USA: Minnesota’s largest hop farm and processor up for sale

Mighty Axe Hops, Minnesota’s largest hop farm and processor, is up for sale as the result of a storm that devastated the hop farm’s 2019 crop, The Growler reported on March 9.

Late in the evening on Labor Day in 2019, roughly halfway through their harvest season, Mighty Axe’s hopyard in Foley, Minnesota, was hit by 55-mph straight-line winds that snapped hundreds of support poles and grounded 12 acres of hops. The winds were particularly damaging to the farm’s highest-yielding hops, whose thick and heavy cones were just days away from harvest. Acting quickly with the help of a team of volunteers, Mighty Axe was able to salvage a small portion of their downed crop, but as CEO Eric Sannerud ran the numbers in the wake of the storm, a bleaker picture started to emerge. Mighty Axe had lost hundreds of thousands of dollars worth of their crop, creating a shortfall in revenue so severe that it will prevent them from growing hops in 2020 without additional funding.

Mighty Axe’s majority stakeholders initially informed Sannerud, who is a minority stakeholder in the company, that he should begin looking for other funding sources in December before officially confirming with him their intent to sell the company two weeks ago. While disappointed, Sannerud remains undeterred from his mission to cultivate a regional identity for Minnesota-grown hops.

He will remain in his position as Mighty Axe’s CEO until the company is sold and is acting as the company’s designated point-person for any purchase inquiries.

“My job right now is to make sure that Mighty Axe grows hops in 2020,” Sannerud says. But it’s a race against the clock. Unless a deal is solidified by May 1, Mighty Axe will not grow and harvest any hops in 2020. “There’s a lot of effort that a lot of people have invested in Mighty Axe hops—and by extension, Minnesota hops—that if this farm doesn’t grow hops, it’s a significant waste.”

Sannerud is adamant that though the farm’s majority shareholder has decided not to invest more money in the operation, the pending sale is “not a moratorium on Minnesota hops. It’s almost entirely unrelated to the performance of Minnesota hops as an industry.” He continues, “It’s a thing that happens in farming where you get unlucky and then there was a decision made from there. We have proved the viability of Minnesota hops. Regardless of what happens in this process, I hope that someone will pick up where we’ve left off in Minnesota hops. There’s a huge opportunity.”

Mighty Axe was founded in 2014 by college friends Eric Sannerud and Ben Boo on Sannerud’s home farm in Ham Lake. Fresh out of school at the University of Minnesota, the duo began by planting a quarter-acre hopyard on Sannerud’s grandparent’s farmland, which grew into a 3.5-acre operation by 2016, thanks to percolating interest from local brewers.

That year, Sannerud and Boo announced that they had secured $4.6 million in funding and had purchased a 120-acre property just outside of St. Cloud in Foley, Minnesota to serve as their new base of operations. Mighty Axe made an ambitious push, planting 40 acres in 2016 and another 40 in 2017 while breaking ground on a 13,000 square-foot production facility and headquarters.

The investment necessary to scale up their operation came with much greater risks than those faced by hop operations in the Pacific Northwest, where the vast majority of America’s hops are grown. Hop farms in that region have had access to crop insurance—a safety net that is designed to protect farmers against yield-destroying natural disasters and sudden fluctuations in commodity pricing.

The Risk Management Agency, an agency within the USDA, only currently offers crop insurance for hop producers in Washington, Oregon, and Idaho. Sannerud told us that he had been searching high and low in the public and private sector for a policy to cover his farm since he first founded it in 2014 and had been stymied at every turn.

“We ran the math once on how much the premiums would be, and what the potential payout would be, and it wasn’t even worth the paperwork,” Sannerud told us. “There are no insurance options for hop growers in Minnesota.”

“We’ve had higher-ups from companies that underwrite private crop insurance out west visit our farm and see all of our stuff, and we’ve answered surveys […] It’s not for lack of effort, it’s just that no one has offered something that’s worked,” he continues.

Sannerud tells us that if the company doesn’t find new investors by May 1 and is not able to grow and harvest hops in 2020, they’ll still need additional capital to preserve the crops for future buyers. When left to grow wild, hops are far more susceptible to disease, which means a loss of value to a prospective buyer.

“If we’re not going to grow them for harvest, it’s a lot less expensive to just keep them alive, but then you have the issue of losing a whole year of marketing, selling, and you’ve lost the trust of brewers,” Sannerud says. “It’s taken us a long time to get a reputation as a reliable source. Our contracts this season are more than double what they were last year.”

Sannerud has been dutifully working the phones with Mighty Axe’s brewery clients on contract to inform them of the current situation. Despite the uncertainty of Mighty Axe’s future and Sannerud’s role in the company in the wake of a sale, he is optimistic about the future of the farm and the viability of Minnesotan hops.

“We’ve proven to brewers that Minnesota hops can be good, that there’s terroir in hops, there are unique and interesting things that can come out of different regionalities,” Sannerud says. “We’ve educated a lot of brewers about various growing conditions and the influence of that on their beer, to say nothing of the consumer base of folks who are excited about local ingredients in their local beer. That energy is growing, and as beer becomes a tighter market, the opportunity is there for more differentiation, for breweries that tell different stories.”

13 March, 2020