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Popular North Shore brewery forced to stop selling growlers due to state law

Updated: July 03, 2019 08:02 PM

Castle Danger Brewery in Two Harbors announced in a post on Facebook it will no longer sell growlers starting Oct. 1.

Once a brewery hits 20,000 barrels sold in a year, Minnesota law dictates it can no longer sell growlers, crowlers and other off-sale bottles in its taproom.

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In a statement to 5 EYEWITNESS NEWS, a Castle Danger spokesperson called the decision to end growler sales a "blow to our company culture and history," adding the brewery will "need to make several hard decisions come fall."

"The loss of growlers for these companies can be upwards of $300,000 in a loss of revenue for them so they will have to make tough decisions," said Lauren Bennett McGinty, Executive Director of the Minnesota Craft Brewers Guild. 

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Bennett McGinty says several other breweries in Minnesota are quickly approaching the 20,000 barrel threshold in Minnesota, including Indeed Brewing in Northeast Minneapolis, Lift Bridge Brewing in Stillwater, and Bent Paddle Brewing in Duluth.

Indeed Brewing Co-Founder Tom Whisenand expects to surpass the 20,000 barrel threshold within the next two years.

"What do we tell our customers when they come in [to the taproom]," said Whisenand. "What does Castle Danger tell its customers? Why can't I get a growler any more? Well, it's because we sell too much beer outside of here."

The Minnesota Craft Brewers Guild has lobbied the Minnesota Legislature unsuccessfully over the past several sessions to change state law.

"[The Minnesota Craft Brewers Guild] will continue to push for those changes to allow for these breweries to grow and not have to make decisions about cutting staff and continued growth for their business because at the end of the day they're small businesses," said Bennett McGinty.

A bill filed during the 2019 session, sponsored by Sen. Karin Housley and others, to raise the growler cap from 20,000 to 40,000 barrels produced in a year failed to make it into the final omnibus liquor bill.

"We should be supporting our homegrown small businesses—not making it harder for them to grow," said Sen. Housley in a statement to 5 EYEWITNESS NEWS.  "The growler cap puts local breweries in an impossible position and unnecessarily affects those in our communities who enjoy their products. Next session, I will aggressively push for a change to this unnecessary law."

Whisenand hopes the cap is either lifted during the next legislative session so he ultimately won't have to make some of the same choices his fellow brewery owners already have.

"We already have [growler sales]," said Whisenand. "Why take this away from us especially when breweries like Castle Danger or Indeed or Fulton, our growth is coming from the system that our opponents want to protect and this is not a threat to it."

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"The only thing that's changing is we're growing outside the taproom," added Whisenand. "That's causing us to exceed this 20,000 barrel threshold and we get penalized for that by losing growlers."

On its website, the Minnesota Licensed Beverage Association says one of its legislative agendas is to limit what mirco-breweries can sell directly to the public.

The association's Executive Director Tony Chesak told 5 EYEWITNESS NEWS the following in regards to the growlers:

"When growlers were legalized, brewers testified that they would be used to market the product and that there was never any thought that a brewery of any size would one day turn into a liquor store. A few years ago, a compromise was reached that allowed smaller breweries to sell growlers, but once they became big breweries to phase that out. The "growler cap" was increased from 3,500 barrels of beer to 20,000 barrels of beer. 20,000 barrels of beer is the equivalent of 2.8 million 12 ounce bottles of beer. Of the over 160 breweries in Minnesota, only a handful are over this amount or even approaching 20,000 barrels of beer because it is such a large amount of beer. Summit, Surly, and Schells don't sell growlers and haven't asked to do so. The MLBA is made up of small mom and pop liquor stores, we want other small businesses to be able to establish their business, but we are concerned when big breweries are attempting to become liquor stores. We are also concerned that this will only help larger breweries to the detriment of many of the smaller breweries that are trying to get established. It changes the playing field for only a few of the biggest breweries in the state. When a brewery reaches 20,000 barrels, they have made it. In many cases, they are in multiple states and have vast marketing budgets. Under current law, breweries are thriving. The change sought would impact only a few breweries, potentially to the disadvantage of other smaller breweries. A compromise was reached recently that increased the limit."

Sen. Gary Dahms, who opposed the so-called growler cap bill filed in the 2019 session, released the following statement to 5 EYEWITNESS NEWS: "The craft brewing industry in Minnesota has clearly thrived under current law. This so-called growler cap only impacts a handful of the dozens of craft breweries across the state, which was set as part of a compromise between the various players involved in the production, distribution, and sales of liquor in Minnesota. As was said on the Senate floor when this amendment came up, the industries involved should come to the table and find a compromise that works for everyone."

In an email to 5 EYEWITNESS NEWS, Lift Bridge Brewing's Marketing Coordinator, Christina Underkoffler, wrote: "It will be based on how the rest of the summer goes, as the law states that if we sell more than 20,000 barrels for the last 12-months running calendar, then we have to stop. We may make it until the end of the year, but not sure yet. We will make sure to let everyone know when it will be because we will want to go out with a BANG."

Here's the full statement from Castle Danger Brewing:  

"Come October 1, 2019 Castle Danger Brewery will no longer be able to sell growlers of any size from our taproom in Two Harbors. This is a blow to our company culture and history and it will affect our staffing as a small business. We will need to make several hard decisions come fall.

Because growlers are a form of off-sale, the opposition suggests growler sales by breweries undermines the "three tier system" for beer where there is independence between supplier, distributor, and retailer. We couldn't disagree more. Growlers are beer souvenirs that have proven to build brands, create exposure, and increase the volumes that flow through the three-tier system. 

Having said that, losing the ability to sell growlers also impacts our hometown of Two Harbors. Growlers are a marketing tool for breweries around the state. They draw customers to the North Shore and benefit the tourism industry in Two Harbors. 

We are working hard to engage our customers, fans, and representatives during the legislative off-season in an effort to bring about change in 2020. The ultimate goal is to eliminate, or significantly raise, the growler cap."

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Tim Vetscher

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