Minnesota mug clubs offer free beer — for a price

For a one-time payment of $1,000, fans of Wooden Ship Brewing Co. in Minneapolis can get one free beer, per day, for life.

You can get a similar deal if you live closer to Utepils Brewing, the upcoming Hackamore Brewing in Chanhassen or Wandering Leaf in St. Paul.

Minnesota breweries are offering more of these high-cost, high-reward memberships as the industry settles into a hyper-local era with greater focus on serving — and retaining — neighborhood customers.

And as breweries emerge from the pandemic or grapple with startup costs, a cash infusion can go a long way.

A step above the average mug club, these lifetime memberships are typically limited in number and sold only before a brewery opens its doors, as was the case recently with Invictus Brewing in Blaine.

Wooden Ship, which opened in May 2021, decided the time was right to offer Mug Club 2.0.

"Right after we opened we had people asking to bring it back, that they would love to be a part of it," said co-owner Suresh Graf. "So we brought it back, by popular demand."

"Everyone in the industry I've talked to says, 'You blow us away with what you give away,' " said Utepils President Dan Justesen. "But it's about building community."

Many breweries offer mug clubs, which are essentially customer-loyalty programs that offer discounts on beer and merchandise for an upfront or recurring membership fee and serve a limited number of people.

They're different than membership in a brewing cooperative, such as Fair State or Broken Clock. Both of those Minneapolis breweries offer lifetime memberships that come with one additional perk — an actual ownership share in the business.

What all these programs have in common is an aim to boost taproom sales, often the most important part of a small brewery's bottom line.

As more breweries continue to open, the competition to fill seats in taprooms is starting to focus heavily on proximity.

Graf said trends in other brewery-rich states point to a growing focus on neighbors supporting local breweries, like what Wooden Ship is promoting for its Linden Hills home.

"What happens when there is such a high per capita brewery rate, it's more about, 'There's a brewery in my neighborhood, let's go there,' " Graf said. "There's an enhancement of community and a desire to participate locally."

Galligan said he has seen the perks — and prices — tick up for brewery memberships in recent years as a result. Hackamore's highest-tier Beer Club membership runs $2,500.

Memberships offered as a brewery is getting started can help offset high startup costs; Galligan said banks can still be hesitant to back breweries even as the U.S. approaches 10,000 in operation.

All that free beer is still expected to generate revenue beyond the initial $1,000. Breweries are betting members will often bring a friend or stay for a second round to help offset the freebies.

Breweries are finally starting to return to 2019 production and sales volumes after the pandemic wiped out taproom sales and bar accounts, according to the national Brewers Association, but it is still rough going for many.

Due to continued supply-chain challenges and higher costs, "even when brewers are selling as much beer as they were, margins often remain under pressure," Brewers Association chief economist Bart Watson said in the group's 2022 annual report.

Justesen can attest to that at Utepils.

"Those of us that survived COVID are coming out with debt on our balance sheets," he said. "People walk in and see huge crowds and think, 'You're doing OK.' But the look of the place is different than the balance sheet."

The revenue from $1,000 memberships can make a difference, even if the total sum raised pales in comparison to ongoing payroll and ingredient costs. The cash infusion can help with projects that are otherwise out of reach — Utepils used proceeds from its first run of the VIPer program to build out the taproom's patio.

One patron said they planned to attach their Utepils "MemBEERship" to their house, so if they ever move out of the neighborhood the next owner can enjoy the perks.