Contract Brewing and its Implications for the Beer industry
After years of consolidation in the industry, the beer industry has recently witnessed a wave of entries by small and medium-sized “craft” brewers. As brewing beer requires a significant investment in operational facilities, many small start-up breweries have resorted to contract brewing in their start-up phase. By collaborating with a contract brewer, who typically has already made the investment in larger brewing facilities, craft brewers can benefit from the economies of scale and scope realized at the contract brewer, and slowly assess whether the market demand for their beer would require the establishment of their own facilities. As such, contract brewers have greatly accommodated the recent rise of craft breweries. However, if the demand for craft beer saturates, the impact on contract brewers will be significant.