Interview with 10 Barrel Brewing Founders and Anheuser-Busch InBev CEO of Craft Brands (Part 1)

The morning of November 5, 2014, most Americans woke up to the news of election results which informed us that the Republican party will now have control of both the House and the Senate in Washington. Here in the Pacific Northwest we learned that Oregon would become the third state in the union to legalize cannabis for recreational use. For us Pacific Northwest craft beer lovers, we were hit with the news that 10 Barrel Brewing was in agreement with Anheuser-Busch/InBev to so be acquired outright.

Obviously there were many opinions flying around across the Internets, many within Brewpublic’s readership demographic who worship artisan beer such as the brand that 10 Barrel is renowned for were a bit taken aback, many downright upset at the brewery for what they see as morally selling out or giving in to the multinational Belgian owned behemoth aka “the Man.” This is a very easy and obvious response, especially in a region where craft and local community is so important.

However, a lot of the critics have never met the owners of 10 Barrel Brewing and have never had the opportunity to sit down and converse with A-B/InBev’s craft beer CEO. I have felt very blessed to have known many of the 10 Barrel staff since their early days. I’ve always held them and their beer in high regard and though I must admit that I am always skeptical when it comes to the largest of global brands stepping in to buy out local enterprise, I felt I must hear more 10 Barrel’s side of the story to see what what up with this who undertaking.

It was no surprise to me that when I entered the agreed upon site of the interview at Belmont Station, that the 10 Barrel staff would be accompanied by a small team of Anheuser-Busch InBev staffers. Perhaps some of the answers were a little coached, but in sound business, that’s the way things are done in Big Business. With 10 Barrel co-founding identical twin brothers Chris Cox and Jeremy Cox and their brand ambassadors Mark Carver and Mayme Berman were two other A-B InBev reps. No they were not wearing suits and dark sunglasses, they were dressed casually in standard Northwest-appropriate attire. These men were Andy Goeler and Adam Warrington. Goeler who has served as a VP with Anheuser-Busch currently holds the title of CEO of craft at the company, overseeing brands such as Goose Island Beer and Blue Point Brewing. Warrington, A-B’s Senior Director of Corporate Communications, referred to himself as the “PR Guy” and welcomed me to bring further questions after the evening’s interview to him via email.

For a communications director, Warrington had little to nothing to say and had an air of awkwardness looming about him, while Goeler with an East Coast cadence quite reminiscent of Robert DeNiro was far more personable and enthusiasticly embraced all of my questions with press release-like responses that came from a place of much study in the craft beer world. For all I know these guys at InBev have law degrees too. I regret not asking them if they did. To be honest, I was quite surprised that they didn’t bring a lawyer with them to make sure nothing improper was spoken. Despite any preconceived notions I brought into this interview about Anheuser-Busch InBev and the larger lowest denominator breweries, I felt honored that I was afforded the opportunity to speak with them about this big news and what it means to the future of craft brewing.

Andy, when did this new position of overseeing craft brands come into play? Is it relatively new considering the acquisition of Goose Island Beer (Illinois) occurred just a few years back and soon after the acquisition of Blue Point Brewing (New York)?

Andy Goeler: Actually, what I’ve been doing is running Goose Island for the past two years. And then we did a partnership with Bluepoint, which is a little craft brewery out in Long Island. So when we did the partnership there I had oversight responsibility for helping them and now the third one (10 Barrel), so it’s a vault over the past couple of years.

Where are you based?

AG: Chicago.

Note: After learning the names, roles, and assumed responsibilities of the men on hand from Anheuser-Busch, I turn to 10 Barrel Brewing co-founder Chris Cox and ask him what his title is.

Chris Cox: (Laughing) I don’t have a title. I want to title. I want to be CEO of 10 Barrel Brewing Company.

When had it become official that 10 Barrel Brewing was acquired by Anheuser-Busch?

Chris Cox: So we are not actually acquired. We are in the process. We are closing at the end of the year and we announced (November 6, 2014) at 9:00 AM.

How did this whole deal come to fruition? Who approached who in initiating this acquisition deal?

Andy Goeler: (Looks at Chris and Jeremy as all concur) You guys can probably get with this: it was mutual, A mutual coming together. I know from our perspective, we first and foremost loved the beers. That’s something that’s very important as we look at trying to do partnerships like this, making sure that the beer is outstanding. These guys (10 Barrel) have an amazing portfolio of beers so that kind of intrigued us and made us want to go to the next level which was getting to know the guys and how they run their business. And again, we just loved their approach, the culture that they had been established at 10 Barrel; a very beer-centric, a great team, fun lovers. I think they like to drink beer more than anything which is, again, things that are very important to us. It’s just a great beer culture, so, it was about six months ago when things started.

Jeremy Cox: From our perspective, and you already know this, we’ve already been aligned with A-B Distribution since day one of signing up with Maletis (Distribution), we went with Western Beverage along the I-5 corridor, so we’d already had our relationship established with A-B. They’d obviously already done a great job of growing our brand over the last four years. We’d already had that communication there so it was an easy next step forward for us when we started talking strategically. Garrett’s dad owned a distributorship in Bend it for 28 years I believe also.

Note: Known under many names including High Desert Beverage, Mt. Hood Beverage and others, the brothers tell us that it was operated under something like six different names and had been acquired more than a dozen times in those nearly three decades.

What are plans for reaching further distribution after the acquisition takes place?

Garrett Wales: Currently we are going to concentrate on the Northwest and stay in our core territory, in our back yard. We don’t have any plans to grow distribution currently. Obviously we’ve been growing our business at a rate we are comfortable with in the last for five years. I think we will remain growing at that same rate, but primarily we are focusing on our core markets.

The way your brewery is set up right now, it is set up to produce about 50,000 barrels at maximum capacity, Is that correct?

Chris Cox: Yup, the way we are set up right now with the tank farm, the brewery has capacity to do about 48,000 barrels. The building if you look at the maximum capacity, is probably somewhere around 100,000 barrels.

How much if you include the Boise, Idaho brewery?

CC: Those are the pubs, and if you include the Portland pub, those can do about 1500 to 2000 barrels annually depending on what beers they are brewing. You know this, but there are no restrictions on this. It’s up to what the pubs are doing. Sometimes they brew beers that sit in the tanks for (up to) seven weeks.

So for the most part Anheuser-Busch InBev have kept the quality of their craft beers, notably those from Goose Island Beer, intact and at a high quality and consistency level suited toward the most discerning beer geek palates. However there has been speculation that A-B’s craft beer lineup will include corn and rice or other adjuncts in future “craft” beers to cut costs or start cutting corners where quality is concerned to turn a profit. What do you say to those critics and further will 10 Barrel keep the beers brewed in Bend, or like Goose Island, will some core brands like the Apocalypse IPA be brewed elsewhere (St. Louis etc)?

Jeremy Cox: Definitely right now we are focused on brewing beer out of Bend. We have the ability to grow the capacity out of the Bend brewery Jimmy (Siefrit) the brewer is brewing the same beer today as he’ll be brewing tomorrow. We haven’t gotten into discussions of where we will be brewing the beer in three years from now, but we are just focusing on brewing the beers out of Bend and staying in the Northwest.

Chris Cox: …And Boise and Portland at the pubs, too.

Note: At this point in the interview Michael Taylor (Anheuser-Busch “finance guy”) pours in along with 10 Barrel Brewing co-founder Garrett Wales.

There’s been some speculation even from brewers at larger scale venues, as well as from other insiders, that perhaps Budweiser has a strategy of now seeking out craft brewery brands of relative size such as 10 Barrel, Goose Island, Blue Point. Are their any ideas of looking further into other unchartered craft territories for AB like the Southwest and looking into picking up say a San Diego brewery like a Ballast Point, a Green Flash sort of brewery and moving on into other markets like Midwest, Southeast, etc?

Andy Goeler: I would say that there is no grand strategy. There’s a lot of talk about that but there really isn’t a grand strategy. Obviously, you look at opportunities as they come up. 10 Barrel made so much sense to us because of its geography. In specific terms the Pacific Northwest is an incredible craft part of the world. This is the hub of craft in the world so having a partnership with a team like this in this area makes tons of sense for us. Blue Point is great on the East Coast, A nice regional brand around that metro New York area. Goose Island plays phenomenally in the Midwest, so this is a great partnership for us to participate in in this part of the world. In terms of what’s next, we’re always looking for opportunities but there is no grand master plan.

Would you like to see the staple beers from 10 Barrel being brewed at your other facilities like Goose Island beers currently are?

AG: The beauty of what we did at Goose Island is that we took some of those bigger buying brands that were available in all 50 states and freed up a lot of time in capacity in the Chicago breweries. So now, all of a sudden our brewing teams have a lot of time to innovate and start creating stuff. We went from having about a 20,000 square-foot barrel aging room 240,000 square-foot barrel aging room. We have a whole team who do nothing but mess around with barrel aging – wine barrels, Bourbon barrels, and they are constantly experimenting. We’ve got a lot of local farms in the Metro Chicago and Michigan with fruit flown in constantly so these guys have some sour beers that the teams have worked on. It’s amazing. (Mass brewing core brand craft beers) has freed (Goose Island brewers) to innovate. You talk about the real craft lovers, that’s the kind of stuff that excites them, that they look for, so some of the staples are great for an audience of consumers, but there’s also the audience of “What’s next? Go ahead and shock me with something that’s new.” That’s the art of brewing. So I look at the brewing team at Goose Island and here and they want to create. That’s the fun part. So we’ll do the same in. We’ll let these guys and gals by helping them with some resources from access to ingredients to better distribution opportunities to some brewing expertise to help them with some things and some ideas. If anything, what we want to do, I use the word “facilitate”, like we did to Goose. I know there was a lot of “oh, they are going to cut costs and they’re going to make the beers less quality.” That’s not at all what’s going to happen. That’s going to be the opposite.

So is the brewmaster team of Jimmy Seifrit, Tonya Cornett, and Shawn Kelso all on board with this acquisition?

Chris Cox: 100%, and Whitney (Burnside).

And they all knew about it and were totally cool with it?

CC: Uh, yeah, um, they all found out about it at different times. Everyone found out about it at different times so everyone is aware.

They were all initially cool with it?

CC: They’re all excited about the opportunity. You tell Shawn and Jimmy there’s a hop farm up in Idaho (Elk Mountain Farms) and “You can plant whatever hops you want and you can take advantage of that.” That’s like a kid in a candy shop. Tell Tonya “Hey we can throw another 50 barrels in your sour room, and her eyes open up big and gets really excited. So they’re really excited about the resources that we’ve talked about and are bringing into the brewery. It’ll let them further showcase their skill set.”

It’s amazing to see a beer that Tonya has brought forth from a four-barrel brew system at Bend Brewing that is now going to be brewed by AB-InBev, the largest brewing company on earth. It just blows my mind (group of us all laugh). The Cucumber Crush is now going to become an InBev beer!

(Asking 10 Barrel folks) When A-B purchased Goose Island, their pubs stayed in contact with founder John Hall. The 10 Barrel transaction stated that A-B purchased all of your entities. Was selling the entire operation your goal or was this something that the A-B pursued or required?

 

Garret Wales: It wasn’t a goal and it wasn’t required. I don’t think either of those are the right answers. I think that the way we positioned our pubs in support of our distribution networks with getting Portland up and running and obviously Boise in Idaho and Bend in the center of things, it’s part of what really strengthened our brand. It’s part of what brought us to the attention (of A-B InBev). It’s played a key role on the distribution and production side as well. Instead of being a bunch of small pieces to the puzzle it’s all one big piece. We never really looked at it in our growth as two separate entities or is one independent of the other. They’ve always gone hand-in-hand and I think that that, speaking on behalf of Anheuser-Busch, is what was identified in a strength in the brand as well. It was just kind of a no-brainer looking at the whole package.

Is this sale something that you view as something that will allow you to free up a lot more time doing other things in your life that you like to focus on…

Garrett Wales: …Like open more pubs (Wales and 10 Barrel team laughs).

Chris Cox: …Like brew more cool beer (more chuckles ensue)

Once the Portland pub opens, are there any others soon to follow like in Seattle for example?

GW: All along our plan has been to continually grow. Getting Portland up and running and start looking, start seeing what makes the most sense and what markets we are going to have the most fun in, continuing that process. Right now, there are no plans for sure. We need to get Portland up and running, get great beer coming out of there, keep things running smoothly at the other locations and then hopefully the conversation will take place where we can start looking at additional pubs but right now the emphasis is definitely Portland, Portland, Portland.

Are you looking at early 2015 to open up in the Pearl District in Portland?

GW: Yeah, hopefully. Call it February.

Next up in part 2, the 10 Barrel and A-B InBev folks respond to questions and comments directed at them from Brewpublic readers and social media followers.