Just got an offer from a local brewery to do contract brewing

Cheers everyone!

I was just wondering if anyone is doing this and what the pros and cons were. I may have an opportunity to do this but it would be a long shot.

I really do not want to hand over my recipes to someone else and let them brew my beer for me. I want to be involved in every step of my brews. Is there another option that I can do? I have heard that there is a way for me to rent space in another brewery and use their equipment, allowing me to be responsible for every step of by beers.

In either case I am super excited :rockin: about this opportunity and can't wait to see what I can turn this into. Any ideas or help would be greatly appreciated.

cheers,

What is the purpose?

I live here in AZ. I'm curious which brewery? Sun Up, Sonoran, Sleepy Dog?

As for your recipes, They'll stay yours. There seems be a certain level of professional courtesy in the brewing profession. Which goes for you too: I would make sure none of the brews you plan on selling step on any toes of the breweries here in town.

I'm assuming you already have, or are, working on the legal side of things, if you are going to be labeling beer for market, you need to be a 'brewery' with the state, file all the needed forms, and pay the needed costs associated with that.

Lots of things to think about...

jlaureanti said:

Cheers everyone!
Is there another option that I can do? I have heard that there is a way for me to rent space in another brewery and use their equipment, allowing me to be responsible for every step of by beers.

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Yes, this is an option, but one that requires significantly more time and money. If they take the recipe and brew it for you, you don't have to jump through any hoops. But then you also don't get as much control, as you've realized.

BendBrewer said:

What is the purpose?

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+1 are they asking to buy your recipe from you? Will your name be represnted?

jlaureanti said:

Cheers everyone!

Today I was just offered a deal with a local brewery to do some contract brewing. I was just wondering if anyone is doing this and what the pros and cons were.

I really do not want to hand over my recipes to someone else and let them brew my beer for me. I want to be involved in every step of my brews. Is there another option that I can do? I have heard that there is a way for me to rent space in another brewery and use their equipment, allowing me to be responsible for every step of by beers.

In either case I am super excited :rockin: about this opportunity and can'y wait to see what I can turn this into. Any ideas or help would be greatly appreciated.

cheers,

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In contract brewing you would have little involvement in brewing. Your job would be to license and sell the beers.

Alternating proprietorship is where you would lease the breweries equipment but be your own independent brewery. This is what Jamil Z is doing and he said in order to have an alternating proprietorship approved you have to have a business plan that involves getting your own equipment/building etc at some point.

What is the purpose?

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My purpose is to make wonderful beer that I can share with everyone. I hope to one day run a completely organic brewery where I grow all my ingredients (yeah, I know high hopes but you gotta dream big right?)

I live here in AZ. I'm curious which brewery? Sun Up, Sonoran, Sleepy Dog?

As for your recipes, They'll stay yours. There seems be a certain level of professional courtesy in the brewing profession. Which goes for you too: I would make sure none of the brews you plan on selling step on any toes of the breweries here in town.

I'm assuming you already have, or are, working on the legal side of things, if you are going to be labeling beer for market, you need to be a 'brewery' with the state, file all the needed forms, and pay the needed costs associated with that.

Lots of things to think about...

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We haven't fully finished our agreement yet so I don't think it is right for me to name names yet. But, it is a brewery in tempe and no its not 4 peaks (i wish) or sleepy dog (also a very nice brewery).

I am in the process of getting all my applications filled out and filed. I am just not exactly sure what license I need? I am thinking I need a nano brewery license (series 01 in arizona), but I am not sure since I am hoping to do the contract brewing.

Also, I do not want to step on any toes. I do know that Four Peaks 8th St. Ale is a nearly perfect pale ale and Sleepy Dog has a delicous hefe. I would hope to meerly add to the craft brewing that is going on here in town.

+1 are they asking to buy your recipe from you? Will your name be represnted?

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Currently we are in the middle of the negotiations. The idea was literally presented to me this morning and I am trying to get some background info for when we are scheduled to meet next.

I am still confused on what you are doing. Are you brewing your beers for them to sell? Brewing their beers for them for them to sell? What is the partnership?

I still don't understand the point of what you are doing. You are going to have a brewery brew your beer and then you are going to drink it or give it away or sell it?

is it Dave's?

I am still confused on what you are doing. Are you brewing your beers for them to sell? Brewing their beers for them for them to sell? What is the partnership?

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Ultimately, I am trying to start my own micro/nanobrewery. Currently I am a homebrewer. Recently, there was an (bar) industry get together and I brought y homebrew. The owner of one of the local breweries tried my beer and i guess he saw some potential in it. Today, we talked and he offered to do contract brewing with me. So, they would be makig my beer for me and I would be selling it.

My big question is.... is this a good idea? Should I take the exposure and run with it or should I spend time trying to open my own nanobrew and not go through another brewery.

So let me get this strait, you'd supply the recipe and they'd brew it for you but you'd have to sell it?

If you have a chance to test the market first before making the investment I would do that. Not sure what the laws are. I think you have to have some type of federal license to sell or distribute alcohol though.

There's a guy in my area doing something like this.
http://www.mysterybrewingco.com/
Send him an email with your questions, he's a nice guy. I know he had a lot of paperwork to do beforehand and he also raised quite a bit of capital for this endeavor as well.

So let me get this strait, you'd supply the recipe and they'd brew it for you but you'd have to sell it?

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I think so? Not really sure. Your question is pretty much my question in a nut shell. I don't really get how this all works! If i am doing contract brewing, what exactly do I get to do? Do i just provide a recipe and then they take care of the brewing process as well as the selling process and then give me a small portion of profits?

I doubt anyone is going to give you any money simply for using your recipe which when scaled up isn't going to look like yours anymore anyway.

Contract brewing to me means they make your product and then you come pick it up.

They can't let you brew it as their insurance wouldn't cover you working there.

It sounds hokey to me. The brewery probably wants to make use of underused equipment and saw the opportunity with you as a way to fill their fermenters with pre-payed for beer.

Questions come to mind like:
Where would you sell it?
How much are they going to charge you to brew your beer for you?

Sounds like a sweet deal for them but you're going to be stuck with a lot of beer that you will have to figure out what to do with.

I'm not trying to rain on your parade, just keeping you grounded. I really do hope you figure out a win-win deal and I can drink some of your beer soon.

Good luck and be careful.

I doubt anyone is going to give you any money simply for using your recipe which when scaled up isn't going to look like yours anymore anyway.

Contract brewing to me means they make your product and then you come pick it up.

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This is pretty much what I thought was going to happen and would be completely fine with me.

Thank you all for your input. This community has been incredibly helpful and I thank everyone for all the helpful input :rockin:

It sounds hokey to me. The brewery probably wants to make use of underused equipment and saw the opportunity with you as a way to fill their fermenters with pre-payed for beer.

Questions come to mind like:
Where would you sell it?
How much are they going to charge you to brew your beer for you?

Sounds like a sweet deal for them but you're going to be stuck with a lot of beer that you will have to figure out what to do with.

I'm not trying to rain on your parade, just keeping you grounded. I really do hope you figure out a win-win deal and I can drink some of your beer soon.

Good luck and be careful.

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Honestly, thank you. I was waiting for this answer. I think its kinda strange too and they might just want to fill unused fermenters.

Does anyone know what a good rate is for contract brewing, so I do not get totally hosed in this deal?

jlaureanti said:

Honestly, thank you. I was waiting for this answer. I think its kinda strange too and they might just want to fill unused fermenters.

Does anyone know what a good rate is for contract brewing, so I do not get totally hosed in this deal?

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I understand better now. Remember, don't put the cart before the horse. In other words make sure you can sell this stuff first or you will be out money and stuck with a bunch of beer you can't sell. I would ask why they don't want to try and sell it for you, they already have the means to do so, if they are not interested I would agree this sounds odd. For them it is solid deal, for you not so much.

jlaureanti said:

Also, I do not want to step on any toes. I do know that Four Peaks 8th St. Ale is a nearly perfect pale ale and Sleepy Dog has a delicous hefe. I would hope to meerly add to the craft brewing that is going on here in town.

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There's room for more than one Pale ale or Hefe in town, I meant more specifically: 8th st Ale is an English Best bitter, so don't make an extact copy of that. Nearly every brewery has a Pale Ale or Hefe, but everyone has their own twist.

You don't need to be unique, so long as your not a carbon copy of the next guy.

I believe it comes down to you paying the brewery to make and package your beer. You're left with the marketing, finding places to serve your beer and a distributor to supply them. Sounds like the brewery is looking for some additional income.

It would probably be worth your while to ask this question on Probrewer.com.

Contract brewing can be very beneficial for a start-up if you can get a good arrangement. I know that Terrapin Brewing started this way. You'll probably be paying the cost of ingredients, labor and packaging and then picking up finished product. Depending on your state laws, it will then be your responsibility to either contract with a distributor or sell the product to retailers.

-Chuckwheat

Im very confused here.

Normally contract brewing is when a company contracts out another brewery to brew beer for them. They provide the labels, recipes and money and the contracted brewery produces and packages the product. It is normally done because a brewery cannot full fill the amount needed. Or if they have a beer they like to mass produce they will contract it out to a brewery geared toward bottling.

skeeordye11 said:

There's a guy in my area doing something like this.
http://www.mysterybrewingco.com/
Send him an email with your questions, he's a nice guy. I know he had a lot of paperwork to do beforehand and he also raised quite a bit of capital for this endeavor as well.

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Thanks for the link. I'm in the Raleigh area and am very interested in what this guy is doing.

fftopic:? maybe.

remilard said:

Alternating proprietorship is where you would lease the breweries equipment but be your own independent brewery. This is what Jamil Z is doing and he said in order to have an alternating proprietorship approved you have to have a business plan that involves getting your own equipment/building etc at some point.

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I believe Jamil was saying that is the rule in California. It may not apply to Arizona. If you're interested in brewing your own beers and doing it all yourself, this may be an option for you. You could probably email him if you wanted to go down this path. Either way, good luck!

I don't mean to be a skeptic, but I smell some shennanigans based on the OP's track record of posts....

And there's enough of us here in AZ to know the beer scene....

Not trying to **** on the OP, but his (your) threads seems to be, well, nevermind...

Good luck - go for it.

Ever put together a business plan?
I don't want to rain on anyone's parade, but it is VERY important to have a (business) plan so you know FULLY what you are getting into. Doesn't matter if it is twiddly-winks or beer.

jlaureanti said:

Cheers everyone!

Today I was just offered a deal with a local brewery to do some contract brewing. I was just wondering if anyone is doing this and what the pros and cons were.
cheers,

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Good info
http://www.legallibations.com/2010/06/contract-manufacturing.html


Cheers,
ClaudiusB

I don't mean to be a skeptic, but I smell some shennanigans based on the OP's track record of posts....

And there's enough of us here in AZ to know the beer scene....

Not trying to **** on the OP, but his (your) threads seems to be, well, nevermind...

Good luck - go for it.

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I would just like to say that I never once said that this was in anyway shape or form actually happening. All I said was an offer was made. I have no where near the capital right now to do this. All I wanted to know, was some of the pros and cons of doing contract brewing and what it actually was. I did say that I am in the process of filling out the applications (which I am) and that one day I would like to open a micro/nanobrewery. But that day is not anywhere near here. I also said that we are in the middle of negotiations, so I may have been drinking a little and exagerated a bit (a meeting is planned and I am also working on a business plan).

Ever put together a business plan?
I don't want to rain on anyone's parade, but it is VERY important to have a (business) plan so you know FULLY what you are getting into. Doesn't matter if it is twiddly-winks or beer.

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I am currently trying to complete a business plan. Not the most enjoyable thing to do. I definitely see this as an unexpected bump.

I appreciate all the helpful links and information

barrooze said:

I believe Jamil was saying that is the rule in California. It may not apply to Arizona. If you're interested in brewing your own beers and doing it all yourself, this may be an option for you. You could probably email him if you wanted to go down this path. Either way, good luck!

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IIRC, Jamil mostly mentioned it in terms of the Feds.

I would suggest working out some sort of licensing deal with your recipe. Were for whatever compensation you decide upon, they are granted brewing rights to the recipe. However, I'm not sure what the man would have to say in that regard.

So if for brewing and legal convenience a brewer must own the rights to the formula, then you should get more compensation.

I have to agree with some of the others. This does sound like a small brewery trying to find a way to utilize extra capacity. Not that that is a bad thing. As long as you can come to reasonable terms that don't leave you with $30k+ in beer you can't sell. Just don't rush into this. Do the research. It does sound like you are going to be solely responsible for taking ownership, marketing and selling the beer. Just make sure you are willing and able to run a business at this point.

As for pricing, I don't know what a good contract brewing price would be, but figure you are going to sell a 6-pack at retail for $8.99. Which means you need to be able to sell it to a retail store for around $5 at the most. Which means you are going to need to pay less than $3 per finished 6-pack to make any type of profit after expenses. These calculations are working off of what I would consider the bare minimum profit margins.

As for pricing, I don't know what a good contract brewing price would be, but figure you are going to sell a 6-pack at retail for $8.99. Which means you need to be able to sell it to a retail store for around $5 at the most. Which means you are going to need to pay less than $3 per finished 6-pack to make any type of profit after expenses. These calculations are working off of what I would consider the bare minimum profit margins.

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So far the pricing is my main worry. Twigboy2000 had given me a link to probrewer.com and they have a ton of info in their boards about this subject. I was aiming to mainly keg all of the brew and they had a rough estimate of $70 a keg for the finished product. They didn't really specify whether the kegs were included or not.

pricing that I have seen from breweries to distributors:

6 packs - 50-60% of retail price

kegs - 50-60% of retail price, with a $30 keg deposit (keg deposits vary by state) distributors pass the $30 charge along to the liquor store or restaurant.

Your larger and more immediate problem is licensing/labeling/packaging supplies. Wanna do cans? Most suppliers want a minimum order of 500,000 printed cans.....not sure if this number is going up or down with the recent boom in craft breweries that are canning. Does this brewery have a canning or bottling line? Do they have a forklift/loading dock? Do you have a vehicle that can handle these types of pickups and deliveries? In AZ do you have to go through a distributor or can you self distribute? Have you looked into insurance requirements?

Good Luck!

Not sure if anyone has mentioned this yet, but you still need to be licensed to sell beer and pay taxes and all that even if you don't brew your own beer.