The Brewers Association (BA) separated contract-brewed and alternating proprietorship (alt prop) small breweries for the first time in this year’s compilation of craft production in the May/June issue of New Brewer Magazine.
The change comes as production costs increase, and facility leases are harder to hold on to, making contract brewing with an existing brewery an appealing choice for craft breweries, particularly newcomers. Larger breweries have also offered contract brewing partnerships in order to fill capacity as their own volumes decline.
The BA also updated its bylaws’ definition of voting BA members earlier this year to include those that “control the intellectual property for one or more brands of beer, have that brand or brands brewed for it in the United States, and have as its primary business purpose the resale of the brand or brands it controls,” with contract-brewed beer companies meeting the definition.
Contract and alt prop breweries produced a combined 197,195 barrels of beer in 2023, just above 2022 levels (196,750 barrels), but below 2021 (228,440 barrels). Contract brewing production volume peaked in 2020 (324,524 barrels), when COVID-19 drove business to the off-premise.
Contract and alt prop’s share of total craft volume increased +0.03 share points, to 0.84%. The BA did not separate openings and closings for contract breweries. However, the trade association did list brewery openings and closing by region, and when tallied, they equate to the opening of 17 new contract/alt prop breweries and the closing of 19.
“Switching to production, the contract brewery and alternating proprietorship models are growing in popularity in an era with high rates and lots of excess capacity,” BA chief economist and VP of strategy Bart Watson and BA senior VP of professional brewing Paul Gatza wrote in a feature for the New Brewer, titled “Overview: Carving a Path Back to Growth.”
“It will be interesting to see which direction these businesses go over time, and anecdotally we’re seeing more of what could be termed ‘taproom contract companies’ focused less on distribution and more on hospitality, which is a shift from the route most contract companies took in the past,” the duo continued.
Twenty of the contract/alt prop breweries who shared production data produced more than 1,000 barrels of beer. The largest by a significant margin was Montana’s Montucky Cold Snacks, which maintained flat production in 2023, at 63,560 barrels, after increasing production +247% in 2022, to 63,250 barrels. Montucky was also the 40th largest regional craft brewery by volume in 2023.
Montucky’s growth is expected to continue in 2024, thanks to a strategic investment from Gallo, announced last month. The light lager brand is distributed in 40 states, but its presence in a majority of those markets is still in its “infancy” Gallo EVP and general manager Britt West told Brewbound.
Montucky’s 2023 volume was nearly 45,000 barrels more than No. 2 Peak Organic Brewing. The Maine-based contract-brewed company produced 18,893 barrels of beer in 2023, a -2% decline year-over-year (YoY).
Seven of the top 10 contract-brewed craft breweries, including Peak Organic, recorded a -2% decline in production volume, including:
- No. 3 Latitude 33 Brewing, 14,722 barrels (California);
- No. 4 O’Connor Brewing, 14,722 barrels (Virginia);
- No. 7 RAR Brewing, 9,245 barrels (Maryland);
- No. 8 Fordham and Dominion Brewing, 7,852 barrels (Delaware);
- No. 9 Orpheus Brewing, 7,852 barrels (Georgia);
- No. 10 Grüvi, 2,453 barrels (Colorado).
No. 5 Eight Brewing, the light lager brand backed by Monday Night Football host and former National Football League quarterback Troy Aikman, increased production volume +21%, to 12,057 barrels. Eight distributed its beers only in its home state of Texas in 2023, expanding outside of the Lone Star state for the first time in February, with the addition of Oklahoma.
No. 6 Mason Ale Works increased production volume +533%, to 9,500 barrels. The triple-digit growth follows a -83% decline in 2022, to 1,500 barrels. 2023 also marks Mason Ale Works’ largest output since at least 2019, the earliest year production data is available in the latest New Brewer issue.
Nine of the remaining 10 breweries above 1,000 barrels recorded YoY declines, with the majority declining -2%. The largest declines were recorded by No. 13 California’s The Lost Abbey (-79%, to 1,800 barrels) and No. 20 Hawaii’s Kohola Brewery (-40%, to 1,025 barrels).
The Lost Abbey downsized its operations last year, moving operations from its San Marcos facility to Mother Earth Brew Co.