City Council could open doors for brewers

Jason Sowards is arranging his financing, has written a business plan and has his eye on a 6,000-square-foot building on Minnehaha Avenue S., where he plans to launch his Harriet brand of beer this fall.

But he's holding off on signing his lease until Friday.

That's when the Minneapolis City Council is likely to approve a seven-word ordinance change that local brewers hope will spark a microbrewery explosion in the Mill City.

The change would allow small brewing companies to sell their product out the brewery door in 64-ounce or 750-milliliter bottles known as "growlers." They afford a higher profit margin than selling through distributors to bars and restaurants. That's important to brewers, who need to accumulate capital to build their brewing staff and eventually expand to bottling lines. It also creates brand loyalty, brewing aficionados say.

"It's huge," Sowards said. He's one of several young Minneapolis-based microbrewers hoping to take advantage of the change. All have chosen Minneapolis names and plan to open or shift their operations here.

"I can't think of another change we could make that just deletes seven words and helps create possibly five new businesses in Minneapolis in the next year," Council Member Gary Schiff said last week at a public hearing on his proposal.

"I want to have a Minneapolis microbrewery," Sowards said. "As a process engineer, it's been my dream to design my own brewery and build it." That dream got a kick start when he was laid off last year from AEC Engineering, and friends and relatives urged him to start brewing commercially now rather than someday.

"They say, 'What are you doing?'" he said. "I say, 'Come on in and have a brew.'"

Tale of two cities

In general, Minneapolis has lagged behind St. Paul in the brewing industry. Although both cities have boasted nationally known breweries over the years, Minneapolis has no production breweries, aside from its brew pubs. Minnesota brewing historian Doug Hoverson counts 30 breweries that have opened and closed in the city, many of them short-lived.

That reflects a historical split that favored St. Paul. St. Paul's Irish and German Catholic populations were more hospitable to brewing, Hoverson said. Meanwhile, Yankee Protestants with more of a temperance ideal founded Minneapolis, he added, and its Scandinavians arrived with more of a dry mentality and less of a brewing tradition.

Sowards won't be the first Minneapolitan to brew for profit.

St. Paul approved the change in 2006, but the four Minneapolis partners behind Fulton beer didn't wait for Minneapolis to catch up. They launched their brand, with the name of the Minneapolis neighborhood, last fall, contracting with a Black River Falls, Wis., brewery. Fulton supplies two year-round brews and a seasonal stout to 90 bars and is scouting locations for a local brewery in anticipation of the ordinance change.

Jim Diley, one of Fulton's partners, expects to have a locally produced beer on the shelves by early 2011, with a workforce of five people. He calculates that brewers can realize four times as much money from growler sales as from selling through a distributor. That's a difference of roughly $268 per barrel.

"Those numbers allow someone who is new to the business, or who is making a capital investment, as most new brewers are, to have the chance to succeed," Diley said. The initial investment in brewing equipment can hit $250,000 or more.

But growlers are more labor-intensive to fill and cap, and the bulk of any small brewer's sales is likely to come through distributors, said Robert Kasak, one of a group of five people working toward launching 612 Brew.

However, growlers also build customer loyalty. "The big advantage is that it will attract people to their breweries," Hoverson said. "People who like craft beer tend to brag about going to the brewery and talking to the brewer."