Wednesday, November 24, 2010

Contract Brewing

The Sand Creek Brewing Co. in Black River Falls makes about 7,000 barrels of beer a year. About 35 percent of it is for other companies such as Furthermore Brewing Co. in Spring Green. Furthermore’s owners have plans to build a brewery, but contract brewing allows them to grow their brand before investing in construction of a brewing facility. Eric Helstad, an employee of Sand Creek, worked last week to fill cases with six-pack cartons from Furthermore.
M.P. KING – State Journal

The Wisconsin State Journal has a nice article on contract brewing in Wisconsin (something that goes on a lot there).  What I find particularly interesting is the contrast of the culture of craft brewing there versus here in Oregon where contract brewing is essentially a non-starter.  The ethos here is if you didn't brew it yourself, it isn't legit.  This of course makes the whole endeavor a lot riskier.  I watched as a couple of friends in Ithaca, NY start a brewery by first contract brewing from Chicago.  Once the brand was established they leased some space and built a brewery and were able to stop contract brewing in a short span of time.  In many ways this seems like a better business model, and it allows for scale efficiencies, so why don't we see more of this in Oregon?

Anyway here is an excerpt from the article:

BLACK RIVER FALLS — Aran Madden hopes to someday make his beer in Spring Green.
He has plans for a brewery. But for now, he's quite happy with his Furthermore products being made here, 120 miles away in Jackson County, within the 154-year-old stone and red brick walls of what is now the Sand Creek Brewing Co.

The arrangement, called contract brewing, allowed Madden's company to begin production in 2006 within months of its inception, fulfill an agreement to make beer for American Players Theatre and avoid going $1 million in debt to build a brewery.
"We had shallow pockets," Madden said. "As soon as we walked in the door to Sand Creek, we said, 'This is silly not to utilize this facility. They're hungry and we're hungry.'"

Contract brewing is big business in Wisconsin, home to some of the biggest contract brewing facilities in the nation. The players include City Brewing Co. in La Crosse with a capacity of about 7 million barrels a year; Stevens Point Brewery in Stevens Point; and Minhas Craft Brewery in Monroe, where about 10 percent of the 280,000 barrels made this year will be for other brewing companies.

The relationships have helped the rapid expansion of the domestic craft brewing industry that grew to 9.1 million barrels in 2009 from 5.9 million barrels in 2000, according to the Brewers Association in Boulder, Colo. In the first half of this year, craft brewing was up 9 percent by volume.

Paul Gatza, director of the Brewers Association, said there are about 350 alcoholic beverage companies in the country that have their products made by other brewers. Between 150 and 200 of them are beer companies. Some do not have their own facilities, while others with breweries lack the capacity to meet the demand for their products.

"There's such a long brewing tradition (in Wisconsin) and, for efficiency's sake, they want to fill that capacity," Gatza said of contract brewers. "It's an inexpensive way (for brewing companies) to get into the market."


Bill Night said...

I take it you mean something a little different than Full Sail brewing up Henry's and the like.

Maybe it's a sign that the Portland beer industry is running at capacity. Wasn't Roots doing some brewing for Alameda right at the end? In other words, when they had unused capacity.

Patrick Emerson said...

Yes, what I mean is why don't we see new breweries start first by having their beer contract brewed and then if it is successful, set up their own brewery. Here we seem to only see a big up front investment in a brewery than beer brewed on site.

Would the contract strategy be a non-starter in the NW and why?

Compass said...

Contract brewing has a stigma about it: you either brew it, or you don't. As a contract brewing company myself, Jobless Burring Co., I had to consider the economics of it before I chose that route. I have a very small brewery producing the beer for me, and am still producing low volumes. My budget didn't allow for a facility of my own. If it had, it would probably not be an ideal setup. Contract brewing gives me a chance to show investors that I am worth the risk. I always disclose my arrangement, but I hope soon to make the leap to my own facility. Here in Kentucky, however, the stigma is less of an issue as our beer scene is in its infancy.

Anonymous said...

So glad I found this article because Im looking for a good sized contract brewery that is not too far from Chicago. Now thanks to your article I have several options to look in to.
Thank you!

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