Is Minnesota craft beer headed toward a bust?
Rising costs, COVID-19 and competing beverages are putting a stress on the craft beer industry, but industry experts say there’s room for growth.
ROCHESTER — Is that pint glass half empty or half full?
The craft beer industry took a hit during COVID-19 when taprooms were closed and workers were furloughed. Other alcoholic beverages are cutting into craft beer’s share of the adult beverage pie, which more breweries now have to share.
The announced closing of Tin Whiskers in St. Paul, one of the state’s largest craft beer producers, later this month came with a prediction from the owner there that the craft beer industry is a bubble in the midst of a burst. With that closure, two of Minnesota’s three largest cities no longer have craft breweries in their downtowns as of June 2022.
Industry experts say they see potential for growth with BIPOC and women. Leadership at the Minnesota brewers guild say people should expect to see breweries pop up where they might not expect them.
Scott Stroh is taking a leap of faith starting a brewery in Kasson at a time when some industry experts say beer is heading for a bust cycle.
Donovan Sietz, owner of Rochester’s oldest brewery, Kinney Creek Brewing, says versatility has been key to his surviving his increasingly crowded market.
Craft breweries have a connection with the communities they serve that’s unique to the industry, said Jess Talley, executive director of the Minnesota Craft Brewers Guild. Minnesota drinkers helped their local breweries through the pandemic by picking up growlers and other to-go containers of beer when taprooms across the state were closed in 2020, she said.
While that support didn’t make up for the loss of taproom revenue for most Minnesota breweries, that kind of support is unique to the industry and a big reason why guild leaders expect craft beer to bounce back.
“For me, I see it as a back-and-forth,” said Bob Galligan, the Minnesota Craft Brewers Guild’s director of government and industry relations. “You take care of us, we take care of you.”
That’s why guild leaders say they expect to see breweries in unexpected places despite some crowded markets seeing some closures.
“Some breweries are going to open in places people didn’t anticipate breweries opening,” he said.
Ten years of growth
By every measure, the craft beer industry in Minnesota is booming compared to a decade ago. As of 2021, the state had 226 active breweries — up from 57 in 2012. Minnesota breweries produced a post-prohibition record of more than 1.6 million barrels of beer in 2019 and, as of that year, the brew industry employed 8,435 workers while generating more than $1 billion in estimated economic activity, according to a study by the University of Minnesota’s state extension office .
However, COVID-19 put a strain on an industry that was already experiencing a slowing rate of growth. Nationwide, craft brewers saw their share of beer sales drop for the first time in more than a decade, according to the Brewers Association .
The Minnesota beer industry was not exempt. The UM Extension report estimates Minnesota breweries saw an 18% dip in sales and a 10% drop in the industry’s workforce in 2020.
The industry did find some relief from lawmakers. Federal COVID aid helped some breweries through the pandemic. Now they’re also looking for help closer to home. Guild members say legislation from the state would expand the types of to-go containers Minnesota breweries would be allowed to fill.
A wounded industry
In early May, about 10,000 people gathered in Minneapolis for the Craft Brewers Conference. It was the biggest industry gathering in the world since 2019.
Bart Watson, Brewers Association economist, gave a state of the industry address saying the craft beer industry is coming out of the COVID-19 pandemic wounded but more mature.
Watson said the industry has spawned a greater variety of products while offering opportunities to a more diverse group of people.
“A more mature market forces us to think about the customer more and find niches where we can grow,” Watson said.
Watson addressed years of speculation about a craft beer bubble burst.
“I want to highlight for the hundredth time, this isn’t a bubble bursting,” he said.
Only about 30 percent of craft beer brands showed growth through 2020 to 2022, Watson said. Sales of other beverages including canned cocktails and seltzers are growing faster, he added.
“If these trends continue, beer is not going to be the number one beverage in the United States,” he said.
Part of what is driving that are the demographics of drinkers, he wrote in a Brewer’s Association report last fall .
“The American beverage alcohol consumer is increasingly BIPOC and female," Watson wrote.
In the report, Watson points out about 92% of American craft breweries are under white ownership, and more than 75% have all-male ownership.
Broadening the inclusion of groups normally not associated with craft beer could help the industry grow, Watson said.
Keeping it local
J. Nikol Jackson-Beckham, the Brewers Association's diversity ambassador, said the industry is making strides but the effort is a marathon. However, the association’s main concern is the needs of the brewers and the communities they serve.
“We’re a trade association,” she said. “We need to listen to our members.”
The two aren’t mutually exclusive because the people who live in this increasingly diverse country don’t live very far from a brewery.
More than 85% of the U.S. population lives within 10 miles of a craft brewery, Jackson-Beckham said.
That percentage might grow as breweries continue to open in smaller communities. Once confined to urban centers, Minnesota breweries are opening in smaller towns — the places people don’t anticipate as Galligan said.
That’s something Scott Stroh is banking on as he converts a car wash in Kasson into a new space for Chaotic Good Brewing Co .
“I think some areas that got really full really fast may start to see some contraction,” he said. "Overall, I still think Minnesota is going to gain (breweries) over the next few years.”
Donovan Seitz doesn’t think Rochester’s craft beer industry is particularly crowded, but when he established Kinney Creek Brewing Co. in December 2012, the brewery was the first and only to operate in the city at the time.
Since then, other breweries have joined the market. Seitz said more breweries means more interest in craft beer.
For Kinney Creek, the line of seltzers brewed there has helped sustain the business through the pandemic. Prior to 2020, Kinney Creek’s seltzer’s accounted for about 30% of sales. Now, they’re about 50% , Seitz said.
Responding to customer needs and trying new things are key survival strategies, Galligan said. It’s also a reason he doesn’t think the industry is heading to a bust.
“With the styles and varieties people are coming up with, there’s a lot of room for innovation,” he said.