Schell's brewery in New Ulm to mark 150th anniversary

The second-oldest family owned brewery in the U.S. will mark its 150th year in business according to company tradition.

"Have another beer, of course. Or two or three," said Ted Marti, who is now running the August Schell Brewing Company that was founded by his great-great-grandfather.

German immigrant August Schell established the business in New Ulm next to a spring in the Cottonwood River Valley.

Schell's descendents have been making beer since the Civil War, and the company's future looks promising, especially as demand for craft beers continues to grow.

The brewery plans to introduce a new beer -- Schell's Hopfenmalz -- to celebrate the sesquicentennial. It also has events scheduled throughout 2010 to mark the occasion.

"There was definitely some luck involved, as well as good business decisions and good beer," said Doug Hoverson, author of the book "Land of Amber Waters: The History of Brewing in Minnesota."

Two early factors shaped August Schell's business: The main product had to be moved by horses and it was a two-way operation. Full wooden barrels went out and empties came back -- the containers were too expensive to throw away or make smaller, like bottles.

That meant that Schell's, like other breweries, made small batches and had its own territory and its own style, unique to the area.

August Schell diversified his company early by bringing wine grapes and seedlings for trees from Germany. Schell's father had been a forester, and one of the trees planted in New Ulm later was sold off to keep the business running.

Early in Schell's history, many buildings in New Ulm were destroyed during the U.S.-Dakota Conflict of 1862. Schell's brewery remained standing, perhaps because it was located away from the city center or perhaps, according to family accounts, because the Schells were kind to the Dakota.

In 1920, Prohibition forced breweries across the country to go out of business. Schell's made soft drinks and candy.

"We did everything we could to possibly stay open," Marti said.

The brewery also got a license to brew non-alcoholic beer -- or 'near beer,' as it was known. Marti remembers his father telling him the mark of a good near beer was how good it tasted when spiked with liquor. "Because that's what everybody did," Marti said.

At one point Schell's got in trouble for its near beer when authorities tested it and found it had too high of an alcohol content. The family told the authorities the near beer had just been sitting too long, and the brewery was eventually found not guilty.

"We had to come up to St. Paul to plead our case," Marti said. "If they wouldn't have (believed us) we might not even be here today."

The prohibition era didn't last as long in New Ulm as in other cities across the country, where officials were passing dry ordinances long before the Constitution was amended, Hoverson said. That and the fact that Schell's equipment was kept in working order to make non-alcoholic beverages helped it become one of nine Minnesota breweries that were able to resume business when Prohibition ended, he said.

The repeal of Prohibition and World War II brought a new golden age for beer and Schell's, as distribution matured and marketing improved.

But the rise of disposable packaging, such as six and 12 packs, changed the nature of the business. The cans replaced returnable bottles and let big brewers ship just one-way to their customers. That gave companies like Budweiser and Miller national reach and economies of scale.

A wave of consolidation swept through the industry and all but wiped out small breweries starting in the late 1950s.

Schell's, like most breweries, was making a generic, light American lager beer at the time. Business wasn't good, so the family tried some contract brewing. That wasn't working well, so the family turned to other assets to stay in business -- including a mammoth walnut tree August Schell planted long ago.

"Business was really, really, really seriously bad back then. And we ended up selling this tree off to help keep the doors open," Marti said.

The brewery plans to plant 150 trees in 2010 in honor of that tree and its role in keeping the business alive.

Schell's managed to hang on until a new style of beer came into fashion. Small batch, craft beers -- like Schell's had made long ago -- got popular again.

"The market for craft been has grown over the last number of years. So we're definitely seeing a trend of people wanting to drink a more flavorful beer, a better crafted beer, and I think Schell's definitely fits in with that," said Ryan Anderson, who runs MNBeer.com, a Web site devoted to regional brewing.

Anderson said Schell's and Summit Brewing Co. both have a good enough product to expand their distribution nationally, but he said he's not surprised neither have made a move to do so. Schell's has stayed true to the more traditional German-style lager beer, while Summit is famous for its ales.

Both breweries are also benefiting from a new wave of customers who aren't interested in national brands, Hoverson said.

"There's an ever-growing group of people that are always sampling the local," said Hoverson, who described the competition between Summit and Schell's as "generally friendly and good-natured."

In New Ulm, where Schell's has a loyal following, 2010 is expected to be a big year. The town already relies on the brewery to bring in thousands of tourists each year, and the special anniversary events are expected to draw even bigger crowds.

"Brewing and brewing history was very important to the early settlement and development and it's still very important in this region," said Bob Burgess, director of the Brown County Historical Society. "We are historically proud of Schell's."

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