The Increasingly Heated Debate Around Contract / ‘Gypsy’ / Resident Brewing…

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Fresh back from the annual Craft Brewers Conference in Washington DC, I am struck by the looming tension and sense of anxiety presently bubbling to the surface in this industry. The conference played host to a number of interesting seminars and a few fairly repetitive ones. Mixed among the nearly 100 offerings were multiple courses on how to deal with trademark and intellectual property related issues, including litigation, and a panel on why attendee should not open a brewery (in reality, it seemed pretty pro-brewery opening if you ask me). One refrain that continued throughout the event was the anxiety over the continued and seemingly unmitigated growth of craft brewers, specifically in the number of breweries at offer. Forecasts of shelf space fights and tap tussles seem apt and the established brewers are starting to let their protectionist and curmudgeonly ways show. I heard a lot of “Get off my lawn” comments from craft brewers, both on panels and in bars, a lot of analogies to poorly rooted trees and less charitably to Third World buses. The common takeaway was the growing sense of unease at the caliber and intent of these aspiring and new brewers and what impact their entrance might have on craft beer generally.

Closer to home, the issue came to the forefront today in the post of Cambridge Brewing Company’s brewmaster, Will Meyers, who added an entry to the brewpub’s blog celebrating his 20 year anniversary at my hometown brewpub. Before I get into the story, I wanted to first say two things. I want to wish Will (and his wily boss Phil Bannatyne) a hearty congratulations at this impressive achievement. Cambridge has built an impressive name for itself and largely due to Will’s hard work and dedication, along again with the continued guidance and presence of Phil and the rest of the team. For my second point, I want to note that I consider myself friends with every person appearing in this story. While loyal readers may not believe this, I actually don’t really have a position on the issues involved here, which I suppose I may later discuss.

In any event, Will’s post on topics including contract brewing lays out his history and the pub’s achievements before, as is relevant here, laying out a position on some of the issues described above from the conference. The important thing to note here for purposes of context is that the Boston area has not seen the explosion of growth that you are likely witnessing in your hometowns. Rents are incredibly expensive and available industrial spaces nearly non-existent. Instead, Boston and its environs has seen a pretty substantial number of individuals and companies bringing beers to market that are made in breweries that they do not own. Historically, this practice was called contract brewing. In the early days of craft brewing, that became a bit of a pejorative, often cast in the direction of the Boston Beer Company. Today, the practice can be called resident brewing, alternating proprietorship, or somewhat offensively, ‘gypsy’ brewing. Whatever phrasing you choose, the practice is again becoming increasingly controversial, sometimes for reasons I can’t quite grasp. And it’s hard to say exactly who qualifies under which of these offered monikers.

In the modern craft era (say the last seven years), this practice appeared to start with the appearance of the eclectic Danish brewer Mikkeller, that, depending on the account you hear, would travel to breweries around Europe and beyond to produce beers on other people’s systems. Using excess capacity built into the global brewing system has a certain understated and elegant efficiency about it. If there is space available, why not use it to go in a very different direction than that of the host brewery? The practice gained some traction, resulting in similar approaches by Stillwater, Evil Twin (from Jeppe, brother of the individual behind Mikkeller), and others.

In New England, we have seen everyone from stalwart industry vets to individuals with absolutely no experience try their hand at the brewing game. Whether this involved participation in recipe formulation, brand and media direction, involvement in the brewing process, or actually directing the brewing and cellaring, each individual and company appears to fall into this hard to define categories of contract / gypsy / resident / altprop.

Getting to back to Will Meyers, his post touched on his personal feelings about this trend in New England, which is likely to grow with the addition of a massive new brewery operation in Connecticut and another planned operation by a local beer bar owner. I found his piece to be interesting for a number of reasons, none the least of which is his not-so-veiled shots at some people in the local industry. I am including Will’s piece here in full.

Following his piece, Jeff Leiter (note, as I said above, that he is also a friend of mine), of the local Somerville Brewing Company, Inc. aka “Slumbrew,” provided me with his response. As I noted, I haven’t really developed much of a position here, though I have historically focused more on the quality of beer than where its made and by whom (if my thoughts on Blue Moon weren’t proof enough). These pieces provide for interesting reads and it’s the kind of discussion that I would like to see more of in this sometimes too-chummy industry.

First, here is the relevant excerpt from Will Meyers, brewmaster of the Cambridge Brewing Company.

By making Craft Beer welcoming to all by design, we’ve made it a desirable industry in which people want to play a part. This includes the inevitable number of beer marketing companies, aka contract brewers (a few of whom call themselves “gypsy brewers”), who either feel that there’s money to be made in this fad or who genuinely love craft beer but don’t want to invest the capital in their own brick and mortar breweries. This lack of skin in the game shows me that they value short term gains over long term personal investment and hard work. And I truly believe that there is no such thing as a gypsy brewer. In fact I know of only one couple, our friends at Pretty Things, who “reside” at another brewery but who actively create every drop of their own beer, each and every brewday. There’s a big difference between having that level of commitment and integrity, and claiming to be a “gypsy” because you occasionally show up at a brewery on days your beer is being made for you. If you’re not there, every time, doing it entirely yourself and if there are other people physically making your beer for you (sometimes in your absence), you’re simply not a brewer in my book. It’s more than just cutting open some bags of grain or making a ceremonious addition of hops or cacao nibs or some other exotic ingredient and Tweeting about it. I’m sorry if that offends some folks, but this is something that our industry – producers, retailers, consumers, everybody – will need to struggle with as time goes on. The Brewers Association made a valiant effort over the past year with their Craft Vs. Crafty campaign, exposing to the general public the lengths to which the international macro-industrial brewers are going to obfuscate the origins behind “fake craft” beers like Shock Top, Blue Moon, etc. Unfortunately we are always reticent to take a look at the fingers pointing back upon ourselves, so we fail to give the consumer the opportunity to understand the differences among us – those who make beer, and those who just place orders for “their” beer, and the inevitable grey-ish line of separation.

Here is Jeff Leiter, Somerville Brewing Company, Inc. aka “Slumbrew, “Somerville, Massachusetts, and his “Response to contract brewing critics.”

Something about springtime makes brewers maybe a little more introspective than they should be. I remember 20 years ago I was thinking about leaving my Somerville apartment for a new adventure. Before I could leave, I got into graduate school at MIT which secured another two years and, well; it got hard to leave a place I called home. My wife Caitlin and I both have entrepreneurial upbringings, so it was a natural fit back then for us to set out on our own to build our first company that is, in its broadest sense described as “marketing”, nearly 14 years ago now. We learned a great deal about business, running a company, managing a staff of over 15 people at times and developing brands for other businesses. But perhaps the most rewarding part of those years was the ability to travel and observe something we were passionate about: the creation of small batch beer as an artisanal product in this country.

I just got back from attending the Craft Brewers Conference in Washington, DC last week. Things look dramatically different today than they did when visiting breweries a decade or so ago. There has been a near exponential rise in the number of breweries opened in 2012 and now an unprecedented number of breweries-in-planning for 2013. The leadership of the national organization of craft brewers, the Brewers Association, is cautiously exuberant over the growth: Finally, their constituents are earning a recognizable share of overall beer sales in a market long dominated by macro brands! The tradeshow floor had more vendors selling raw ingredients, stainless steel, kegs and beer packaging than I can remember at any previous conference. All is good, except, for some, it’s set against a background voice saying this is all too good to be true, and the industry, as a whole, can’t sustain this kind of growth. Maybe, Maybe not – but this is certainly uncharted territory for the craft beer biz.

The business of making American craft beer, especially in the last 5 years or so, has often been veiled in a mystique of the brewer’s art. This is partly for the benefit of consumers as they take satisfaction in knowing the liquid they are drinking is a product of complex processes guided by a skillful hand(s). But in a few unfortunate cases, the veil is more refined by some individuals and developed mostly to protect the fragile ego of someone who has come to rely on the title of “brewer”. My role at Somerville Brewing Company is quite a bit more sober. It would be an envious job if my responsibilities provided for dedication to just the brewing aspects of the business. Indeed, as a small company, I have an enormous range of obligations from finance, managing wholesaler logistics, inventory, and ingredient procurement all the way down to arranging who might attend what bottle shop tasting. Thankfully, we have a great team and wonderful group of supporters we call Slumbassadors to rely on for much needed help. However, the best part of my job is still doing what I initially got into this for – to produce beers that I develop from concept, ingredient selection, test batches in my small pilot brewery to their final production at Mercury Brewing Company.

Certainly one side effect of the recent surge in new breweries is there is more product available. This is a boon for consumers who can now sample a different style or approach every day of every week and never have the same beer twice. With the exception of flavored water and candy, I can’t think of any other consumer products that offer that opportunity. The down side is that many brewers feel a pinch in market share they once dominated, or thought they could dominate. Whereas a few years ago, one brewer may have been the only game in town, they now find themselves among other bottles on a retail shelf. To those of us with a more mature perspective on business, we call this friendly competition. Some of the best advice I’ve received has been from people you might call “competitors”. When the entire segment of craft beer is only approaching 7% of the US beer market, it’s almost absurd to describe other folks in the industry as a threat. Sadly, other brewers internalize the presence of other brands in their local area or the arrival of new brands by people that did not chose the same career lifestyle 20 years ago as an attack on their “brewer” sovereignty. And so, instead of stepping up to lead in a time of exciting expansion, they resort to embarrassing public infighting and attacking members of their own industry.

Some of this is being played out with the recent, yet perennial debate over contract brewing. The latest thinking goes that contract brewers are less genuine versions of a true brewer and are merely engaged in covering up mediocre beer with marketing shtick. A simple beer marketing company has a lack of “skin in the game” over brick and mortar breweries, and don’t want to invest their own capital. As one of the leading grandstanders of this position recently said, “This lack of skin in the game shows me that they value short term gains over long term personal investment and hard work.” Although I will never question the integrity of those who choose to earn a paycheck over setting out on their own, the irony of this coming from someone who achieved their entire status in the brewing world as an employee is overwhelming. It’s also astounding to call other brewing businesses as disingenuous for their lack of capital resources from the safety of a weekly paycheck and staff payroll/equipment financed by someone else. Although, we at Somerville Brewing currently rely on what is technically defined as a contract brewing relationship, it’s downright laughable to think we have neglected to smack down any skin for the “game”. From the personal guarantees and cash outlays to achieve our float of over 1,000 kegs in the market, to the near 90 hour work weeks we spend building our business without a paycheck every Friday – it’s a story that resonates all too well for anyone starting a business in craft beer. The ultimate irony comes from the fact that one of the pioneers of the craft beer movement, Jim Koch, started his business in nearly the exact same fashion; as did our friends at Brooklyn Brewery and many other breweries both now and in the early years of craft beer.

Others have tried to stratify real brewers from less-real brewers as well; though consistently these attempts seem to originate from those who have been in the industry a while or actually own a brewery that might need to work harder to maintain market share. And, a recent (outrageous & pathetic) attempt to tie contract brewing with the crafty side of the Craft vs. Crafty commotion put out by the Brewers Association ended with the accusation that contract brewers just ‘place orders for beer’. No doubt, with an industry seeing the current levels of growth, some individuals see opportunity and, albeit misguided, paths to a quick buck in a hot business. Those that helped shape the industry over the past ten or even twenty years see the newcomers as just opportunistic. In some cases, this is a rightfully deserved perspective. At other times this is simply a deviant and undignified brand strategy to promote their own products over others; a strategy beneath even the marketing companies.

In the end, do the actual people that like our beer and buy our bottles or draught make their decision to support us by whether I checked the gravity on the 2nd day of fermentation at 10:30am? If I am personally not present to transfer our Flagraiser IPA from primary fermentation to a brite tank, will it taste less genuine? I am overseeing the production of our beer on nearly every brew day and key points in the production process to meet my quality standards, but like my other colleagues, I value the care and contribution of the talented staff at Mercury Brewing that work with their equipment to achieve my results. How is that different than virtually every other brewery, including the little local pub that employs a division of labor for the day-to-day production of beer? One old-timer recently put it as follows, “If you’re not there, every time, doing it entirely yourself and if there are other people physically making your beer for you (sometimes in your absence), you’re simplyff not a brewer in my book.” Not only is this statement outrageously myopic, but contradicts his own process. Whether I brewed our beer entirely with my own hands, worked as a tenant brewer to use someone else’s capital investments or worked with the brewers and cellarmen at Mercury to produce Slumbrew, my goal is to produce the same quality product. I depend on that so my customers continue to buy our product and support our brand.

It’s been no secret that we are actively working towards setting up our own small brewery in Somerville. With this endeavor, we will surely sign more promissory notes and personal guarantees that are so highly acclaimed as a badge of honor to some brewers. Our sights are set way above the pettiness of critics though, who in the absence of genuinely positive contribution to the growth of our industry, choose to base their product marketing strategy on consumer confusion, industry division and false definitions of “Craft Beer”. Instead, our goal is to continue our strategy of producing inventive and ingredient-driven beers our customers like to drink. And as for the brand strategy coming out of our little marketing company: we continue to be focused on making good liquids, spreading goodwill, embracing our charities and making people happy. Our new facility will only strengthen this mission by enabling us to produce even more inventive and esoteric beers while serving as a destination for our customers on a regular basis. This is what it’s all about for us.

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