Contract Brewing and its Implications for the Beer industry

Book Title: 
New Developments in the Brewing Industry: The Role of Institutions and Ownership
Publication Year: 
2020
Publication Place: 
Oxford
Publisher: 
Oxford University Press
DOI: 
10.1093/oso/9780198854609.003.0011
ISBN: 
9780198854609
Pages: 
235-255
Abstract: 

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.

Keywords: 
contract brewing, craft beer, microbreweries, outsourcing, economies of scale, gypsy brewers, market entry, beverage production, investment