NEW ULM Schell's Brewery is looking at a major growth year with a $6 million expansion project and a potentially beneficial tax credit legislation.
Schell's announced the expansion project this week.The project involves two phases of construction in 2013.
The first phase will cost $2 million and is set to begin in May. This project will involve significantly expanding Schell's space by filling in the alleyway between its two main buildings with a new canning building that connects the two areas and expanding the back side of its brewery house towards the hillside. This portion of the project includes the installation of a new yeast propagation system, several hot and cold water tanks and six new "bright beer" tanks, which hold the finished beer before bottling.
Photo illustration courtesy of Schell’s Brewery
A new canning/bottling building (center) will be constructed between the brewery’s two main buildings at Schell’s. The backside of the current brew house would be expanded toward the hillside. When complete, the project will increase brewing capacity from 131,000 to 230,00 barrels per year.
The second phase has an unknown cost, but is estimated at more than $4 million, and is scheduled to begin towards the end of the year.
This portion of the project will involve installing a new canning machine in the new alleyway building, and moving the bottling machine into that building. In the brew house, an energy recovery system will be installed to capture the steam generated by the process and convert it back into energy to save on costs. Finally, the project will involve installing four 720-barrel fermentation tanks, similar to the ones added last year. It will provide enough space to increase from four to eight tanks if market trends are favorable.
When the projects are completed into 2014, the brewery will have expanded its capacity by up to 100,000 barrels, according to Schell's owner Ted Marti. The brewery produced approximately 131,000 barrels in 2012 and its goal is 230,000 barrels.
The project is intended to create new tank space to increase the number and amount of diverse craft beer brands Schell's can offer.
"The market has absolutely exploded in recent years," said Marti, "[The market] is calling for more variety of offerings. We were getting tight on space, and it takes tanks to start new lines."
With the increasing number of microbreweries emerging in Minnesota, Schell's will hire four new sales department employees to improve competitiveness with distributors.
Another potential growth area for Schell's is pending state legislation that will allow it to rejoin the state's qualified brewer tax credit.
The tax credit is only available for breweries that produce under 100,000 barrels per year by providing up to $115,000 in tax credit for the first 25,000 barrels produced each year. The proposed legislation would increase the threshold to 250,000 barrels, benefiting Schell's Brewery and Summit Brewing Company.
The bill was introduced in the Senate by Sen. Gary Dahms (R-Redwood Falls) and was passed through Commerce Committee over the Taxes Committee. The bill was introduced in the House on Monday by Rep. Paul Torkelson (R-Hanska) and is waiting for a hearing.
Supporters of the legislation said the bill has a good chance of passage. It was passed through committees last year, but ended up in tax omnibus bills that were vetoed in the fight leading to the state government shutdown.
Marti said the money gained from the tax credit, if the legislation passes, would be put towards capital improvements at the brewery.
(Josh Moniz can be e-mailed at email@example.com)