Microbrewed beers have been a hot topic in the restaurant industry for the last few years, and the trend is still going strong. An April 15, 1996, article in the Wall Street Journal estimates that those "craft" beers now account for $1 billion per year in sales. Although many restaurants offer one or more craft beers on their menus, another way to tap into more profits is to offer a signature or private-label beer.

Restaurant owners do not have to go through the rigors of making beer to sell their own brands. Brewpubs — which in fact make beer on the premises — are enjoying considerable growth, but it can be an expensive and complicated undertaking to add a brewpub arm to an existing restaurant. Equipment costs alone can soar into the hundreds of thousands of dollars. In addition, the brewing process requires a lot of space, expertise and knowledge of regulatory issues.

An easier alternative is contract brewing — having an established brewery or microbrewery make the beer for your restaurant. A restaurateur can determine how involved he or she wants to be in the brewing process; some restaurateurs go as far as to devise their own recipes and oversee production of the beer.

Contract brewing is a relatively new phenomenon for individual restaurants but not for beer companies. Many popular craft beers, including Sam Adams, Pete's Wicked Ale, Rhino Chasers and Blue Moon, are actually brewed by large commercial breweries.

T.G.I. Friday's is probably the largest restaurant chain to have its own beer label — T.G.I. Friday's Premium Amber. Another large operator to jump on the private-label bandwagon is Walt Disney World, which uses a local microbrewery to produce its house brands.

Hometown brews

Even if your operation is not the size of Disney, it usually makes sense to have a signature beer produced locally. Unless you sell a tremendous volume of beer, the large contract brewers, which include Stroh Brewery in Detroit; Genesee Corp. in Rochester, New York; Pittsburgh Brewing Co. in Pittsburgh; Hudepohl-Schoenling Brewing in Cincinnati; and F.X. Matt in Utica, New York, probably will not be interested in producing your brew.

Local breweries, on the other hand, often have excess capacity and are eager to work on private labels. In addition, customers tend to perceive local breweries as more genuine and like to support a locally produced product.

Going local also eases regulatory bottlenecks. Earle D. Bellamy, an attorney who specializes in brewery regulation and has represented a prominent national brewer for about 20 years, advocates getting a signature beer from a microbrewery located close to the restaurant.

"If you buy from a producer in your state, and the beer stays in your state, you do not need federal label approval — as long as the bottles carry the mandatory health warning," says Bellamy. "You may need state label approval, as is required in many states," but that is often an easier process.

If an operator does choose to go out of state, which may be a necessity for chain restaurants that operate in several states, the bottles have to go through the Federal COLA (certificate of label approval) process to obtain a certificate of label approval. Normally, a restaurant works with the brewer on the label design, and then the brewer handles the processing with the Bureau of Alcohol, Tobacco and Firearms. According to Bellamy, the cost for processing the label can often be built into the contract-brewing order.

As far as state label issues go, Bellamy suggests "approaching a regional brewer who has some experience with private labels, and allow them to make a legal determination."

Private-label perks

The Long Trail Brewery in Bridgewater Corners, Vermont, has been producing private labels for its customers for more than five years. Ruby Tuesday Inc. and the Killington Ski Resort — the largest ski resort in the East — are among Long Trail's customers. Killington's Skyeship Ale, named after its new high-speed gondola, is served throughout the resort and has been quite popular with customers.

"We look at private labels as an avenue to further increase consumer awareness of beer styles," says Scott Halnon, Long Trail's sales manager. "If it helps our account enhance their business, then it is beneficial for both of us."

Boyd Holk is the food-and-beverage manager for Woodstock Inn & Resort in Woodstock, Vermont, a four-star hotel that is a client of Long Trail. The inn offers 15 beers in bottles and five local microbrews on tap.

"We already had experience with a private-label house wine, made for us in France, and it has been very popular," says Holk. "For us, the beer has not been so much a matter of making a big profit as getting our name out to guests, but the beer has been selling fine. We've recently received a second-class license so we can sell six-packs in our gift shop for off-premises consumption."

Tie-ins such as beer to go and T-shirts featuring the name of the craft beer and the restaurant's logo are another benefit of offering a signature beer. And in states that require a "three-tiered delivery system," where restaurants must buy from wholesalers and not directly from brewers, there can be additional advantages. Local merchants can buy a restaurant's private-label beer and put it on sale in their grocery stores, creating customer interest and giving the restaurant free advertising.

Don't dodge the draft

A small operator or one who does not want to go through the labeling and bottling investment might try offering a private-label draft beer, says Bellamy.

"It can be much less expensive to do draft. Small brewers can manufacture as little as a few kegs per week for you. All you need is a tap handle," says Bellamy. "There are bigger margins on draft beer and no labeling issues. Draft is a sweet and easy way for restaurants to get into private labels. And if you run out, you just switch the tap handles and sell something else."

If a few kegs a week is still too much for your operation, consider buying a local brewery's existing beer and selling it under your own private-label tap handle. Pick a beer you like, and you save the hassle of developing your own brew.

Craft breweries often use smaller brew kettles, fermenters and conditioning tanks than large commercial breweries, which translates into smaller batches. At Catamount Brewing Company, in White River Junction, Vermont, an award-winning brewery that makes its own beers for retail as well as contract brews for both restaurants and other microbreweries, the smallest batch is 2,000 gallons. That translates into 840 cases of bottled product, or about 150 kegs. Because keg beer has a recommended shelf life of 90 days, a restaurant would have to go through almost two kegs a day to justify having its own recipe. But using an existing recipe means the operator could buy kegs as needed.

Picking suds that sell

When picking a style of beer for a private-label brew, operators should think about what their customers are likely to want to sip. The house beer should be different from the other drafts sold, but not so different that regulars will shy away from trying it. According to the trade publication Beer Marketer's Insights, there are regional differences in customer preferences. "In the Northwest and Northeast, heavier-tasting beers, like imports and specialties, are far more popular than in the Midwest and South," writes reporter Eric Shepard.

Use the sales strengths of the beers that currently sell well to help focus in on what might be popular with customers.

The Institute for Brewing Studies, located in Boulder, Colorado, suggests that the decision of whether or not to offer a private label is also influenced by a restaurant's location. "Right now, private labels are more popular in the Northeast than the rest of the country," says David Edgar, director of the institute.

Part of the reason for the regional variance in craft-beer popularity, according to the institute, is that in the West and the Northwest microbreweries and brewpubs are far more prevalent, so there is less demand for private labels. For a restaurateur who has three or more micros on tap, adding a private label might not make sense.

Regulations on brewing do not change much based on the location of the restaurant. Bellamy says that "in terms of current statutory language, I can't think of any state that expressly precludes a restaurant from obtaining a private label. There may, however, be interpretive issues, such as how the beer is wholesaled or whether retailers are gaining a special advantage." Again, local breweries that provide contract-brewing services should be familiar with state-specific regulations.

Boosting beer sales

Whether a restaurateur opts for bottles or draft, private labels can achieve two key business goals. First, they can pump up stagnant beer sales. But perhaps more important, they can make your establishment the toast of the town by giving customers a taste of something they can't get at any other restaurant.

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