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  • Contract Brewing Logistics...

    Howdy Hi All,
    Does anyone have any real-world advice regarding entering into contract brewing (from the brewery's POV). Also, does anyone have a contract I could look at to get an idea of what issues I need to cover in our contract for contract brewing and packaging? Any input is always absorbed!

    As always, when you're in Polson, stop by the brewery to claim your "PROBREWER.COM" discount!

    Prost!
    Dave
    Glacier Brewing Company
    406-883-2595
    info@glacierbrewing.com

    "who said what now?"

  • #2
    Contract Brewing Info

    I would like to follow up on this post by Dave with the same question:

    Would anyone PLEASE be prepared to share with me their contract brewing contract, or at least some specific hints and tips of what should be included and excluded? I am looking to be the brewer producing the beer under contract for a customer, and am wary of the contract detail. The contract will include packaging into bottles.

    I'd REALLY appreciate someone being kind enough to help me out here. Pm me if you'd rather not post publicly...

    Thanks.

    Comment


    • #3
      #1 thing to remember, you are not partners with your contract brewing customer.

      First thing to do is give them your exact specifications for all packaging materials. Have them make all items (labels, mother cartons, six-packs, etc) so they will run on your packaging eqpt. Get your hands on the prototypes and approve them before the box company runs 20,000 of them. Do not back down on this one. So what if their designer made this nifty 5-sided label, if it doesn't run seamlessly in your plant it's not worth it.

      The customer should pay for all packaging materials and have them delivered to your brewery before you start brewing. If you brew before they arrive in your plant I guarantee you'll have tanks tied up way longer than you want. Do not pay for any of the packaging materials, you should never even see the invoices from the box company or label company, etc.

      Ideally you get payment in full for each batch before you brew it. Realistically get half payment before you brew and demand the other half before you ship the first case. You getting paid for your work should not be held hostage by their ability to sell beer.

      This may sound draconian but it is hard-earned wisdom. If you partner with the customer in any aspect--pay for their printed crowns, brew before you have money in hand, etc.--you will end up with liquid in your tanks and/or packaged product and packaging materials in your warehouse that you paid for and can not use.
      Last edited by pennbrew2; 11-27-2005, 10:31 AM.

      Comment


      • #4
        In addition to Pennbrew's great advice...........

        I would think you'ld want a release and indemnity statement of some sort that releases you from any lawsuits that may result from product misuse or overuse. Since you wouldn't control the distribution, you want to be well separated from the folks who sold it.

        Are they supplying the recipe, or do you have to develop it. If there's any tweeking to their established recipes that require test batches, etc., do you want to be compensated for that?

        Warranties, if any? How long will you stand by your product once it leaves the facility? That probably should be in there as well.

        Just a few thoughts.........

        Comment


        • #5
          Hello,

          I have a boiler plate contract that I have used as the basis for contract brewing for the past several years. For those interested, please send me a private message with your email address. I'll be happy to send you a copy.

          Cheers,
          Mike

          Michael Labbe
          Milly's Tavern
          Manchester, NH 03101
          Last edited by mlabbe; 05-06-2008, 02:07 PM.
          Michael Labbe
          Brewery Engineer / Director of Operations
          Lord Hobo Brewing Company
          5 Draper Street
          Woburn, MA 01801

          Comment


          • #6
            Brian hits on a great point, I will expand...what happens with the recipe...maybe the "pilot" brew was great on someone elses system, but once you go full steam, the customer decides that the beer does not taste the same as the original? I have seen this happen and the brewery gets stuck with the beer! (has to change the name, then figure out how to sell it)Make sure you address this in the contract!

            Comment


            • #7
              Check this PDF out...a circular related to contract brewing by our palls at the TTB
              Attached Files

              Comment


              • #8
                To Pennbrew2

                Regarding contract brewing, what do you think of completely managing their brand and sending them a small royalty for them to license us to use their name regionally (west coast)? It seems clean and simple but I really hear your obviously hard earned wisdom on several points. Is this unwise to do for a seemingly good brand?
                Last edited by Another Beer; 01-30-2006, 09:34 PM.

                Comment


                • #9
                  Managing a contract brand

                  Another Beer asked: "Regarding contract brewing, what do you think of completely managing their brand and sending them a small royalty for them to license us to use their name regionally (west coast)? It seems clean and simple but I really hear your obviously hard earned wisdom on several points. Is this unwise to do for a seemingly good brand?"

                  Another Beer,

                  Be careful about how much time and effort you put into managing and marketing someone else's beer. It can seem like a very good idea on the short term, particularly if you are working with a brand that has name recognition at the start. Let's face it, every drop of beer in your tanks is a good thing! Contract brewing is a great way to fill excess tank capacity and to keep your machinery running more of the time.

                  If you do decide to go down this road, give a lot of thought to previously stated advice regarding packaging. Make sure that the packaging is paid in advance. You could find yourself out thousands of dollars for useless packaging if the contract doesn't work out.

                  Never forget that at the end of your contract term, or if you are unable to meet contracted sales volumes, the brand could move down the road to one of your competitors leaving you with absolutely nothing to show for your efforts. You give up margin to brew a contract, and you also give up control of the brand.

                  Wouldn't your time be better spent creating a stronger market for your own brand(s)!

                  Now that I have put my somewhat cynical views out there, let me temper them a bit. With the right partner, and the right contract, there is no reason that this sort of arrangement can't work. Just make sure that you have explicit terms in your contract that address the potential pitfalls to the mutual satisfaction of both parties.

                  Cheers,
                  Mike
                  Michael Labbe
                  Brewery Engineer / Director of Operations
                  Lord Hobo Brewing Company
                  5 Draper Street
                  Woburn, MA 01801

                  Comment


                  • #10
                    Originally posted by Another Beer
                    Regarding contract brewing, what do you think of completely managing their brand and sending them a small royalty for them to license us to use their name regionally (west coast)? It seems clean and simple but I really hear your obviously hard earned wisdom on several points. Is this unwise to do for a seemingly good brand?
                    If it's a new brand I wouldn't touch it. A brand's value is directly related to its sales volume; if you're the one creating the value why should you pay for the effort? The beer market has seen an almost infinite array of flavors/names/concepts, I can't envision a new brand that would be interesting enough that I'd want to pay royalties to develop it for someone else.

                    If it's an existing brand with proven sales volume and name recognition, that's a different story. Obviously, make sure your interests are protected and efforts are rewarded.
                    Last edited by pennbrew2; 01-31-2006, 02:32 PM.

                    Comment


                    • #11
                      Hello all!

                      Great advice on contract brewing. Pennbrew and packaging materials, Diamond knot, and mlabbe. All must follow advice. I have one more to offer. Kind of obvious, but a mistake I keep making again and again. Pricing. Make sure you are charging an appropriate amount for your services. See, I love to brew beer. I love new projects, new ideas, and that gets me into trouble. Figure what you need to charge, then double it. If they decide to have the beer brewed somewhere else. You just saved yourself a small bit of headache. Unless you really need that extra volume. But, as I'm constantly reminded each time an invoice goes out, the return on my brands are much higher than any of the contracts I do. I've made some good connections via the contracts, but overall brewing / selling my beer is what keeps my brewery afloat. Don't loose focus by being all caught up in someone else's project.

                      (Sure hope none of my contracts read this! I love you guys, really!)
                      (I'm just not charging you enough!)
                      Cheers,
                      Ron
                      Jolly Pumpkin Artisan Ales

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