Rochester's breweries going with the flow in uncertain times

Yahoo

10-05-2025

May 10—ROCHESTER — Beer production in Minnesota was up 10.8% in 2024, but the signs the industry is in uncertain times are apparent at Rochester's small craft breweries.
LTS Brewing Co. planned months ahead to import European malt to ensure its brewers can produce popular autumn seasonal beers. Forager Brewery established a production spinoff business in Wisconsin in response to Minnesota alcohol production rules. A quarter of the beer produced at Little Thistle Brewing Co. in 2024 was sold outside the brewery's taproom which cuts into the business's revenue.
Kinney Creek created an entire line of seltzers for outside sale — those now account for the bulk of its sales. And for Thesis, the last successful year in which the brewery made a profit was 2022, said Adam Fredericksen, Thesis co-owner. That was the brewery's peak production year since it opened in 2019.
One main pressure on the business is people's drinking and going-out habits have changed.
"Younger people are drinking less alcohol," Fredericksen said.
That's a trend all Rochester breweries reported seeing when asked. As a result, the businesses are adjusting.
Right now, half of the digital menu boards at Thesis Beer Project don't display beer choices.
"We opened this place in part for a love of beer," Fredericksen said. "Right now, part of making this place successful is straying away from that."
It's not a new trend for breweries to diversify to serve non-beer drinkers. Kinney Creek Brewing doubled its capacity in 2021 with its line of hard seltzer drinks.
"We have been able to create what started as a craft beer passion into a craft beverage movement, with something for everyone to enjoy," said Donovan Seitz, Kinney Creek founder and owner. Most of Kinney Creek's seltzer is sold in cans off site. In the taproom, seltzer and beer flow about equally, Seitz said.
"Although seltzers have been a big part of our business, we still pour just as much, if not more, craft beer in the taproom compared to seltzer," he said. "At our core, we still stick our roots creating locally crafted and fire-brewed beer."
Kinney Creek isn't the only Rochester brewery turning toward outside sales for survival.
By one measure, the beer business is booming at Little Thistle Brewing Co.
The brewery produced 811 barrels — 25,141 gallons — of beer in 2024. That's the most a Rochester-based brewery has produced since prohibition and one barrel more than Little Thistle produced at its previous peak of 810 barrels in 2021.
The Minnesota Department of Revenue's annual numbers show overall beer production in the state is up. Some hailed that as a sign of the health of Minnesota's craft beer industry which was hit hard by the COVID-19 pandemic.
"Frankly, most folks haven't recovered from the pandemic," said Bob Galligan, director of government and industry relations for the Minnesota Craft Brewers Guild. "But of course an increase of production is a good sign."
While that itself is good news, Galligan added the overall picture is more complex.
"I certainly wouldn't say that we have 'recovered' or bounced back," he said. "Some specific breweries have seen decent bumps but most are still down compared to 2024."
Steve Finnie, Little Thistle co-founder and co-owner, said looking only at overall output doesn't tell the whole story.
"It's misleading," Finnie said.
Little Thistle sent about one-quarter of those 811 barrels of beer out the door to be sold elsewhere in 2024. That's the highest percentage of off-site sales since the brewery opened in 2018.
Selling that much beer outside of the taproom, even having a canning operation at all, wasn't in the owners' original business plan.
That's in part because beers served in the taproom have a higher profit margin. Retailers take a cut of the sales proceeds from beer sent out the door of the brewery. It also costs more to buy and fill cans than glasses, and it takes staff time to fill those cans and deliver them to retailers, Finnie said.
"The reason we distribute is because we have to," he said. "It's what's keeping the business going."
Thesis Beer Project is bringing a new 12-ounce canning machine online to put more of its beer in cans as well. Like Finnie, Fredericksen said that wasn't part of his original business plan either.
"We make it work, but we make it work because we have to make it work," he said.
Another Rochester brewery took to not only taking its beer outside the taproom but making it elsewhere, too. Forager Brewery owners spun off Humble Forager, which produces beer in Wisconsin for distribution. Minnesota law distinguishes brewpubs as breweries that serve both food and beer. State law doesn't allow brewpubs to distribute the beer they produce. Minnesota brewpub license holders also aren't allowed to own both a brewpub and a distribution company.
In a creative work-around in 2019, Forager owners and husband and wife Annie Henderson and Austin Jevne decided to split the business. Henderson maintains ownership of Forager, and Jevne oversees Humble Forager, which produces beer in Waunakee, Wisconsin. That beer is canned, kegged and distributed for sale and isn't reported as part of Forager's production numbers, since it's a separate business.
As a result, on paper, it appears Forager's production has dropped after peaking in 2019 at 757 barrels of beer. Forager's in-house production fell to about half that in 2024, at 385 barrels.
In 2020, Rochester's only other brewpub, Grand Rounds, closed its downtown restaurant and brewery to move beer production to Pine Island, Minnesota.
Although Minnesota laws have been revised in recent years, including in 2022, when lawmakers raised the cap on growler sales and allowed smaller breweries and distilleries more off-sale options, some laws, including restrictions on brewpubs, are still stifling the industry, Frederiscksen said. Allowing breweries to serve food or make ciders would help the industry statewide, he said.
Inflation in 2024 put pressure on the brewing industry, and this year threats of tariffs proposed by the Trump administration on supplies and ingredients including grain and stainless steel threaten to put more pressure on the industry. Proposed tariffs against Canada could mean higher malted grain prices. A 25% levy on aluminum cans will also add costs to the industry.
"We get emails everyday about whether this price is going up, or these things will get more expensive, or suggesting we should stock up on this or that," Frederiscksen said. "At this point it feels like there are so many factors out of our control."
Tariffs sometimes get announced, delayed or changed, which makes it hard for smaller producers to plan ahead, said Brandon Schulz, co-owner of LTS Brewing Co.
"It's not being rolled out in a controlled way," Schulz said.
Schulz ordered grain and brewed LTS's annual Oktoberfest beer ahead of schedule in an effort to stay ahead of possible tariffs.
Uncertainty makes it tough to plan and hangs over the industry, Finnie said. However, he knows the craft brewing industry isn't the only one facing challenges in 2025.
"If you think about it, nonprofits are also feeling a squeeze," he said. In March, Little Thistle kicked off monthly community pint nights. On the first Friday of each month, a nonprofit is invited to the taproom to share its mission with customers and receive a portion of taproom proceeds on the day. Little Thistle hosted Paws and Claws animal shelter in May.
Finnie said it's a way to build community, have a positive influence and support organizations and people who are feeling uncertainty right now.
He said the brewery's first community pint night in support of Planned Parenthood March 27 showed that people want to come out in person to support causes they believe in.
At Thesis, Fredericksen said he's renewing commitment to live music after previously pulling back on the frequency of shows there.
"What we're doing for live music is really important to me," he said. "It's really fulfilling."
Live music and events tend to fill the taproom, unless Thesis is competing with another event, he said.
"It seems like either you're doing the coolest thing in town and people show up for it or somebody else is doing the coolest thing and everybody is there," Frederiscksen.
Seitz also pointed to Kinney Creek's community events and hosting nonprofits as an important way to bring people out and build community.
Kinney Creek is teaming up with Camp Companion on June 14 for their own pet adoption event, among other events planned this summer.
LTS keeps the event calendar full as well, with chess tournaments and other game nights as well as live music.
"What this small group of breweries in this town do for the quality of life here, it's hard to quantify," Fredericksen said.