Supplement Manufacturing Contracts: Red Flags, What They Mean, and How to Negotiate Better Terms

Most founders sign a “standard” one-pager from a well-known U.S. contract manufacturer and only later discover how much risk they just accepted.

Key takeaway: Common supplement manufacturing contracts push risk and cost to the brand owner: payment due even if labels are late, 50%–100% prepay, tight 3–5 week label windows (with fees if you miss), no flexibility on Supplement Facts formatting, you pay for incoming-ingredient testing (or waive it), no best-before date without a paid stability study, and broad indemnity/hold-harmless if claims, defects, or website copy cause trouble. Protect yourself by (1) redlining key clauses (timelines, testing, labeling flexibility, stability, indemnity), (2) baking cooperation and documentation access into your MSA, (3) budgeting for testing/stability up front, and (4) carrying the right product liability insurance. (Not legal advice—bring counsel.)

The “Standard” Clauses You’ll See (and Why They Matter)

1) “You agree to these terms whether or not you sign”

If you pay deposits or let production start, the agreement claims to bind you.
Impact: You can be held to terms you never formally executed.
What to do: Require a mutually executed MSA/PO before deposits or production.

2) Prepayment: 50% (U.S.) / 100% (international)

International is often 100% prepay to avoid customs/import risk to the co-man.
Impact: Cash flow strain + little leverage if timelines slip.
What to do: Stage payments: tooling/labels, WIP milestone, post-QC release.

3) Labels & artwork timelines (and fees)

Typical: 3 weeks from receiving the Supplement Facts to deliver print-ready files, or 5 weeks if you send physical labels. Miss it? Expect schedule bumps + ~$1,000 “processing” fee.
Impact: Real risk of delays and surprise costs.
What to do: Lock a shared timeline with grace periods and a cap on rush/processing fees; allow provisional scheduling pending label approval.

4) “Payment is not contingent on label completion”

Unlabeled, tested bulk can be deemed “finished,” so you owe payment even if labels aren’t ready.
What to do: Define Finished Goods as labeled, packaged, QC-released product that meets your spec.

5) Using your own ingredient: test or waive

Two paths:

• No incoming test (rely on supplier COA) —high risk

• Incoming test at your cost —safer, slower
  What to do: Default to incoming ID + risk-based purity/micro/metals, with a pre-approved test menu and turnaround. Waivers only by written deviation.

6) “No other changes” to Supplement Facts

Some vendors lock formatting/content beyond what FDA requires.
Impact: Hard to fix nuanced compliance issues or consumer-friendly disclosures.
What to do: Add a clause granting reasonable FDA-compliant formatting alternatives proposed by your compliance advisor.

7) Best-before date requires stability study

No stability? They’ll stamp a manufactured date. Retailers often want BB/EXP.
Impact: You may be forced into a $3k–$6k stability program per SKU (and time).
What to do: Agree on accelerated + real-time plan, packaging barriers (liners/desiccants), and provisional BB once interim data supports it.

8) Broad indemnity/hold harmless (you indemnify them)

Covers label/website claims, mods, defects, attorney fees.
Impact: You carry the bag—even for shared responsibility areas.
What to do: Make indemnities mutual, proportionate to fault, and exclude their negligence, GMP failures, or spec deviations.

Quick Negotiation Playbook (Founder-Friendly Redlines)

Share with your attorney; adapt to your deal. These are starting points.

• Finished Goods definition
  “Finished Goods means labeled, packaged, QC-released product conforming to Buyer’s approved finished-product specification. Unlabeled bulk is not deemed Finished Goods.”

• Label/art deadlines & fees
  “Deadlines subject to mutual written schedule; any delay fees require prior written notice and are capped at $XXX per lot. No schedule removal without a 5-business-day cure.”

• Testing & COAs
  “Manufacturer shall perform incoming ID and risk-based purity/micro/metals per the agreed Test Plan and provide ISO 17025 COAs for each lot. Buyer may audit methods and labs.”

• Stability & dating
  “Parties will execute a stability protocol (accelerated + real-time). MFR will apply a Best By date supported by interim data; final dating adjusts upon completion.”

• Indemnity (mutual and limited)
  “Each party indemnifies the other for losses arising from its negligence, willful misconduct, or breaches. Manufacturer indemnifies for GMP nonconformance and spec failures; Buyer indemnifies for claims content it directs. No indemnity for the other party’s negligence.”

• Access & cooperation
  “Manufacturer will provide batch records, QC results, reserve samples and reasonably cooperate with retailer programs (e.g., CVS Tested to Be Trusted), at pre-agreed rates.”

Pre-Sign Readiness Checklist

• Finished-product spec (identity, strength, purity, composition)

• Artwork routed early (leave space for variable data: lot/BB)

• Test plan (incoming + in-process + finished) agreed in writing

• Stability protocol & packaging decided (desiccants, OTR/MVTR)

• Reserve/retention sample policy (per lot, per SKU)

• Mutual indemnity + insurance limits aligned (see below)

• Retailer-readiness language (docs access, timelines, costs)

Insurance You’ll Want (at minimum)

• Product Liability (often $2M–$5M aggregate for retail)

• Contractual Liability rider (covers your indemnity)

• Product Recall (especially for mass retail/e-comm)

• Errors & Omissions (if you provide guidance/claims assets)

(We cover policy gotchas—like exclusions that silently void coverage—in our liability deep-dive.)

Deal-Breaker Signals (When to Walk)

• No finished-goods COA per lot (only raw COAs)

• Refusal to share batch records under NDA

• “We don’t do stability” or “we only give manufactured dates”

• One-sided indemnity that also waives their GMP responsibility

• Fees for every deviation, but no SLAs on their side

Fast FAQ

Do I really need a best-before date?
Retailers and marketplaces often require it. If you claim BB/EXP, you need supporting stability data.

Can I rely on my ingredient supplier’s COA?
Only with a qualified supplier program, periodic verification, and method suitability. For high-risk ingredients, run your own incoming tests.

Who “owns” compliance—the co-man or me?
FDA treats the brand owner as responsible for compliant product/labeling. Contracts should share duties, but you’re still on the hook.

Is a one-page contract normal?
Yes—and it usually favors the manufacturer. Ask for an MSA + SOW/PO stack with the protections above.

How long should I plan from PO to ship?
Even with clean artwork, 8–12+ weeks is common when you factor testing, labels, components, and stability setup.

Next Steps (Actionable)

This week

• Review Finished Goods, testing, stability, indemnity, and cooperation clauses.

• Build your finished-product spec and test plan (incoming + finished).

• Start your stability protocol (accelerated + real-time) and align label dating.

Want a pragmatic sounding board? I can step in as your advisor/compliance partner.

• Book a Signature Consultation
  A focused strategy call to clarify your situation, triage the top 3–5 risks (e.g., testing plan, dating/stability, indemnity language, documentation access), and outline practical next steps you can take after the call.
  Best for founders who want clarity before engaging counsel or committing POs.
  Tip: bring your top questions and 1–2 contract clauses you care most about.

• Enroll in SSET — Supplement Startup Essentials Training
  An on-demand program for founders covering: what regulations apply (FDA/FTC/GMP basics, DSHEA, claims & substantiation 101), how to build a market/product brief, how to find and vet co-manufacturers, and what early retailers/marketplaces expect at a high level, plus realistic budget ranges to plan for.