Last week, I was interviewed by Jeremy Goodrich on the Scratch Entrepreneur podcast. We spoke about how Upland grew from a small Indiana brewery into an internationally recognized producer of craft beer and multimillion dollar company. You can check out the episode on Soundcloud or download it on iTunes.
Critical Drinking- Pros, Not Cons: Making Independence Matter (this article originally appeared on www.goodbeerhunting.com)
Several notable craft beer personalities have expressed the hope that the explosively negative sentiment toward the Wicked Weed transaction might cause AB InBev to re-consider acquiring other breweries in the future. That maybe it would cow fellow breweries into “not selling out.” According to this line of thought, fewer acquisitions of strong, mid-sized breweries by Megabrewers will improve the odds of independent breweries’ success over the long term.
But I’m afraid that way of thinking is not only inaccurate but also misleads the energies and missions of the remaining independent breweries—not to mention, most importantly, the consumers who want to support us. There’s nothing more that ABI (and MC, Constellation, etc) would like to see than all of us putting our energies into anti-Megabrew activism and rhetoric.
A few reasons why I believe this:
- While people love the David vs. Goliath narrative, that narrative ends with David winning. They want their long-shot horse to win, not to fall apart in the third turn. But here’s the thing: we know we are never going to bring the Megabrewers to their knees. As romantic and passionate as this narrative may be, it’s not sustainable.
- Over time, the anti-/activist sentiment starts to sound like weakness and whining, and consumers prefer winners. We need to show them the wins and price that are worth their investment in us.
- The chink in Megabrew’s armor is not that they’re well-armed and overly powerful. It’s that their corporate mission has nothing to do with trying to make the world a better place in which to live. They’re not innovators in beer diversity and choice, and they don’t consider it a goal to leave the world a more dynamic, interesting place for the next generation. This is important to remember.
Real talk: in the short term, it’s helpful to remind consumers of the David vs. Goliath narrative. But the big meal lies in that third element.
I base my thinking on the excellent article by Creature Comforts’ Chris Herron. He points out that ABI has $25 billion worth of brand equity/goodwill on its balance sheet. I won’t delve into any accounting or finance theories, but I assure you that this statistic accurately measures the degree to which consumers have voted with their pocketbooks in favor of parading horses and funny frog commercials. In the clear light of day, that’s an awfully shaky basis for that much brand value. In fact, it’s an indictment of the corporate values and competence of their competition since the 1980s when I was coming of age. Alas, all the corporate breweries’ beers and values are similar, whether wrapped in an American flag, a Mexican beach, or a EuroLatin bon vivant.
Meanwhile, ABI has billions of dollars in annual revenue which they can use to defend that asset, and they will, because that asset is the core of their economic existence (just like brand equity is the core of independent brewers’ existence). Don’t expect ABI to stop throwing hundreds of millions around just because their acquired companies might not sell as much beer to a minority of industry insiders. Likewise, money that would affect my family for generations is simply a rounding error on their balance sheet. Which means you shouldn’t expect an acquisition target to say, “no thank you,” nor should you begrudge an entrepreneur when she sells out.
But to those of us who are deeply, unequivocally invested in our small- to mid-sized breweries for the long haul, ABI’s $25B goodwill (not to mention that of the other megabrewers) is the bullseye at which we should aim.
“Willie Sutton, why do you rob banks?”
“Because that’s where all the money is.”
—Where the Money Was: The Memoirs of a Bank Robber
Over the long haul, independent breweries should make the narrative about differentiated beers and a better world instead of wasting our resources railing against bigger, stronger competitors. Our mission is attractive in a philosophical sense, but it also has demonstrable, practical benefits in consumers’ lives. Large corporate breweries historically strive for economic efficiency above any other goals, which tends toward sameness of the lowest common denominator. But humans, at least the ones that we and many other craft brewers want to attract, desire meaning beyond efficiency. And Americans, especially, crave freedom of expression and the pursuit of happiness, which to some extent requires a sense of independence. As soon as a degree of independence is sacrificed, we naturally expect expression to be sacrificed as well.
In pursuit of profits, Upland does some of the same things that Megabrew does: we try to drive volume and look for ways to make the business more efficient every day. But we do some things that they do not, like make meaningful investments in our communities with anemic financial returns.
One example: for Upland’s latest brewpub, one of our investors brought to the management team a difficult renovation of a 140-year-old building, that had set more or less vacant for decades, in a city where little craft beer had been or will be sold. We partnered to take on that risk while knowing it would be a low rate of financial return because of the team’s commitment to taking on challenges and making our communities better places. The real return we got from that investment was pride in our town and a catalyst to a better community for our customers that will take years to pay off. We get to see those changes every single day, in the smallest of ways. and that personal connection is what makes it seem worthwhile. Projects like these are what fuel our passion as both brewers and community members.
With that kind of community connection, and a clear expression of our value, how could a Megabrew ever compete? The trick is not to talk about why independence matters, but to express it. Express it in your innovation, your connection to the local economy, the real estate you buy and develop, the other businesses you support—earn the vote of the consumer through demonstrable evidence. Then, and only then, talk to them about the value of independence. Because at that point, what’s in the glass will count 10-fold.
Don’t dwell on transactions where Megabrew throws their money around. Instead, notice that they feel compelled to try to play the game on our terms. Business is a game won by offense, not defense. You can’t win this game when revenues are declining. Some of the proposed rollups in our business are predicated on the idea of creating a coalition of independent breweries (Duvel, Oskar Blues, etc.). Those may be the best opportunities both to achieve some economic scale and make brewers better partners for distributors while preserving their individual character and independence. But regardless of how things continue to evolve, let’s be happy warriors in this game—consumers will react more that tone.
If Hunter S. Thompson were around today, drinking too much and chatting with his old pal Ralph Steadman about his latest Flying Dog illustration, I imagine him yelling, “We’ve got the bastards on the run!”
Against all odds, we’re the big door prize.
It’s a crazy, ironic world: Wicked Weed sold out to ABI Megabrew in the midst of the Stars Wars Week celebrations. The struggle between institutionalized power and homogeneity versus the spirit of independent thinking and living is real and timeless: Imperial Forces versus the Rebel Alliance.
We all counted the Wicked Weed team as part of our Rebel Alliance; their brand even mocked an old monarch. But the king of beers had enough money to cause Wicked Weed to give up their rebel life. I don’t begrudge them. It’s lucrative to be part of the Galactic Empire, and now they’re playing with a stacked deck.
Walt and I shared beers together a couple weeks ago, and a few days ago I gave Evan a big thumbs-up on the exciting news that he will soon have a daughter. I hope to do more of the same with both of them in the future. They’re forever good dudes.
For those of us who are left in the independent brewers’ community, we have to use this moment to make our hardscrabble lives better. Kudos to Jester King for showing how one small gesture can be a powerful statement against Megabrew. But this moment will soon pass. How do we sustain and promote our cause beyond the headlines of the next week or two?
Creature Comfort’s Chris Herron wrote a GREAT PIECE about the potential ABI endgame of de-valuing craft beer by bringing average craft prices down. ABI is not an evil Empire, but its institutional power is an existential threat to smaller breweries in wholesale channels. The fact of the matter is that most independent breweries cannot compete in a wholesale world that doesn’t function on at least $10/6-pack (or even higher for 7%+ or highly hopped beers). So his analysis points to the difficult road ahead: we must build our own brand identity and equity even deeper. Consumers must both be able to identify independent brewers as such (how many people buying Sculpin and Space Dust know them as soldiers of multinational corporations?), and be willing to pay a premium for our beers.
Boycotting a single festival won’t get the job done. In fact, now more than ever we will need to get out of our breweries and in front of consumers to share our passion, tell our stories, and ask for their support. Publishing stories via digital media about our team and the beauty of small-scale brewing (and not just trying to advertise a new beer release at the pub) is a requirement. We also need to remind our retailers and distributors of how much more profit our higher-priced cases generate for them, so that they motivate their staffs to amplify our stories. And maybe we now need to refer to ourselves as “Independent Brewers” rather than “Craft Brewers” – identify ourselves as something that Golden Road and 10 Barrel cannot.
I can’t help but worry that some of the emotion right now stems from a subconscious fear that we won’t be able to compete against this ABI Empire – that WW is the beginning of the end. But it wasn’t over when the Death Star blew up Alderaan, and the fundamental rules of the beer business haven’t changed. Our breweries have to stand for something different and better than Megabrew.
We can do this! But success depends on deciding which festivals we ARE going to attend, not deciding on the festivals we aren’t going to attend. So while Upland won’t be at the Funkatorium Invitational, everyone on our team will be somewhere that weekend sharing our beers and our stories, and working to make consumers’ lives a little less homogenized and a little more interesting.
President, Upland Brewing Co.
PS – Some people rightly pointed out that our action might have the unintended consequence of reducing the funds raised for Asheville’s Eblen-Kimmel Charities. Upland is making a $250 contribution directly to EKC on Monday. We REALLY love spending time in Asheville; it reminds us of a bigger version of our hometown, Bloomington; we will continue to be frequent flyers there and want to see that community thrive.
Or Is Doug Dayhoff an Olympic Putz
I’ll never win an Olympic gold medal, or a bronze, for that matter. I know this because I just hung out with a guy who recently won both, and I can say with the certainty of a righteous preacher that he has more focus at age 24 than I have ever had in my professional life. For the past six years he constructed, then executed 7/24/365, a disciplined life program that prioritized his time into activities guaranteed to move him closer to success. He treated success in his sport as non-negotiable.
Guys like him would beat me every time.
I came away from that night lamenting my inability to manage my time and focus in a similar way. I haven’t had a single month in the last twenty years when I accomplished all the things I set out to do. This guy does it for years in a row. I’m a putz.
Then again, he swims in a simple pool: one stroke, a lane to himself, a couple similar distances, a starting gun and a clock to beat. My world in craft beer is like the swimming pool in “Caddyshack,” before the Baby Ruth showed up. It has an unlimited number of chicken fights and fun games begging for me to join in.
Maybe the trick in the real world is not the Olympic focus, but the recognition of entrepreneurial leadership as a chaotic jumble of contradicting competitions – then having the discipline at the start of every month/week/day to pick which small number of those games you are going to compete. Create for yourself some sort of lane with room to swim and a touch pad somewhere in clear sight. Ignore the other stuff, then go for it.
No one will give me a gold medal for reaching the other end of my baby pool, but maybe I’ll have some shred of dignity next time I hang out with an elite athlete. And then maybe I can challenge him to a cannonball competition, which is my kind of sport.
I wish you could swim
Like the dolphins, like dolphins can swim
Though nothing, nothing will keep us together
We can beat them, forever and ever
Oh, we can be heroes, just for one day
~ David Bowie, “Heroes”
Some people don’t want to be left alone.
“Screw you & the horse you rode in on.” He didn’t actually say it, but he came close. And this unceremonious resignation came from a senior manager whom I really liked (thought it was mutual) and who had a bright future with the company (thought he understood and was energized by the coming challenges and opportunities).
Why was he pissed off at me?!? I was his biggest fan.
Here’s the ugly truth:
- I tend to chase after the staff and projects that are going in the WRONG direction.
- The people going in the RIGHT direction command my respect and appreciation, and I purposefully steer clear of nitpicking their work. When their phone doesn’t ring, I’m the one calling.
- For the managers who value autonomy and need only the proverbial high-fives from me, the system works. They’re generally self-critical and don’t need me piling on.
- But for others, the act of interrogating [politely] their projects and challenging their plans conveys interest and engagement. This is particularly true with managers and staff who don’t report directly to me (because we have a regular status meetings and scheduled food fights).
It’s all a little perverse to my way of thinking, but it cost us a good head.
So, I’m making a couple changes coming out of this incident:
- Blocking three hours every other week to follow up with a talk, call or note to staff who are doing good work. (Ideally it would be in person, but we have operations in multiple cities.) Just a few “nice job” acknowledgements and/or a simple “How are you dealing with this?”
- Focusing on fewer problems. I’m probably not more effective than my direct reports in solving the problem anyway. And it’s better for my mental health.
Any other ideas on saving me from myself?
Well, tonight when you lay lonely in your king size bed
With a hunger inside you can’t feed
Well, I’ll be the empty place lying next to you
And when your phone don’t ring, it’ll be me.
~George Jones, “When Your Phone Don’t Ring (It’ll Be Me)”
Or One Key Step To KEEP Your Sanity
I’m like the journalist, Raoul Duke, in Fear and Loathing: I see ALL the bats. Fail to hit budget in one of your markets: there’s a bat. Read a post in our company’s social feed which isn’t very interesting: bat. Walk onto the production floor and notice some poorly organized supplies: bat, bat, bat.
One of those little shits doesn’t bother me. But when 50 of them are wheeling overhead, you’ll quickly find yourself sitting on the corner of Sanity and Madness.
Is hunting and killing bats an essential duty for the CEO/entrepreneur? I’m certain the rest of the team doesn’t see most of them. So if I don’t do it, who will? Some Harvard snot will say the key is to distinguish between those details and shortcomings that matter and those that do not. Well, I’m not smart enough to get in to Harvard, and I’m not smart enough to tell the difference between those two types of details.
I’m lying, at least on one count. But my natural tendency is to see all the bats and worry about every single one of them. It’s the entrepreneur’s blessing and curse. And I’ve seen more than a few commercially successful entrepreneurs who follow this recipe (and go insane):
- Focus on the negative/gaps in execution
- Do it all the time
- Don’t cut anyone, including yourself, any slack
I started out down that path, but with the benefit of hindsight I know this much: you better focus on learning how to happily ignore many of the bats. Don’t even ask one of your managers to see them: like Mr. Duke said, “The poor bastard will see them soon enough.”
Your sanity will thank you.
You see, the Devil haunts a hungry man,
If you don’t want to join him, you got to beat him.
I ain’t sayin’ I beat the Devil, but I drank his beer for nothin’.
Then I stole his song.
~Kris Kristofferson, “To Beat the Devil”
Leadership: Hard-fought Wins, Undeserved Losses, and Vice Versa
I stole the title of this blog from a middle-aged guy who got into trouble and then wondered, “How do you know when it’s too late to learn?” That’s an interesting question for someone like me who’s had his fair share of hard-fought wins alongside a few undeserved losses, and some undeserved wins and hard-fought losses. Go figure.
As the title suggests, I’m passionate about not knowing, especially when it comes to the right way to lead people and grow a business. At any given moment, I have ten ideas, and I’m absolutely certain that six of them are correct. I just don’t know which six. Evangelically agnostic. Such are the paradoxes of being an entrepreneur.
Now I’m running a craft brewery, which is an industry full of more challenging paradoxes than any I’ve ever seen. We must simultaneously be world-class creatives and scientists. Beyond the brewpub, it’s a capital-intensive industrial business. Treat it like a factory, and your culture and brand fall apart. Treat it like a marketing agency, and your beer will be mediocre and you’ll never generate a return on all that capital. Treating your team like family is a requirement; managing your team like family is a disaster. And if you juggle all those balls but lose sight of your personal family, friends and health, you’ve lost the only things that matter.
It’s enough to drive a man crazy. And I’ve been out on that limb a few times.
P.S. Because I like straying outside the lines, I’ll say here and now: I intend to write about leadership psychology, organizational culture and performance, and navigating the daily shitstorms that come your way as an entrepreneur (what Alex Trebek would call “Potpourri”). That, and any other issues I can’t deal with in therapy.
A little out of place, a little out of tune
Sorta lost in space, racin’ the moon
Climbing the walls of this hurricane
Still overall, I can’t complain.
~Todd Snider, “Can’t Complain”