The People Ingredient: Is it a craft brewery’s biggest threat?

This article expands on the article written by Ed Sealover published in the Denver Business Journal Aug. 5th: “What Ails Colorado Brewing“

Craft brewing is (still) booming. The Colorado economy alone sees $1.15 billion from the burgeoning brewery industry, and currently there are more than 300 brewing licenses in Colorado, according to the Boulder-based Brewers Association. The craft brew business certainly looks delicious … from afar.

Yet growing pains persist. Sure, it has high-profile enemies in the form of big brewer buyouts, trademark disputes and the forecasted bubble burst, but perhaps the most crippling threat resides within the industry and individual breweries themselves: your crew and you. Internal friction, poor communication and disjointed operations can cost a brewery dearly and even lead to its demise. If this is uncomfortable for you to hear, good. That means you must keep reading.

Every brewery has a People Ingredient, which has two main components: the obvious (people) and the formless (their interactions). While it is common knowledge that breweries hire qualified individuals, it is also important to keep them, to utilize their skills and benefit from their role and input on the brewery team. How? That’s a great question, and this is where the tricky part comes into play.

Interpersonal interaction, communication and cooperation face obstacles, and the devil is in the details. These terms are not new but are often taken for granted or misunderstood. What does communication actually entail? What are considered “interactions?” And does cooperation mean more than just getting along?

The keystone is communication. We must pay heed to what Sun Tzu said: “Know the enemy and know yourself.” In this case, the enemy is poor interpersonal skills, and yourself is … well, yourself. How well do you communicate? Communicating is more than using the correct words; it includes listening, understanding the process of word selection, the words you select, your state of mind, your overt and latent emotions, the medium used, knowing your audience and why you feel compelled to communicate at all. This is not easy, to say the least. Even the best businesses can suffer from fragile internal dynamics, miscommunication and misunderstandings that can decrease productivity and foster disappointing results.

Communication breakdown

While poor communication and disjointed operations can plague any company, the craft brewing industry is especially vulnerable to these common pitfalls. Many breweries start out as small businesses, without the budget or scope to maintain full-time staff to manage the daily facets and dynamics of internal communications or to install and maintain special systems for grievances and feedback. Often that responsibility falls on the brewer, the owner, a board member or shift supervisor — if there are any. And their pint glasses already runneth over with their primary responsibilities. Furthermore, many small craft breweries are formed by close knit groups where established relationships are plunged into unfamiliar waters. Emotions can affect difficult business decisions, and vice versa, making sticky situations almost immovable and especially frustrating. Fortunately, there are processes craft breweries can acquire and utilize to prevent and avoid potential internal disasters.

In a March 8, 2016, Forbes article, Harpoon Brewery CEO Dan Kenary discussed his leadership lessons and revealed that he and his business partner couldn’t co-exist. Eventually, Kenary’s passion for beer conflicted with the need for profits. He realized the salience of the People Ingredient. His employees became his partners and culture came first.

David Lin, chairman of Comrade Brewing Co., understands the importance of the People Ingredient. With a background in hospitality management and sporting an MBA, David hires people “who are smarter and more talented” than himself and “there’s no shortage of those people.” He applies the age old motto: Treat people like you would want to be treated. While this is great advice with a strong foundation, keeping up its practice in a business setting can be difficult. Especially if starting a brewery involves outside investors.

Brewers focus on creating beer they love: Investors and owners rightfully seek return on investment and to keep costs low. Disagreements and disputes between the sides ensue. Egos and judgments inflate. “Brewers are not managers,” a brewing industry profession once told me. Add to that its reverse, “managers are not brewers,” and we get a recipe for toxicity and damage. But they need each other.

Or as Tim Myers, Strange Craft Beer Co. owner, deftly put it: “Being an awesome homebrewer doesn’t make you an awesome business partner … breweries that have great recipes but no business savvy have had to find out how to survive.”

Myers should know. He spent 18 months in conflict with a Boston homebrew shop over trademark and other legal issues. Now he is parting ways with a business partner and friend of 12 years. “We were a textbook case for everything that could go wrong, would go wrong.” he added. “Two buddies going into business together is almost as risky as a couple thinking that having a child can save a marriage!”

The People Ingredient: The family feud over the Schlafly craft beer trademark has ended.

Myers described themselves as naïve, thinking they knew everything needed to open a brewery. They didn’t have responsible partner practices, they had no operating agreement and “while we were frenetically running and trying to expand the business, things failed.” He currently spends “too much of his time” negotiating a buyout. Hardly a yellow brick road.

“I’m happy we’re still alive,” said Myers, adding that having business experience in one industry doesn’t prepare you for the craft brewery business. He wished he had spent time and money using business or communication consultants on crafting an operating agreement, as well as a buy/sell agreement. “If we had written and verbal communication plans in place and had agreed on a set of solutions while we were all on the same page, it would have changed everything. When forming a partnership, everyone assumes it will be rosy; no one talks about the ‘what ifs.’

It’s not a negative process to plan for the future, it’s looking out and protecting each other.”