Is there a craft beer bubble? Minnesota brewers say there's room for everyone, but some taprooms face uncertainty

It's a turbulent time to be in Minnesota's craft beer business.

More than a dozen years after state laws began to change to allow breweries to sell their products on-site, craft beer is everywhere. So are a bunch of beer alternatives — like locally distilled spirits, hard seltzers and THC drinks.

Add inflation, changing consumer habits, some high-profile closures and a recent bankruptcy filing from Fair State Brewing to the mix and some proprietors see an uncertain future.

Wooden Ship Brewing Company in southwest Minneapolis experienced that uncertainty last month when the typical winter slowdown turned dire.

"It's been a rougher winter than normal for us," said Josh Oestreich, an owner and director of brewing who put out a plea for support in a Jan. 26 social media post. Oestreich said January was the brewery's worst month since opening about three years ago.

"The response was incredible," Oestreich said. "The last six days pretty much equaled what we made the first 25 days of the month."

Taprooms are an important part of the craft beer business because it's where brewers interact with customers and show off their newest creations. But there are growing signs that the novelty of drinking beer where it's made has worn off and breweries need to find new ways to get patrons in the door.

"We are hoping to figure out what normal looks like," said Jen Fox, one of the founders of Spiral Brewery, which opened in Hastings in 2018. "If last year was normal, we need to figure out how to get more butts in seats."

Is there a brewery bubble?

Bob Galligan of the Minnesota Craft Brewers Guild acknowledges there's been nationwide speculation about a brewery bubble for years. He doesn't think it has gotten to that point in the Twin Cities metro, but he agrees some urban brewers have had a tough run recently.

Production and labor costs are up, Galligan says, and people are not drinking as much beer as they did a few years ago.

National beer consumption declined by 3% in 2022, according to the Brewers Association. Craft beer made up about 13% of a beer market worth more than $115 billion and still dominated by domestic giants and imports.

Nevertheless, Galligan says the guild lost six of its roughly 180 members in 2023 and gained eight new ones. There are more than 200 craft breweries in Minnesota with at least seven more expected to open this year, most of them outside the core metro.

"Most of our new members are in the suburbs or in greater Minnesota," Galligan said.

Proliferation in the suburbs, outstate

There was a time when a beer connoisseur had to go to a hip neighborhood like northeast Minneapolis or the North Loop to find a taproom — but not anymore. Breweries have popped up across the suburbs, keeping suburban drinkers closer to home.

Lori and Joel Fischer, of Burnsville, have visited a lot of them in the past few years as a weekly ritual to break up the monotony of working from home. They still head downtown to check out new spots or visit old favorites, but that's typically on the weekends.

For a weeknight pint, the Fischers favor closer options like Bald Man Brewing, which opened more than seven years ago in an Eagan business park. "For me, it's the ambience; for him, it's the beer," Lori said.

It's hard to be more off the beaten path than North 20 Brewing in Rosemount that the Schmitz family opened in 2022 on a plot of rolling hills off a gravel road.

Christian Schmitz, one the founders, said he and brother Jordan caught the home brewing bug and decided a taproom would be a great use for the family land their grandfather used to mow on his John Deere tractor.

"Our main focus is providing a place for Rosemount," Schmitz said. "There are plenty of people here and there are not a lot of places like this to gather."

The taproom is a regular spot for Mike McGowan, of Eagan, and Ryan Hollom, of Inver Grove Heights because it's within walking distance and they love the pastoral setting.

"It has a neighborhood feel," said McGowan. "First time I came here, I saw so many neighbors that I hadn't seen in a long time."

Finding a niche

Competition and slowdowns aside, plenty of people are still bullish on making craft beer in the core metro. Pat Carey, Jason Myrold and Steve Wankewycz are three of them.

"Do you buy a stock at the top or the bottom?" Carey asked, adding that he thinks there's plenty of room in the market for a brewery that stands out.

The trio purchased 612Brew, one of the Twin Cities' first taprooms, in 2023 and converted it to Padraigs Brewing. They focus on Irish beer styles, which Carey and his partners think are underrepresented in the region.

Carey is quick to acknowledge the impact the pandemic and changing attitudes have had on the brewing industry. He's confident beer and a taproom "with an Irish lilt" will help Padraig's stand out.

"Everybody's got the same kind of beer. It's the same experience," Carey said. "I think there's a business case for Irish beer."

Padraigs, Spiral, Bald Man and other breweries across the metro also have zeroed in on events as a key way to draw customers. Music, trivia, even bingo nights are now commonplace in taprooms large and small.

Jim Watkins, co-founder of Sociable Cider Werks, says craft drinkers are looking for more than a good brew or cider. That's why in addition to a variety of different types of drinks, Sociable has added more food and activities like an ice rink in the winter.

"People are looking for an experience, not just a place to drink anymore," Watkins said.

Continued challenges

Minnesota brewing has evolved considerably since the so-called "Surly bill" passed in 2011 allowing onsite beer sales at breweries. The change sparked a craft-drinks revolution, but many brewers and distillers say lawmakers have been slow to make other needed updates.

For instance, distributing four- and six-packs to liquor stores was a lifeline during the pandemic, but it was just in 2022 that lawmakers OK'd a change that let brewers sell those same multi-can packs out of their taprooms.

"We live in a state that handcuffs small businesses like us," said Daniel Jacobs, a co-founder of Bald Man Brewing, who was one of several brewers who characterized laws about how they sell their products as archaic.

Another big market shift is on the horizon. In early 2025, Minnesotans expect to see commercial cannabis products become available for sale at dispensaries across the state.

It's hard to predict how legal cannabis will impact Minnesota alcohol sales. Some studies have shown booze sales decline when marijuana is in the mix, but the effect isn't necessarily permanent.

David Tolchiner, owner of the Midway Saloon in St. Paul, opened Potshotz to sell hemp-derived THC products last year. He says the two markets are different in a lot of ways.

"There's some overlap," Tolchiner says. "The THC bar is a work in progress. The Midway is a beer and whiskey bar. It's pretty timeless."

Despite challenges and a rapidly evolving market, most craft brewers continue to have a "the more the merrier" attitude, saying they hope to learn from each other's mistakes and successes.

"I know of several in planning right now," said Oestreich from Wooden Ship. "That's the thing about creators, we can't stop creating. Even if it is a terrible time on paper to open."