During its annual staff summit earlier this week, Great Lakes Brewing Co. owners Pat and Dan Conway announced that the company would be starting an Employee Stock Ownership Plan (ESOP), giving workers a minority stake in the company.
The Conways made the announcement Monday while presenting the annual “Conway Award” — historically given to a single employee — to all 245 workers of the 30-year-old, Cleveland beer company. News of the ESOP was first reported by the Cleveland Plain-Dealer.
The Conways also had a special beer — Extra Special Opportunity Pils — brewed for the occasion with a label that read: “For freshest taste: Enjoy on this day, May 21, 2018, and for years to come.”
Great Lakes CEO Bill Boor told Brewbound that the ESOP will start “relatively small” with the Conways diluting their ownership stakes annually in order to build the ESOP trust.
“This is more of like a gift from Pat and Dan,” Boor explained. “They’re allowing themselves to be diluted so that the employees can share ownership in Great Lakes.”
According to Boor, the Conways, who had maintained a fifty-fifty ownership stake in the brewery prior to Monday’s announcement, have been considering going the ESOP route for about a decade.
Great Lakes’ ESOP is non-leveraged, meaning the company will make contributions to the program as opposed to a “leveraged” ESOP in which a business borrows money in order to buy back shares from investors.
“This wasn’t designed to be a liquidity event for Pat and Dan,” Boor said. “It wasn’t designed to bring capital into the company. This is 100 percent focused on putting an ESOP in place so that our employees can share in the upside of Great Lakes.”
Cathy Ivancic, an advisor with Workplace Development Inc., which consulted with Great Lakes on the ESOP, described the plan as a “contributory ESOP.”
“It’s an additional benefit, and the company pays for those shares and makes a contribution,” she said.
Ivancic added that the ESOP will not cost anything to employees.
“In fact, at Great Lakes, it’s a contribution in addition to a very generous profit sharing and a 401K match,” she said, noting those benefits will continue.
The value of the stock — and contributions from the Conways this year — will be determined following an end-of-the-year independent valuation. Boor said contributions to employees will be based on a yet-to-be-determined percentage of income. He added that some of the plan’s details — including how long it will take for an employee to become vested — are still being determined.
Great Lakes, which sold about 150,000 barrels of beer in 2017, joins an expanding list of craft brewery owners who have chosen to turn their companies over to employees. Last July, Modern Times Beer Co. announced the implementation of an ESOP, giving the company’s workers a 30 percent stake in the 4-year-old San Diego-headquartered company.
Other beer companies that have taken similar paths include Deschutes, Harpoon Brewery, Left Hand, New Glarus, Alaskan Brewing Co., Voodoo Brewery, Odell Brewing (partial ownership), and New Belgium and Switchback, which are wholly-owned ESOP companies.
Harpoon CEO Dan Kenary has been a vocal proponent of ESOPs and challenged brewers to institute employee-ownership programs during last June’s Brewbound Session.
Boor told Brewbound that Great Lakes consulted with Kenary as well as Odell Brewing and others about the programs. (Harpoon produces Great Lakes’ canned products.)
“Dan sent us an email last night welcoming us to the club,” Boor said. “They’ve been a model for us.”
The announcement of the ESOP comes two months after Great Lakes announced the purchase of eight acres of land on the Scranton Peninsula, which the company has earmarked for a potential brewery project.
A sale price for the property was not disclosed, but Boor called the investment “significant.” A timeline for the project has not been set, but Boor added that finding a way to do the ESOP without taking on debt was important.
“We’ve got some big strategic decisions in front of Great Lakes that if we decide to go forward with them are going to need a healthy balance sheet,” he said. “So we found a way to get into the ESOP world without levering up our balance sheet and cutting up any strategic options.”