South Dakotans living on the South Dakota/Minnesota border have been able to get Lupulin Brewing Company’s beers at liquor stores and on tap throughout their state since April 2019, when the Big Lake, Minnesota, brewery expanded its brewhouse and partnered with Global Distributing, Inc. Soon, they’ll also be able to post up at Lupulin’s second brewery and taproom, slated to open this July or August in Sioux Falls in the now-former Hydra Beer Company space.
Lupulin announced Thursday, June 6, that it will be acquiring Hydra Beer Company, a process that has happened quickly, says Jeff Zierdt, co-founder and president of Lupulin Brewing Co. “We’d been thinking of expanding for over a year, and were looking at a location in Wisconsin nine months ago,” he says. That plan ultimately fell through, meaning the company was able to jump on the opportunity to acquire Hydra when it came up. “It gave us experience and exposed us to the steps that we needed to go through in dealing with an acquisition and conducting preliminary due diligence,” Zierdt continues. “This [Sioux Falls deal] has all happened over the course of two weeks.”
The absolute earliest Lupulin would be able to close on the location is July 1, says Zierdt; they hope to have everything finalized by August 1. Timing all depends on getting approval from the Alcohol and Tobacco Tax and Trade Bureau (TTB) for the new location.
Hydra Beer Company, co-owned by Chad Petit and Nick Murphy, has had beer on shelves and taps since May 2015 thanks to contract brewing agreements with Sprecher Brewery and Brau Brothers Brewing Company. They opened their heavy-metal influenced taproom in Sioux Falls in late 2015 and have had a full 10-barrel brewhouse since March 2016.
While details on why Hydra decided to sell to Lupulin weren’t given, Petit says he and Murphy poured their “hearts and souls into Hydra, and are happy to see it going to a company like Lupulin, who will bring great things to our community.” The breweries will be working closely together over the next several weeks to finalize and close on the transaction. During that period Hydra will continue standard operations.
“We are excited to become a part of this growing community,” says Lupulin’s VP of operations and co-founder Matt Schiller of the expansion. “The Sioux Falls market is an ideal fit for us. We have family and friends living in southwest Minnesota and Sioux Falls. It has always felt like a home away from home to me.”
The plan for Lupulin’s Sioux Falls location is to produce several taproom-only releases onsite, with the company’s core hoppy brands, such as Blissful Ignorance and Hooey, still being made and brought in from their Big Lake location. Eventually, Zierdt says they’d like to produce 350 barrels at the South Dakota location—approximately what the company originally brewed when they first opened in Big Lake in May 2015.
Minnesota state law doesn’t allow for a production brewery to operate more than one taproom at a time, which has led more than brewery to expand outside of the state. Lupulin is the third Minnesota brewery to open a second brewery and taproom out of the state, following Barley John’s Brew Pub, which opened a production brewery in New Richmond, Wisconsin, in 2015 in order to distribute its beers to retailers, and Indeed Brewing Company, which is in the process of opening a second location in Milwaukee, Wisconsin. South Dakota’s laws allow a brewery to open up to five additional taprooms throughout the state, as well as sell bottles and cans out of the taproom—which is restricted under Minnesota state law.
Opening multiple brick-and-mortar locations as a part of a wider distribution plan is hardly a new trend. Elsewhere in the country, most notably out west, breweries such as Rogue Ales, Melvin Brewing, and Modern Times, among others, have opened two or more breweries to expand their foothold in the market.
This may be a strategy that more breweries employ in the future. As many of the country’s large distributing breweries have experienced flat or negative sales over the last three years, the craft beer landscape is shifting toward smaller, taproom-based breweries. The median-size brewery on the Brewers Association’s 50 fastest growing breweries list from 2018 was only producing 1,350 barrels annually and taprooms are becoming more important than ever before in driving growth for breweries. At-the-brewery sales for craft brewers grew about 400,000 barrels to around 3–3.1 million barrels in 2018 and these sales represented 40 percent of craft category growth in 2018.
For Lupulin, the new outpost gives the company a chance to forge a local connection with patrons in the community where they live—part of the brewery’s company philosophy of “community involvement, access to the public, and a little splash of idiocracy along the way,” says Zierdt. “I think to create that local presence, you have to have that presence,” he continues, adding that he also plans to get involved with the Sioux Falls chamber of commerce. “I think it’s been proven […] that to grow business—especially with distribution—you need to have a local stake.”
The Growler’s managing editor Ellen Burkhardt and editor-in-chief Brian Kaufenberg contributed to this story.