Brewpubs: A Viable Business Model in Minnesota?

Brewpubs and production brewers all feel this way. I’m writing from the brewpub perspective, because I left a huge brewery to run a small brewery. For me, this allows more personal creativity and control then I had before. I enjoyed my time at Pyramid, and everything I learned at the production brewery allowed me to run a successful brewpub.

The website vita.mn posted this headline on June 7: “MINNESOTA BEER GROWTH NO. 2 IN NATION.” That headline was about production breweries. The reality is that only two brewpubs have opened in the last five years — Northbound Smokehouse and Canal Park Brewery. Fitger’s Brewhouse and Town Hall Brewery continue to expand by creating new beer-centric locations. Other than that, brewpubs are actually expanding much slower than production breweries.

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My hope is that soon Minnesota will enact more business friendly laws like Texas did. Texas was fairly restrictive, but they recently gave production breweries the right to have taprooms, just as the Surly Bill did in Minnesota. They also gave brewpubs the right to sell to wholesalers for distribution to bars, liquor stores and grocery stores. That seems very fair to me, but of course I am biased. I love working at a brewpub and am comfortable with the work we have done at Fitger’s Brewhouse, and I hope for similar changes in Minnesota laws in the wake of the Surly Bill’s passage.

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My goal here is to clarify the situation. Since I am giving brewpubs a voice in this article, I decided to ask the owners of six of the most successful independent brewpubs in Minnesota the same three questions.  The owners I spoke to were:

 

Pete Rifakes, Town Hall Brewery (PR)

Rockie Kavajecz,Canal Park Brewing Company (RK)

Sean O’Byrne, Great Waters Brewing Company (SO)

Jamie Robinson, Northbound Smokehouse Brewpub (JR)

John Moore, Barley Johns Brewpub (JM)

Tim Nelson, Fitger’s Brewhouse (TN)

 

Here are some excerpts from my interviews with each pub owner.

 

Are brewpubs a viable business model in MN?

JR: “Yes.  Every drop is sold at retail.  Also, there is demand for good food and table service to go with the beer brewed on site.”

 

JM: “Yes, but marginally. Not as they should be, could be, and ought to be. It is no wonder there has been a net loss in the state. It’s like being in the ring with Mike Tyson without ear protection.”

 

RK: “Minnesota is very viable for brewpubs, with the caveat of our limitation of job creation. You really have to want to be in Minnesota.”

 

TN: “When we opened Fitger’s Brewhouse in 1995, it was a different market. The only way that we were able to slowly build a following for craft beer was through educating each of our customers.

Today I’m not sure that brewpubs will continue to appear a viable option for startup companies in Minnesota.

It makes sense to me that there has been an explosion of craft production brewers in Minnesota and not brewpubs. Brewpub licensing is more difficult and insurance expenses greater, while production brewers are not encumbered to serve food, don’t have the huge staffing needs, don’t have caps on production, are able to pour beer in their taproom, can sell growlers from the brewery, and have the right to self-distribute to restaurants and liquor stores. Minnesota brewpubs are at a place where their viability is being diminished as the craft beer market expands.”

 

SO: “Brewpubs in Minnesota have a severe handicap compared to brewpubs in other states. With distribution limitations, no national brewpub chain would consider coming into Minnesota. We are limited to selling on-site or growlers, limiting return on investment of equipment.”

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