The most traditional contract relationship is known as an alternating proprietorship, in which a host brewery lends its facilities on a regular basis to another brewery that legally “owns” the facilities for the duration of production. For instance, 21st Amendment brews the beer served in its San Francisco brewpub on the premises, but they produce their canned line via an alternating proprietorship with Cold Springs Brewing in Minnesota. In addition to the equipment, 21st Amendment owns the beer and its ingredients for the duration of production, holds its own permits, and pays excise taxes according to its own barrelage, rather than Cold Springs’.
An alternating proprietorship is a convenient arrangement if one brewery has invested in equipment that another brewery doesn’t have. It’s also convenient if the host brewery is located in a place that would shorten distribution time. Kona Brewing is based in Kailua Kona, Hawaii. As mainland demand for their beer increased, Kona entered in an alternating proprietorship relationship with Widmer Brothers Brewing in Portland, Ore., to produce kegged and bottled beer stateside. In 2010, Kona merged with Widmer and Redhook to become the Craft Brew Alliance.
“Beer is made up of water, and the island of Hawaii has been in a drought for decades,” said Mattson Davis, Kona Brewing’s president. “It doesn’t make sense to be shipping this scarce resource across the ocean to the mainland in bottles. Brewing closer to market has eliminated 800,000 miles and saved 1,500 tons of carbon dioxide, the equivalent to taking 319 cars off the road for a year.”
A brewer that enters into an alternating proprietorship relationship legally owns the other brewery while they’re brewing. Tenant brewers, however, like Dann Paquette and Martha Holley-Paquette of Massachusetts-based Pretty Things, merely rent a host brewery’s facilities for a flat fee. An experienced commercial brewer, Dann Paquette began tenant brewing when he was unable to find a brewing job in Boston. It’s a tenuous arrangement because the tenant is entirely reliant on the goodwill of the host brewery. “The big downfall of this model is that the host brewery can always make more money brewing their own beer,” Paquette said. “If they decide to do that, then we don’t exist anymore. But we’ve always known that. It doesn’t bother us.”
A third common arrangement is for a business or brewery to solicit the services of a contract brewery to produce an entire beer for them, from recipe development to brewing to distribution. If a restaurant has a line of house beer, odds are that it came from a contract brewer like Custom Brewcrafters. Custom Brewcrafters’ brewmaster Mike Alcorn devises original, exclusive recipes for clients who want a proprietary brew, and he also helps smaller breweries like Three Heads Brewing scale up production for wider distribution.
Those who take issue with the concept of contract brewing see it as a matter of misrepresentation. Greg Koch, founder of legendary Stone Brewing near San Diego, said, “As a consumer, I want the truth to be easy to understand and require no special knowledge ... If [the beer] is not brewed at the company whose name is on the label, I’d want to know.”
Many traditional brewers also see contract brewers as less willing to put their “skin in the game,” as Will Meyers, the brewmaster at Cambridge Brewing Co. in Boston, puts it. A homebrewer who raises $20,000 to develop a recipe and design eye-catching sweatshirts has a lot less to lose than a brewer who has invested $500,000 to rent and equip a warehouse space. A contract brewer is also more likely to spend more time marketing beer than brewing it—a fact that is frowned upon by businesses whose primary marketing assets are the sweat and tears expended by their founders.
But as the industry expands and competition for even the lowliest jobs becomes more intense, brewers must put their vaunted creativity to use finding different means to get their beer into the public eye. And contract brewing is changing to accommodate the new craft beer economy: The Brew Hub, which recently opened a 50,000-square-foot facility in Lakeland, Fla., plans to help craft brewers who don’t have the money to expand or build their own premises to scale up production and store, market, and distribute their beer. Like most contract brewers, the Brew Hub’s clients aren’t evildoers out to grab a piece of the market at the price of their integrity. They’re just craft beer aficionados who are trying to get a toe on the lowest rung of the ladder.
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