Pros and Cons of Contract Brewing

Contract brewing offers both opportunities and challenges for craft brewers looking to expand their operations or enter new markets. This brewing model has gained traction for its strategic benefits.

This blog post was inspired by an interview with Sleeping Giant’s Matthew Osterman and North Coast’s Jennifer Owen, as well as a YouTube excerpt by The Hoppy Hour.

Pros of Contract Brewing

For breweries seeking to expand capacity or access specialized equipment like pasteurization or centrifuges, contract brewing provides a cost-effective solution without requiring massive capital expenditures and associated debt interest.

Liquor corporations like NSLC, ANBL and LCBO are cracking down on product recalls and random lab testing to ensure beverages stay within their advertised specs, like ABV. One brewery we know lost hundreds of thousands of dollars of sales due to a recalled beer whose ABV was higher than advertised. Specialized equipment and lab services can ensure consistency in product every time.

Specialized equipment can also mean specialized packaging. If a craft brewer wanted to produce their award-winning IPA, currently sold in a 473ml can, in a new 355ml can format, they would need specialized (and expensive) tooling on their canning line.

Contract brewing also enables brewing companies to allocate resources to sales and marketing. For years, we at Good Robot Brewing were “trapped on the canning line” instead of focusing on selling and marketing to NSLC. Not enough craft breweries focus on growing the brand, which could be part of the reason for stunted category growth.

Co-manufacturers often have accreditation and certification that craft breweries do not, which can enable access to market. For example, HACCP Certification reduces risk in producing unsafe beverages, enabling credibility with global customers like Costco.

Cons of Contract Brewing

One of the critical issues in contract brewing is ensuring that the beer is properly attributed to the original brewery on the label. For breweries with strong brand identities, the perception among consumers that the beer is contract brewed elsewhere can impact brand loyalty and authenticity.

Coordinating production schedules, shipping logistics, and quality control processes between the contract brewery and the original brewery can be challenging and result in delays in production timelines. It’s important that both the client brewer and the contract brewer review a services agreement to ensure both parties know what they are responsible for and when.

Co-founder Angus Campbell describes our contract brewing capabilities

Contract brewing typically involves financial commitments upfront, such as bulk purchases of beer batches. Breweries should forecast demand accurately (we can help with this) to avoid overcommitting or underutilizing contracted production capacity.

The biggest barrier we’ve seen is the ability to let go. We all got into craft beer because we love the product. It’s our baby. Letting someone else produce the product we created and love can be quite challenging.

Considerations for Brewers

Brewers considering contract brewing should weigh these challenges against the potential benefits. Clear contractual agreements and effective communication channels are essential to mitigate risks and ensure a successful partnership.

We are, of course, happy to chat through these challenges. Contact us today.