Why Relationships in Contract Brewing Can Benefit Both Partners

Just like a good employee, finding the right fit for contract brewing can be a challenge for breweries. Small to mid-size breweries can use the free space and time in their tanks to maximize capacity, make extra capital and help build other area breweries in the area grow.

“It has been a nice way for us to increase revenues without having to invest in the sales and marketing side of the business,” said Crazy Mountain founder and owner Kevin Selvy of his Colorado brewery, “so in a way it has helped us to grow somewhat in-organically.”

For Mississippi’s Lazy Magnolia, contract brewing has been a staple since 2008.

“At the time we understood that our strength was in manufacturing — doing an excellent job of producing consistently good beer,” said co-owner Leslie Henderson. “That is still our strength. We have more engineers on staff than most small breweries, we have invested heavily in excellent equipment, and we dedicate appropriate resources to designing, analyzing, and improving our processes.”

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It meant finding local breweries that were looking to grow, yet not have the capability to expand inside its own walls. Determining the right fit for breweries to work with came down to open communication and the more frequently a customer can be on-site to monitor production activities, the better.

“Our most successful contract brewing relationships have been with brewers who have a well thought out business plan and very specific future goals that include having their own brewing system now or in the near future,” Henderson said.

Even with that, some potential customers simply won’t be a good fit due to logistical concerns, including batch size, she noted.

“In those cases I always refer those customers to another brewer who may be able to help,” Henderson said. “We are all about growing craft beer culture in the South, so helping other nearby breweries get more business fits into that mission.”

Contract brewing has allowed Minnesota’s Third Street Brewhouse to build a new brewhouse and cellar in 2012 with a second cellar addition in 2015.

“We used that new facility to create our own brand of craft beers under the Third Street Brewhouse label,” said Brewhouse Manager, Karl Schmitz. “Contract brewing is a great way to fully, or more completely, utilize the assets of the brewery.”

It is also a way to create revenue that wouldn’t otherwise exist. Schmitz noted that Third Street co-packs for many non-alcoholic beverages as well.

Selvy noted that contract brewing has been found to be a good strategy to utilize Crazy Mountain’s smaller tanks.

“It forced us to grow the production run sizes of our core brands, which ultimately made them more profitable brands for us to produce,” he added.

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