Once a craft beer darling, New Belgium Brewing is discovering how tough it can be to transform from a niche player into a national brand.
Once a craft-beer darling, New Belgium Brewing is discovering how tough it can be to transform from a niche player into a national brand.
In January 2013, Kim Jordan, the cofounder and CEO of New Belgium Brewing, called an allhands meeting and stunned employees by announcing that the company had been sold. Once the gasps subsided, she told staffers that the envelopes on their chairs contained the identity of the buyer. Inside they found a mirror, Jordan’s way of informing them that they were the new owners of New Belgium through an employee stock-ownership plan.
Two years later, the more than 600 employee-owners of New Belgium awoke to a Reuters report that stunned them again: New Belgium was up for sale, its corporate leaders looking for a buyer willing to pay $1 billion for the Fort Collins, Colorado, craft brewer. A brewery tour guide, Dave Ponceby, remembers having trouble mustering enthusiasm that day as he walked visitors through the spotless, high-ceil-
inged brewhouse, past the four gleaming stainlesssteel tanks where barley and hops are mashed and boiled. He gave his usual spiel but couldn’t bring himself to talk about what it meant to be an employeeowner. “I was hurt,” he says. “The rumor was that they were going to sell to Anheuser-busch, which would have changed everything.”
Anheuser-busch Inbev had in fact been buying up craft brewers. At the same time, New Belgium customers were defecting to microbreweries. In the past five years, according to the Brewers Association, the number of brewers in the United States has more than doubled to 5,300 and counting. Fort Collins alone has 21, with 4 more in the works. Increasingly, New Belgium has failed to match cachet with the smaller players and marketing dollars with the Goliaths. “New Belgium is too big to be small and too small to be big,” says Beer Business Daily editor Harry Schumacher. Jordan’s response: Get bigger.
The path has been rocky, however, for a company that once led the charge against bland American beer and that has prided itself on its progressive management. The decision to sell 100% of the company to her workers appealed to Jordan’s ideals about employee empowerment but created debt and put pressure on the company to generate cash to service it. New Belgium took on even more debt to build a second brewery in Asheville, North Carolina, which cost $140 million and opened in 2016. The second plant increased production capacity by 50%, and New Belgium is now sold in all 50 states, but it must compete in places where beer drinkers have never heard of it.
In 2015, while waiting for the Asheville brewery to start producing, New Belgium had its first down year, with revenue slipping to $225 million from $226 million in 2014. That, along with the decision to put the company up for sale in late 2015, took a toll on the staff. Last October, Christine Perich, a 16-year New Belgium veteran Jordan had selected just a year earlier to succeed her as CEO, phoned in her resignation with no other job lined up and no public explanation, although there has been speculation about whether Jordan was ready to give up control. (“I’m still the chair of the board, and that’s where the big-picture strategy is,” responds Jordan.) This May, Peter Bouckaert, the company’s longtime brewmaster, announced he was leaving to start his own microbrewery and coffee roaster. And Jennifer Briggs, head of human resources and a fervent brand evangelist, also resigned without public explanation. In the last year, as more people question whether New Belgium is still a special place to work, turnover has doubled to 10%.
The turnover spike is notable at a company where staffers have long told the company’s story with pride: Electrical engineer Jeff Lebesch, a home brewer from Fort Collins, went on a mountain-bike tour through Belgium in 1988 and fell in love with the country’s beer. Belgian brewers often add fruit, such as oranges and cherries, and spices like cardamom to the usual malted barley and hops. After Lebesch met Jordan, a social worker, at a party that year, the couple traveled to Belgium and decided to open a brewery, the first in the U.S. to make Belgian-style beer. After getting married, they took out a $60,000 second mortgage to buy equipment and nearly maxed out their credit cards. An artist who lived next door made their labels.
The marriage didn’t last (Lebesch left the company in 2001), but the brewery thrived, and Jordan introduced perks like an onsite medical clinic with a full-time doctor who provides free care to staffers and their families. Employees get a free cruiser bike after a year of service and an all-expensespaid beer tour of Belgium after five. In 2013, the company became a certified B Corp, submitting to rigorous monitoring of its commitments to transparent governance and environmental sustainability. “New Belgium was a company that didn’t act like a company,” says Greg Owsley, the brewery’s chief branding officer from 1996 to 2011. “When New Belgium was at its strongest as a brand, it was
more a social movement than a brewery.”
But as New Belgium grew, Jordan’s ambition competed with her idealism. In 2005, she and her executive team, known internally as “missionaries,” decided the company should plot a national strategy. The goal, says Jordan, was to offer new opportunities to employees and build a bigger platform for New Belgium’s progressive environmental and management practices. Others sensed ego. “Kim wanted to be a force to be reckoned with,” says a former member of the inner team.
Jordan says she has no regrets about selling the company to the employees even though an openmarket sale would have brought a higher price.
Forbes pegs her net worth at less than $200 million, a fraction of the $1 billion fortune of Ken Grossman, founder and 100% owner of Chico, California, craft brewer Sierra Nevada, whose revenues are not much higher than New Belgium’s. “I have plenty of money,” Jordan says. “We sold to the [employees] at a fair price.”
After Jordan decided to explore a sale of New Belgium in 2015, she likened the process to a “death march.” But she says she had a fiduciary responsibility to her employee-owners to assess the prospects. Heineken had just bought 50% of the California craft-brewer Lagunitas at a reported $800 million valuation, and Constellation Brands paid $1 billion for another California craft brand, Ballast Point. In the end, Jordan says, while there were offers on the table, none fit: “We didn’t find the magical combination of cultural meshing and commitment to the craft of brewing, and the ability for us to be innovative and experimental.” At least not yet.
Before the talks ended, Jordan hedged her bets with a new hire who didn’t fit the typical New Belgium profile. Most staffers, including Jordan, dress in flannel, jeans and hoodies. Tattoos and piercings are common. In March 2016, Jordan hired Ruairi Twomey, a native of Ireland, as vice president of marketing. In 14 years at the beverage giant Diageo, he had marketed Guinness in Toronto, New York and Lagos, Nigeria.
Dressed in a crisp white shirt and black blazer, Twomey describes the new product lines he has helped bring to market, including Day Blazer, a light blond ale sold in 12- and 24-ounce cans. Twomey says he tested 39 names and 16 designs before finalizing the Incan-inspired graphic meant to appeal to Latino drinkers. Introduced in January, it already accounts for 6% of New Belgium’s sales. “It’s been really good to have someone who encourages us to take risks,” Jordan says.
At Wilbur’s Total Beverage in Fort Collins, sixpacks of Day Blazer cost $7.99 and sit in a case a distant 27 refrigerator doors from the craft-beer display, where a six-pack of New Belgium’s flagship Fat Tire amber ale fetches $9.99. “To a lot of beer geeks, New Belgium is considered the Budweiser of the craft beer world,” says the bearded store clerk.
It’s a dilemma other nationally distributed craft brewers have faced, including Jim Koch, the founder of Boston Beer, which makes Sam Adams and has annual sales of $879 million. “If you make great beer,” Koch says, “and people love it and drink it, and more and more of them love it and drink it, the beer geeks will turn against you. You’re talking about roughly 5%, but they’re an influential 5%.”
Craft geeks can object, but New Belgium recovered from 2015 to sell more beer than ever last year, booking $234 million, with a net profit Forbes estimates at $17 million. In the first four months of 2017, as sales of Sam Adams and Sierra Nevada slid 20% and 11.1%, respectively, according to Nielsen data, New Belgium’s sales surged 8.5%.
Jordan, who says she is reviewing CEO candidates, makes no apologies for a down-market offering like Day Blazer or for leaving the door open should the right suitor come along, even if it’s one of the Goliaths. Anheuser-busch Inbev and Millercoors, she says, “make technically excellent beer, and you will never hear me disparage them. They’re excellent brewers.”
Smart business. But fans and employees who fear something special is being lost at New Belgium may find those words chilling.
a former social worker, kim Jordan cofounded new Belgium, a company that both employees and beer drinkers considered special.
Cheers! inside new Belgium’s spotless brewhouse and taproom.