Northeast Minneapolis’ Fair State Brewing exits bankruptcy, eyes ‘fresh start’

Minnesota’s first cooperative brewery has exited bankruptcy protection and plans to spend millions to upgrade equipment and grow sales through the coming years by producing THC seltzers for other brands.

Fair State Brewing Cooperative won court approval this summer for its plan to cover millions owed to suppliers, lenders and others that threatened the viability of the business.

“This milestone represents a fresh start for our brewery,” CEO Evan Sallee said in a prepared statement last month. “As we embark on this next chapter, we are more excited than ever about the future.”

Part of that comes from its revenue projections: By 2027, sales could surpass $14 million after hitting just $830,000 last year, according to court filings.

The brewery will funnel boosted profits into $3.3 million in new equipment through the next three years, according to the financial outlook.

The expected sales growth is largely due to contracts the brewery has to manufacture hemp-derived THC drinks for other companies, which is already Fair State’s largest revenue stream. This year, the brewery expects to earn $2.5 million from its cannabis co-manufacturing operation, 64% of total projected revenue.

Fair State also produces and distributes its own cannabis beverages, Chill State.

Closures during the pandemic, skyrocketing ingredient costs and lost customers or delayed deals all contributed to a mountain of debt that culminated with a cash crisis earlier this year, according to court documents. An inability to obtain certain federal pandemic aid because of IRS rules about cooperatives filing taxes on paper also contributed to the shortfall that led to the Chapter 11 bankruptcy filing in February.

Fair State might consider changing its structure, according to court records, which could leave the existing cooperative in charge of the taproom and a spun-off production brewery that could more easily access financing.

The brewery would also like to expand the Central Avenue taproom, but the landlord did not allow it in the past, according to the bankruptcy filing.

“[Fair State] may not be able to negotiate a lease for the new space, and the time to build out the addition is unknown,” the filing said.

Sallee thanked the customers and co-op owners who stood by the northeast Minneapolis brewery.

“Your belief in our vision and products keeps us motivated and inspired, even in the face of adversity,” he said. “Our team continues to be dedicated to crafting the highest quality beer and THC seltzers, and we are working on exciting new initiatives that we will be able to announce more details about soon.”