New Belgium and the Battle of the Microbrews
On a crisp October morning in Fort Collins, Colo., Kim Jordan arrives at work, as she usually does, on her red Italian bike. The chief executive officer of New Belgium Brewing is clad in jeans, a tight black top, and a flowing beige tunic that looks like something Stevie Nicks might have worn in her Seventies heyday. The ensemble suits Jordan, but it’s not enough to keep her warm. “I’m not dressed for this weather,” she says, shivering. She locks up her bike and hurries into the brewery.
It’s fitting that Jordan, still slim and girlish at age 53, should dress like a rock star. She is treated like one within her industry. In two decades she has built New Belgium into the country’s third-largest craft brewer, known for its flagship, Fat Tire Amber Ale. She is also one of the few female CEOs of a major beer company.
Lately, though, Jordan has felt overextended. She’s traveling constantly as she attempts to transform Fat Tire into a national brand like Sierra Nevada Pale Ale and Boston Beer’s Samuel Adams Boston Lager. In August, New Belgium expanded its distribution into Maryland, Virginia, and Washington, D.C.; its beers are now available in 28 states. Jordan hopes to select a site by the end of the year to build an East Coast brewery, which will enable New Belgium to extend its reach farther. The reasons for this latest push are twofold. If she wishes to maintain her company’s growth, Jordan has little choice but to enter new markets. At the same time, she faces an existential threat from both newer, smaller microbrewers and Big Beer companies that covet New Belgium’s customers. “I’m not sleepless about it, but I’m attentive,” she says.
The U.S. beer market has declined 7 percent over the last decade, according to IBISWorld, inspiring a wave of consolidations. Canada’s Molson merged with Coors. South Africa’s SAB consumed Miller. The two companies combined their U.S. operations in a joint venture called MillerCoors to better compete with the mighty Anheuser-Busch. Then three years ago, InBev, a Brazilian-Belgian conglomerate, swallowed the maker of Budweiser in a hostile takeover.
While America’s largest brewers have been suffering, craft brewers have provided one of the business’s bright spots. The Brewers Assn., the sector’s trade group, says the craft industry’s sales rose 12 percent last year, to $7.6 billion. Jordan and her peers now produce 4.9 percent of the U.S. market’s total volume. That number could double in the next few years as more Americans develop a thirst for homegrown ales. “Ten percent market share is not unrealistic,” says Julia Herz, spokeswoman for the Brewers Assn. “It’s just a matter of when.”
This has translated into enviable growth rates for individual craft breweries such as New Belgium, which define themselves as small, independently owned operations producing no more than 6 million barrels a year. Jordan says her company’s annual sales have risen an average of 15 percent; some of her smaller rivals have seen even more rapid increases.
The challenge, as ever, is to sustain growth in an increasingly crowded field. According to the Brewers Assn., there are now 1,829 craft breweries in the U.S. and 760 more in the planning stages. That means a flood of new beers for fickle craft aficionados, some of whom view older craft brands like Fat Tire as uncool. At the same time, companies such as Anheuser-Busch InBev and Miller-Coors have come to realize that if they want to boost their sales in the U.S., they must compete directly with the likes of New Belgium. They’ve tried before—and failed. Now they’re finally making some headway in this latest battle to influence America’s changing perception of beer.
This unnerves some craft brewers, but not Jordan. “We kind of stumbled into this. For the most part, it’s been pretty hilarious,” she says.
Jordan spent her early years in Sacramento, the daughter of Democratic Governor Pat Brown’s press secretary. After Ronald Reagan defeated Brown in 1966, the family moved to Washington, D.C. But Jordan always considered herself a westerner, moving to Fort Collins in 1976.
After graduating with a social work degree from Colorado State University, Jordan met Jeff Lebesch, who had become infatuated with Belgian beer while touring the tiny country on his mountain bike in 1988. The two married in 1991 and started New Belgium. He brewed up Fat Tire in their basement, using repurposed dairy equipment. She handled sales, often parking her Toyota Tercel between Anheuser-Busch and Miller trucks when she visited accounts. “It wasn’t so tough early on,” Jordan says. “The big guys were busy being the kings. We were flying under the radar.”
Inevitably, Big Beer took notice of Jordan and her fellow microbrewers. In the mid-Nineties, Miller created Red Dog. Anheuser-Busch introduced its own faux craft beers, such as Elk Mountain Amber Ale. These brews failed, in large part because of internal resistance. “You have a lot of people who said, ‘Bud Light put my kids though college. I’m not selling this stuff,’ ” recalls Lew Bryson, a veteran beer writer. At the same time, many craft brewers succumbed to self-inflicted wounds. Between 1990 and 1995, the number of small breweries tripled. Beer sat on the shelves and spoiled. In 1996, Consumer Reports found that many craft beers were “sulfry” tasting, and plenty of beer drinkers agreed.
While many craft shops didn’t survive the late-Nineties backlash, New Belgium prospered, creating innovative brews such as Prickly Passion Saison, an ale brewed with prickly pear and passion fruit that was weird, but refreshing. “Fat Tire, for its day, was a breakout beer that introduced an entirely new flavor to most Americans,” says Christian DeBenedetti, author of The Great American Ale Trail: The Craft Beer Lover’s Guide to the Best Watering Holes in the Nation. “But what they have managed to do since is introduce new beers that have pushed the spectrum wider.”
Jordan proved herself a gifted marketer. She worked tirelessly to convert distributors who might have been reluctant to carry beers like Fat Tire for fear of alienating Anheuser-Busch; they began looking at craft beer differently, especially when they discovered they could sell a case of it for a good deal more than a case of Bud Light. That translated into higher margins.
Her company didn’t have Anheuser-Busch’s television advertising budget, but it had something that else that resonated: an anti-corporate story that has become one of the signature marketing tools of the craft business. From the start, she extolled New Belgium’s culture almost as much as its taste. In 2000 the founders introduced an employee stock ownership plan. They rewarded those who stayed for five years with a cruiser bike and a trip to Belgium. As a result of these and other perks, New Belgium boasts a 93 percent employee retention rate. All these things became part of the brewery’s marketing. The tale of how the couple started New Belgium became an integral part of it, too. It still is, though Lebesch left the company in 2001, and he and Jordan are divorced.
Jordan also urged her craft-brewing peers to avoid past mistakes. “We can be as groovy as we want to be,” she warned at a craft brewers’ convention in 2003. “But if we can’t keep the doors open because our beers lack quality, it won’t matter.”
Nothing fills a bar like the promise of free beer. Jeff White is offering some unusual ones tonight. “You are going to get a little bit of bubble gum in this one and a little bit of banana,” he says. White encourages everybody in the tightly packed room to sample Wild Pitch Hefeweizen. He raises his glass to his lips and takes a drink himself.
This would appear to be a craft beer tasting. It’s not: White is senior director of strategy for Tenth and Blake Beer, a MillerCoors subsidiary. The tasting takes place in the employee pub in the brewing giant’s Chicago headquarters.
Tenth and Blake is the most serious effort yet by a large American brewer to compete in the craft market. Its best-known beer is the popular Blue Moon Belgium White. Many people assume Blue Moon is the product of a craft brewery. This is by design; there is no reference to its corporate lineage on the label.
Tenth and Blake CEO Tom Cardella is trying to create some distance between his operation and MillerCoors. He requires everybody on his staff to be a certified beer sommelier, able to serve an exotic brew in the proper glass at the correct temperature, as a wine steward would do with a fine Chablis. He encourages employees to brew their own beer in the office.
Cardella knows that craft brewers get angry at the corporate omission on Blue Moon’s labels. “At the end of the day, when people get negative on Blue Moon, what they need to remember is the story behind Blue Moon is as authentic as any in the craft business,” he insists. The creation fable: Keith Villa, a Coors brewer trained in Belgium, concocted it at the company’s Sandlot Brewery in Denver. “They were going to call it Belly Side Ale,” Cardella says. “But Keith’s secretary said, ‘A beer like this only comes along once in a blue moon.’ Isn’t that great?”
Cardella has had huge success in blurring the distinctions between his products and those of microbrewers such as New Belgium. In August, MillerCoors announced that its overall sales were flat for the first six months of the year, yet Tenth and Blake’s portfolio enjoyed “double-digit” growth. “Consumers just want great beer,” Cardella says. “They are not overly concerned about how it is made or where it is from.”
There may be some truth to that. Anheuser-Busch InBev is making inroads with its Shock Top Belgian-style ales. In August, Shock Top boasted that its sales were up almost 77 percent for the first half of 2011. Like Blue Moon, the labels on Anheuser-Busch’s craft-style beers carry no reference to their parent company.
Some craft brewers are stoic about the rise of these macrobrewed craft brands. “My outlook is, well, you’ve taught a lot of Americans that cloudy beer with spicy flavors is kind of cool,” says Garrett Oliver, brewmaster of the Brooklyn Brewery. “So who is that really good for? Is that good for MillerCoors? Maybe somewhat. Is it good for me? Absolutely.” Others are more concerned. Sam Calagione, founder of Dogfish Head Craft Brewery in Milton, Del., says, “They go into a Joe’s Bar and say, ‘Hey, we’ve got a craft beer. Instead of a keg of Dogfish Head at $140, we’ll sell you this quasi-craft beer for $90 and you can charge the same price per pint.’ They use these quasi-craft beers as pawns to clear the real craft beers off the chessboard.”
Jordan maintains that her industry’s best defense is to stay true to its roots and continue to foster the indie beer ethos that has served it so well so far. This means fermenting beers with unusual ingredients and even more unusual names. It means operating breweries using alternative energy. And it means telling and retelling the stories of pioneers like herself who rose up against the makers of Budweiser and Miller Lite and prevailed because they were authentic. “We are drawn to stories that resonate with us,” Jordan says. “Beer is ancient. We know that story viscerally, and we like it. It helps us to keep connected to that thread.”
Jordan also believes in a practice that her larger rivals would never consider: Call it craft beer co-optition. When Colorado’s Avery Brewing and California’s Russian River Brewing discovered they were both developing dark Belgium ales called Salvation, they didn’t phone their lawyers. They produced Collaboration Not Litigation Ale. Dogfish Head has done more than a dozen collaborations. One of the most recent, Cornholio, is a Beavis and Butt-Head-inspired Baltic porter, with Three Floyds Brewing of Munster, Ind., and Short’s Brewing of Bellaire, Mich.
These mashups have been hugely popular with fans and are also mutually beneficial for participants. “The thinking is, we’ll combine our chocolate with their peanut butter,” says Dogfish Head’s Calagione. “It grows awareness for both our brands. It’s unique.”
“We created our own reality,” Jordan agrees. “We didn’t say, ‘This is the way the big guys do it. We won’t speak to each other. We won’t drink each other’s beer.’ We said, ‘That’s not interesting to us.’ We hang out together.” Indeed, Jordan is now dating Dick Cantwell, co-founder of Seattle’s Elysian Brewing. The two breweries have been working together since 2008. In October, she and Cantwell introduced their latest collaborative effort, Kick Sour Cranberry Pumpkin Ale.
It’s especially important for New Belgium to collaborate with its small peers. The bigger New Belgium gets, the more it risks losing its credibility. Jordan acknowledges that her company has had some difficulty selling its products to pubs catering to beer snobs. “Sometimes we struggle with these little esoteric bars,” she sighs. “They say, ‘Oh, New Belgium. That’s not exotic enough.’ I would be lying if I didn’t say sometimes that makes me frustrated.”
“We’ve got some of the same issues,” says Ken Grossman, founder of Sierra Nevada Brewing in Chico, Calif. “We are getting chipped away at by some of the new entries. It hurts.”
In early October, Jordan added a chapter to New Belgium’s tale when she reviewed plans for a new test brewery in Fort Collins, inspired by Japanese sake breweries. The walls will be supported by huge timbers. The furniture will be rough-hewn, like something one might find in a giant’s farmhouse. “It has a freedom and a creativity,” the architect says. “It’s uncorporate.”
He knows his client. “I love the look of it,” says Jordan. She doesn’t flinch when she is informed it will cost $652,000.
The official line at New Belgium says the test brewery will allow the company to experiment with smaller batches of beer. But most of the discussion at the meeting is about how the facility will enhance tours, in which New Belgium tells its stories to 140,000 annual visitors. The overriding message? This is not a subsidiary of MillerCoors.
Then Jordan retires to an upstairs balcony for late afternoon beers with her senior staff members. She introduces Josh Holmstrom, New Belgium’s new branding director. He will play an important role in the brewery company’s expansion. He doesn’t know much about beer. But he knows something about selling. Previously he worked at WhiteWave Foods, maker of Silk Soymilk. Before that, Holmstrom was at PepsiCo.
“O.K., there will be no Pepsi smack-downs here,” Jordan warns her other staff members.
Whatever Holmstrom doesn’t know about craft beer, he will undoubtedly learn quickly on the job. As the sun sets, many beers are consumed. Jordan downs two herself. “We have a pretty sweet life,” she muses. “That’s not to say it doesn’t have its stressful moments. But you get to drink beer.”