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‘Contract’ brewing boom in Ontario stokes debate over future of craft beer

Lost Craft brews its beers at Brunswick Bierworks in Toronto.

Brunswick Bierworks

Craft beer in Ontario is booming – there are an estimated 216 craft breweries in Ontario and roughly 120 more that will open soon.

However, this boom has also given rise to a number of craft breweries that aren't actually breweries at all. You won't find their address on any walking brewery tours, and you can't stop in for a sample and a chat with the brewer, because these businesses, known as "contract breweries," ostensibly rent space from larger, established breweries to make their beer. They often pay a brewmaster to develop recipes, then use host breweries to package and store their beer. Depending on the contract, the brewery can brew and package the beer, or the facility is simply rented to companies which brew the beer themselves.

At one time, they were something of a rarity in the province – two "virtual breweries" opened here every year from 2010 to 2012 – but the number of these companies has skyrocketed in the past couple of years to almost 70, according to the industry news site, Ontario Beverage Network.

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From the archives: Spoiled with plenty: Is Toronto drowning in craft beer?

It's a less expensive way to enter the business by skipping the costs associated with real estate, and some posit that contract brewing has flourished because more people see it as an opportunistic way to make a buck in a growing market.

For others, contracting space in larger breweries is simply a means to pursue a passion for beer for those who might not have the capital to launch their own facilities.

Shehan De Silva is the founder of Lost Craft Brewing, a company that has found success via the contract brewing model. His company's beer ranks among the LCBO's best-selling tall cans and, in January, his Revivale lagered ale outsold the next two best-selling competitors in the "micro" category, combined.

Mr. De Silva hired brewmaster Jamie Mistry – who worked at Upper Canada Brewing Company, did a post-graduate degree related to brewing and has had stints working at Cool Beer Brewing Company in Etobicoke and Toronto's Steam Whistle and Amsterdam breweries – to develop his product. Mr. De Silva's beers are brewed at Brunswick Bierworks in Toronto and Common Good Beer Company, which Mr. Mistry runs in Scarborough.

Mr. De Silva chafes at the notion that he's somehow less committed to craft beer because he pays someone to brew it. "[Brewers] want you to start your company by building a multimillion-dollar facility and I just couldn't do that," he says. "I started the company with my life savings. I don't come from money. There are no restaurant investors backing me. I had to start with a lot of sampling, hounding the LCBO and pounding the pavement with bars and restaurants."

But for some, regardless of the effort expended by people like Mr. De Silva, the contract brewing model is a shortcut into Ontario's craft beer scene and is doing the industry a disservice.

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"It's not truthful," says Jason Fisher, owner of the Indie Alehouse brew pub in Toronto, of his misgivings about the contract brewing model. "Craft beer in Ontario has been behind the rest of the world for over 20 years, and we're finally catching up – then comes along contract companies who say, 'We are brewers,' and they are not. It's a lie. They start off their relationship with new customers in a still-fragile market with a lie."

In addition to the sometimes blurred lines about who actually makes the beer, for Mr. Fisher, the contract model – which necessitates volume sales to pay host brewers – isn't helping to advance the craft beer cause.

"To sell a high volume of beer, particularly in Ontario," Mr. Fisher says, "you need to make a very approachable beer that will appeal to the market. This 'mass market friendly' beer does nothing for growing the market."

Mr. Fisher says that small batch and experimental offerings are what make this segment of the industry unique. "It isn't pushing boundaries and isn't helping grow the industry."

However, Mr. De Silva argues that beers like his are actually bringing more people into the local market.

"My goal isn't to erode sales from [craft breweries] Beau's [All Natural Brewing Company] and Collective Arts," Mr. De Silva says. "I'm trying to expand craft beer. I'm trying to get the Bud and the Coors Light drinker drinking a craft beer instead. ... We are trying to make the market bigger."

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While the "contract brewing debate" is so far largely relegated to Ontario, it's a conversation destined to be repeated in other jurisdictions. Open since June 27, Factory Brewing in British Columbia is the province's first facility dedicated solely to brewing beer for other companies. CEO Andrew Harris says the timing feels right given the maturing market in British Columbia.

"Up until five years ago, no one here would even consider brewing their beer in another facility," he says, noting people demanded full ownership of their own beer. "But now, the market is such that people are realizing the realities of having to brew with a large capacity, and brewers are realizing the capital costs of expansion."

Walking a fine line between business and artistry, the debate over the merits of contract brewing is unlikely to be settled any time soon. But for Mr. Mistry, who spends 95 per cent of his time making beer for other people, the argument is moot.

"I make great beer for them and they sell it," he says. "What's the difference? I think with contract brewers or bricks and mortar brewers, we should think more about why they're in the business as opposed to how they got there."

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