Contract Brewing, the Pugsley / Shipyard Way

by: Todd on 04-01-2002
Contract Brewing: The term, for many non-drinking impaired consumers, often brings with it a cringe, sigh of disappointment, or instant dismissal for the brewery or beer brand that carries the tag. Some might even suggest "If a brewery doesn't brew its own beer, then it's not a brewery.", and, in most cases, they're 100% correct. A brand is owned by a company, but they don't have a brewery, so, they contract a brewery to handle the production of their brand. The brand owner is typically in charge of administration, sales, and the like. In essence, they are simply selling a product, and in this writer's mind, one without a heart or soul - something that a dedicated brewer gives it, its true "flavor" if you will. Yes, I too have fallen into this way of thinking. That is, until I was given the task to write this piece on Shipyard Brewing Company.

Shipyard Brewing Co., led by old school beer revolutionary Alan Pugsley, is a lead contract brewer in New England. Each brand under the umbrella has a very unique relationship with Pugsley and Shipyard:

Davidson Brothers Restaurant and Brewery: Shipyard makes all of the bottled beers for this brewpub based in Glens Falls, New York. They brewed 200bbls in 2001, their first year.

Gritty McDuff's (aka Gritty's): All bottles they sell and market themselves in Maine, however outside and they roll with the Sea Dog and Shipyard portfolio. 1,500bbls / year.

Nutfield Brewing Company: sells and markets themselves within New Hampshire; outside they join-up with the other portfolio brands. Nutfield has created joint ventures in New Hampshire with the Nutfield Ale and Steak House in Manchester and the Nutfield Brewport at the Manchester Airport. Our contract brewing relationship with Alan was the next logical step to make", said Jim Killeen, Nutfield's President and Founder. "Alan and I first worked together when we set up the Nutfield brewery in Derry, N.H. in 1995. Under our new relationship Nutfield can now meet all our growing beer orders on time with a better quality product and much improved shelf life. That's good for the consumer".

Jim Killeen along with his wife Tina, Jean McCaffrey (retail sales) and Scott Watson (Nutfield's head brewer) are still all on board in Derry in the same office. "We just moved our production area a few miles up the road to southern Maine, Scott Watson is at Shipyard just about every week and we have also recently hired a new Sales Manager", said Killeen. "We are employing a different process to achieve our goal of producing world class ales with improved sales/marketing support. It was of paramount importance for us to enhance our quality and meet all orders to be competitive in the marketplace. Our soul is definitely there and our heart is pumping stronger".

Nutfield hopes to sell 5,000bbls this year, and word is that they are looking at doing a brewpub sometime in the future.

Sea Dog Brewing Company: Shipyard has a licensing agreement with Sea Dog in which they represent all of their beer, except for its 3 brewpub locations. 3,000bbls / year.

And then there's of course Shipyard Brewing Co. which is hitting 28,500bbls per year.

In regards to future expansion or partnering with other brands, Pugsley remarked "We're always looking at new things. We'll be releasing something new later in the year, and Shipyard Fuggles IPA has brand new packaging due out in May. It's quite bright and features a classic English hop field scene by a world class artist named Paul Black. 12-packs of Shipyard Light Ale were also introduced in March in conjunction with and to help the American Lighthouse Foundation."

In the past, they've also been contracted by Martha's Vineyard (now out of business) and their first contract was with Magic Hat who came on board back in the end of 1994. It was quite substantial at the time with 8,000bbls at its peak production year; however Magic Hat has since pulled their operations in-house. The common theme amongst the brands is that they all have, or have had, breweries designed by Pugsley using The Original Peter Austin Brick Kettle Brewing Systems (except Martha's). Pugsley also crafted most of the recipes and they are all, you guessed it, beers fermented with Ringwood Yeast.

Pugsley's view on contract brewing?

"It depends on the nature of the beast, many people have opened up breweries and need to expand ... you need to move upwards to break even and become profitable. Maintenance and repairs can become very expensive particularly as the plant gets older and without a top of the line bottling line such as Krones like Shipyard has, negatively impacts stability and shelf life of beer. They hit the crossroad. More overhead or contract brew? It's a great thing for a contract brewer ... their primary focus is on marketing and selling versus dealing with a broken down refrigeration unit or electrical power outage halfway through a brew!"

Many don't consider companies that have their beer contracted out to be actual breweries. Do you agree or disagree?

"In certain cases this is absolutely true. 'Can you make this label for me?' They're just a marketing company. However the relationships we have created are all legitimate brewers in their own right."

How do you handle brewing so many brands?

"It takes a lot of attention. At last count we had 60 flavours that we make, including seasonals and deal with about 170 SKU's involving many container sizes. That takes some managing."

One of Shipyard's defining keys to success is that Pugsley tends to lean towards people who run breweries, or who have done in the past, which brings some legitimacy to the table, and that missing heart and soul. Pugsley's 20 years of brewing experience, with his brewing roots originating at the Ringwood Brewery in England also might help, but if that were not enough ... Shipyard is very well positioned with a 100,000 barrel per year capacity utilizing a 400bbl a day brewhouse, with a 7 days a week brewing potential.

Another key is their portfolio tactic, or "strategic partnerships" as Pugsley states. "It's tougher to get attention when you're small." explained Pugsley. "It's early days in the portfolio days, but it's turning out good for the smaller brands."

All of this begs the question, Is contract brewing actually all that bad? If one brewery can save another brewery from total extinction, or help to get it from A to B, while using a passionate business model like the one Pugsley/Shipyard has developed AND retain the "flavor" of the brand, then this beer writer would have to reply with a no, it's not a bad thing at all.

Note: bbls per year and capacity info from Shipyard.
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