Summit Brewing, at 30, finds itself in crowded craft beer market

More than 30 years ago, a serious home-brewer named Mark Stutrud wrote a letter to the head of the American Brewer's Association. Stutrud told the guy who represented the likes of titanic Budweiser and Miller that he was thinking about launching a beer company.

The response, framed in Stutrud's office at Summit Brewing in St. Paul, was dismissive.

The industry guy doubted that a 31-year-old chemical-dependency social worker from North Dakota who worked in a hospital could be successful with a St. Paul microbrewery. That irritated Stutrud, a stubborn Norwegian whose tagline is: "Beer is my life."

Stutrud bagged his job and went to brewing school, convinced he could carve some market share among goliaths for a local beer that would be different. Stutrud launched Summit commercially in 1986, after raising nearly $500,000 in capital over 18 months, in a nondescript building on University Avenue. And he beat the industry odds, thanks to frequent seven-day work weeks and a head brewer who has come up with some winners called Extra Pale Ale, Summer Ale, Saga IPA, Pilsener and the 30th anniversary brews, Double IPA and Keller Pils.

"I never had the attitude that Budweiser was swill or Miller was crap," recalled Stutrud, 63, founder and still CEO of Summit. "Miller makes a good light beer. But I knew there was room for our boutique beers.

"And no one has pushed the envelope as far as we do and it's gotten our brewers recognized."

And Summit has worked as a long-term investment, if not an overnight investment flash.

Summit last year cash-flowed on revenue of nearly $30 million from 129,000 barrels of beer it brewed at its two-building, 6-acre campus in a redeveloped St. Paul industrial park that was once a polluted, abandoned oil-tank farm. Summit has invested $50 million since it moved in 1998 from its tiny facility on University Avenue. The company employs more than 100 people in good jobs with benefits.

It is Minnesota's second-largest brewer, behind family-owned, century-old Schell Brewing of New Ulm, maker of Schell's and Grain Belt. And it is the 29th-largest craft brewer in the country. More than 75 percent of sales are in Minnesota and the rest from surrounding states.

That's a lot of accomplishment for a guy who spent 18 months raising $300,000 in equity from 20 investors, including $40,000 of his own and a $240,000 loan from the St. Paul Port Authority. The agency remained a shareholder until Summit bought it out at a profit nearly 15 years ago.

Stutrud likes to show off made-in-Minnesota steel kegs, pressurized equipment, copper vats and the latest equipment designed to ensure beer quality. Ironically, the price of success is future challenges from the industry he helped create. About 100 microbrewers have popped up around Minnesota, mostly in the last decade. And that has shaved Summit's 10 percent annual growth rate of the last decade to 2 percent last year.

Stutrud, the noncomformist 30 years ago, notes that he is now viewed as the establishment. And he is a bit miffed.

Municipalities have allowed hosts of tiny brewers to start out, make and sell beer, including Sunday on-sale and off-sale. Larger brewers such as Summit and Schell's are limited in how much they can sell in their limited taproom hours. And they can't sell growlers or other packaged products at the brewery, under law that generally separates alcohol manufacturing from distribution and retail. To be sure, that also has enabled beer entrepreneurs to join artists and restaurateurs in helping resurrect inner cities from Central Avenue NE. in Minneapolis and St. Germain Street in St. Cloud.

Stutrud, once the rebel, was the face of the traditional brewing industry three years ago at the Minnesota Legislature, beating back a big increase in excise taxes that he successfully argued would discriminate against local brewers, because it wouldn't be assessed against tiny microbrewers and out-of-state giants. He won in what he described as a less-than-fun experience.

These are interesting times, he notes, as millennial beer drinkers in particular move from one new trendy beer to another. As the local beer market gets saturated not everybody will survive.

Stutrud is determined Summit will summit the challenge and grow faster again.

Summit now sells 10 percent of its beer in cans including the most popular varieties such as Extra Pale Ale and Pilsener. Stutrud believes, after years of testing, that he can provide a canned beer that tastes as good as bottled. And that category is growing faster than the overall market.

Summit also continues to focus on its "unchained series" of beers, now on No. 21, that allows its brew masters to introduce specialty, usually pricier beers to beer aficionados who want the latest thing.

And Summit will double down on the music festivals, free beer at charitable events and fundraisers, and community gatherings that Stutrud says endears the brand to locals, and ultimately leads to more sales.

The industry no longer dismisses Mark Stutrud.

"Mark is a dynamic hardworking entrepreneur who worked hard and took calculated risks to develop a great portfolio of products and was smart in growing incrementally over the years," said Mike Madigan, president of the Minnesota Beer Wholesalers Association. "He's very measured, and he's got a great product. I do think we are at part where the craft segment is growing but there is only so much shelf space out there. We're nearing the point where that segment is saturated. Some people probably will go out of business."

Stutrud is still the single-largest shareholder in Summit, which has considerable employee ownership. Summit has not been a great return, but Stutrud focuses on getting rich slowly, quality products and growing an enterprise. He didn't take private-equity money that likes to double in value over five years, sometimes at the expense of employees, the product or other stakeholders.

Stutrud talks of slowing down in five years, perhaps moving from CEO to strategist and culture keeper.

"And retirement in my mind would be working only 25-30 hours a week," Stutrud said.

After all, beer is Stutrud's life.

Neal St. Anthony • 612-673-7144 Patrick Kennedy • 612-673-7926