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laughinglemur
10-09-2010, 12:23 PM
So my long term goal is a owning a brewpub. I've been writing a business plan and working towards this, but I'm 5-10 years away from it being even close to a reality.

I was speaking with a nearby brewer friend of mine and brought up the possibility of contract brewing in his brewery. As he's not at capacity, he was open to the idea, and so now that I see it as a real possibility, I'm wondering if it's a path worth considering. The brewery is about 15 minutes from me, and I would be able to brew my own beer, so unlike many contract breweries, I would basically be renting the equipment, not just providing a recipe.

As I see it, there are upsides and downsides to going this route. The potential upsides include brand recognition later down the road when I'm ready to open the brewpub, a foot into the business for considerably less than the cost of a brewpub, and obviously a way to do something I enjoy.

The downsides include the public perception of contract beer, as well as the potential for problems down the road if the brewery begins to reach capacity.

So, that said... what does everyone think? Is it a worthwhile move, or would it be a dumb way to get started, and why?

LuskusDelph
10-10-2010, 10:29 AM
You sound fired up enough...if you can afford to take the chance I say just go for it. I think it's great that you have a brewery nearby that can let you come in and do the brew.

I think the "public perception" of contract beer is not a big issue, because if the beer is good it doesn't matter where the beer comes from. There are definitely some beer snobs in the world who would reject out of hand any contract brew or big brewery "craft" product just 'because' , but the reality is that vast majority of the beer drinking public (including lovers of 'better' beer) just doesn't care. Let's face it, there is enough lousy beer coming from small breweries, big breweries, and brewpubs, so I think quality should be the top priority as well as successfully determining what kind of beer will meet with approval in the already overpopulated and very competitive jungle of specialty beers.

It won't be an easy road and much of your energy will go into marketing the product.
Ultimately the most important thing is to make a beer that the public wants.
Or at least one that you can convince them they want.

Schubros
10-10-2010, 01:15 PM
I'm in a similar boat. I'm looking at a startup, lets call it 18 to 24 months out, and considering starting brewing with the contract brewer. I'd really appreciate hearing what anyone else out there thinks of my logic below.

It will be a packaging facility as opposed to a brewpub, but I have the same branding concerns and perception fears you have. The good news is that like you there are close-by contract brewers, so the beer is still a 'local' product that I could still drive design of -- though your situation sounds really ideal in that control perspective.

I'm currently leaning toward the contract brewing for two reasons. One, I don't have to go through the admin torment of starting up an industrial facility and getting the permissions, environmental inspections, etc. The second is primarily financing - it's a much smaller financial investment and risk right out the gate, both for me and for any bank I would take a loan from. So I think I'm looking at a good percentage point plus off the loan rate once I can build up some kind of a sales track-record and request capital financing a couple years down the road.

The plan medium term is to always keep the relationship open with the contract brewer, but in a few years as demand hopefully grows and starts to outstrip my little slice of the contractor's capacity, bring the majority of brewing in-house. Then market the heck out of our facility.

In the meantime it is a bit of a marketing risk, but the reasons to contract out are looking pretty compelling. Can I ask what other people think of my logic?

toddbrew
10-12-2010, 11:44 AM
I do not see that contract beers have a bad reputation. Here in the Northeast there are a lot of brands that started as contract brands and are doing really, really well - like the new Clown Shoes beers, Pretty Things (not really a contract beer, more like a brewery renter) and a little brand called Samuel Adams. The craft beer road is littered with brands that were really good beers but couldn't market and sell them - that is a very large piece of the game. I think that your situation sounds favorable - a nearby brewery and the chance to focus on how your brand is perceived and marketed sounds great. then years down the road you can open your brewpub and on the first day, look out at a sea of fans waiting to get in and not a parking lot :)

Good Luck!

ClaudiusB
10-25-2010, 06:38 PM
I was speaking with a nearby brewer friend of mine and brought up the possibility of contract brewing in his brewery. As he's not at capacity, he was open to the idea, and so now that I see it as a real possibility, I'm wondering if it's a path worth considering. The brewery is about 15 minutes from me, and I would be able to brew my own beer, so unlike many contract breweries, I would basically be renting the equipment, not just providing a recipe.

Called alternating proprietorships.
Read more here.
http://www.legallibations.com/2010/05/alternating-what.html

Cheers,
ClaudiusB

laughinglemur
10-25-2010, 06:43 PM
Called alternating proprietorships.
Read more here.
http://www.legallibations.com/2010/05/alternating-what.html

Cheers,
ClaudiusB

Actually NJ doesn't allow alternating proprietorships, so it would be contract brewing. The only way I would be able to brew my own beer is if the contract brewer hires me as an employee. When I spoke with TTB about this, they said that they don't care who brews, and that as long as I'm a proper employee, there isn't an issue with this.