Northern Michigan hop farm is set to grow
Private equity firm buys controlling interest in the venture.
Brian Tennis thought his one-acre hop farm near Traverse City was “hot” when he started it nearly a decade ago.
At the time, one acre was a big deal in Michigan hops. Tennis and his wife, Amy, were among the first hop farmers in the state since a major blight wiped out Michigan’s small lot of commercial hops — about 400 acres — in the 1800s.
New Mission Organics now produces more than 20 hop varieties on 35 acres. In 2010, Tennis started Michigan Hop Alliance to process his hops as well as those of other farmers, and he’s currently managing approximately 30 more acres of hops.
As the growing Michigan hop industry becomes a larger player in the global hop scene, Tennis knew it would become difficult to make money as a small grower.
Now, the Michigan Hop Alliance is poised to grow: A controlling interest in the two companies was purchased by commerce-based private equity firm Streetcar Partners. New Mission Organics and Michigan Hop Alliance will merge into one entity known as Michigan Hop Alliance under the deal. Tennis will serve as president and director of marketing of the company.
Tennis recently retired from his role as IT support specialist at Herman Miller.
The injection of private equity funds into the Michigan hop scene is a growing trend and is fueling a rapid rise in hop acreage, Tennis said.
“It’s been really ridiculous in the last 24 months,” Tennis said. “The face of Michigan hops changed overnight. It makes your head spin.”
The relationship with Streetcar Partners started when the firm purchased a lot in nearby Northport to start the 80-acre Baia Estate to grow grapes, hops and apples to make wine, beer and cider. The group approached Tennis about managing the hop yard.
“We got in touch with Brian to talk about setting up the hop portion, and in doing that, we got to know them and hit it off,” said Michael Collins, a principal of Streetcar Partners. “The more we talked about the hop industry, we agreed scaling up would be important.”
Streetcar Partners is not new to the beverage game or to Northern Michigan. Collins and his business partner, Michael Chetcuti, have been involved with real estate in the area for nearly two decades.
In the beer and wine retail industry, they’ve been investors for 18 years with a store called Cloverleaf Fine Wine and Craft Beer in Royal Oak, and the restaurant chain Pizzeria Biga, also on the east side of the state.
Unlike other private investors that looked at Michigan Hop Alliance, Tennis said Streetcar Partners was unique in that it wanted to be involved in the process.
“We had investors approach us, but it was guys who wanted to get into the hop game and didn’t know anything, or wanted to dump a bunch of money and not be seen,” Tennis said. “These guys (Streetcar Partners) are very good business people and very fun to work with.”
Tennis said he’ll oversee the farming operations but will dedicate more time to the marketing side of the business as it grows.
Collins said Streetcar Partners is a closely held group, which looks for opportunities with a strong operator who needs strategic, financial and administrative help to grow.
And grow it will.
Tennis said the company is currently looking for new property to reach 100 acres of hops this year as an initial growth goal.
In 2014, Michigan had just 300 acres of hop farms. Near the end of last year, that total was likely near 600, although final counts for 2015 aren’t finished.
Along with the acreage growth, the new increase in funds will allow the company to upgrade its harvesting, processing and packaging equipment, which will help increase the quality of hops coming from Michigan producers.
For the first part of the Michigan hop renaissance, quality was an issue, and some larger brewers wouldn’t commit to using Michigan hops.
“The first couple of years, our product was OK,” Tennis said. “We’ve honed our skills now. The product we’re seeing is topnotch and it’s comparable to what’s coming out of the Pacific Northwest.”
In 2014, Washington, Oregon and Idaho produced 38,011 of the United States’ 38,910 acres.
Quality and quantity could still be an issue for several years to come, but with small brewery commitments, the hop growers have been able to grow and increase quality to the point that larger breweries are beginning to make a commitment, as well.
Last year, New Holland Brewing Co. made a commitment that 100 percent of its pub beers would be brewed with all Michigan ingredients by the end of this year. Bell’s Brewery makes several beers utilizing Michigan ingredients. Founders Brewing, which last year cited quality in processing as the reason it used only fresh Michigan hops in its Harvest Ale, has since released several taproom-only beers made with Michigan hops and recently received approval for a packaged beer made with Michigan hops.
Collins pointed to the similarities and positives of Michigan compared to the Pacific Northwest, including great climate, no droughts and, for the most part, cheaper land.
“We just think the hop industry will explode in Michigan,” he said. “As the craft beer industry continues to grow, we are poised to be a player in the hop industry.”