Yards Brewing Co. is getting ready to boost beer production at its facility in Northern Liberties, but it won't be the company's roster of flagship ales filling up additional tanks at the brewhouse on Spring Garden Street.
Last week, Yards embarked on a new collaboration with two other beverage-makers — Pennsylvania's Bald Birds Brewing Co. and Connecticut's Two Roads Brewing — to offer contract services to smaller companies that need help with manufacturing and logistics. The new entity, B3 Beverage Co., builds on Yards' yearslong role as a beer producer for smaller brands in a changing — and challenging — landscape for craft beer.
"One thing we do very well is we can make other people's beer and we package it well," Yards founder and president Tom Kehoe said. "We have a very nice canning line that does a great job and gives great shelf life. It's a big part of keeping our plant running at an efficient level and keeping pace for our employees and the company."
When Yards moved from its original brewing facility on Delaware Avenue in 2018, the company had planned for its new brewhouse to become a regional powerhouse. The 70,000-square-foot building, also home to a taproom, began producing and packaging beer for a small group of regional, national and international brands — including Fishtown's Evil Genius Beer Co. and Cape May Brewing Co.
"We saw there was going to be a need for that," Kehoe said. "There were brewers growing and some that would need beer before they were ready to expand."
Yards produces about 70,000 barrels of beer per year, including its own lineup and the work it does for nine other brands. With B3 Beverage Co., Kehoe said he expects to double or triple the number of companies Yards works with and reach up to 150,000 barrels per year.
Contract brewing offers a lifeline for some smaller craft brewers. The industry's market share has been pinched by hard seltzers, spiked iced teas and other canned cocktails that exploded in popularity during the COVID-19 pandemic. National craft beer production declined by about 4% annually in 2024, according to data from the the Brewers Association, and the total number of operating U.S. craft breweries fell last year for the first time since 2005.
Kehoe thinks changes in consumer habits were bound to happen at some point, but the pandemic accelerated shifts in how people buy beer and what they prefer to drink. The craft beer boom of the 2010s has given way to a preference for variety.
"The cooler is not all full of beer anymore," Kehoe said. "… It's almost like a culinary question. Some tastes have moved from traditional beer and strong IPAs to sweet, lighter products that might have some perceived health benefits — lower sugar and calories — and there's a lot more interest in non-alcoholic beer."
Bald Birds, based in Lycoming County, already produces a mix of beer, canned cocktails and non-alcoholic beverages. Two Roads also specializes in non-alcoholic beer, giving B3 Beverage Co. versatility to meet the needs of a range of companies in the region and beyond.
"The great thing is that geographically, we cover a nice swath of business up and down I-95," Kehoe said.
Large-scale contract brewing has typically been offered by big national producers, but B3 Brewing Co. aims to make beer for brands that occupy a middle ground. Smaller batches let companies test the market for demand before making major decisions about scaling up or starting their own production. For some craft brewers, less can be more — at least initially.
"We always laugh that what sells beer is scarcity," Kehoe said. "If you have a beer that only has limited availability, there's more demand for it. Once you start making more of it, it doesn't always catch up with sales. This can tell brewers how big to build their own brewery, or whether to keep making it with us."
Headwinds in the craft beer industry have resulted in similar moves to pool resources in the region over the last decade. Downingtown's Victory Brewing merged with New York's Southern Tier Brewing Co. in 2016 to form Artisanal Brewing Ventures, which combined the companies' production capabilities. The business now also produces for New York's Sixpoint Brewery and Virginia's Bold Rock Hard Cider.
Kehoe said he sees a craft beer industry that's learning how to strategize and survive in a difficult market. With B3 Brewing Co., he's excited for Yards to help more breweries grow and find their footing.
"It's a real sense of pride seeing the beer out there," he said. "Beer will be back to a good place. It will take a little bit, but it will definitely get back there."
