Can Beer Stay Cool?

Can Beer Stay Cool?

Craft breweries are springing up all across the Twin Cities. Why now? And will demand keep these start-up businesses from going flat?

If you’re not paying attention, you’ll drive right past one of the Twin Cities’ newest breweries. Go south of Lake Street a little ways down Minnehaha Avenue, one of Minneapolis’s most unassuming thoroughfares. (It’s also one of the city’s most unassumingly hip streets, with Peace Coffee, the Trylon “microcinema,” and the XYandZ art gallery within steps of one another.) Harriet Brewing is on your right, next to the Hub, a worker-owned bike shop.  

On weekends and some weekday evenings, Harriet opens its doors to the public. In a small front room, you can quaff small glasses of samples pulled from taps at a small bar. If you want to buy a “growler”—a 64-ounce jug filled with beer—make your way to the back, into a warehouse-like space with high ceilings. The damp air here smells slightly sweet; affable hipsters of both sexes take your money and hand you your beer across an old folding table. Behind them stand tall steel tanks and rumbling equipment; thin plastic tubes twist and tangle across the concrete floor.

Harriet’s brewery is not at all reminiscent of the massive Germanic castles of 100 years ago, like Grain Belt’s in Minneapolis and Schmidt’s in St. Paul. But those palaces, though still standing, are no longer brewing. Harriet is. And it’s not alone. In the past year, no fewer than seven craft breweries opened in the Twin Cities metro area.

Unlike the pale lagers that poured forth from those castellated confines, Harriet and its confreres produce craft beers—simply defined, beers that use only barley (and, in some cases, wheat, oats, and rye) as their fermentable foundation. The lagers that dominate the U.S. market mix in rice and corn along with the barley. These “adjuncts” impart that attribute known as “drinkability”—a lightness that makes a cold one roll smooth and easy across the drinker’s palate and down his throat.

The new wave of small breweries evokes both industrial chic and digital-age cool. And both state and local government have recently passed legislation designed to make it easier for such breweries to arise. But does that cool translate into sustainable businesses? True, you can point to the success of Summit Brewing in St. Paul, which has been producing craft beer since 1986, growing from local microbrewer to a regional player that sells beer throughout the Midwest. You can even go back to 1860, when August Schell in New Ulm, which makes Grain Belt as well as several craft beers, began selling barrels of its brew.

Still, the sheer numbers make one wonder how many funky little breweries the Twin Cities can support. Is there demand? Is there a real business opportunity here? Is cool enough?
 

Tapping the Potential

To craft brewers and beer geeks, drinkability is the potable equivalent to background music, or at best, classic rock. Crafties want you to pay attention to a symphonic interplay of flavors—the citrus-like fruitiness of a pale ale, the sharp-elbowed bitterness of an India pale ale, the multilevel complexity in an imperial stout.

According to the Brewers Association, a Colorado-based craft-beer trade group that gathers stats on the brewing industry, craft beer makes up roughly 5.4 percent of the U.S. beer market by volume. But while Budweiser and MillerCoors sell about 75 of the beer that Americans knock back, the classic light, inexpensive lagers they produce aren’t growing market share. A December Wall Street Journal article reported that while the 2011 U.S. beer industry saw a 2 percent decrease in volume (though revenues rose about .3 percent), the craft beer market output rose 16.4 percent, with revenues up 17.5 percent. The Brewers Association projects that more than 200 new craft breweries started up in 2011—nearly double the number of start-ups the year before.

Despite its relatively small piece of the market, craft beer has become rather mainstream, thanks to what might be called the “first wave” of craft breweries that began in the 1980s. Summit is available in numerous bars and restaurants across the metro, and beyond; national brands Samuel Adams, Sierra Nevada, and Fat Tire have helped raised craft’s profile even among those who would flinch at having the “beer snob” label attached to them. (Many purists don’t classify these larger entities as craft brewers. Your humble scribe is no purist: These companies produce all-malt, adjunct-free beers, just as smaller craft brewers do.)

The second wave that has arisen in the past few years has built upon that market recognition. What’s more, as Brewers Association director Paul Gatza observes, “beer is fun—more than doing just any old job.” Many start-up brewers, he believes, are finding more satisfaction building a beer business than toiling amidst the postrecessionary uncertainties of corporate America.

The people behind the new Minnesota breweries have diverse professional backgrounds, but they all share this: a hobby that morphed into a passion, then into a dream. Many point to the fateful gift of a homebrewing kit. Harriet founder Jason Sowards began making beer at home while working as an engineer in the energy sector; when the engineering business soured during the recession, he followed his bliss. Kevin Welch, who started Boom Island in Minneapolis, is a professional French horn player who developed his taste buds and his skills with distinctive yeasts during a trip to the breweries of Belgium. Some, like Jason Schoneman founder of Steel Toe Brewing in St. Louis Park, went from home cooking to professional brewing before striking out on their own.
These newer brewers also see a market opportunity as well as a chance to indulge their love of beer. Many Twin Cities beer fans believe that the metro is “under-breweried” compared to similar metropolises such as Portland, Seattle, and Denver. Minneapolis brewers in particular got a boost in 2010, when the city passed the “Brew Beer Here” ordinance. This allowed brewers to sell their products on their premises as well as in bars, restaurants, and liquor stores. Since the bar trade can be tough to crack at first, selling on premises helps breweries generate revenue and brand recognition more quickly.

One of Brew Beer Here’s beneficiaries was Harriet Brewing, which started offering its beer early in 2011. Sowards notes that selling growlers—which spares brewers the need to buy expensive equipment to fill standard 12-ounce bottles—helped his company get off the ground when bars and restaurants initially balked at carrying his beer. They’re aren’t balking now: Sowards says that the bar trade now soaks up two-thirds of his production.

According to Minneapolis Council Member Gary Schiff, a key political leader behind Brew Beer Here and other pro-brewing ordinances, one of the forces driving the growth in craft beer is the “a huge interest across the country in ‘buying local.’ People are craving a local experience—something they can’t get anywhere else. And craft breweries also create jobs.”
 
In 2011, two more pieces of legislation further boosted the local craft beer industry. One was what was referred to in the media as the “Surly Bill,” after Brooklyn Center–based Surly Brewing, whose highly regarded products have taken the company from zero to more than $6 million in revenues in five years. Surly and others successfully pushed last year for state legislation allowing brewers that sell off site to offer not only beer but food at their breweries. (Brewpubs, which now can sell beer only where they brew, are now seeking to sell their beer off site, too.) And in November, the City of Minneapolis began allowing purveyors of alcoholic beverages to proffer their products within 300 feet of a religious institution—which will let a new “tap room” brewer called Dangerous Man open in Northeast in 2012.

Still, launching a new brewery isn’t as easy as popping open a Pabst. Start-up equipment costs typically run around a quarter of a million dollars; and less expensive used boilers and kettles are getting harder to find as more and more brewers snap them up. While brewery founders can bring in enough to hire and pay employees (Harriet Brewing, for instance, has 10 part-time staffers and two full-timers), they often don’t have enough to pay themselves. Dan Schwarz, one of the five cofounders of Stillwater’s Lift Bridge, continues to run his software company; his colleagues also have employment outside of Lift Bridge.

Then there are the thousands of dollars and the days of delays that brewers have to deal with to get their businesses licensed and permitted. As a company, Lift Bridge got started in 2008, but it wasn’t until early 2011 that it had the location and financing to open its own facility. (It had contracted production of its beer to Flat Earth, a St. Paul brewery launched in 2007.)

Gathering the funds remains another challenge, of course. As with many start-ups, family, friends, and personal savings are key investment taps. There is anecdotal evidence that banks are becoming more open to making loans to brewing businesses. Ryan Libby, a cofounder of 612Brew, a Minneapolis start-up that hopes to be brewing this year, says his company was able to get a bank loan, but that he and his comrades needed “to educate” their bankers about the viability of a craft beer business.

Others are finding other ways to save keep costs down. Boom Island’s Welch was able to reduce his expenses to about $35,000 by welding or building much of his own brewing equipment. Badger Hill in Minnetonka, which plans to introduce its beers this spring, has an “alternating brewery proprietorship” with another brewing start-up, Lucid. The two companies share space and equipment, but keep their recipes and records separate. Lucid itself put together much of its financing through the online fundraising platform Kickstarter.

Once the money and location come together and all the hoops are jumped through, things can move fast. Lucid posted a “year in review” on its blog in January 2012:

January 2011: Form the business and order the brewery equipment.
February: Begin serious amounts of test batching.
Easter 2011: Fly to China to finalize the equipment order and inspect before shipping.
June: Thumbs up from the city to start construction (yah!). Start digging a 160’ long trench (booo!).
July: Equipment arrives! Begin assembling the brewhouse and erecting the fermenters.
August: Plumbing and welding and tiling.
September: We’ve got a boiler.
October: Install the glycol chiller, plumb the chilling lines, connect all the sensors. Lots of praying that the city inspectors wouldn’t slow us down any more.
November: We’re brewing! Kickstarter drive is a success!!!
December: On tap at 25 bars!

With little money for marketing, craft brewers get the word out mostly through social means: not just via Twitter and Facebook, but also by holding events such as tours and music concerts. They are aided in their evangelizing by beer-related businesses organizations including the Minnesota Craft Brewers Guild; Northern Brewer, a St. Paul supply store that has inspired many a garage hobbyist; A Perfect Pint, which puts together craft-beer pub crawls; and the Beer Dabbler, which runs beer festivals throughout Minnesota and the Midwest.

“Timing is Right”

If they’re going to grow, the new craft brewers will need to wrestle with the demands of running two businesses: brewing and distribution. As Tod Fyten, a local craft brewing pioneer and owner of the Mantorville, St. Croix, and Theodore Fyten brewing companies, notes, “with fuel prices approaching $4 per gallon . . . coupled with various state and federal regulations, self distribution [i.e., delivering kegs of beer in your car] can be quite an uphill challenge for new brewers.”
 
Then there are the large national entities that have invested in smaller craft-oriented breweries. Budweiser parent Anheuser Busch InBev now owns about a third of Seattle-based Craft Brewers Alliance, which owns the Red Hook brand; and announced plans in 2011 to purchase all of Chicago-based Goose Island. MillerCoors owns Wisconsin-based Leinenkugel, which has several craft beers in its portfolio. North American Breweries is a Rochester, New York–based company set up by New York investment firm KPS Capital Partners to manage its beer brands, which include craft brews Pyramid and Magic Hat. These entities can put serious marketing and distribution power behind their brands.
That competition and the hurdles they face haven’t deterred craft brewers from pursuing their dreams. Mark Stutrud, founder and president of Summit Brewing, observed on Minnesota Public Radio’s Midmorning program in late December that while he saw many wannabe brewers come and go during the 1990s, this new batch appear to be more serious about the business side.

Still, are there enough craft beer drinkers to keep them brewing? Jason Alvey, who recently expanded Four Firkins, his St. Louis Park craft beer specialty store, believes that the demand is there: “Craft beer is no longer a niche.” Each weekend, he says, “we see 20 to 40 customers who are new to craft beer.”

Minnesota craft brewers seem to see themselves not as competitors but as comrades, banding together to raise consciousness as well as pints. “The timing is right” for new breweries to start, says Badger Hill Brewing cofounder Brittany Krekelberg. “The state is ready, and we want to be a part of that.”

—Gene Rebeck

Who’s Brewing—and Who Hopes To:

Summit
St. Paul
First beer for sale: 1986
Flagship: Summit Extra Pale Ale
The granddaddy of local craft breweries, Summit now would be considered a regional, producing more than 100,000 barrels of beer annually from its state-of-the-art facility. (The term “craft brewer” often refers to a facility producing fewer than 10,000 barrels a year.)

Surly
Brooklyn Park
First beer for sale: 2006
Flagship: Furious
The hippest of the newer craft breweries—its devotees refer to themselves as “Surly Nation”—with a national reputation for sharply hopped beers and highly prized seasonal specialties.

Flat Earth
St. Paul
First beer for sale: 2007
The first new brewery to open in St. Paul after Summit. New ownership added funding in 2010. Introduced Red Cape ale in December to help the Winter Carnival Vulcans in their charitable fundraising.

Lift Bridge
Stillwater
First beer for sale: 2008
Flagship: Farm Girl
After contracting its production to Flat Earth, Lift Bridge opened its own brewery in February 2011.

Fulton
Minneapolis
First beer for sale: 2009
Flagship: Sweet Child of Vine
Its new brewery, located near Target Field, has quickly given this newcomer a high profile.

Harriet
Minneapolis
First beer for sale: 2011
Flagship: West Side
First new brewery in Minneapolis since the departure of James Page about eight years ago.

Steel Toe
St. Louis Park
First beer for sale: 2011
Flagship: Provider
Evidence that the demand for craft beer extends into the Twin Cities suburbs.

Lucid
Minnetonka
First beer for sale: 2011
Flagship: Air
Another suburban suds start-up, Lucid funded its production facility through Kickstarter.

Staples Mill
Stillwater
First beer for sale: 2011
Flagship: Isaac Staples Pale Ale
Located in a historic structure on Stillwater’s Main Street.

Boom Island
Minneapolis
First beer for sale: 2011
A self-described “authentic Belgian-style brewery,” selling its beers in 750-milliliter corked bottles as well as kegs.

Hopefuls for 2012
•    Badger Hill (Minnetonka)  Its inaugural product will be called Minnesota Special Bitter, which cofounder Brittany Krekelberg describes as a “well-balanced beer that will be a nice complement” to the other craft beers produced locally.
•    612Brew (Minneapolis)  Cofounder Ryan Libby says that “everything’s ready” for the company to start brewing—except for a suitable building. Plans to introduce an “American ale” that is lighter than most craft beers. “We want everyone to drink it,” Libby says.
•    Last City (St. Paul)  Hopes to introduce a “pre-Prohibition American lager.”
•    Big Wood (Vadnais Heights)  Its coffee stout won best beer at the Autumn Brew Review in Minneapolis last year. Now looking for a permanent facility to start brewing for public sale.
•    Theodore Fyten Brewing (St. Paul) Plans to focus on Fytenburg Grand Cru—a Belgian “dubbel” ale brewed with several Belgian malts and a yeast strain from a Belgian monastery.
•    Pour Decisions (Roseville) Cofounder Orsi England describes its expected flagship, the Pubstitute, as “velvety smooth, creamy yet light, and absurdly drinkable.”Beer Styles: Accounting for Taste

The style of beer that dominates the world—what the vast majority of us think of as “beer,” “coldies,” or “brewskis”—is the pale lager, which in turn comes in several subspecies: “super-premium,” “American lager,” pilsener, et cetera. Though several local brewers—including Summit, Harriet, and Staples Mill—produce lagers, none of them emphasize them, and some don’t make lagers at all. (That said, at least one newcomer plans to introduce a lager as its flagship beer.)

Lagers, which use “bottom-fermenting” yeasts, take more time to make than the ale family of beer, which uses “top-fermenting” yeasts. An ale needs as little as a few weeks to produce. Lagers require a longer period of aging. If you’re a small brewery paying rent and other big expenses, you want to produce beer as quickly as you can. (Without, of course, sacrificing quality.)

Ale yeasts also lend themselves to a wide variety of styles, and for craft brewers, that variety is part of the fun of starting a brewery. Besides, why make a style that’s so readily available?

Pale ale
Local examples: Summit Pale Ale, Flat Earth Angry Planet, Steel Toe Provider
Orange or gold in color and balancing hoppy bitterness with malty sweetness, pale ale is best known as the chief style of England (though Yanks rarely serve it “warm,” as they do across the pond). Pale ale is the best style for newcomers to craft to dip their tongues. Lighter-bodied versions, such as Lucid’s Air, offer particularly good introductions to craft beer. Porters and stouts are also ales, though much darker and roastier in flavor. Their even darker, heavier, and stronger cousin is imperial stout, originally produced for the pre-revolution Russian market. Surly’s Darkness is a crowning achievement of this regal style; Fulton’s Worthy Adversary is another worthy example.  

Belgian ale
Local examples: Flat Earth Belgian-Style Pale Ale, Lift Bridge Farm Girl, Harriet Saison Nourrice, Boom Island Thoprock
A style of pale ale that imparts a wide variety of flavor characteristics, thanks to the yeasts they use. Saison Nourrice and Farm Girl represent a stylistic variation called a saison, which is paler and stronger than the standard Belgian.

India pale ale (IPA)
Local examples: Summit IPA, Fulton Sweet Child of Vine, Steel Toe Size 7, Harriet West Side, Flat Earth Northwest Passage
Maybe the hippest style of craft beer right now. Aficionados find IPAs’ high hop content and the resulting bitterness bracing—a sharp, bare-knuckled blow to the palate. These beers are typically fuller bodied than American pale ales. There are many variations on this theme, like “Imperial IPA” (Lucid’s Camo is an example) and other hop-forward products such as Surly Furious. Probably not the style a craft beer newbie should start with.