MN Craft Beer Sales Boom Despite Recession

Are beer sales recession proof? That doesn’t appear to be the case now. Overall, U.S. beer sales were flat in 2008—they saw a meager 0.4 percent increase in sales, according to the Association of Brewers, a beer trade group based in Colorado. The beer industry typically sees healthy single-digit growth each year.

But there’s some good news on the craft beer front, which includes all of Minnesota’s beer makers. Nationally, craft brewers (defined as brewpubs, microbreweries, regional craft breweries, and contract brewing companies) saw their sales rise 5.8 percent in 2008. During that same period in Minnesota, craft beer sales were up a whopping 74.5 percent.

Why such a jump? One explanation is that there’s room to grow. Craft brewing is a small part of the overall U.S. beer industry—just $6.3 billion of the $101 billion beer market in 2008, according to the Association of Brewers.

In the last three years, several new Minnesota brewers, such as Flat Earth Brewing Company in St. Paul, Lift Bridge Brewery in Stillwater, and Surly Brewing Company in Brooklyn Center, have emerged to fill the demand for beer made in smaller batches.

Minnesota’s two largest brewers, August Schell Brewery in New Ulm and Summit Brewing Company in St. Paul, say their business is growing, albeit it at a more modest pace than in the past 10 years.

Summit saw sales grow 3 percent in 2008 to $15 million. Mark Stutrud, the company’s president and head brewer, says commodity costs for hops and other beer ingredients now account for 17 percent of the cost of making beer. Raw material costs were only 7 percent 26 years ago. Last year, the restaurant industry took a hit and brewers that rely on restaurant and bar sales took a hit right along with it.

Restaurant and tavern beer sales remain slow. “In 2008, almost 50 percent of our sales were draft beer,” Stutrud says. “So we’re directly connected to the restaurant-tavern industry. When the restaurants slow down, we see the [effects] within a week or two of our production schedule.”

This year, Stutrud says he’s budgeted for 6 percent growth, but that’s still off from Summit’s average 10 percent growth during each of the last 10 years.