The increasingly blurry line between brewpubs and breweries

Grand Rounds Brewpub in Rochester, Minnesota // Photo by Louis Garcia

Grand Rounds Brewpub in Rochester, Minnesota // Photo by Louis Garcia

Brewpubs and breweries both have “brew” in their titles and both places serve beer; and that’s largely where the similarities between the two business models end—or at least where they used to.

Brewpubs and breweries are separate entities, each with its own definition and set of possibilities and limitations, and each offering owners very different business opportunities. However, the legislation passed in Minnesota in recent years has blurred the line between the two business models. With so many breweries and brewpubs popping up around Minnesota recently, we thought it was high time to finally explain what exactly the separation between a Surly, a Town Hall, and a Union Pizza & Brewing is, and why the owners of such establishments chose their respective routes.

In short, a Minnesota production brewery makes beer for distribution. Like Summit or Lake Superior Brewing Company, being a brewery means kegs, bottles, and cans, with the option for the brewery (following passage of the taproom bill in 2011) to sell its own beer onsite in a taproom. Breweries whose annual production is less than 20,000 barrels can also sell their beer directly to consumers in growlers and 750ml bottles.

A Minnesota brewpub, on the other hand, is a restaurant-plus-brewery that can pour its own beer as well as operate a full bar, including non-house beers, wine, and hard liquor. Brewpubs cannot distribute or package their beer (except for onsite growler and 750ml bottle sales for offsite consumption), but they can operate multiple locations and serve their beer at them, whereas a production brewery can only operate one taproom. Brewpubs are also capped at brewing no more than 3,500 barrels per year.

Seems clear cut, right? But don’t forget, some production breweries like Dangerous Man choose to forego distribution altogether and only sell their beer exclusively onsite in their taproom and in growlers. Oh, and did we mention production breweries can also operate restaurants at their breweries?

Brau Brothers Brewing Company began as a brewpub and then transfered to a production brewery with a taproom // Photo by Jim Tate, Southwest Minnesota State University

Brau Brothers Brewing Company began as a brewpub and then transitioned to a production brewery with a taproom // Photo by Jim Tate, Southwest Minnesota State University

Advertisement
Fair State Premium PahlayAhlay

For a long time, the presence of a restaurant served as the key indicator that a place was a brewpub and not a brewery. When the first generation of Minnesota brewpubs opened in the 1990s, the only avenue available to brewers who wanted to sit across the bar from their customers was to go the brewpub route. But now that breweries can operate kitchens onsite—think Surly, Urban GrowlerBrau Brothers, and more—the difference between the two models has become less distinct.

“There was more of a community aspect to brewpubs,” says Town Hall owner Pete Rifakes. “I don’t think that’s true today.” He chose the brewpub model when he was planning Town Hall in 1995 because it’s what he knew and loved. In graduate school, he was a regular at Seattle’s Big Time Brewery & Alehouse, and when he moved to Minneapolis and started his own business plan, he frequented Rock Bottom. The social aspect was something production breweries couldn’t provide back then. “If we were to reopen…I’m not in that situation, but I would probably lean toward opening a taproom,” Rifakes says of today’s marketplace. “The only reason to do [a brewpub] is if you’re going to have a full bar.”

Town Hall Brewery Owner Pete Rifakes // Photo by Brian Kaufenberg

Town Hall Brewery Owner Pete Rifakes // Photo by Brian Kaufenberg

Brewpubs are restaurants first, Rifakes adds. The beer is important, but “Your competition is other restaurants and the majority of your labor costs are on the restaurant side,” he says. Being known first and foremost as a restaurant with a full bar are marketing tools for brewpubs to draw different clientele and drinkers than production breweries. “Not everyone who walks in our door is a craft beer lover like we are,” says Steven Finnie, co-owner of Rochester, Minnesota, brewpub Grand Rounds. “It allows us to appeal to a wide variety of people.” Downtown Rochester’s bar scene is already crowded, so being a restaurant helps distinguish their business, he says.

Related Post: Now Open: Grand Rounds Brewpub

Brau Brothers has held both brewpub and production brewery licenses over the years. “We actually opened as a restaurant first,” says co-owner and brewer Dustin Brau. “To be honest, we added the brewery to the restaurant simply to get people to drive to Lucan for food. It was never meant to be the focus of the business originally; it was developed to give us identity and draw the then-limited craft beer crowd out of the woodwork.” Due to growth, they changed direction in 2006 and began distributing their beer.

In some cases, the community dictates which business model brewers choose to run with. With the Mayo Center drawing travelers to Rochester, food sales are a key aspect to the survival of a business, says Grand Rounds chief operating officer Tessa Leung. A full bar and the ability to sell lagers, sours, cider, and other beverages they don’t make in-house is an extra bonus. The taproom limitations just don’t make sense for a downtown Rochester business, Leung says.

Grand Rounds' Steve Finnie, left, and Tessa Leung // Photo by Louis Garcia

Grand Rounds’ Steve Finnie and Tessa Leung // Photo by Louis Garcia

Farther outstate, away from Minnesota’s population-dense metropolitan areas, owners have to take stock of their town’s dynamics when deciding between the models. “If you didn’t have any food I think you’d have a hard time making it a full-time deal,” says Ben Schierer, owner of Union Pizza & Brewing in Fergus Falls, Minnesota (population 13,351). He and his wife run the brewpub as their primary employment, and the restaurant gets customers seven days a week.

Next page: Overcoming challenges and looking toward the future

Pages: 1 2

 
MN Made Market Banner June-July 2017