Your Local Beer Isn’t as Local as You Think

And maybe that’s OK.

Samuel Adams beer and other drinks are displayed at the Boston Beer Co. booth at the 28th annual Nightclub & Bar Convention and Trade Show.

Samuel Adams Boston Lager: maybe brewed in Boston, maybe not.

Photo by David Becker/Getty Images for Nightclub & Bar Media Group

After you’ve been on four or five brewery tours, they all start to look the same. Here are some plastic bags for your feet, and here is the sharp stink of bleach. Here is the gleaming mash tun, and here are some tall fermenters. The monotony doesn’t matter to beer geeks, who make pilgrimages to pay their respects to their favorite beverage (and possibly score some free samples). To me, Anchor Brewing’s beautiful brewery in San Francisco is basically the Lincoln Memorial.

For many craft beer drinkers, choosing a beer isn’t purely a matter of taste—it’s about place and connection. It’s thrilling to visit a brewery and enjoy a pint with the people who made the beer just a few yards away from where they’re serving it. Craft beer enthusiasts invest in a business, but also in a story: beer as a local product, produced by passionate local entrepreneurs.

But what if you visited your favorite brewery and discovered that they didn’t make your favorite beer there? Sometimes they don’t. That’s because of a practice known as contract brewing, in which one brewery hires another brewery—sometimes one across the country or on the other side of the world—to make some or all of its beer.

Most craft beer produced in the United States isn’t contract brewed. Ten million of the 13 million barrels of craft beer sold in 2012 came from regional craft breweries like Sierra Nevada and New Belgium, whose beers are brewed at facilities owned and operated by the brewery. According to the Brewers Association, only 1.7 percent of the beer sold last year was contract-brewed. But as demand for craft beer grows, more and more small breweries are experimenting with alternative, cheaper brewing arrangements to get their foot in the door.

Within the beer industry, the phrase “contract brewing” has pretty negative connotations. Many brewers working today still remember the shakeout from the last craft beer bubble in the mid-1990s. Just as the tech bubble made everyone snatch up shares for every company that ended in dot-com, the staggering rise of breweries like Redhook and Pete’s Brewing made everyone think there were similarly big bucks to be made in beer.

The market was flooded with beer, and a lot of it was terrible. As beer journalist Tom Acitelli documented in his excellent history of the American craft brewing movement, The Audacity of Hops, Anheuser-Busch saw a prime opportunity to deliver a heavy blow to its rivals in the independent craft industry. In a Dateline episode that aired in October 1996, it targeted one of the country’s leading craft brewers, Boston Beer’s Jim Koch.

At the time, Boston Beer contracted out production of the iconic Samuel Adams Boston Lager—named for the city’s beloved “brewer patriot”—to other commercial brewing facilities around the country: in Pittsburgh; Portland, Ore.; and Eden, N.C. An Anheuser-Busch rep made an appearance on Dateline, making an earnest call for truth in advertising. If Sam Adams wasn’t made at the historic brewery in Jamaica Plain in Boston, where were most craft beers made? And how? Between the bad PR and the bad beer many upstart breweries were churning out, the industry suffered through a slump between 1996 and 2000, and the words contract brewing were usually followed by a sneer.

Today, beer drinkers are a much more discerning lot than they were in the ’90s, with more sophisticated palates and the savvy to know, for example, that Anheuser-Busch makes Shock Top Belgian White and that MillerCoors owns Blue Moon. Also, many breweries, including Boston Beer, now voluntarily print the location of the actual brewing facility and not just the location of the brewery headquarters.

But even with this openness, there is still a lot of room for interpretation, especially when there are so many different kinds of contract relationships. The initial cost of starting your own brewery can be intimidating—rent on a warehouse, large steel fermentation tanks, kegs, and forklifts are all expensive. Paying an existing brewery to make your beer for you means that aspiring brewers only need to raise $50,000, not $500,000, to realize their dreams.

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.