From 30,000 feet up, American craft beer looks to be settling into a new, stable normalcy. After years of double-digit production volume growth, craft beer grew at just 4% in 2018 and according to the mid-year report by the Brewers Association, 2019 is projected to stay steady at that mark.
But look closer and you’ll see that behind the steady numbers is an industry in the midst of chaotic flux. Millennials and health-conscious consumers are turning away from beer for other beverage options, regional craft breweries are floundering, and the growing consumer trend for “what’s new” rather than “what’s good” adds a confounding layer of unpredictability for brewery owners to navigate.
In Minnesota, our state’s 187+ breweries and brewpubs faced these challenges and more in 2019. Let’s break down the biggest storylines from 2019 in craft beer and cider.
The Good, The Bad, and The Brewpub
The state restricts brewpubs from distributing their beer to bars, restaurants, and liquor stores. Along with the passage of the Taproom Bill in 2011, it’s a factor that has persuaded the vast majority of breweries in Minnesota to open as production breweries instead (85%, in fact, of those opened between April 2015 and December 2018.)
But 2019 was an outlier. Notably, eight of the 22 breweries that opened this year are licensed as brewpubs. What happened to make the brewpub model seem more appealing? In a word: competition.
With around 7,500 active breweries in the U.S. as of this year (and thousands more in planning), cracks have started to form in the distribution market. In the past two years, flat and negative growth at the regional brewery level has quashed any dreams a brewery may have of starting the next Sierra Nevada. Instead, the trend is toward opening taprooms that operate more as neighborhood pubs (where the profit margin of a pint is significantly better than the retail market.)
However, neither model is impervious to financial difficulty. Location, lease, and overhead costs of construction are factors that weigh heavily on a brewery or brewpub’s future success—factors that fed into 12welve Eyes Brewing’s closing and Birch’s Lowertown going up for sale. What’s more, the intensifying competition between breweries is making it more important than ever to bring in new consumers to the craft beer segment.
Easy to Find Hard Seltzer
Nationally, hard seltzer continued its blistering growth in 2019, surpassing $1 billion in sales. Hard seltzer now makes up 2.5% of the alcohol market, up from 0.9% a year ago, according to a CNN report. Locally, hard seltzer exploded as a category in 2019. With only two local brands commercially available in the market at the end of 2018, by the end of 2019, Minnesota will have had 28 seltzers hit taps and packaged in cans.
For brewery owners, offering hard seltzer is a way to engage non-beer drinkers, and that strategy seems to be working. An analysis by the Brewers Association’s economist Bart Watson suggests that the majority of the hard seltzer market is coming from new consumers to alcoholic beverages and from market segments outside of craft beer, meaning that breweries aren’t cannibalizing their beer sales, but rather bringing in new revenue.
While consumers should expect more hard seltzers from their local breweries available in 2020, they should also keep an eye out for other offerings that appeal to health-conscious consumers. Low-calorie beer, gluten-free beer, and CBD beverages could be the next styles that local breweries explore.
With regional brewers in the U.S. projected for another year of flat or negative growth, two Minnesota brewers are taking a different tack to expand into new markets. Lupulin Brewing and Indeed Brewing Company bet big in launching new markets by investing in opening a second brick-and-mortar brewery to create a local presence in the communities of Sioux Falls, South Dakota, and Milwaukee, Wisconsin, respectively. Owners from both breweries expressed similar beliefs that having a permanent presence in the community was important to their success in the market. If their bets pay off, this could be a model that other breweries will follow in future years.
Next Level Cider
Minnesota’s cidery count is up to 20 with the addition of two urban cideries in 2019: Minneapolis Cider Company in Northeast Minneapolis and Wild State Cider in Duluth’s Lincoln Park neighborhood. All of them could benefit from a new research project that received funding this year.
After spearheading two research grants on their own, Minnesota’s orchard-based cideries and apple growers got some welcome news in May when it was announced that University of Minnesota researchers were awarded a $100,000 grant to conduct research on the quality of juice and cider from Minnesota apple varieties, as well as the viability of introducing traditional European cider apples to Minnesota.
The three-phase project will help develop a set of guidelines for which cider apple varieties can successfully be grown in Minnesota and what qualities they contribute to cider, including levels of tannins, sugar content, and acid. This has the potential to shape the trajectory of cider in Minnesota, both from a stylistic perspective and from a local economic point of view.