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Eastern Iowa craft breweries merge operations to form new model for the future in Waterloo
New strategy could define the next era for craft brewing in Iowa
Jan. 25, 2026 5:30 am
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WATERLOO — Something new is brewing in Eastern Iowa’s craft beer scene.
As Coralville’s Backpocket Brewing and Peace Tree Brewing merge operations with SingleSpeed Brewing in downtown Waterloo, the new anchor, finalized with a move this month, could be more than a change of address.
The three-in-one brewery powerhouse, dubbed The Brewery at WonderBread, marks what the breweries’ owners say is a new era for craft brewing across the country.
The strategy is one of the first of its kind in Iowa. As the growth of new breweries starts to slow, it could be key to surviving headwinds facing the industry.
“This is the way to find innovation in craft beer,” said Aaron Vargas, owner of Backpocket Brewing and Peace Tree and director of sales and marketing for the new trio. “Craft beer isn’t about making the next new style, it’s about being innovative in other ways.”
What innovation looks like
Opening The Brewery at WonderBread — which included the move of Backpocket and Peace Tree Brewing’s operations to SingleSpeed’s facility — didn’t require a groundbreaking. But it did require them to raise the roof.
Backpocket Brewing, which started brewing Peace Tree’s award-winning Blonde Fatale on contract before acquiring the brand in November 2024, was only operating at about 45 percent of its capacity before.
The new move to Waterloo gives the three brands a combined capacity of 14,000 barrels, including Backpocket’s 100-barrel tanks that required an extra 4 1/2 feet of headroom. The newly combined venture still has another 2,000 barrels of untapped capacity.
New improvements to the building, mostly seen from the production side of the facility, have further cemented SingleSpeed’s presence in downtown Waterloo, putting to use a $750,000 grant and five years of tax rebates approved by the city.
“On paper, it looks like an acquisition. But in reality, it’s a merger,” Vargas said.
It’s not the first move for either of the newly settled Waterloo residents. Backpocket started in 2008 as an offshoot of The Old Man River Restaurant & Brewery in northeast Iowa’s McGregor before moving to Coralville in 2012. Peace Tree, started by Megan McKay in Knoxville, was one of the few breweries in Iowa owned by a woman for 15 years.
If everything goes as planned for each brand, consumers across Iowa will hardly notice a difference in their presence across grocery stores and bars.
Staff can now focus on greater efficiency in production, marketing, sales, maintenance and payroll. But more critically, the combined forces allow them to focus on innovations that cultivate the future’s potential, rather than trying to survive the challenges of the present.
“You’re trying to do all these things, rather than focus on what you got into the business for,” said Vargas, who started at the family-owned business in 2017. “We’re able to have fun doing this again.”
He said the three brands together rank third in the state for market share, after Toppling Goliath in Decorah and Big Grove in Iowa City.
In the coming years, Vargas envisions bringing production of other Iowa brands into the fold in Waterloo.
What prompted it?
Vargas and SingleSpeed founder Dave Morgan had already worked together as industry friends for years. The move in January completes a collaboration they soft launched in previous years by combining resources for sales, marketing and purchasing power for equipment and supplies.
But after seeing breweries in Colorado and along the East Coast find success with fully combined operations, they listened to the advice of one owner in Denver with a national footprint: build an island to land on in choppy waters.
“The path for us became clear. We can be strongest and have the brightest future if we fully join forces, combine into one facility and bring the best people from their team onto our team,” Morgan said.
Production costs like steel and aluminum that started to increase during the pandemic have continued to rise, making beer more expensive to produce.
But consumer behavior is changing, too. Younger generations coming of age drink in different ways and aren’t as receptive to marketing as other generations, Vargas said.
“Folks who used to be all-in on one category (of alcohol) are now spreading their beverage dollars wider. And in some markets, cannabis and THC beverages are pretty prolific competing for the same occasions,” said Matt Gacioch, staff economist for the Brewers Association, a national craft brewing trade group.
Over the last few years, Iowa breweries have tried to compete for changing consumer preferences with a proliferation of THC beverages.
“Craft doesn’t resonate with the new consumer we’re targeting, but local does,” Vargas said.
A new era for craft brewing
The Brewery at WonderBread may be one of the first major examples to bring the trend of craft consolidation to Iowa, but Gacioch said it has been growing in other states.
In the last year, he has tracked 20 similar examples.
“There’s a pretty long list of why, and a lot of it is tied to what’s going on in the industry right now,” he said.
Costs are rising faster than beer prices, shrinking margins as competition continues to grow and consumer habits change.
Consumer trends that used to underscore brand loyalty later yielded to consumers who were willing to experiment a little more and try new releases. Now, Vargas is noticing a return to brand loyalty with “tried and true” beers.
One industry leader for Iowa craft beer says the industry is showing signs of maturity after a “massive period of growth” that started in the early 2010s.
Today, Iowa has about 120 breweries, according to Noreen Otto, executive director of the Iowa Brewers Guild. When the members of the Waterloo trio got their start, it was a fraction of that.
“SingleSpeed and Backpocket get a lot of credit for blazing a new path in Iowa and thinking about what makes sense for their business and brands in Iowa,” Otto said. “I think it’s exciting to see what’s coming out of that. A lot of breweries are watching and learning from their courage to try something.”
For a while, innovation in craft beer meant coming out with the latest new flavor, localizing what national breweries were doing or recreating trends on a local level.
As openings flatten, Otto said improvements in quality and consistency are the new hallmarks of the state’s maturing producers.
“(Novel flavors and trends) kind of went by the wayside because … breweries got better, and the expectation was just that beer was good,” Vargas said.
Maintaining distinct brand identities
With SingleSpeed, Backpocket and Peace Tree being brewed in the same place, marketed by the same team and distributed by the same vendors, Morgan said the team is being diligent to ensure each brand maintains a distinct identity.
Each brand’s route to the market remains the same. But more importantly, the merger retained head brewers, operations staff and marketing staff from both SingleSpeed and Backpocket to ensure each brand is fully realized and represented.
Plenty of room remains for growth in Iowa craft beer sales. Less than 2 percent of beer consumed in Iowa was manufactured locally, according to a 2022 Iowa economic impact report. Nationally, that number hovers around 10 percent, Otto said.
“We see the future, and we’re trying to be on the front side of it,” Morgan said. “And we think we are.”
What it takes to survive
Leading up to and through the pandemic, demand for craft beer skyrocketed as social habits were altered. Now, demand isn’t growing like it used to.
“You have to figure out how to operate in a market where demand in the near future doesn’t look like it’s going to increase dramatically,” Morgan said.
In recent months, industry leaders have emphasized breweries not just for their drinks, but for the community they foster in what sociologists call a “third space” away from home or work — similar to cafes, clubs, libraries, gyms, parks and churches. They’ve bolstered their menus with lines of non-alcoholic options including craft sodas, craft kombucha and mocktails.
“Creating an industry that welcomes people in and is a fun third space … is at the heart of craft brewing,” Otto said. “Hospitality isn’t just about what’s in your glass.”
For that reason, Gacioch said that brewpubs — establishments that brew their beer on site while providing a robust menu of food in a restaurant — have been weathering challenges better than other brewing models.
“For thousands of years, humans have come together over a drink. That’s not going to change,” Otto said.
Comments: Features reporter Elijah Decious can be reached at (319) 398-8340 or elijah.decious@thegazette.com.
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