Ben's Beer Blog

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Five more points about contract brewing

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Last week, I wrote a piece for  the Globe and Mail about contract brewing, the practice wherein brewing companies or virtual breweries rent space from larger facilities to make their beer.

Given the constraints of the 800 words I was alotted, there was much I did not have time to dig in on and so the final piece was something of an overview of the practice, with some brief discussion of why it might be growing in popularity–especially in Ontario–with some insight from a business owner, Shehan De Silva of Lost Craft Beer, who has had success with this model, and from a bricks and mortar brewery owner, Jason Fisher of the Indie Ale House, who is generally opposed to this model for what he feels it brings (or doesn’t) to the industry as a whole.

The article was intentionally targeted at the Globe and Mail’s “general audience” and so much of the beer geekery I might have dug in on was omitted. Accordingly the responses from beer industry folks on twitter, Facebook, and my email were passionate and varied. Interestingly, the article seemed to simply confirm everyone’s beliefs no matter which side of the argument you might be on. Both virtual brewers and bricks and mortar brewers have reached out to me in the interim to say I had represented their side well (Not to toot my own horn, but beep fucking beep).

Also of interest, one owner of a contract brewing facility says he was subsequently inundated with calls from interested new brewing companies. Er, sorry / you’re welcome, Ontario?

Anyway, here are some mostly random tidbits I had hoped to include but couldn’t.

1. Consumers don’t care

Up and coming beer writer Stephen Beaumont used my piece as an occasion to raise one of the points I was hoping might come up when he wrote something for TAPS on Friday posing the question “Who cares about contract brewing?” (spoiler alert: Probably just brewers). One of the points I had hoped to make by talking about how much contract brewing is growing in Ontario was that, while the stout sniffing cognoscenti and the people who own breweries make much ado about where their beer is made, it is mostly irreleveant to the people who actually buy the damn beer. Which is not to dismiss the whole argument about what this means to the industry as mere naval gazing, but simply to once again remind folks, like Beaumont did, of that oft overlooked voice in this industry: the average consumer.

As an extension of that point, I don’t think Shehan and others like him ought to be criticized so much for making “approachable beer.” When we talked, Shehan essentially said he wanted to bring more people into craft beer. “The main criticism [about craft beer] that I heard from my demographic,” he told me “which was admittedly Bay Street [Shehan left a career in finance to persue a career in beer], was ‘we’d love to support craft beer but there are two reasons we don’t. Number one, the beer is unapproachable and number two, I don’t want a lion jumping out of an airplane on a battleship on the can in my hand.”

Now, Jason Fisher makes good points in my article about “approachable beer” not moving the craft beer needle forward, but I don’t think it’s fair to fault a guy like Shehan for trying to design a product that will sell. Shehan made a well-designed can and filled it with a crowd-pleasing (and now award-winning) beer. Consumers responded, and his sales numbers prove that if you’re providing a product people like, they don’t really give a shit that the company’s owner pays someone to make the beer in East York and Scarborough.

2. Contract Brewing is not the much-mythologized stepping stone to owning your own brewery that it’s often portrayed as

It’s a fairly oft-repeated claim that new brewing companies lease space in the early days of their business simply to build up funds for a bricks and mortar location. This is roughly 90% bullshit. The margins for contract brewers are razor thin and I honestly don’t understand how half of them are still in business. For many contract brewers, like the kind Jason Fisher is likely railing against in my Globe piece, the idea of owning a “brewery” is a vanity project. There are many people who just like to say “I own a brewery.” Hogtown Brewing Co., for example, was started by nine finance guys who played rugby together. I interviewed them early on in my beer writing career and they confessed to starting the brand with “play money.” That company has since been sold off.

They, and others like them, had no designs on building a brewery. Furthermore, given those thin margins, it’s often just not economically possible to “save up” for a brewery by contracting. Unless you are working your ass off to push beer, contract brewing is a very, very tough model to make money off.

Aside from Shehan, there are only a couple brewing companies of this province’s 69 that I could say for certain are making money. They are making some dough because they bust their asses and push volume–and even they recognize this model isn’t ideal. “As well as we’ve done,” Shehan told me, “the contract model doesn’t really work based on our volumes so we are looking for space. We were just in deep negotiations to take over Mill Street’s old space but that didn’t work out.”

Shehan and others like him who are committed to building their brand are currently shopping for bricks and mortars places of their own because they realize contracting actually isn’t a money maker and don’t want to give away money any more to other people who are making their beer.

The thing that contract brewing CAN do for people who want an actual brewery someday is show investors that you have run a successful company and have an established brand. Mark and Mandie Murphy of Toronto’s Left Field Brewery, for example, used their hard-earned brand awareness from contract brewing to get loans to finance their east end brewery. Kensington Brewing Company, that other contract-to-bricks “success story,” actually dithered for years contracting until only recently bringing in investors to make the final push to finish their brewery. The guys who have gone from contract to bricks are the exception, not the standard.

4. Many bricks and mortar brewers use ‘contract brewing’ to brew their flagship beers in volume elsewhere to free up tank space

Lots of people own breweries or brewpubs and also brew large volumes of their beer at other people’s facilities. Toronto’s Junction Craft Brewing currently does it for their Conducters Craft Ale, Duggan’s still brews volume somewhere other than their Parkdale brew pub, etc. It’s a perfectly acceptable–and, really, wholly logical–concept that one might brew one’s so-called “rent beers” in large volume at another brewery so that one’s small batch brewpub or brewery has more capacity for experimental stuff.

Andrew Harris, the CEO of Factory Brewing in BC whom I also interviewed for this piece, is actually mostly hoping to court this kind of business. Only one of his future customers were so-called virtual breweries at the time of my writing and the rest were bricks and mortars places simply looking to free up tank space.
There seems to be a weird distinction that it’s “OK” to brew most of your beer in someone else’s brewery so long as you own a brewery somewhere, but if you don’t own a brewery, this practice is scorn-worthy.

5. Shehan De Silva is not representative of all contract brewing companies and Jason Fisher is not representative of all bricks and mortar brewery owners

While I used these two guys to speak to both sides of the argument for probably obvious reasons — Shehan ranks among the more successful and dedicated virtual brewery owners in Ontario and Jason is (as always) very vocal about his objections to contracting in favour of “real” breweries–they clearly don’t actually speak for the entirety of their respective segments.

Indeed, for beer nerds reading this post and the Globe piece last week, this is really the main point I’d like to make. I’ve seen that it’s become de riguer to pile on “contract brewers” and paint them all with the proverbial “Ace Hill” brush as a bunch of non-beer-people marketers, and I realized it wasn’t a fair take. There are, unquestionably, a shit ton of opportunistic folks in Ontario craft beer these days and contract brewing does seem to be their preferred method of entry. I’ve seen my fair share of them too. But I’ve also seen Shehan’s success due to his own hard work and I’ve had lengthy conversations with guys like Graham Woodhouse and realized that there are hard-working, passionate “beer people” in this province who own virtual breweries too. It’s not fair to assume they’re all cut from the same cloth.

On the flipside, let’s be honest, there are bricks and mortar craft brewery owners who do not give much of a shit about what their beer tastes like and are simply worried about marketing and their own bottom line. It’s likewise not productive or realistic to paint bricks and mortar brewers all as hardworking artisans toiling to advance the industry as a whole.

And so, much like my Globe and Mail piece, while I don’t think this blog post will do much to sway anyone who feels strongly about contract brewing one way or the other, for me, it ultimately it just comes down to this: First, is the business in question making good beer and secondly, is that company being honest with its consumers about the business and the way their beer is produced.

Author: Ben

http://www.bensbeerblog.com

13 thoughts on “Five more points about contract brewing

  1. Have you watched Game Of Thrones?

    You will enjoy Thyrion’s character a lot.

    “That’s what I do. I drink and know things”

    Bro, you are good. I have followed you!

    Thumbs up!

  2. So Jason Fisher gets almost a quarter of a million dollars from the Government of Ontario and then bemoans what others try to do by starting their own business.

    Too bad we all couldn’t get a cool quarter mill from the government to help us out

    • Have you ever applied for government grants before? They don’t exactly just give money away to people… I’m sure Jason worked hard and probably tried and failed a few times before being awarded his ‘cool quarter mill’.

    • Do you have any idea how much Indie would have needed to spend on increasing barrel capacity, job creation, lab equipment, etc. in order to get that grant? At least another cool quarter mill. Gov’t grants usually only fund a % of the costs of any project. 50% at the high end, I believe. Any “brewery” is welcome to apply for funding. If they’re spending money on viable projects to grow the industry and create jobs, there is a little support out there. Difficult to get but it does exist.

  3. Didn’t Indie Alehouse contract brew their beer at Niagara College for a while?

  4. Consumers would care to a greater degree if there was information explaining what was going on. Ensure the actual origin is on the label and refusing non-brewers the right to use the word “brewery” and then there is an informed discussion. Few people care about what is hidden from them because it is hidden from them.

  5. To my mind, the question should be focused on creative control. I distinguish based on those fixated on “crafting” the product and those fixated on “marketing” a product. Both contractors and bricks and mortar breweries can fall into either category. Ownership of the actual bricks and mortar should have little relevance. In fact, how many “bricks and mortar breweries” actually own the brewery; some lease space and/or equipment, some have debt and those with neither are probably most beholden to their “investors”. As a poor analogy, Michelangelo didn’t own the Sistine Chapel. Or perhaps more apt, how many of the worlds great architects actually built and owned the building? In larger craft breweries, is the head brewer not effectively contracting employees or the head brewer may in fact be contacted as an employee (I believe one brewer made a similar point in your G&M piece). And if we are judging the craftsmanship of a beer, why is such significance placed on who and how capital is deployed to fund that craft?

  6. I’m learning a ton of stuff on your blog.

  7. Very nicely balanced piece Ben. While I have been aware of the contract brewing business model, I hadn’t given much thought to my own perceptions about contract versus owned (what is the right term for non-contract…?) brewers. I guess I fall somewhat on the side of the guys who own their own breweries, because it seems to me they have made a bigger commitment to craft beer. Though I must admit that if I came across a great beer from a contract brewer, I’d be happy to buy and consume it! So I guess my own priorities are (1) make very good beer; (2) build a successful and committed business while doing (1); (3) grow the market – get more people drinking and appreciating good craft beer. And I fully agree with Alan, that it would be great to have more information readily available about the beers we are buying and drinking, including where the beer was actually brewed (as well as more details about the ingredients, etc.)

  8. Pingback: Five more points about contract brewing — Ben’s Beer Blog | Acantiza

  9. I’d be lying if I said I tend to see a strong correlation between beer that boasts brick-and-mortar provenance and enhanced quality. So contract brewers, keep the beer flowing.

    I loved the comment from the contract guy about beer cans depicting a “lion jumping out of an airplane.” This kind of “sassy” marketing with garish imagery and beer names that are pretty much sentences is starting to feel pretty tired, sort of akin to that guy at work who was still saying lame “yeah bay-bay yeah” Austin Powers jokes in 2003. Aside from mere groan factor, there are other real-world implications. Imagine yourself standing at a party, you reach in the fridge to grab one of the assorted cans you brought with you, and you begin to pour it into a glass. Some gregarious Bud Light guy sees what you’re doing, gets curious, and comes up and asks “hey, whatcha drinking dude?” And you answer “Oh… hi… uh… actually… it’s a Belgian witbier called ‘Guillaume Goes Bungee Jumping in a Codpiece'” And the guy’s like “heh… ooookay.” *walks away* I mean, it’s just beer… make it with care, make it good, feel free to give me a general idea of what’s in the can, and feel free to use eye-catching colors and logos. But I don’t need some arbitrarily selected back story about a lumberjack who lived 150 years ago and, legend has it, got trampled by a 3-legged moose while urinating on a rare deciduous shrub. Would that lumberjack even enjoy a black IPA? Nobody does, so I’m thinking not; thus, the association is stupid.

    The beer might be completely awesome, but I think the glut of over-the-top packaging is counter-productive if the goal is to win over some of the AAL market. In the example scenario above, the curious Bud drinker walks away thinking that the primary craft beer stereotype is true — namely, that the only point of buying craft beer instead of macro swill is to be weird and different, not necessarily better.

  10. Good analysis…but what’s your third point?

    • Holy shit. Hahaha! Over 1000 views on this post and you’re the first one to point that out. Damn. Guess I have to change the title or add a point?

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