Compensation (or fee) for new recipes?

[Kevin N.]

We are a little nano brewpub (2bbl), just starting out...we are not open yet. We have been test marketing our beers for the past year and have been receiving very positive results.

A brewery in our area really liked our beers too. They are a micro (10bbl), bottle only brewery. Their brewer knows the mechanics of producing their current selections of beer but, their beer knowledge ends there. They have asked us to formulate two new recipes so they will be able to expand their offerings or, possibly start a new brand with the new styles.

What do you think?
First, has this happened to anyone before? I always assumed that a brewery could come up with their own recipes.
Second, if I do it, what do I charge? They would like us to brew a pilot batch, tweak it according to their likes and then another batch to test the results. They would own the recipe.

Any help would be greatly appreciated.

[AT-JeffT]

We are a little nano brewpub (2bbl), just starting out...we are not open yet. We have been test marketing our beers for the past year and have been receiving very positive results.

A brewery in our area really liked our beers too. They are a micro (10bbl), bottle only brewery. Their brewer knows the mechanics of producing their current selections of beer but, their beer knowledge ends there. They have asked us to formulate two new recipes so they will be able to expand their offerings or, possibly start a new brand with the new styles.

What do you think?
First, has this happened to anyone before? I always assumed that a brewery could come up with their own recipes.
Second, if I do it, what do I charge? They would like us to brew a pilot batch, tweak it according to their likes and then another batch to test the results. They would own the recipe.

Any help would be greatly appreciated.

Sounds like you've just entered the contract brewing industry. I would start looking into typical contract brewing business models.

[Kevin N.]

Sounds like you've just entered the contract brewing industry. I would start looking into typical contract brewing business models.

Except that we will only be making the test batches. We hand over the recipe and they brew the rest.

[AT-JeffT]

Except that we will only be making the test batches. We hand over the recipe and they brew the rest.

Yes, that would be one minor difference. Use contract brewing as a starting point.

[beerme]

you could either make a flat fee for the recipe or a 'commission' per litre.

ask for 10c/L and if the recipe is popular and they make a lot of it you will have an ongoing stream of income.

[mashpaddled]

At a minimum you should charge whatever costs are incurred plus profits lost by not using that brewing capacity for your own products. You should also charge a premium for the value of the expertise you are providing them. You could honestly consider charging 50% or more of the lost profits as that premium. Maybe more.

Something to seriously consider is whether you want to do so much work helping a competitor produce products that may push you out of the market. That attitude may fly in the face of the craft beer brotherhood mentality but you have bills to pay and people that will rely upon your solvency to feed their families. If you give them two successful products then that is shelf space and market identity that you can't take. If you are going to be taproom only you may not be concerned with shelf space today but if you are successful then you may want to expand into packaging. If this 10BBL brewery really lacks the ability to design basic products then they may not hang around long enough to be your direct competitor without your help.

[hallertau2000]

Charge a flat fee say 500-1000$ for the recipe. Then of course charge them for the contract brewing you are doing for them.