Minnesota's craft breweries saw an 18% drop in sales in 2020 due to the COVID-19 pandemic, despite studies that show many Americans are drinking more.
Breweries rely heavily on selling beer in their taprooms (73% of sales are made on-site) but were limited by state-ordered shutdowns last spring and fall, resulting in an 18% decline in sales and the loss of 595 direct jobs, the report states.
What's more, the industry's economic impact on Minnesota's economy fell from $1 billion in 2019 to $813 million in 2020, causing the state's economy to lose an estimated $186.6 million in economic activity and impacted 1,050 direct and indirect jobs, the report says.
The pandemic forced breweries to delay or downsize projects, leading to a 37% decrease in capital investments, which lowered the industry's impact on the economy, the report said.
The projects breweries did take on were often related to health and safety upgrades or were related to expanding outdoor space to serve more people on-site.
"In some ways, the pandemic brought out craft brewing's strengths," Brigid Tuck, the senior economic impact analyst with the U's Extension office said in a news release. "Brewers were able to shift operations to focus on more production for retail sale, but it was still difficult for an industry that depends heavily on on-site sales, as well as tourism."
Efforts to change liquor laws frustrated
While many breweries switched up their operations to sell more growlers and crowlers directly to customers to keep them afloat, it led to a decline in margins for many, the report says. One brewery noted that's because it's more expensive to package beer than to sell it on tap.
But selling packaged beer wasn't an option for all breweries. Five Minnesota breweries are prohibited from selling their products to-go from the taproom because they're too big under state law. And all breweries are prohibited from selling beer in containers smaller than a growler or crowler (32-ounce and 62-ounce vessels) for off-site consumption.
The report underscores the argument the state's craft breweries and other craft beverage makers have been making at the state Capitol to modernize Minnesota's Prohibition-era liquor laws.
While there have been efforts to update the laws for years, the COVID-19 pandemic heightened the industry's push for change. Some of the state's largest breweries formed an alliance and the associations representing craft beverage makers teamed up to form the Minnesota Craft Beverage Council (MCBC).
The state's beer, cider, wine and spirits associations teamed up to push for change together in support of the bipartisan Drink Local Economic Recovery Act. The MCBC says the legislation would ease regulations on craft beverage producers and allow them to help recover some of their losses incurred in 2020, while also helping the state's economy recover from the pandemic.
“We have all been asking for these changes separately at the Capitol for years, and have gotten nowhere,” Lauren Bennett McGinty, executive director of the Minnesota Craft Brewers Guild, said in a statement earlier this year. “So we’re coming together to say that we can’t afford to wait any longer. Without significant changes to the restrictions Minnesota places on craft beverage producers, this entire industry is at risk.”
The U of M's report noted many breweries missed out on federal and state COVID relief funds for various reasons. Among them: they're newer so they don't have the financial history to prove they qualify; and the pandemic's impact on the industry wasn't uniform — breweries saw strong sales over the summer when restrictions were eased but poor sales the rest of the year led to an overall loss in revenue — so if a relief program compared sales between summer 2020 and summer 2019, they wouldn't qualify.
At least two Minnesota breweries closed for good during the pandemic (Wayzata Brew Works closed in December 2020 and the Herkimer in Minneapolis closed in June 2020) and at least two other breweries closed temporarily.
Canal Park Brewing Co. in Duluth temporarily closed on Nov. 23, 2020, due to the second state-ordered shutdown but plans to reopen this spring. And Surly closed its beer hall in Minneapolis before the second shutdown, citing COVID restrictions and lack of people going out and drinking, but has plans to reopen June 1.
Breweries do have hope for the future and with ongoing COVID vaccinations, they're optimistic about their bottom lines.
"It is clear that Minnesota's craft beer industry has been met with significant challenges over the last year and that the impact will be long-lasting,” Minnesota Craft Brewers Guild president Dawn Finnie of Little Thistle Brewing Co. said in the release. “This report demonstrates that breweries have a history of community support and the ability to adapt, which hopefully leads to a quick recovery and a thriving craft beer industry in the future."
The U of M Extension's report stems from a partnership with the Minnesota Craft Brewers Guild. They surveyed members of the guild in December 2020, with about half of the state's roughly 183 licensed breweries responding. Respondents included a mix of new, small breweries and large, established breweries, with 51% of the breweries being located in the Twin Cities metro.
You can read the full report here.