Northland’s largest breweries hoping bill would allow for growler sales, even if annual barrel limit is surpassed

Minnesota breweries face a difficult choice - growlers or growth.

State law currently prevents breweries that produce more than 20,000 barrels of beer per year from selling off-sale, in the form of growlers or crowlers, out of the brewery's taproom. But bills introduced in the Minnesota House and Senate last week would eliminate that cap, allowing a brewery to produce more than 20,000 barrels annually while continuing to sell growlers.

That's welcome news for Castle Danger Brewery in Two Harbors and Bent Paddle Brewing Co. in Duluth, for which the 20,000-barrel cap looms. Castle Danger actually surpassed that mark in 2018, with 23,500 barrels, while Bent Paddle will likely reach it within two years.

Lauren Mullen, a Bent Paddle co-founder and vice president of outreach and marketing, said once the brewery gets closer to producing 20,000 barrels of per beer in a year, “we would be strategic about not going over 20K until the end of the year in order to preserve growler sales for the following year.”
Even if the current barrel cap isn’t eliminated, Mullen said Bent Paddle would eventually surpass that annual barrel limit and give up selling growlers.
“It’s just so strange that a for-profit company would have to choose between growth and sales in that way,” Mullen said. “It just seems a bit backward.”
Growlers, Mullen said, might be a small portion of overall sales, but are an important tool in marketing the company and its beer.
Castle Danger said it has surpassed its annual barrel limit, and will give up growler sales when it is time to renew its license unless the current law changes.

"Upon our next license renewal on Oct. 1, 2019, we will no longer be able to sell growlers under current Minnesota law," Jamie MacFarlane, co-owner and chief financial officer, said. "We have chosen to not halt production to stay under the 20,000-barrels cap. Our situation in contrast to Bent Paddle's decision highlights the issue with the law as it stands. We do not believe that a business should have to choose between capping production and selling growlers."

Castle Danger's taproom accounts for roughly 20 percent of the company's annual revenue, with 30 percent of taproom sales coming from growlers.

"There is nothing quite like grabbing a growler at your local brewery and heading to the cabin for the weekend. We want to continue to offer growlers to our customers as they have come to expect this," MacFarlane said.

At Bent Paddle, growler sales are also a fraction of the brewery's total sales.

Of the 17,347 barrels Bent Paddle produced last year, 1,541 barrels were sold in its taproom - two-thirds of that were sold in pints and the other one-third were off-sale, namely growlers.

But if the barrel-cap bill doesn't pass, the brewery will stick with growler sales and halt annual production at 19,999 barrels, Mullen said.

"It has added to our marketing. ... I think it would just be a really big tragedy for us and Castle Danger to not be able to have those experiences for customers," Mullen said.

The proposed law change would only apply to breweries, not brewpubs. Brewpubs, unlike breweries, can serve food and are already limited to producing 3,500 barrels of beer per year.

A similar bill was introduced in 2017, but it did not pass the House or Senate.

This bill, pushed by the Minnesota Craft Brewers Guild, a lobbying group representing the state's craft brewing industry, is part of a bill package meant to advance brewpubs and breweries.

Lauren Bennett McGinty, executive director of the guild, said many of the existing laws are outdated and need to adapt to a growing craft-beer industry.

"What we're doing is creating more opportunities out of the laws that already exist, and just kind of expanding them," Bennett McGinty said. "Because I think what has happened in the beer industry - not just in Minnesota but around the country - is that it's grown so quickly, and nobody's really known what to do with that."

Bennett McGinty said the industry has a "growing consumer base" in Minnesota.

"We have a lot of really amazing craft beer fans here in Minnesota who just want better access and ease of purchasing," Bennett McGinty said.

That's gone hand-in-hand with a growing number of breweries in the state.

From 2011 to 2017, the number of large brewers and microbrewers licenses in the state jumped from 6 and 16, respectively, to 20 and 113, according to the Minnesota Department of Public Safety.

"And so the laws that were created or put on the books, maybe even 10-, 20-plus years ago, don't really resonate with what the industry is now," Bennett McGinty said. "And even in the last five years or so, we've changed significantly."

But not everyone is on board with changing the laws.

The Minnesota Licensed Beverage Association, a lobbying group representing liquor stores and other legacy alcohol retailers, which pushes to maintain the "three-tier system of distribution" of producer, distributor and retailer, said the laws should remain the same.

"Minnesota's craft beer explosion has provided great choices for consumers. Minnesota's small breweries and taprooms have existing incredible legal advantages and the industry is obviously booming," Tony Chesak, executive director of MLBA, said. "We don't think they need additional law changes at this time over existing bars and liquor stores."

Other proposed changes to craft beer laws

The growler cap is one one of four bills related to craft brewing to be introduced for legislative review last week. The other bills focus on allowing brewery tap rooms to have collaboration guest taps; allow the filling of growlers in other locations such as bars, restaurants and liquor stores; and expanding the sale of off-sale beer in a larger variety of sizes.

Collaboration guest tap bill

As the law stands right now, if two breweries collaborate to create a special brew, that beer would have to be brewed separately in each brewhouse in order to be sold on tap. The introduced collaboration bill would instead allow brewery taprooms to have collaboration guest taps, so long as they consist of less than 20 percent of their taplines.

"We're actually doing a collaboration with Sleeping Giant Brewing in Thunder Bay, Ontario this spring. We have to brew it separately, in our own brewhouses. They're going to have it on their taps, we'll have it on ours," said Mike Prom, CFO of Voyageur Brewing in Grand Marais. "But it would be nice to be able to showcase the collaboration without having to brew it twice."

Retail growler-fill bill

This bill would allow the filling of growlers at retail locations such as restaurants, bars and liquor stores.

"The goal there is to have just the the ability for those places to sell the growlers and that's just adding a new license for those retail establishments," Bennett McGinty said.

"To me it just fits environmentally because it's not so much packaging and it streamlines the process," said Prom. "And you get fresher beer, which I think is great for the consumer."

Vessel size expansion

Currently, breweries can't sell off-sale beer in vessels smaller than 750 milliliters, but a bill introduced last week would widen that range to 350 milliliters (a 12-ounce can) to 2 liters (a 67.6-ounce European-style growler, slightly larger than the 64-ounce U.S. growlers).

Mullen of Bent Paddle said that the vessel-size-expansion bill might help smaller, younger breweries reach customers, but more off-sale options would send larger breweries over the annual 750-barrel limit. In 2018, Bent Paddle sold more than 500 barrels in off-sale, Mullen said.

"I really think that it would help a lot of the smaller breweries," Mullen said. "But I don't believe too many big ones that are like our size would be able to do it because of that 750 cap."

Growler cap bill numbers and authors

House Bill 1802, authored by Diane Loeffer, DFL-Minneapolis; Jamie Becker-Finn, DFL-Roseville; Jim Nash, R-Waconia; Greg Boe, R-Chaska; Nick Zerwas. R-Elk River; and Liz Olson, DFL-Duluth

Senate Bill 1707, authored by Karin Housley, R-Stillwater; Sandra L. Pappas, DFL-St. Paul; Kari Dziedzic, DFL-Minneapolis; Michelle R. Benson, R-Ham Lake; Tom Bakk, DFL-Cook

1/6: Beertender Abigail Conlin of Duluth fills a growler for a customer at the Bent Paddle Brewery taproom in Duluth. State law prevents breweries that produce more than 20,000 barrels of beer per year from selling off-sale, usually in the form of growlers, out of the brewery’s taproom. Bills introduced in the Minnesota House and Senate would eliminate the cap, allowing breweries to produce more than 20,000 barrels annually while continuing to sell growlers. Clint Austin / caustin@duluthnews.com

2/6: The Bent Paddle Brewery taproom in Duluth. State law prevents breweries that produce more than 20,000 barrels of beer per year from selling off-sale, usually in the form of growlers, out of the brewery’s taproom. Bills introduced in the Minnesota House and Senate would eliminate the cap, allowing breweries to produce more than 20,000 barrels annually while continuing to sell growlers. Clint Austin / caustin@duluthnews.com

3/6: Growlers sit in a cooler at the Castle Danger Brewery taproom. Steve Kuchera / skuchera@duluthnews.com

4/6: Filled crowlers for sale at Bent Paddle Brewery taproom in Duluth. State law prevents breweries that produce more than 20,000 barrels of beer per year from selling off-sale, usually in the form of growlers, out of the brewery’s taproom. Bills introduced in the Minnesota House and Senate would eliminate the cap, allowing breweries to produce more than 20,000 barrels annually while continuing to sell growlers. Clint Austin / caustin@duluthnews.com

5/6: A poster at Castle Danger Brewery seeks support for the effort to change state law prohibiting brewers producing more than 20,000 barrels annually from selling growlers. Steve Kuchera / skuchera@duluthnews.com

6/6: Castle Danger Brewery employee Erin Cole fills a growler at the Two Harbors taproom recently. Castle Danger’s annual production is nearing 20,000 barrels, above which it will not be allowed to sell growlers unless state law is changed. Steve Kuchera / skuchera@duluthnews.com