New Belgium Brewing Co.: Building a Brewery

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Written by David Young for coloradoan.com

Sitting in her office on National Repeal Day, the day marking the 78th anniversary of the end of prohibition, Kim Jordan admits she is not invincible.

That may come as a sur­prise to some.

With the success of New Belgium Brewing Co., one of the nation’s most successful craft breweries, Jordan has overseen an average year-over-year gain of 15 per­cent over the past decade.

At the same time she has fos­tered a culture of environmental, social and cultural change with innovative programs such as giv­ing employees’ bikes and donat­ing $4 million in grants.

With plans on tap for a new East Coast brewery, new canning line and a new pilot brewhouse on tap, Jordan is trying to find the best way to continue what she calls her “magical experi­ment” knowing change is inevitable.

Humble Beginnings

By now, New Belgium’s gene­sis is almost legendary.

It started in 1991 with an esti­mated 60 cases a week brewed in a basement homebrewing opera­tion.

On June 28, New Belgium cel­ebrated two decades at 500 Linden St.

Last year it sold more than 661,000 barrels of beer . The company employs 300 workers locally and 425 throughout the country.

Jordan said when she started the brewery in 1991 with her ex­husband Jeff Lebesch they had no idea it would ever get as big as it has.

“There is no way we envi­sioned anything like this,” said Jordan, who would have laughed if anyone had told them at that time New Belgium would grow to what it is today.

“We didn’t have a goal for how big we wanted to be but we did have a sense of the fla­vor of the company that we wanted to be… At the time I do not think we knew how important that would become to the company.”

That flavor is New Belgium’s 10 core values and beliefs that all employees must adhere to. Jordan said the four core values they started with were: making good beer, promoting beer culture and the responsible enjoyment of beer, fostering social and environmental change and having fun.

Jordan said as the company has grown and evolved over the years it is a daily effort to keep the core values in mind.

Be it an internal email or a editorial in the Washington Post, Jordan said repeating the core values is key to New Belgium’s success.

Jordan never refers to her staff as employees but as co­workers. In fact 41 percent of the company is employee owned providing a vested interest for those who work there.

The unorthodox business model has worked for New Belgium, the third largest microbrewer in the country, as it has become a trendsetter in the craft industry.

Third only to the Boston Beer Company and Sierra Nevada, Paul Gatza, Brewers Association director, said New Belgium has been an integral player and role model in the craft industry.

“They continue to grow very strongly,” he said. “It’s tough to post a huge growth percentage.”

Any successful microbrew­ery reaches a point where they have to decide how they are going to manage growth, said Gatza.

“One thing I have learned is craft brewers are not all about getting bigger. A lot like the lifestyle they have created and want to keep as it is,” he said.

Going Big

For 16 years Jordan debat­ed whether New Belgium should grow.

“We had the grow (or) no grow discussion, we still have it, but we had it 100 times in the old days,” Jordan said.

In 2000, the company pulled the trigger on the “grow” option. Jordan said the decision to expand the brew­ery over the years was not motivated by competition with other breweries or money rather opportunities for New Belgium employees.

“When we started to talk about opportunity it felt like that switch flipped and every­body felt like that was some­thing they could get behind,” Jordan said.

Like the company’s core values, maintaining the growth and remaining true to its craft roots is something Jordan said they have to work on daily and reevaluate.

New Belgium has grown by leaps and bounds as the brew­ery added its second brew­house in 2002 and expanded its keg line in 2010. Cellaring expansion for the company has been ongoing.

Earlier this year, New Belgium expanded its distri­bution into Maryland, Virginia and the District of Columbia, making New Belgium’s beers available in 28 states plus Washington, D.C., and it’s eyeing the East Coast for further expansion.

Gatza said he remembers a time when there were bars in Denver clamoring to get New Belgium on tap. Now there are entire states that want New Belgium to distribute to them.

That is the reason New Belgium is looking to open a second brewery. They have narrowed the list of potential cities to four. Community leaders in Asheville, N.C., and Philadelphia, Pa., leaked that New Belgium was consider­ing their communities. Jordan declined to comment on any of the cities because the selec­tion process is still under way. But she said she would like to make a decision by the end of the year.

On Wednesday, Jordan was expected to visit Asheville. She plans to visit each prospective city and meet with municipal and brewery leaders. Jordan said for the most part she has received a warm welcome from the com­munities New Belgium is considering and will bring 70 jobs to the community they select.

Oscar Wong, founder of Highland Brewing, the origi­nal and largest craft brewery in Asheville said he is con­flicted about New Belgium possibly locating in his com­munity.

Wong founded his brewery in 1994 and has watched as nine more breweries opened up shop in the community of 75,000 people. Today, Highland brews more than 20,000 barrels a year and Asheville has been named Beer City USA.

“For the first few years it was an uphill battle, but then after a while we were quite well received and the interest spawned several different breweries,” said Wong, who knows New Belgium would alter the brewing landscape. “It would change the dynamic of the area … I think it would also enhance the area’s repu­tation as a brewing center.”

On one hand he would like to have the new jobs that New Belgium would provide the community, however he is concerned about the stiff competition it would bring.

Wong spoke with Jordan by phone recently and tried to gauge how involved she would be with the community. Wong said he suggested something along the lines of a brewing museum would go a long way with local brewers, an idea Wong said Jordan was open to.

Asheville Brewers Alliance President Tim Schaller and owner of Wedge Brewing Co. said that the brewing industry in Asheville generates 280 jobs and $2.5 million for the community with an additional $3.5 million in tax revenue.

Schaller said New Belgium is reported to bring upwards of 150 jobs and is expected to receive tax incentives to locate there.

If New Belgium builds in Asheville, Schaller said it’s not clear what impact it might have on the community and brewing industry.

“We are sort of in love with our small town and it’s our fault we are getting discov­ered,” he said. New Belgium’s growth potential is not limited to the East Coast. In Fort Collins New Belgium is installing a nearly $8 million new canning line that will have the ability to fill 12-ounce and 16-ounce cans. There are also plans for a 10-barrel to 15-barrel pilot system brewhouse.

With the East Cost expan­sion, plans for a 5-acre parcel of land south of Buckingham and east of Linden Street for new offices, meeting rooms and small living quarters has been shelved for the moment. “There are certainly trade­offs between being big and small, but I would not say that one is inherently better than another. We expect children to grow and we expect trees to grow and living systems, which a community of coworkers is, also to grow. And for me, the focus is what do you grow?”

New Belgium’s Future

In the past 20 years New Belgium has received numer­ous offers to sell. Jordan said she never seriously consid­ered any of them.

Does that mean she would never consider selling? Jordan said she has been con­sidering possible strategies such as private equity, initial public offering, synergistic buyers, employee share own­ership plan, management buy­out or family foundation with her chief financial officer and chief operating officer Christine Perich over the past year.

“Something is going to have to happen to the company at some point. That I’m sure of.

“I’m not invincible and you would hate to see the perpetu­ation of the company — in this context I’m talking about really any business — be real­ly clunky because the founder never bothered to sort of pay attention to that process would certainly be inelegant. And you know I don’t want to do that to my coworkers or my kids. And so I think it is important for me to be think­ing about what does company perpetuation look like and what are the possible strate­gies.”

Jordan, 53, said she is in no hurry to choose a strategy, and it is important to explore such options while the compa­ny is doing well and does not need to move quickly.

Jordan said she knows roughly how much New Belgium is worth based on brand strength and traditional formulas, but declined to dis­close that number.

More import, Jordan said she is striving to maintain the culture she has created for her co-workers at New Belgium and continue her “magical experiment.”

While the long-term future of New Belgium is unclear, craft brewing appears to only be growing as Jordan antici­pates the industry could dou­ble its market share.

Growth of the craft brew­ing industry in 2010 was 11 percent by volume and 12 per­cent by dollars compared to growth in 2009 of 7.2 percent by volume and 10.3 percent by dollars, according to the Brewers Association.

“I think craft brewing has a bright future,” Jordan said. “I think there is every reason to be optimistic, and I think we are well-positioned for that (growth) because we are craft brewers and we have done this long enough that we have a pretty good feel for how to make wonderful, flavorful, technically excellent beers and how to be good partners with distributers in getting beer to market.”