It probably comes as no surprise that American alcohol consumption grew during the pandemic, but that hasn’t necessarily benefitted Minnesota’s brewers.
In 2020, the state’s craft breweries saw an 18 percent year-over-year decline in sales, according to a new report from the University of Minnesota Extension.
University economists say the sales decline doesn’t fully capture the depth of loss last year. Alongside a drop in revenue, many breweries had to make costly operational changes to adjust to the pandemic. They also faced a decline in on-site food sales.
“Margin-wise, breweries had a tough year, and it may take them a few years before they’re able to fully recover,” said Brigid Tuck, a senior economic impact analyst with the U of M Extension.
The university conducted the report on behalf of the Minnesota Craft Brewers Guild, the state’s trade group for small brewers. The U.S. Economic Development Administration provided funding for the study through a pandemic recovery program, Tuck said.
The report was partially based on survey responses from 95 members of the Minnesota Craft Brewers Guild. Minnesota is now home to 183 breweries, which means the survey covered more than half of the industry.
Researchers also relied on other published data for the report, Tuck said. According to their findings, Minnesota’s craft brewers were responsible for $1 billion in economic activity in 2019, as well as more than 8,400 jobs. It’s not yet clear how the pandemic will affect those figures, but Tuck said many breweries likely had to scale back expansion plans, which could have an impact on the state’s broader economy. “We lost a lot of potential capital investment,” she said. “The industry is going to need a couple years to get back to the point where breweries feel they have the profits to reinvest and grow. I think we might see some cooling of the industry.”
For businesses that depend primarily on on-premise sales, pandemic restrictions have undoubtedly been tough. According to the Extension survey, breweries derive about three-quarters of their revenue from on-site sales.
But in the years before the pandemic, Minnesota brewers had been rapidly ramping up beer production. In 2019, brewers in the North Star State produced 1.6 million barrels of beer. That’s up significantly from just over 500,000 barrels in 2018. A decade earlier, brewers produced just 296,000 barrels. The report didn’t include beer production figures for 2020.
Tuck suggested that many startup breweries that formed a few years ago have been rapidly growing, and as a result, producing more beer. Of course, the number of breweries in the state has been growing, too: In 2012, there were just 39 licensed breweries in Minnesota. By 2019, that number grew to 183.
As the state’s craft breweries grow, they’re also running up against Minnesota’s restrictions on off-sale liquor. Under current state law, breweries are prohibited from selling beer in growlers once they begin producing 20,000 barrels a year — a restriction that the guild and many brewers have been trying to change.