grow­ing PAINS

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.

Forbes - - CONTENTS - by su­san adams

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.

Cheers! inside new Bel­gium’s spot­less brew­house and tap­room.

a for­mer so­cial worker, kim Jor­dan co­founded new Bel­gium, a com­pany that both em­ploy­ees and beer drinkers con­sid­ered spe­cial.

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