April 14, 2015 ROTARY IN REVIEW:
Changes in the Brewing Industry

Dave Dominick, YMCA Twin Cities, gave a personal Ode to Spring followed by a very appropriate prayer.

Bill Collins, Actor’s Theatre, passed the microphone for visiting Rotarians and guest introductions.  Frequent visitor, Don Craighead, from the Roseville Club mentioned how much he admired our club.  Bill Klump, of the Shoreview-Arden Hills club, acknowledged that he frequently makes up at our club but usually leaves early.  However, in light of our speaker, he was planning on staying.

Three guests of Rotarians were introduced.  Hopefully, at least one will move on to join.  All are welcome.

St. Paul Sunrise Community Forum

President John announced that our usual Thursday morning meeting was canceled and everybody was encouraged to attend the Community Forum hosted by the St. Paul Sunrise Club this Thursday at Town and Country Club. The topic is Campaign Financial Reform.  He also announced that Fellowship day will be June 9 not June 2.  Get it right.

Jay Pfaender

President John announced that our member, Jay Pfaender, has been named to the World Fair bid committee.

New Member Promotion

Mindy Kastelic, St. Paul Chamber of Commerce, announced a new promotion for new members.  First, she established that at least some people in the club love the Rotary Club of St. Paul.  Perhaps, some people were too shy to publicly proclaim their affection. Anyway, any new member who joins between now and July 1 will receive a $150 event credit to be used to pay for St. Paul Rotary events.  Also, any member who brings in a new member will received 250 Paul Harris points.   Go get ‘em.

April 21 speaker

Mark Henneman, Mairs & Power, previewed the speaker for our April 21 meeting.  After suffering a downturn in the super computer business, Cray has experience an impressive recovery of recent years.  In the last three years, Cray stock has doubled and revenues are up 300%.  It is possible that we are witnessing a renaissance in the super computer industry.  This will, of course, have an effect on several hundred employees here in St. Paul at the Cray regional headquarters.  Our speaker next week will be Peter Ungaro, the President and Chief Executive Officer of Cray. 

Camp RYLA

Steve Gerber, Terracon Consultants, reminded us that RYLA (Rotary Youth Leadership Awards) is coming up in 10 days.  We still need people to help give students a ride to camp and a ride home from the closing activities at the Rotary meeting on April 28.  Also, we need Rotarians to be present and participate in the ethical questions discussion on Sunday, April 26, at 6 PM.  This will be at Camp St. Croix in Hudson, Wisconsin.   Check out campryla.com for more information.

Feed My Starving Children

Doug Bruce, UBS Financial Services, reminded us that our Feed My Starving Children event is also happening that same weekend.  He also acknowledged the tremendous contribution that our speaker has made to Feed My Starving Children by hosting this event at his business in years past and this year as well.  The members gave him a standing ovation.  Mark that is, not Doug.  Although, maybe we should give Doug one too some time.  There is a particular shortage of workers for the 12 to 2 shift on Saturday, April 25, and 12 to 2 on Sunday, April 26.  Doug asked incoming president Carla Hauge what her best memory was of working at Feed My Starving Children events.  She said it was how it was a family event with both children and grand parents helping out.  She also like how it felt when at the end of a shift they told you how many kids could be fed with the meals completed. Doug allowed as to how this was a better memory than Carla’s father’s favorite memory being the hats (hair nets) that you got to wear while packing.

Rotary Family Day at the Minnesota Children’s Museum

Carley Stuber, Minnesota Children’s Museum, announced the Rotary event at the Children’s Museum.  This came out of a conversation she had with past president Carolyn Brousseau who encouraged her to promote family oriented events.  So, the Children’s Museum and the Rotary Club of St. Paul will be hosting a Rotary Family Day at the Museum.   On Sunday, May 3, admission will be free to Rotarians and their families.  Also, from 3 to 5 treats with be available to club members.  She asked that members RSVP by May 1, 2015 at DevEvents@MCM.org if they are planning to attend.

Visiting Rotarians from Nagasaki

Al Zdrazil, Retired, announced that several Rotarians from Nagasaki will be visiting our club from August 18 to August 25.  Your reporter asked Jerry Faletti to take notes during Mr. Zdrazil’s presentation.  Mr. Faletti declined to do so.  Therefore, your reporter cannot swear to the accuracy of this part of the meeting minutes.  Anyway, the visit will be in conjunction with the celebration of 60 years of a sister city relationship between Nagasaki and St. Paul and 40 years of a sister club relationship between the Rotary Club of Nagasaki and the Rotary Club of St. Paul.  In 1955, St. Paul formed a sister city relationship with Nagasaki.  This was the first sister city relationship between a United States city and an Asian city.  In 1975, the two Rotary Clubs also formed a sister club relationship.  Both will be celebrated in August.  Several officials from Nagasaki will be visiting St. Paul on these dates, including the Mayor and City Council members.  From 6 to 10 Rotarians will be visiting as part of the delegation.  The St. Paul Nagasaki Sister City committee is already planning events for the city delegation.  We need to plan additional events for the Rotarians.  People interested in helping plan should attend a meeting on April 28 right after the regular Rotary meeting.  If you cannot attend, but want to help, please let Al Zdrazil know at morzil2@tcq.net.

Happy Dollars

Time was allowed for a few Happy Dollars.

It was announced that the Happy Hour scheduled for next Wednesday has been canceled.  A new date will be selected and announced.

Roger Nielsen reminded us that the weekend of April 24 to 25 is the St. Paul Art Crawl.

Our Values day will be on May 19 at the new St. Paul Saints Stadium.

John Cieslak introduced our speaker Mark Stutrud, founder and owner of Summit Brewery and member of the Rotary Club of St. Paul.  He invited members to look at the St. Paul Rotary website to learn about Mr. Stutrud.  He did note that Mr. Stutrud was a founding organizer of the Thursday morning meeting and has remained active at that meeting since its start in 2002. He specifically said, “Mark has been mostly there.”

 Mark started with a bit of history.  Prior to prohibition, breweries followed the Tied house plan.  The breweries did their own distribution and owned the bars and sold their beer in the bars they owned.  So if you wanted a Hamm’s beer you went to a bar owned by Hamm’s.  If you wanted a Gluek beer, you went to a bar owned by Gluek.  This was all stopped b y Prohibition.  It is still common in Europe. 

At the start of Prohibition, there were 2000 breweries in the United States.  When Prohibition was repealed, there were only 70.  Congress was afraid that these breweries would be able to control the retail market, so they prohibited tied houses.  Because of this, beer wholesalers were born. 

An additional feature of this change was the money the major brewers made selling their bar and distribution properties.  Coupling this with the tremendous appetite among the American people for beer, after years of denial, the major breweries set out to become as big as they could and develop region wide or even nationally.  This resulted in a few (3 or 4) stock beers.  Varieties were made by blending

The few remaining small breweries had a difficult time.  He gave the example of Shell Brewery in New Ulm.  In 1970, they had to cut down an 80 year old walnut tree and sold it to make payroll.

By 1970, there were only 40 breweries in the United States. 

Things started to shift in the 70’s.  More people were traveling, coming to appreciate ethnic food, boutique wineries, and home brewers. 

When he was starting his brewery in 1983, he applied to Brewers Association of America   .  This was a small brewers group that started in the 1940’s to help with product procurement and tax issue.  He received a letter from the Association discouraging him from starting a brewery because of the difficulty is starting a small brewery.  At the time there were only 9 micro breweries in the United States.  Today, there are close to 3500 craft breweries in the United States, 1,400 of those are brew pubs, 1,900 are micro breweries with production of over 15,000 barrels per year, and 135 are regional breweries.  Summit Brewery is one of these regional breweries.

Summit is the 34^th largest brewery in the United States.  However, it is still far behind the top four.  It is the 28^th largest craft brewery. 

Starting a brewery is a humbling experience. It can be a fun life standing on concrete for 10 hours, cleaning tanks, scrubbing walls and floors, and screw up the books at night.  The life style with test you but it must be lucrative because; in the last six years we have gone from 24 breweries to 100 in Minnesota.  Also,big brewers try to maintain control of the distribution system.  This is an ongoing challenge. 

 One of the things that has really changed the local scene is that brew pubs became legal in 1991.  Minnesota has generally been conservative.  He likes to blame this on Volstead (look it up). Originally, brew pubs were limited to 1,500 barrels per year.  About 6 years ago, the legislature allowed brew pubs to sell to other retail operations that they own, similar to the tied house system.

Four years ago, the tap room legislation passed.  This allowed tap rooms with up to 250,000 barrels per year to sell their own beer on premise.  This is where a lot of folks that were dreaming about starting their own brewery got involved.  It allowed cash flow right on the premises of the brewery.  Most new breweries are focused on this retail aspect of the business.

In 1986, they were looked at being innovative and weird.  The beer wholesalers would not talk to them.

Since them there has been a re-education process of what beer is all about.  This was lost during Prohibition. 

Some brewers will grow and some will close.  The challenges are to be focused on quality.  Some brewers have grandiose plans, terrific kitchens, great chefs, but no laboratory to verify quality.  He has a problem with someone starting a business and then letting their customers pay for their learning curve.  Consistency and quality with every batch is a difficult thing to do. 

100% of their beer goes to the distribution system.  90% of their sales are in Minnesota, 72% are in the metro area, 45-48% is draft beer and the rest is packaged beer.

Surly Brewing has a 30 million investment.  Summit has a 46 million investment without having a restaurant, no kitchen, no beer hall, no beer garden.   Surly is also competing directly with its retail customers, so it will be interesting to see how that develops.

Respectfully submitted,

Al Zdrazil