So, you’re talking with another brewery about brewing beer for you under contract. Contract brewing can be a great, lower-risk way to get beer to market. But… What are your responsibilities? What are their responsibilities?
With logistics such as timing, legal issues, purchasing ingredients, and shipping the final beer, everyone needs to be on the same page in order to have a successful contract brewing relationship. Whether it’s knowing what questions to ask or making sure you are pursuing the right partner, here’s your guide to knowing what to expect when having your beer contract brewed.
Determine your contract brewing arrangement
On the plus side, there’s no one set way to handle a contract brewing arrangement. That’s great: Instead of being shoe-horned into a one-size-fits-none arrangement, you and the other party can negotiate the right agreement for your circumstances.
On the downside, there’s no one set way to handle a contract brewing arrangement. That means that you have to think through all the details to minimize the occurrence or impact of unforeseen problems or misunderstandings.
“The nature of their arrangement is going to be a big deal,” says Ashley W. Brandt, a manufacturing and food-and-beverage attorney partner at Goldstein & McClintock LLLP. “One party makes it, one party buys it. Or does one party make it under a license and it goes out to distributors? We are typically talking about where someone pays a licensed brewer for them, and that beer then goes back to them.”
There are many ways a contract brewing deal can be structured. Regardless, the right contract brewing arrangement makes sure that every party knows who is responsible for what, such as:
- Brewing and conditioning processes
- Packaging and labeling
- Testing and quality control
- Shipping and distribution
- Lead times and timelines
“With contract brewing, someone has a license, they brew it, they sell it,” explains Brandt. “There are lots of ways it can be understood, and TTB has very specific rules. Every state has its own statutes too.”
However you are structuring your contract brewing arrangement, make sure you are getting to the nitty-gritty on all the details. That way, everyone starts the relationship on the same page, and you are less likely to have misunderstandings down the road.
Approaching your contract brewery partner
From craft breweries with excess capacity to dedicated contract-only breweries, there are many potential contract brewing partners to choose from. It’s essential to find a partner in the right geographical area, who offers the range of services you need, and who will make sure that your beer is a priority.
Located in Denver, Colorado, Sleeping Giant Brewing Company has been described as “the largest brewery you’ve never heard of.” The reason why? It only brews beer for other parties on a contract basis.
“We’re a fully integrated supply chain partner,” says Matthew Osterman, Sleeping Giant president and founder. “We think of it as one-stop shopping. We are able to effectively become one of two things: either an extension of your own brewery, or its own unique animal that you don’t have to really worry about. Depending on how involved our client wants to be, you can be as uninvolved as simply placing purchase orders with us, letting us know what beer you want and when, or you can come in multiple times a week and check in.”
With up to 20 clients at a time, Sleeping Giant is projecting a 2020 brewing volume of 70,000 barrels, with a two-month lead time. To make that happen with as little disruption as possible takes having clear contracts and arrangements with every client.
Ingredients and packaging are common points of confusion, says Osterman. A contract brewing arrangement needs to specify which party is providing which ingredients, and how any purchased or supplied ingredients will be compensated.
“Some breweries have hop contracts, so they may provide their own hops, or their own kegs or barrels. But our standard arrangement is that we can provide everything for everybody,” explains Osterman. “We would never have anyone provide grain, even if they wanted to. We provide all the grain, plus common packaging goods, such as can ends, PakTechs, etc. There are custom items, which might have the brewery’s name on it, and we also provide those.”
Contract brewers also know their equipment, what works on it, and what doesn’t. For example, Sleeping Giant works with a vendor who creates 12-pack can boxes. The brewery or brand would coordinate art and messaging with the vendor, who would supply the final assets to Sleeping Giant for production.
“We’ve done the dyeline, so you don’t have added costs and we know it’ll work on our equipment,” says Osterman. “You work with our vendor on the design, and once you sign it off we take care of everything else. We place orders based off your needs.”
Start the conversation with details and honesty
Whether you are a startup-stage craft brewery or an established entity seeking to expand production, Osterman advises potential partners to be up front about who they are.
“We have a web contact form, and we often get emails from, say, ‘firstname.lastname@example.org,’ they say they’re interested in contract brewing, and ask for our pricing and minimums.” That sort of thing makes Osterman shake his head. “That for us doesn’t elicit a response. Identify your brewery.”
In addition to being clear about who you are, the more details you can provide, the easier it’ll be for you and a contract brewery to set up your brewing arrangement. Matthew suggests including details such as:
- What types of packaging? “If their email says they want to do 24-oz cans, we can save both of us a lot of time, because we can’t do 24-oz cans.”
- What annualized volume are you looking for?
- What are your timeframes? “Timeline is a question I always ask up front. Are you trying to do this ASAP, six months from now, a year from now?”
- Are you doing standard yeasts or wild brewing? “If someone does all-Brett beers, we don’t do wild yeasts.”
“Those are generally the first four pieces of info that we want,” says Osterman. “Volume, timeline, beer types, and package types.”
Who will the finished beer be sold to?
The arrangement is only the first part, says Brandt. Who it’s going to be sold to is the second part.
“Sometimes you can buy the beer back to distribute,” he explains. “Figure out what the quantities are going to be, inventory minimums, who will be in charge of licensing, getting ingredients, quality control. The party brewing is responsible for TTB approval and licensing. Typically if you’re brewing it, you’re taking care of TTB.”
Contract brewing comes down not just to contract, but to service and rapport
Contract brewing offers parties a cost-effective way to brew beer and get it to market with less risk and capital. Ultimately, a successful contract brewing relationship comes down not just to the contract, but to the overall service, mutual understanding, and rapport between the two parties who are in the contract together.
“If someone’s offering a contract brewing service, they have to understand they are also in the business of making a customer happy,” says Brandt. “Make sure the contract lays out everything. Get that in front of the potential clients, make sure they review and discuss everything.”