Surly Seeks New Liquor Laws for $20M Brewery

The Minnesota company aims to build a "destination brewery" with a restaurant, bar, and event center-but it must first change a state law that prohibits large beer brewers from serving their products on-site. />

Brooklyn Center-based Surly Brewing Company, which is struggling to meet demand for its popular beers, on Monday announced ambitious plans to build a new $20 million “destination brewery” featuring a beer garden, bar, restaurant, rooftop deck, and event center.

The only thing standing in the way is state law.

Minnesota's liquor laws put brewers in one of two categories. Small brewpubs, like Town Hall Brewery in Minneapolis or Fitger's in Duluth, can sell their micro-brews on-site but cannot distribute to liquor stores.

Larger brewers like St. Paul-based Summit Brewing and Surly, which has steadily increased its brewing capacity since opening in 2006, sell their beer at bars and in liquor stores. But they're consequently prohibited from building their own bars or restaurants at their breweries, because they exceed the annual production cap of 3,500 barrels required to be classified as a brewpub.

Surly aims to change that law by introducing legislation next week. Surly founder and President Omar Ansari said in a Tuesday phone interview that he has hired St. Paul-based lobbying firm Cook Girard Associates to help in his fight. And other major Twin Cities beermakers-Summit and New Ulm-based Schell's Brewing Company-“are signed on to the project,” Ansari said. He's also reaching out to smaller breweries like Lift Bridge for support.

Surly produced about 12,000 barrels of beer in 2010-up 32 percent from 2009. The brewery has consistently added equipment since it was founded. “We just can't make enough beer,” Ansari said. The company previously sold its products throughout the Midwest but pulled out of other markets to try to meet growing demand in the Twin Cities-and there are currently hundreds of bars on a waiting list to get Surly kegs.

Surly's current facility in Brooklyn Center-a building previously occupied by Ansari's father's abrasives manufacturing business-has room for additional equipment and brewing capacity. But it would “max out” at about 20,000 barrels, and Surly could hit that mark by the end of this year or next year, according to Ansari.

The proposed “destination brewery”-a 60,000-square-foot facility with a beer garden, a 30-foot bar, a 250-seat restaurant, a rooftop deck, and a rental space for weddings and other events-could eventually bring Surly's production up to 100,000 barrels, but the growth would come in increments as the company adds more equipment, Ansari said.

Surly is also touting its proposed expansion as a boon to the local economy. The company predicts that the second brewery would help create as many as 150 permanent jobs and up to 85 construction jobs.

It would also create a hub for “beer tourism,” according to Ansari, who contends that people are willing to travel for quality beer, and cities like Portland, Oregon have a thriving “beer scene.” Many states in the United States currently allow large breweries to sell their beer on-site-which boosts tax revenue and benefits the hospitality industry, Ansari says.

“This whole project isn't an easy one, but that's how we do it at Surly,” Ansari said. “If people aren't interested in adding jobs” and fueling the economy through a new destination brewery, “just being a bigger brewery doesn't interest me.”

Regarding the proposed brewery's cost, Ansari says he's received “positive feedback from bankers” and has looked into private equity opportunities. He describes the financial element as one piece in a larger puzzle, and “I'm confident it's a piece we can solve.”

If Surly gets its way, the increased capacity would likely allow it to meet demand in the Twin Cities and expand to meet national demand. Ansari's not sure where the new brewery would be built, but it would require at least a seven-acre site.

Ansari announced the expansion plans to a crowded room at the Muddy Pig bar in St. Paul on Monday as Surly celebrated its five-year anniversary. He said he is fielding calls from Minneapolis Mayor R.T. Rybak and “other folks” interested in the expansion plans, and he hopes to garner support for the legislation and have an answer within a couple of months.

Surly has been at the forefront of a micro-brewery movement in the state, winning many awards for its ambitious brews. Ansari attributes much of the business' success to brewmaster Todd Haug, who joined Surly after working for Summit and then Rock Bottom Brewery. Ansari was recognized by Ernst & Young as one of its entrepreneurs of the year in 2010. In fact, Ansari says that the award prompted him to consider expansion possibilities. “It opened my eyes that we could swim with the big fish and be more than just a small brewery in Brooklyn Center.”

Ansari hopes that the new brewery will be “a complete beer experience” and will become a part of the metro area's “cultural fabric.” “This would be another great amenity for the Twin Cities,” much like other attractions such as the Mall of America and Target Field, he added.