning factories—offering access to certified manufacturing, ready infrastructure, and professional quality control.

Whether you’re a startup founder looking to launch your first supplement line or a growing pharma marketing company aiming to expand your portfolio, this model allows you to focus on branding, sales, and customer relationships—while your manufacturing partner takes care of production, packaging, and compliance.

To succeed with third party manufacturing:

• Choose a manufacturer with the right certifications and product specialization
   
• Understand the end-to-end process, from product finalization to batch delivery
   
• Maintain complete documentation and legal agreements
   
• Focus on quality, transparency, and communication
   
• Keep an eye on industry trends to stay ahead of the curve
   

As 2025 unfolds, third party manufacturing will continue to drive innovation, cost-efficiency, and growth across India’s health and wellness industries. By following the best practices and insights shared in this guide, you’ll be well-equipped to build a trusted, scalable, and profitable brand.