The once maligned practice of contract brewing is on the rise—and no one seems to care.
Aswift-moving forklift pulls pallet after pallet of canned beer from a large cooler and loads them methodically into a trailer truck destined for a distributor. The beer was brewed with the best ingredients to meet detailed specifications of ABV, IBU, color, and carbonation; quality analysis was run on the beer during brewing, fermentation, and packaging; the care and attention given to it was second to none. Yet in the end, this brewery won’t stake claim to this beer; it was made for a different company, which will now take it to market under their own brand name.
For years this practice, known as contract brewing, was seen by drinkers and beer industry people alike as a conniving method of bringing beer brands to market. Contract-brewed beer was often viewed as cookie cutter, soulless, and the very antithesis of what craft beer stood for.
This backlash seems to be confined to the beer business. Contract winemaking is the rule, not the exception, and buying pre-distilled spirit is commonplace. No one is boycotting a local grocery store for selling pies made in some factory in Missouri.
As more craft breweries jump into contracting brands at their breweries, it raises the question: Is contract brewing still a “dirty word” in the industry?
Here, There, Everywhere
Contract brewing is happening in every corner of the beer industry. There are one-off beers brewed for events or charity causes, and then there are long-standing mega-brands like Pabst. Craft brewers, too, have turned to contract brewing in various forms. Clown Shoes was contract brewed for most of its existence before the brand was purchased in 2017 by Mass Bay Brewing Company, the parent company of Harpoon. M.I.A. Beer Co. from Miami and Drekker Brewing from Fargo both have brewing contracts with Florida-based Brew Hub.
In the Upper Midwest, contract brewing varies greatly in scale. Last year, Cold Spring Brewing Company produced about 40 million cases of beer, energy drinks, and other non-alcoholic beverages, the majority of which was contract product, including 2.3 million cases of beer or beer-type products. By contrast, smaller facilities like Barley John’s in New Richmond, Wisconsin, can potentially contract brew as few as 15 barrels at a time for another company. Contract brewing can be the sole or primary function of a facility, like at Octopi Brewing in Waunakee, Wisconsin, or it can be something that an existing brewery does to make use of excess capacity, build new streams of revenue, and/or support a brand or cause they strongly believe in.
What Exactly is Contract Brewing?
Using their own equipment, a contract brewer brews, ferments, and packages the client brand’s beer based on the client’s recipes and quality specs. The barrelage of beer counts under the contract brewery’s license, which means, for all intents and purposes, it’s their beer while it’s in their building; they even pay taxes on it. Additionally, the contract brewer submits the label to the Alcohol Tax and Trade Bureau (TTB) for government approval under its name, and the beer is labeled as being brewed and packaged at the contract brewer location. In exchange, the client is charged based on raw materials, time, and labor required.
The beer officially becomes the client’s beer in the eyes of state and federal law when it is brought out of the brewery and loaded onto a distributor’s truck. What happens to the beer from that point on—its sale and distribution to on- and off-premise retail accounts—is managed by the client and distributor.
That, essentially, is the gist. Of course, everything in a contract is negotiable, and there are many variations within this model—some that include the client having a hands-on role in the production process. While this may open the door for deeper engagement from the contracted company, the ambiguity of these relationships, along with the often-present nondisclosure agreement, can make beer drinkers wary of beers that have been contract brewed.
Why Contract Brew?
Why would a company choose to have their beer contract brewed in the first place? Real talk: not everyone has millions of dollars to build a brewery.
Fulton Brewing is a good local example. Founded by four homebrewers in 2009, Fulton’s scaled-up recipes were solely contract brewed for the company’s first three years. After some money made and credit built, the brewery was able to invest in and secure its first brewing facility and taproom in downtown Minneapolis. But even then, a percentage of Fulton’s beer was produced via contract. It was only after they were able to invest even more and build their larger brewing facility in Northeast Minneapolis—which came online in late 2013—that all of their beer was brewed and packaged in-house.
Early on, Fulton did face a small amount of negative reaction to their being contract brewed in Wisconsin. One of the more public instances of this pushback involved being taken off a “Minnesota Only” tap lineup at Stub & Herbs in Minneapolis. Fortunately, says Fulton CEO Ryan Petz, that was more the exception than the rule.
“When we started there was still a stigma attached to contract brewing,” Petz says. “I remember a few people saying that we were just beer marketers, and not actual brewers. We felt like we were always fighting against that misconception, because we were brewers and we had our plan that we were working to put in place. I think that perception has changed over the last 10 years as the industry has evolved. There are now a lot of different business models out there [see sidebar], and people see that a method isn’t inherently a good or a bad thing.”
Legal hurdles can also lead a company to pursue contract brewing. Take, for example, Duluth Brewhouse, a company that is legally separate from but closely associated with Fitger’s Brewhouse in Duluth. Their packaged brands are the same beers made popular after being on tap for many years at Fitger’s. As a licensed brewpub, Fitger’s cannot package and distribute its own beer outside of its restaurant group in Duluth. But, as a Minnesota legacy brand with a loyal cult following, they wanted to tap into the market potential along the North Shore and in the Twin Cities. The solution: Duluth Brewhouse owner Beau Raymond decided to contract brew Fitger’s recipes at Barley John’s production facility in New Richmond, Wisconsin.
The bad reputation incurred and endured by contract brewing over the years has a lot to do with a lack of transparency. In the late 1980s and into the 1990s, brands like Samuel Adams and Pete’s Wicked Ale were being marketed and sold under the guise that they were brewed in one standalone place when in actuality they were being contract brewed at different facilities throughout the country. Other cases involved breweries packaging an existing beer under a different name and label so another company or client could sell it.
There was also a stigma attached to contract brewing because it often yielded low-quality—or at least less appreciated—beers that were trying to compete with the American light lagers of macrobreweries. To beer purists of the day—namely, the craft beer forebears who embraced the flavor of good beer, appreciated the traditions of brewing, and were inspired by the passion of the growing number of local/regional microbreweries— there just wasn’t a lot of integrity involved in contract brewing and the beers it produced.
In the early 1990s, Summit Brewing Company tried contract brewing on a local level. It brewed a beer exclusively for a now-defunct Texas-themed entertainment complex in Minneapolis. The beer: Billy Bob Barnett’s Buffalo Butt Beer. The bar owners’ company eventually tanked, and Summit founder Mark Stutrud swore off contract brewing. That is until 2003, when he met Jacquie Berglund and heard about her business plan for FINNEGANS: she wanted to grow her for-profit beer company and donate all of its profits to food rescue programs. The cause won him over.
Summit contract brewed FINNEGANS for 15 years until FINNEGANS opened their own brewery and taproom in downtown Minneapolis in 2018. Summit has since contract brewed for Kansas City, Missouri-based Boulevard Brewing Company to help them keep up with demand until their canning line was up and running, and currently contract brews for WarPigs.
“These breweries trust us,” Stutrud says. “Together we’re communicating a specific level of quality, values, credibility, and equity to distributors, retailers, and consumers. We work so closely together that we’re both proud to tell the beer drinker the origin of the beer.”
Do Modern Day Beer Drinkers Care?
Which brings us back to the Big Question: Do beer drinkers care enough about contract brewing to specifically drink or not drink a beer that was contract brewed? We found that most drinkers we polled understand the model isn’t quite what it once was, but stressed the importance of transparency about the contract brewing relationship through clearly detailed labeling and marketing.
Robert Browning, who worked in mid-sized breweries for 30 years before changing careers, says contract brewing could have kept some breweries from going out of business. “We have lost so many of our regional breweries. Many of them could have been saved by contract brewing; it has saved many, from Cold Spring to [F.X. Matt Brewing Company]. I think anything that keeps these gems going is a good thing. Otherwise we might only have corporate giants and small craft brewers, and that is not what I want.”