Although its customers were in a slump last year, Twin Cities equipment maker ABV Technology decided to bet on its future growth.
The company moved into about 10,000 square feet of office and manufacturing space in St. Paul, nearly four times bigger than its previous location.
The machines take alcohol out of beer, to make non-alcoholic versions. The extracted alcohol is then used to make hard seltzer.
Last year, its main customers — craft brewers who want non-alcoholic and hard seltzer versions of their recipes — were in a slump due to the pandemic. ABV’s leadership decided to move on with the expansion plan anyway.
And with taprooms reopening and craft sales rising again, ABV is making moves to place more of their machines across North America, and possible overseas, while dabbling in more than just serving beer makers.
ABV Technology has been making its machines since 2018, said Patrick Frimat, one of three co-founders of St. Paul-based ABV Technology and the company’s vice president of business development.
Initially, the founders of ABV were contemplating a mobile service model, where they would bring their machines to craft brewers, but realized setting up the machines in that format would be too complex, Frimat said.
The cost of one of their machines is north of $250,000, which is a hefty investment for most small and independent brewers.
Instead, ABV decided to set up a service center in St. Paul, which has since drawn dozens of Minnesota craft brewers. They soon drew brewers from North Dakota and South Dakota. and came up with a partnership model.
The service validated the idea for a shared revenue partnership model, where a brewer would pay to have a machine installed in their facility and charge to let other brewers in the region use it.
ABV’s first partnership was in Colorado, just north of the Denver area. The company also set up partnerships in California and Nevada.
The plan was to begin deploying more machines in 2020, but that plan got delayed by the coronavirus pandemic.
During the pandemic, however, ABV shipped a machine to a brewery in Canada.
Typically, the company will send a technician to install the machine, but due to COVID-19 restrictions, an ABV technician couldn’t enter the country, Frimat said. The brewery in Ontario installed the machine itself with the remote assistance of ABV.
“Because we were successful in doing that, we’re considering overseas faster than we thought,” he said. “We thought it would be a 2023 venture, but now more like 2022.”
ABV also has in its pipeline partnerships in Texas and North Carolina.
Each ABV machine can produce 6,000 barrels of non-alcoholic beer and hard seltzer per year. With one barrel of beer, a machine can turn out one barrel of non-alcoholic beer, and one barrel of hard seltzer, multiplying the output, Frimat said.
ABV invoices by the barrel.
For perspective, there were 8,884 craft brewers in the U.S. in 2020, which collectively brewed more than 22 million gallons of beer, according to the Brewers Association. The U.S. craft beer market is pegged at $22.2 billion, accounting for just under 24% of the $94 billion U.S. beer market.
That reflects negative impacts of the pandemic in 2020, which in turn affected companies like ABV.
U.S. beer volume sales dropped 3%, and it was even more grim for craft brewers, whose sales declined more than 9%, per the Brewers Association.
That dip in sales for craft brewers shaved about a year and a half off of ABV’s growth curve, Frimat said.
To account for the drop in business, the company raised $1.3 million from private investors.
For additional revenue streams, ABV is also working with cideries to make non-alcoholic cider, and is exploring non-alcoholic wine and whiskey, Frimat said.
The company is preparing for the Craft Brewers Conference in Colorado this September, a large trade show that Frimat anticipates will generate buzz for the company’s machines.
Other revenue streams options continue to present themselves as well, Frimat said.
ABV signed a seven-year lease for its new space on Energy Park Drive in St. Paul, Frimat said.
There, the 14-person company was able to consolidate operations for research and development, its service center and machine assembly and manufacturing.