What is Contract Brewing?

A brewery may outsource the production of its beer to another establishment through the process known as "contract brewing." Contract brewing is a process that allows for the production of specialised and seasonal beers by larger breweries as well as a way for smaller brewers to get their beers out into the market. This process may be employed by both new breweries as well as existing ones. Private-label beers are sometimes brewed by contract brewers specifically for use in restaurants and bars.

Because new breweries don't have to make an initial investment in their own brewing equipment, contract brewing can be a more financially prudent option for new breweries to get their feet wet in the industry. Contract brewing enables brewers to make more beer than they would be able to if they were restricted to producing only as much as their own brewing capacity.

Contract brewing can be beneficial for both the client and the contract brewery since it provides the contract brewery with an extra source of income and makes it possible for the customer to create more beer without the need to purchase additional brewing equipment.

Contract brewing is something you should look into if you are considering establishing a brewery of your own or if you already own a brewery but want to grow your business. You may be able to enhance your production capacity, save money, and increase the number of people who drink your beer by engaging in contract brewing.

Contract brewing

One brewery (the "Contracting Brewery") contracts with another brewery ("the "Host Brewery") to produce its product. The Host Brewery typically handles all aspects of production, including but not limited to, brewing, bottling, labelling, packaging, and taxation, until the beer leaves their site.

The specifics of each party's obligations may differ slightly, but they will always be detailed in the requisite legal document. Each party's level of participation is flexible. In certain cases, the contracted brewery performs little more than public relations and marketing work.

Arrangements of contract brewing

There is a vast range of possible contractual structures in the brewing industry. There are phone-based long-distance relationships and hands-on, in-person collaborations. If the host brewery is providing everything, including the recipe and the beer itself, the contracting brewer may have little to no input. 

When working under these conditions, the contract brewery serves more as a marketing firm than a brewery, as it is responsible for developing the beer's brand and promoting its sales. In other cases, the contracting brewery may provide its own materials and yeast strains, provide the recipe, and dictate all aspects of manufacturing, right down to the packaging. In the latter situation, the contract brewery's brewer or manager will pay regular visits to the host brewery's location to monitor the flow of beer through the system.

Alternating proprietorship 

Alternating proprietorships are another form of business partnership available to breweries. In these types of arrangements, the Host Brewery can take title to the beer while it is being brewed with its own ingredients and infrastructure, and then return it to the Contracting Brewer after production is complete.

On the other hand, a "Tenant" or "Contracting" brewery may rent space and time at a "Host" brewery in order to brew their own goods using their own ingredients. The Contract Brewer or Tenant Brewer is fully accountable for all aspects of the production process, including but not limited to accounting, labelling, certifications, and taxes, and the product is their exclusive property throughout. Brewery licences are a federally defined example of such commercial relationships. Always verify state regulations before moving forwards with a company strategy.

Benefits of contract brewing 

1. Reduce costs

   Oftentimes, the costs of starting a brewery can be prohibitively expensive. Instead of permitting only those who already have the cash or contacts to gain a head start, contract brewing allows more talented brewers the opportunity to be successful. 
   
   Think about it: renting or buying a space for the brewery, purchasing all of the necessary brewing equipment, obtaining insurance for the brewery, and recruiting enough people to perform the brewing themselves all add up to a big expenditure. If you enter into a Contract Brewing or Alternating Proprietorship agreement, you may be able to reduce a significant percentage of these fees and free up monies that you can then put towards other deserving budget lines.

2. Less maintenance work for your business

   If you don't have any brewing equipment or facilities that need to be purchased, maintained, or replaced, you won't have to deal with many different kinds of headaches, such as cleaning the beer lines and performing other kinds of routine cleaning processes. You will have fewer suppliers to deal with for maintenance and repairs, fewer mechanics-related situations to get through, and, once again, fewer costs associated with these issues.

3. Contracts can be negotiated to your business’ favour

   Craft breweries who are interested in signing contracts will have a number of different arrangements from which to pick. If you are aware of the resources and requirements that your company has, and if you are ready to conduct some serious research, then you will likely be able to discover a brewing solution that is suitable for your organisation.
   
   More and more brewers are looking into contract brewing or alternative product arrangements as a result of the current state of the business. It may serve as a transitional step for a business entering a new era. Some developing businesses use this method to gradually increase their output as they expand. Those who have spare capacity can also benefit from this, as it can streamline their operations. All parties can benefit from such arrangements if they are well-thought-out and executed.