Should You Expand Your Brewery Or Use Contract Brewing?
When demand starts exceeding production capacity, you have a decision to make. Do you invest in your own facility, or work with another brewery to produce some of your beer? There isn't one answer for every brewery. Expansion and contract brewing solve the capacity problem in different ways, and the right option depends on your operation, demand, and long-term plans.
What does expanding your brewery involve?
Expanding your brewery means increasing the production capabilities of your existing operation. That could mean adding fermentation vessels, increasing packaging capacity, expanding your physical space, upgrading equipment, or making changes that allow your team to produce more beer. The benefit is that production remains in-house. Your team maintains direct involvement in the brewing process and you are investing in capacity that becomes part of your own operation. But expansion also requires a significant commitment. It is not just the cost of a new tank or piece of equipment. You may also need to account for installation, infrastructure, utilities, labor, space, maintenance, and the time required to complete the project.
What is contract brewing?
Contract brewing means having another brewery produce beer for your brand. The exact arrangement varies, but a contract brewing partner may handle parts of the process such as brewing, cellaring, packaging, quality control, ingredient sourcing, and production record keeping. For an established brewery, this can create additional production capacity without requiring an immediate investment in expanding its own facility.
When might expanding your brewery make sense?
Expansion may be worth considering when your production demand is consistently high and you expect that demand to continue. It can also make sense when keeping production entirely in-house is important to your business and you have the physical space and resources to support additional equipment. Before making that investment, look at your actual production needs. How much more beer do you need to make? How consistently do you need to make it? And what will the brewery need to look like several years from now? Those questions can help determine whether the additional capacity is likely to be useful beyond the immediate problem.
When might contract brewing make sense?
Contract brewing can be useful when you have an established brand, recipe, and demand but do not have enough production capacity to keep up in-house. For example, a brewery may have a successful flagship that is growing faster than its own facility can support. Rather than immediately expanding, the brewery can work with a production partner to increase available volume. This can allow the brewery's own team to spend more time on the parts of the business that require their attention while additional production is handled externally.
What about breweries that don't own a production facility?
Contract brewing isn't limited to breweries with their own production facilities. Some contract or gypsy brewers have recipes, brewing knowledge, and an established brand but use another brewery's facility for production. Contract brewing is generally different from hiring someone to develop a new beer from scratch. Castle Island's contract brewing program is designed for existing brands with recipes and brewing knowledge. It isn't an R&D facility for startups looking to develop their first product or a recipe-development service.
Brewery Expansion VS. Contract Brewing: What Should You Compare?
Consideration
Capital Investment
Production Capacity
Control
Timing
Flexibility
Expanding your brewery
Requires investment in your own facility and equipment, plus potential installation, infrastructure, utilities, and maintenance costs.
Adds capacity to your existing operation. The amount depends on the equipment, space, and upgrades involved.
Your team has direct control over the facility and production process.
Construction, equipment procurement, installation, and other steps can delay when new capacity becomes available.
New equipment and space become part of your own operation and ongoing cost structure.
Contract Brewing
Uses a partner’s production infrastructure. Costs depend on the individual agreement.
Adds production capacity through an outside partner, based on the partner’s capabilities and schedule.
Clear communication, recipe transfer, target specifications, and responsibilities are important.
Requires planning and onboarding, including recipe review, pricing, and production scheduling.
May offer flexibility around batch-by-batch needs, depending on the agreement and partner.
At Castle Island, we work batch to batch, with no annual minimums, exclusivity clauses, or long-term supply commitments. Contract brewing still requires planning. Our typical onboarding process is approximately 10-12 weeks from the initial conversation to the first batch coming off the packaging line. Recipe review, drafting, and pricing generally take 2-6 weeks, and production typically books 6-8 weeks out. Neither option should be treated as an overnight solution. Our scheduling process uses a non-binding annual volume forecast and monthly scheduling meetings so production can be adjusted as demand changes.
You Don't Necessarily Have to Choose One
Brewery expansion and contract brewing aren't always mutually exclusive. A brewery can continue producing some products internally while using contract production for additional volume. That might mean keeping certain beers in-house while having a high-volume flagship or another established product produced externally. The right production model can change as the business changes. Before making a decision, consider:
- How much additional production do we actually need?
- Is our current capacity problem temporary or ongoing?
- Do we have the space and resources to expand?
- How quickly do we need additional production?
- How much of our production needs to remain in-house?
- Do we already have established recipes and demand?
- Would an outside production partner allow our team to focus on other parts of the business?
These questions can help you evaluate the actual business problem rather than treating expansion or contract brewing as a one-size-fits-all solution. The decision ultimately comes down to what kind of production model fits your business. If demand is established and your current facility is becoming a consistent constraint, additional capacity may be necessary. That capacity can come from your own brewery, a contract brewing partner, or a combination of both. For more context, read more about how to tell if you've outgrown your brewery and how ingredient sourcing works in contract brewing. You can also learn more about Castle Island's contract brewing program here.