Schafer: Summit to stick with a recipe that works

Mark Stutrud, Summit Brewing Co. president and founder, is an entrepreneur who just kicked off a project that will double his plant's capacity amid an industry boom.

But twice the manufacturing capacity does not mean there's a bold new strategy or vision to talk about. No new financial partner. No new distribution deal. No plan to enter big markets like California.

He clearly intends to grow, but by getting one more Minnesota beer drinker at a time to buy Summit's products.

You can meet more aggressive-sounding entrepreneurs in the funeral home industry. But you have to admire an approach that, in an industry as fiercely competitive as any, has moved Summit forward steadily for 26 years.

"It's a good time to be in this business," Stutrud said. "But it's also a time not to be cavalier. I really don't take anything for granted. We're working just as hard as we did on Day One."

The craft beer segment is dramatically outperforming the beer industry as a whole. Dollar sales for craft beers were up 14 percent in the first half of 2012, according to the Brewers Association, which defined "craft" as traditionally brewed beer from small, independent firms.

The group also said the United States at midyear had 2,126 breweries -- an increase of 350 since June 2011. You would have to go back to the period just after Prohibition to see that kind of start-up activity. When Summit launched in 1986, there were just 79 brewing companies.

Summit, he said, is just a small company with a little more than $20 million in annual sales and 60 full-time employees.

But it's getting bigger.

The expansion project got pulled into 2012 from a planned kickoff next year because Summit, with capacity of about 120,000 barrels a year, had more customers this year than it had beer to ship.

He said "what really stung" was scratching four batches of Oktoberfest beer due to capacity shortages.

The addition under construction will create space for fermentation tanks, the part of the operation that is currently capacity constrained.

If all goes as planned, the first new tanks will be ready in June.

What Stutrud intends to do with all that new capacity, apparently, is simply more of what Summit has done since its founding. And that means increasing market share close to home.

Some craft brewing companies have shot up in sales rankings by adding new geographic territory, but that's not Summit's plan.

A close relationship with a distributor is critical, Stutrud said, and a recent trend of consolidation among distributors makes it more difficult for a craft brand like Summit to be important enough for a giant distributor's attention.

Stutrud also is not going to get distribution help by linking arms with the likes of Anheuser-Busch InBev, which was the route chosen in 2006 by Chicago's Goose Island Beer Co., and which led to its purchase by Anheuser-Busch five years later.

'Steady as she goes'

Benj Steinman of Beer Marketer's Insights, an industry news and research publisher, said Summit's "steady-as-she-goes approach has seemingly served them well. This expansion is a fairly ambitious move for them."

Stutrud said the aggressive move, the one that created so much financial pressure that it felt like the start-up phase of 1986 all over again, came in 1998.

That was when the new Summit brewery opened in its current location, on the site of an old Texaco tank farm on a wooded bluff overlooking the Mississippi River near W. 7th Street and Interstate 35E in St. Paul.

The new facility could do about 60,000 barrels a year, and capacity has since increased to about 120,000 barrels in the same building, as Summit has invested an average of about $1.7 million annually into its plant over the past decade.

Standing behind the bar in Summit's Ratskeller public meeting room, sipping a Summit "Old 152," Stutrud talked about beer in a way that was maybe one part passionate craft brewer, one part Theodore Hamm.

He said locally brewed products like Hamm's once had a statewide market share that dwarfs Summit's share statewide of about 3.1 percent.

In looking ahead, he said, "6 percent has a nice ring to it."