_RHP5480-cmykBeer lovers Adam Wagner of Fisher and his father, Tim Wagner, a fourth-generation Red River Valley farmer, have launched an independent craft malting company. Last December, Vertical Malt opened a “micro” malt house in Crookston to malt small batches of barley grown on the Wagner Family’s 2,100-acre farm in Polk County.

The start-up currently makes 250 pounds of malt, the foundation of beer, every week. Over the next nine months, Vertical Malt plans to scale up production to 4,000-pound batches. By late 2017, the company hopes to be producing about 20,000 pounds of malt per week.

The malting venture adds value to locally-grown barley, says Harold Stanislawski, AURI project development director. And it’s well-timed to complement the local foods movement and Minnesota’s booming craft beer industry.

Local and distinctive

“Craft brewing is one of the biggest economic success stories of the decade,” Stanislawski says. Since the passage of the “Surly Bill” in 2011, which permitted small Minnesota breweries to serve pints of beer on site, dozens of microbreweries, brew pubs and taprooms have popped up around the state. By 2015, Minnesota boasted 105 craft breweries.

Nationally, growth is in the double digits rising by 13 percent by volume from 2014 to 2015, and 16 percent by retail sales, according to the Brewers Association, a trade group representing small and independent brewers. In Minnesota, which ranks 12th among the states in craft beer production, the sector represents more than $1.3 billion in annual economic activity, the association reports.

Craft beer’s hallmark is its local connection, Stanislawski says. “Beers are often named for the region, and feature interesting local flavors.” Now, brewers looking to differentiate their products are sparking demand for distinctive local malts, Stanislawski says. “The Wagners recognized an opportunity in niche malt processing.”

Most of the malt used to make beer is produced by large, centralized maltsters.

By contrast, small maltsters, like Vertical Malt, are able to put a local spin on malt, offering brewers unique flavors, says Adam Wagner. Regional barley varieties,  _RHP5404location, weather, malting methods — all influence a malt’s flavor profile, he says. “Our real advantage is small batches. We can do what the large maltsters can’t,” like customizing varieties, kernel size, germination time, heat, and other factors to produce subtle flavor variations.

In addition, Vertical Malt “can supply the provenance of our malt — the year it was grown, the growing conditions,” Adam says. “You can see what farm, what field, even provide the day our grain was harvested.” Craft brewers can use this information to market an all-local pint of beer, he says, letting beer lovers trace their beverage’s heritage from “field to glass.”

Consumers are “more interested than ever in where their food and drink come from,” says Tom Hill, cofounder of Bemidji Brewing Company, a craft brewery and taproom that opened in 2013 in downtown Bemidji. “The more information we can provide, the better.”

Love of beer prompts start-up

The Wagners, who were longtime homebrewers, initially planned to start their own craft brewery, using barley and hops they grew themselves.

Good, small-batch beer brewing equipment is readily available, but the Wagners soon discovered that nobody in North America manufactured small-scale malting equipment. “Without malt, there’s no brewing,” Adam says. So he and his dad decided to devise their own malting system.

Malt is made by soaking cereal grains in water to start germination, then halting germination by drying the sprouted grain with hot air. This process develops the enzymes needed to convert the grain’s starches into fermentable sugars.

The Wagners modified a traditional malting technique from the early 20th century, which uses small rotating drums for steeping, germinating and drying. They experimented with several prototypes before settling on a design, which was then fabricated at Young Manufacturing in East Grand Forks. Along the way, they dropped their brewery plan to focus entirely on malting. “Malt turns out to be an interesting product,” Adam says, “and a real challenge.”

_RHP5377-cmykHelp for entrepreneurs

In 2015, the Wagners’ craft malting concept won a $10,000 award in the Northwest Minnesota Foundation’s IDEA competition, which helps entrepreneurs turn good ideas into fast-growing businesses. Soon after, the Wagners were connected with AURI Project Manager Becky Philipp. “That’s when things really got going,” Adam says.

Philipp and Stanislawski steered the young company to experts in business planning and economic development, licensing and permitting, grants funding, and marketing. “At AURI, we have a vast network of resources,” Philipp says.

Once the Wagners set up their prototype malt house, they worked closely with AURI Microbiologist Jimmy Gosse to test and refine the malting process and develop food safety and quality controls. “AURI has been very important in helping us to get the pilot system going and preparing to take the next steps,” Adam says.

AURI will help Vertical Malt carry out a five-state marketing survey later this year. If all goes well, planning for a full-scale regional malt house will begin. “This business would provide a positive economic boost to the northwest region of the state,” Philipp says.

“This business would provide a positive economic boost to the northwest region of the state,” Philipp says.

This season, the Wagners planted 120 acres of two-row barley on their farm. In the short-run, they plan to raise all the barley they need for their operation, but eventually, “we hope to create a new outlet for malting barley in northwest Minnesota,” Adam says. North Dakota and Minnesota rank first and fourth in barley production, growing more than 76 million bushels in 2015.

Old fashioned marketing

Adam, 34, grew up on the family farm east of Crookston and studied music and computer science in college. He left a telecommunications career to launch Vertical _RHP5434-cmykMalt, which is self-financed at this point. That’s been the hardest part of being an entrepreneur, he says, “giving up a good income to start a business with a lot of unknowns and zero income! It’s an uncomfortable place to be — but it’s also a good motivator.”

“Adam Wagner is an excellent example of untapped talent and ingenuity that is out there waiting to be encouraged and nurtured by organizations such as AURI. Adam’s passion for farming, barley and beer along with the back room support of organization’s such as ourselves and Minnesota barley growers and the university system are ingredients for likely success,” said Jerry Hasnedl, AURI Board of Directors.

When it comes to marketing, Adam’s strategy is an “old fashioned one,” he says. “We go out and shake hands and meet people. It’s been a lot of fun getting to know the brewers. It’s a fantastic industry,” he says, with lots of friendly folks who are passionate about great beer.

Local brewers are already calling, Adam says, even though the company’s supplies of malt are still limited.

Vertical Malt made its first sale in April to Bemidji Brewing Company, which recently expanded from a three-barrel capacity to 15 barrels. “To have access to locally-grown barley that Adam and his family grew and malted is really attractive to us,” says Hill. “The local hops scene has been growing, and it’s nice to see local malt coming to fruition.

“We’re really excited to be working with Vertical Malt,” Hill adds. “Adam and his dad are so enthusiastic about their product. It’s fun to see that excitement from the supplier’s side.”


AURI & Vertical Malt

Idea to reality:
The local foods movement and the rise of local craft beer brewing created an opportunity for local craft malt production. Malt is a primary beer ingredient.

AURI’s role:
AURI helped entrepreneurs Adam and Tim Wagner of Fisher, Minn. test a small-batch malting system. AURI also connected the Wagners to business and technical resources.

Outcomes:
The Wagners’ start-up company, Vertical Malt, is making small quantities of custom craft malt at its Crookston malt house and preparing to increase production.


The Craft Beer Scene

Craft beer production has boomed in the past five years. Sources: Brewers Association, www.brewersassociation.org and AURI

Nationally

4,225 – Craft breweries in the U.S. in 2015 — up from 1,977 in 2011

12.2% – Craft beer’s market share in 2015 — up from 5.7% in 2011

24.5 million barrels – Craft beer brewed in 2015 — up from 11.5 million in 2011

$22.3 billion – Retail value of craft beer in 2015

 In Minnesota

105 – Craft breweries in 2015

631,955 – Barrels of craft beer brewed in 2015

$1.324 billion – Annual economic impact on state in 2014