Castle Danger Brewery dumped excess beer that had gone bad down the drain in January. A new report shows Minnesota breweries lost $95 million in sales last year and laid off hundreds of employees due to the pandemic and state restrictions that hurt an industry heavily reliant on on-site sales. (Alex Kormann, Star Tribune/The Minnesota Star Tribune)

DULUTH – On the first Monday that Hoops Brewing had been open in many months, owner Dave Hoops was paying bills and watching the Twins game while taking stock of the past year.

The Canal Park beer hall was "one of the first to close and one of the last to reopen" and saw taproom sales drop by more than half in 2020, he said.

"We depend on people coming in here," he said. "In order to survive we increased retail, curbside and gave a lot of beer away."

Minnesota breweries, which depend heavily on taproom sales, were ravaged by the pandemic and state restrictions meant to combat the spread of COVID-19. Nearly 600 jobs were lost among the state's more than 180 breweries, according to a University of Minnesota Extension report released Monday. The industry's economic impact on the state's economy fell from $1 billion in 2019 to $813 million last year.

"For an industry still in high-growth mode, the impact reverberated in communities where canceled brewery investments meant work, including construction, didn't take place," the report said. "Brewers newer to the business also faced difficulties qualifying for government relief or private lending."

The study was based on a Minnesota Craft Brewers Guild survey answered by about half of the state's breweries in December, representing a mix of the largest, smallest, newest and oldest players in the market. The number of breweries in the state has risen from 39 in 2012 to 183 in 2019.

About 73% of sales at Minnesota breweries are on-site while 12% are wholesale and just 8% come from liquor stores, the report found. The shift toward more growler and crowler sales helped breweries stay afloat, as did the ability to serve drinkers outdoors — though some breweries, like Castle Danger in Two Harbors, aren't able to sell from their taprooms due to their size, and not all breweries have outdoor seating.

"In some ways, the pandemic brought out craft brewing's strengths," Brigid Tuck, the senior economic impact analyst with the U's Extension office, said in a statement. "Brewers were able to shift operations to focus on more production for retail sale, but it was still difficult for an industry that depends heavily on on-site sales, as well as tourism."

Bent Paddle Brewing Co. launched a "cans in hands" campaign to increase its off-premises sales as taproom sales dropped nearly 50%.

"The raw cost of COVID for us was really substantial," said Pepin Young, director of taproom and retail operations at the Duluth brewery, pointing to nearly $100,000 in new equipment for expanded distribution and adjusting the taproom to state restrictions.

Not all breweries were able to keep their doors open after restrictions were lifted. Duluth's Canal Park Brewing Co. has been closed since the second state shutdown in November but plans to reopen this spring; Surly's giant beer hall in Minneapolis is slated to reopen in June.

Federal and state coronavirus relief greatly benefited those who qualified. Survey results and a U Extension analysis showed sales dropped about 22% across all breweries in 2020 — a loss of $95 million.

The worst should be over for the state's beer industry, as expanded capacity limits and hours mean more pints poured and sold on-site.

"I've been saying for months that by July 4 we're going to be looking at a new normal, and we'll have 300 people in the beer hall and 150 outside," Hoops said. "I'm so grateful for that."

Brooks Johnson • 218-491-6496