Contract brewing vs. in-house brewing — we ask New Jersey’s Beach Haus brand

Regulatory changes gave craft breweries in New Jersey generous retail privileges from their tasting rooms, a key reason for ending East Coast Beer’s contract arrangement.

East Coast Beer Co. is bringing its brewing back home, but why exactly? The Jersey craft brewery, which produces its excellent line of Beach Haus brand beers, plans on brewing its future craft concoctions at a newly constructed 30-barrel (bbl) brewery at the New Jersey shore. The new Beach Haus Brewery brings an end to the five-year contract-brew relationship with North American Breweries (NAB) that East Coast/Beach Haus had relied on for producing its beers and distributing them, and we wanted to know why. What are the pros and cons of contract brewing, and what else is East Coast Beer up to these days?

“We never had a quality issue or complaint about any beer we actually made [at NAB], but we were certainly limited, both from a style point of view and a release point of view,” explained John Merklin, Beach Haus president and company co-founder. “We just could not take the chances, or we could not get certain seasonals that we were interested in doing. We had very little reliability to make sure we could get them at the dates we needed them.”

Merklin and Beach Haus officials also cited evolving market conditions, specifically regulatory changes that gave craft breweries in New Jersey generous retail privileges from their tasting rooms, as a key reason for ending the contract-brew arrangement and building its own facility. Taproom sales have become a vital revenue stream to supplement sales through distribution. Additionally, Beach Haus found that contract brewing posed significant obstacles to developing new styles and bringing new beers to market at a time when consumers expect variety and brand portfolios to be well-stocked with seasonal and specialty beers.

“We were kind of handcuffed for a while,” said Merklin. “The truth is, we haven’t released a new beer in three years now. That should have been a death knell.”

Merklin was quick to praise NAB’s services and assistance, as well as the Rochester, N.Y., brewer’s production of the Beach Haus beers: a pilsner, black lager and two ales. NAB, widely known for brewing the Genesee brand, also brews Magic Hat and Pyramid beers. It’s owned by Costa Rican food and beverage concern Florida Ice & Farm. Beach Haus beers were  actually brewed at NAB’s Genesee Brewery. Distribution was certainly good. Through its contract-brew arrangement, East Coast built up bottle and draft distribution in six states since debuting with its pilsner over Labor Day 2010.

However, given the prevailing market conditions, Merklin said the best course going forward for Beach Haus was to have its own brewery and take over production, something that initially had been a long-term company goal, but one without a specified timetable. Brewing at the new Beach Haus Brewery began late last December. Six of the eight beers produced so far at the Belmar facility are styles new to the company’s portfolio, last updated with the 2012 addition of an IPA called Cruiser.

Installation of the four-vessel, 30-bbl. W.M. Sprinkman brewhouse and complementary array of 60-bbl fermenters began in late summer and wrapped up in December.

In addition to recently brewed 30-bbl. batches of stout, porter, a blonde ale and imperial and black IPAs, Beach Haus has made a wheat beer to pay homage to the brewery building’s bakery days. The new brewery occupies about two-thirds of the 30,000-square-foot former Freedman’s Bakery, a family-owned commercial baker that grew into a regional landmark over its six decades of operation. The brewery was granted an operating license by New Jersey regulators in mid-December, making it the largest of the state’s contract-produced brands to transition to opening a brewery and begin producing its beers.Production, in 60-bbl. volumes, also has resumed for East Coast’s flagship beer, Beach Haus Classic American Pilsner, and the amber ale, Kick Back, introduced in early 2012. Production of the black lager, Winter Rental and IPA are due to resume within weeks.

Meanwhile, construction is still ongoing at the three-story Freedman building, bought in July 2013 from HJB Associates by MB1 Capital Partners, whose principals hold a majority stake in Beach Haus/East Coast. Installation of the four-vessel, 30-bbl W.M. Sprinkman brewhouse and complementary array of 60-bbl. fermenters began in late summer and wrapped up in December.

Work on the brewery’s 4,000-square-foot tasting room, the packaging area (they have a Meheen bottler) and business offices continues, as does work on a 1,750-square foot pizza restaurant that’s a tenant in the remainder of the building. A March opening of the tasting room is targeted. Maximum production capacity at the Belmar brewery is around 30,000 barrels; Beach Haus officials declined to specify their current production needs.

Jeff Linkous, a longtime Garden State journalist, follows New Jersey’s craft brewing industry at his website Beer-Stained Letter, which is a pretty awesome portal.