While the acquisitions, mergers, and other seismic forces reshaping the loftiest peaks of the craft-brewing industry generate the most headlines, the bedrock of craft still rests on the creative drive of independent entrepreneurs.
What homebrewer hasn’t had a similar thought while stirring in a hops addition or sharing a particularly good batch with friends? I could do this for a living, he or she thinks. Why not go pro and open up my own place?
It makes for a good story—and many successful craft-beer pioneers got their start in just this way—only now, with more than 4,600 craft breweries and brewpubs currently operating in the United States, the stakes are much higher and the competition that much more intense. Given expectant outside investors, higher initial costs for equipment and real estate, and increasingly saturated local and regional markets, there’s no longer time to learn as you go or much latitude at all for mistakes.
Successful start-ups enter the market loaded with experience and purpose. The beers, branding, and business model are all on point; leadership has a clear understanding of where and how the brewery fits within the landscape; and the investment capital is such that the business has a fighting chance to thrive. Sometimes it’s a new brewer with substantial backing or someone with outside business experience who’s attracted by craft’s growth. But, more often than not, new breweries with the strongest prospects involve talented veteran brewers who leave jobs at larger breweries to pursue a vested stake in their own place.
“It’s a blessing and a curse,” says Mitch Steele, former brewmaster at Stone Brewing Co. “It’s hard to lose people that you’ve invested in training and that you think are very talented, but that’s the nature of the business. These opportunities are going to be there for folks who have some experience, and I think that, overall for the business of craft beer, that’s a great thing.
“I tell people who are leaving to start their own place, ‘do well, never sacrifice quality, have a good time, and just make great beer.’”
In June, Steele announced his departure from Stone after a 10-year tenure to pursue a high-end destination brewery and restaurant concept with a group of partners. Steele emphasizes that he had neither the intention nor the desire to leave Stone—in fact he’d long considered the idea of opening his own small brewery as his “retirement plan”—but the more he talked with his current partners, the more appealing the idea became.
“It’s both terrifying and exciting,” Steele says of his decision. “I think it ties in with the opportunity to start something from the beginning and be 100 percent vested in it. Not that I wasn’t 100 percent vested in Stone, but the idea of starting from the ground level and building is very attractive to me. Brewers, by and large, take a lot of ownership in what they do, and I think that’s a very important part of craft-brewing culture—that it’s brewer driven.”
The prospect of a meaningful stake in both the literal and creative ownership of a brewery is attractive to many brewers. However, the skill-set required to brew great beer doesn’t always translate to being great at running a business.
Tim Lenahan is an industry veteran who’s worked in operations management for macro brewers such as Stroh Brewing Co. and Coors, as well as smaller brewers who include Breckenridge Brewery and Snake River Brewery. He’s seen a lot of the missteps people make in opening up new breweries—mainly involving financing and short-sighted business plans—and seeks to help owners and would-be owners avoid these pitfalls through his brewery consulting business, Brew to Win.
“Not that there aren’t brewers out there who are entrepreneurial, but it takes multiple skills to pull these things off, primarily because of the capital involved,” Lenahan says. “And usually people who are really dedicated brewers can’t focus on all that other stuff.”
While nano-breweries with taproom-only distribution tend to work best for a solo brewer-controlled operation, “even the smallest operations require quite a bit of money,” he says. “And at some point you have to get rid of that three-barrel system and into something bigger so that you can actually make money at it.
“Whoever is thinking about doing it needs to know exactly what it’s going to cost and be extremely conservative, and then take that number and multiply it by 20 percent,” Lenahan says. “And the more experience you can get before you actually have to spend your own money, the better off you’ll be.”
While prior experience isn’t a prerequisite for opening a brewery—or any business, for that matter—it’s especially helpful when seeking to enter competitive markets. Many of the most inventive and buzzed-about start-ups in craft-beer hubs such as San Diego, Portland, Denver, and Seattle were started, at least in part, by brewers who left larger craft breweries to venture out on their own.
“I think every young brewer dreams about doing his/her own thing at one point or another,” says Steve Luke (pictured at top), who left Elysian Brewing early last year to found Cloudburst Brewing in Seattle.
Luke enjoyed the freedom to develop new beers as lead brewer at Elysian Fields, one of the brand’s brewpubs, but also sensed that he’d always regret not trying it on his own. He worked on a business plan for several years and let Elysian’s owners know of his intentions early on, but it was the acquisition of the brewery by A-B InBev that ultimately prompted him into action.
“When that was announced, that definitely kicked things into high gear to close my round of investments and start looking for a location,” he says. Although Luke majored in economics, he says the biggest challenge hinged on “how to raise money when you’re a broke brewer who has zero savings.”
Luke secured a number of small investors, ultimately selling 36 percent of equity in his new company, and also tapped the wisdom of friends in the local brewing community, some of whom had also recently left larger brewers to open up their own.
“It’s such a tight-knit industry out here,” Luke says. “As the word spread, a lot of other brewery owners reached out to say, ‘if you have any questions or need any help, let me know.’ ”
While talented brewers leaving to start their own brands is an inevitable and exciting part of the craft-beer landscape, a few established breweries are encouraging and capitalizing on this rampant entrepreneurialism by acting as incubators for brewers to try new ideas in a supportive environment.
Brewers at Adelbert’s Brewery in Austin, Texas, for example, have spawned several successful specialty brands while working at the brewery.
“I encourage all my employees if they want to go off and do separate side projects,” says Adelbert’s Founder and Brewmaster Scott Hovey. “It’s a good way, at low cost and low risk to me, to let my employees experiment on other tangents that maybe I’m not taking at the brewery, and the benefit is that there’s a lot more creative thinking going on that definitely trickles back into the main Adelbert’s brand.”
Brewing under Adelbert’s license and using its facilities, employees act as brand managers and receive a commission for the work they do on their specialty brands.
The latest successful Adelbert’s offshoot, Oddwood Ales, grew out of a wild ale barrel-aging project started by Brewer Taylor Ziebarth. Ziebarth is in the process of purchasing full rights to the brand from Adelbert’s and opening up in his own brewery and taproom in Austin.
The extra time to work on his brand allowed Ziebarth “to go wild and experiment with fermentation inside the barrels,” he says, as well as to dial in his branding and business plan before venturing out on his own. It was valuable experience and preparation that, in today’s hyper-competitive environment, is critical for success.
“For new breweries opening, you really have to have a creative portfolio and fill a demand,” Ziebarth says. “Get to know the market and then build something that’s better.”