Even if you offered Eric Wallace $1 billion, he says, he wouldn’t sell Left Hand Brewing Company — the Longmont, Colo. craft brewery he co-founded in 1993 — to a private equity firm. Instead, he just entrusted more than half of it to his employees.
That makes his semi-utopian business philosophy a bit more believable.
“We never got into this to make a lot of money,” Wallace told Brewbound during a phone conversation. “How much money would it take to have the same impact, with just money, versus being an operating brewery within our local community? I don’t think even with $1 billion that I could replicate the impact and do what we are able to do because of who we are.”
Wallace said he started Left Hand with the idea of “fixing the beer world.”
“Not that we were doing it solo, but when we started I was extremely beer aware,” he said. “I saw all of these breweries popping up and realized that was my life calling. Like the Blues Brothers, it was a mission from God.”
22 years later, Wallace’s mission is now geared more towards rewarding and retaining Left Hand employees and, through a hybrid model of selling direct equity and shares of an employee stock ownership plan (ESOP), employees now own a majority of the company, Wallace said.
“Our vision is to be significantly employee-owned,” he said. “That means everyone is engaged and has a stake in the results.”
Left Hand, which earlier today announced the creation of its new ESOP, has repurchased — with the help of a bank loan — more than 15 percent of the company’s stock from existing shareholders and plans to make a series of ongoing contributions to the newly established trust. Prior to establishing the fund, Left Hand employees owned about half of the company’s equity shares, Wallace said.
“We have fostered a culture of employee ownership for a long time and had built a fair amount of employee ownership prior to establishing the ESOP,” he told Brewbound.
So does he ever envision a future where Left Hand is 100-percent employee owned?
“Could it? Yes. Is it necessary to be 100 percent employee owned? I don’t think so,” he said, noting that the company isn’t looking to push out its original shareholders.
In recent years, ESOPs have become a popular succession option amongst established craft players. Last July, Boston-based Harpoon Brewery announced it would sell 48 percent of the company to employees. In 2013, Colorado’ New Belgium Brewing announced a 100 percent employee owned structure and, four months later, Oregon’s Deschutes Brewery announced that it had established an ESOP, which was just 8 percent of the company’s total stock. Alaskan Brewing also has a similar program. And earlier this year, Oregon’s Full Sail Brewing exited its ESOP, after selling to San Francisco-based private equity firm Encore Consumer Capital.
Establishing an ESOP was an option Wallace favored over selling to a larger brewer, like Anheuser-Busch InBev, or to a traditional private equity firm.
“When the money starts calling — and we get a lot of calls — that is a bad sign,” he said. “What is the job of private equity? Make money. It is a bit less soulful of a job and they have no place in the Left Hand Universe.”
“Money is only a tool for us,” he added. “Making money is not why we started this and there is no way I am going to sell out for a bunch of money. It [craft beer] is way too cool of a business and we have way too big of an impact on our community.”
So how does Left Hand plan to continue growing alongside competitors who have opted for the financial resources of A-B and private equity? Slow and steady, Wallace said.
“We are constrained by our cash flow and we recognize that,” he said. “Going deeper and deeper into existing markets and opening new markets cautiously is our model. We don’t need to be in every single state, just the ones we can support.”
The company, which produced 74,500 barrels of beer in 2014, expects to brew up to 90,000 barrels in 2015. With additional equipment installments and facility upgrades coming online, Left Hand could eventually brew as many as 120,000 barrels and the company is currently assessing additional expansion opportunities.