Brewbound Podcast S2 E4: Wynne Odell and Ken Grossman Prepare to Step Back

[00:00:00] Justin Kendall: Heading to CBC? Kick things off the day before at Brewbound's meetup at Love City Brewing in Philly, Sunday, April 19th from 5 to 7 p.m. Connect with beer industry leaders, grab a drink, and catch up with the Brewbound team. It's free to attend and walking distance from the convention center. Head to Brewbound.com slash lovecity.rsvp. And don't forget to catch the Brewbound team at booth 956 during CBC. Welcome back to the Brewbound Podcast. I am Justin Kendall and back in the studio with me today is Jeffrey Klineman, the editor of BevNET. Jeff White's up?

[00:00:49] Jeffrey Klineman: Not too much, man. It was a crazy weekend. Watched Borat with the boy. Borat? Borat. Borat. Not a lot of craft beer in there, but I'll tell you it's the kind of juvenile spark that could take a young man and cause him to start making fake IDs. I hope it doesn't involve swimsuits. No, it does not involve swimsuits. It's getting cold here in Massachusetts.

[00:01:15] Justin Kendall: Well, I have a cold, as you can probably hear from my voice, so I've got like a deep voice going, it feels like, maybe not to anyone else.

[00:01:26] Jeffrey Klineman: You know, there's something about this studio that makes me feel a little hoarse as well. Maybe it's that we need to stop recording on Mondays.

[00:01:33] Justin Kendall: Yeah, maybe we should stop doing that altogether.

[00:01:36] Jeffrey Klineman: Yes, so you're saying we stop recording Mondays, we stop Mondays, or we stop recording?

[00:01:42] Justin Kendall: All of the above. No, I'm excited to be here. I'm excited for these two interviews we have with Ken Grossman, the founder of Sierra Nevada, and Wynnee Odell, the co-founder of Odell Brewing. We're going to talk about what happens when the founder's journey is near its end.

[00:02:03] Jeffrey Klineman: What's it like to be able to talk to these folks who were really present at the creation of this industry that you're covering now?

[00:02:11] Justin Kendall: I'm always shocked at how open they are and how available they are. I just saw Ken in New Hampshire at the New Hampshire Brewers Association's meeting. He's like a celebrity when he goes to these things. I mean, he is a celebrity. He's a billionaire craft brewer. And he's just as down to earth and like welcoming to everyone.

[00:02:37] Jeffrey Klineman: You gotta imagine that's not a term that he or Wynne or even someone like Jim were thinking of back in the day. Billionaire craft brewer. It's like world champion S.D. Jones.

[00:02:56] Justin Kendall: Well, there can never be a world champion SD Joe, unless it's on a regional circuit and we've got regional craft brewers, right?

[00:03:05] Jeffrey Klineman: But like many of the great wrestlers, every once in a while, the great craft brewers have to leave the ring. So tell us about what we're going to hear.

[00:03:13] Justin Kendall: We're going to hear from Wynne and Ken in separate interviews that I recorded at the Great American Beer Festival about their succession planning and how that sort of played out, how the conversations went with their, well in Wynne's case, with the co-founders and just why they played out the way they did.

[00:03:33] Jeffrey Klineman: A lot of models for stepping aside these days, you pass it on to the family, you pass it on to the employees via an employee stock ownership plan, you pass it on to Heineken by selling to Heineken. or continue with private equity or other strategics. But the point is, craft beer is an industry that has matured over the course of its founders' lifetimes. And now we're finally starting to see them think about how they move on. So I'm really looking forward to these interviews.

[00:04:13] Justin Kendall: Yeah, let's roll the first one with Wynnee Odell. This is Justin Kendall for the Brewbound Podcast, and I am here at the Great American Beer Festival still, and I'm joined by Wynnee Odell, one of the founders of Odell Brewing. Big news today, you guys are announcing the transition. What's it like?

[00:04:35] Wynnee Odell: That's right. We're announcing the transition of our three co-founders of Odell Brewing, Doug, Corky, and me. And it's been a long time in process to get this in place. And we've been thinking about it since easily 2013. So this isn't like any new information to us or our organization, but it is to the craft brewing world. So we're excited to finally be seeing the end results of this really nice, long process.

[00:05:04] Justin Kendall: What's the response been like? What have you heard from folks?

[00:05:09] Wynnee Odell: Well, since it was only leaked in your session this afternoon, I've had all of two hours since then, so we haven't gotten much response from it. Internally, certainly, we've gotten a lot of response, but externally, not so many people knew that we were on this path.

[00:05:23] Justin Kendall: What's it like to sort of, you know, let your employees in on that and try to maintain the buy-in from them in a multi-year transition like that?

[00:05:35] Wynnee Odell: Right. You know, we started thinking about this transition process, I think I said, back in 2013. And so it's been a long time for us to think about how the messaging works and how we communicate. But a big factor in our communication was that in 2015, we sold the company to our employees. The founders each retained 10 percent. Our executive team outside the founders has 51 percent. And then we have a 19 percent ESOP. So the ESOP is our largest shareholder. So that was stage one of communication. We're already transferring ownership to this group. So then the discussion of how we transfer the management just sort of organically grew from that.

[00:06:17] Justin Kendall: At the beginning of the year, you started a journey of co-CEO with Eric Smitty Smith. He has been your chief sales and marketing officer. He's been with the company for 25 years, which is kind of remarkable in this industry.

[00:06:31] Wynnee Odell: It certainly is.

[00:06:31] Justin Kendall: And so when you have an employee like that, who's been not just loyal, but dedicated to the company, what's it like to sort of hand off that role to him?

[00:06:44] Wynnee Odell: You know, your comment about him being loyal and having been there for so long, I know this man for 25 years. I know everything about him. I know how he works. I know how he would operate in the CEO role. So it's a very easy transition in that sense. It's not like we have to figure each other out or learn what our differences are. We already know that, and we know how we're different in style. And I can already imagine him in this role. and how he will behave differently than I did, but with, I'm sure, even far better success.

[00:07:20] Justin Kendall: When you look at the company and where it's at, because you guys have been on this path of slow and steady growth, and I think you told me that you've only had, what, three out of 30 years where you guys were down?

[00:07:32] Wynnee Odell: That's right. Three out of 30 years, and the biggest downturn we've taken was less than 2%. That's ridiculous. Yeah, it is. It's almost boringly ridiculous. It's true. But it's been a very conscious effort to maintain that steady paced growth. So how how do you pull that off?

[00:07:48] Justin Kendall: Because there are a lot of companies who would love to be in that position. But how do you sort of maintain that? I mean, how do you pull off this slow and steady growth year after year?

[00:08:00] Wynnee Odell: You know, part of maintaining paced growth is to be very thoughtful about what you take on in any given year. And so when we look at the opportunities available to us, we pick the ones that we think are the best shots. We pick a variety of them so it's not all are done with just one option. And we don't bet the bank on what we do. We look for things that will give us slow strategic growth and we look to diversify as much as we can. And I think we've been successful at picking the right mix each year of what will move us forward.

[00:08:32] Justin Kendall: When you're on that path, it would seem to be, and when you're in that position where you've only had three years where you've had negative downturn, that would seem to be very easy to pass that off. You know, you're handing off the company in a very great position.

[00:08:50] Wynnee Odell: That's very true. And what is so cool about this transition is one of the things that the founders wanted to accomplish, the principal thing the founders wanted to accomplish in selling the company was to maintain the cultural legacy that we all as a whole company had built over 30 years. And so to be able to pass it on to someone who's been with us for 25 years, who lives and breathes the same ESOS that we do is very reassuring. It's almost like he's family. Oh, absolutely. Like he's family.

[00:09:19] Justin Kendall: Yeah. And with this change, you've also brought on a number of executive team members to sort of fill in the roles. Could you walk us through that?

[00:09:30] Wynnee Odell: Absolutely. So we sold the company five years ago or four years ago, almost five. And then About two years after that, we brought in some consultants to help us work through the actual transition itself, because we were having a hard time getting our arms around it. And as part of that, we started looking at not just the transition of the founders out, but who then moves into the vacuum that's created by that. So we have our executive team and we also have a team that's a secondary leadership team that manages all the operations of the company. And we had incredible candidates on both those teams because most of them have been with us for a long time and again live and breathe the brewery the same way we do. So when we started thinking of what skill sets we needed to fill for the skill sets that were leaving, it was easy to pick the individuals who were working in that role already and had proven their leadership abilities and their dedication to how Odell runs its business. So it was a long process. We had a lot of whiteboarding to make sure that we were getting the right people in the right places. We weren't looking so much for who the individual was, but what the individual skills were and how they had applied that already in the business. And now I think the executive team we have in place is much stronger than what we had in place before. The founders are still sitting on it. It's a really big group right now. But we'll be off that at the end of January, and then they'll be flying on their own.

[00:10:59] Justin Kendall: What's that going to be like for you when January hits? How are you going to feel?

[00:11:04] Wynnee Odell: That's really hard to say. So far it feels really good. And knowing that that's the date, you know, it gives us some certainty of what's going to happen. It's not like we're moving to Nepal and we'll never be around anymore. As I say to everyone, we're still on the board. I'm still chair of the board. That's not going away. And then all three of us have the last name Odell and Sierra live in Fort Collins. So everyone is going to still think we own the brewery, the people who live in Fort Collins. and we'll certainly disabuse of that mistake, but I don't know, it just seems like a very organic transition. We've been moving ourselves out gradually over time, taking more and more time off, and I think it'll just, we wake up the next morning, it's like, great, what's our next trip?

[00:11:45] Justin Kendall: You mentioned to me that you really liked the organic approach of sort of the baton handoff that Ken Grossman and Sierra did with their CEO leadership. So I guess when you looked at that, you know, why was that so appealing?

[00:12:03] Wynnee Odell: because we were just moving someone who had already been sort of taking on some of the CEO responsibilities directly into the role. So now he has the title. He'd always acted as. to the extent he could or was able to, given that he's our chief sales and marketing officer also, had already been performing some of those activities and thinking at that level and having that perspective on the company. So it just seemed, you know, it's not even news to us that we were doing this. So it's actually great that we've had this opportunity with Brewbound to make it a little more formal so people aren't having to guess who they're supposed to call for what. But with Sierra Nevada, it was sort of the same thing. He'd been working side by side with a new CEO and just then he moved into the position and no one even noticed on the outside. So we're hoping that we have some of that same activity.

[00:12:54] Justin Kendall: So your phone isn't blowing up at the moment with people?

[00:12:57] Wynnee Odell: No, my phone is not blowing up.

[00:12:59] Justin Kendall: That's good to know. And so if we take a step back to when those conversations started, when you have three founders who are making that decision at the same time, How does that work? How do the conversations go and how do you make sure that everybody is sort of on the same page?

[00:13:20] Wynnee Odell: You mean between the three founders?

[00:13:21] Justin Kendall: Yeah.

[00:13:22] Wynnee Odell: I appreciate that question because I said we started in 2013 and it's the three founders sitting down making the decision about the future of the company. And at that point, we owned 98% of the stock, so we only had to consult the three of us in what we were doing, which allowed us to share each of us what was most important to us. And we didn't have to worry about any outside opinion about the decision. It was entirely ours. And we came up with three things that we decided were most important to us when we were getting ready to sell. And the first one was that we wanted to maintain the cultural legacy of our company. So that was what was most important to us. And second was, so I did mention these?

[00:14:01] Justin Kendall: You mentioned cultural legacy.

[00:14:02] Wynnee Odell: Okay, so that was the biggest one. And in making that decision, we realized that the best people to sell it to would be the people who had actually helped us build the company, because they had created that legacy. They were the ones who lived it, breathed it, and made it real. And then because we were going to do an internal transaction, selling it to the people who built it with us, our third guideline was we wanted to maintain financial stability for an organization. So as we all know, when you do an internal transaction, it takes all the cash out of the company to allow the buyers to pay off the sellers. And so we wanted to make sure that when we set the transaction up, we weren't beggaring the company. And it's not that we're stupid and it's not that we're saints. We got a great valuation and a great price for the company, but that it just wasn't our top concern, how much we were going to get out of it. So those were the three things that we got to decide. And as I said, it was just the three of us making that decision. So we were entirely aligned in that the three founders were no argument about it. It took us a while to articulate what we were thinking, but no diversity of opinion on it when we got to the final three.

[00:15:08] Justin Kendall: Wow. Yeah, that's kind of impressive. Well, it is. Yeah.

[00:15:12] Wynnee Odell: I mean, it helps that we're all related.

[00:15:14] Justin Kendall: Oh yeah, I imagine that doesn't hurt, but that's not always the case, you know, with family. It can very much go the other direction, and so it sounds like you're very fortunate.

[00:15:25] Wynnee Odell: Yeah, and we never anticipated it would. We've always worked together really well. We have three very different skill sets, but we share absolutely same bedrock core values.

[00:15:35] Justin Kendall: And among those core values is not dying with your boots on, which I think you told me a couple of times.

[00:15:40] Wynnee Odell: Oh, absolutely. And I feel so strongly about that. I now am on this mission of sharing with everybody ways to be thoughtful about your transition, because I hear so many horror stories of people who just put it off and put it off, like, you don't write your will. And what are you thinking, that you're never going to die, or that you're never going to want to do something different in your life, or that the people who work with you are never going to want an opportunity to make their own stamp on the business? So I am really pleased with the way our process went. It felt I wouldn't say entirely simple. There were definitely hang-ups during it when things got more difficult, but we always centered right back to where we had been before and kept moving on. And I already forget how I started that sentence, but whatever it was.

[00:16:24] Justin Kendall: We had some technical difficulties. You lost an earring. I did, yeah, right in the middle of it. That's all right. But it is that advice that you would give, I guess. When you think about that, and you mentioned being on a mission to sort of tell people, think about your transitions, think about the future and think beyond yourself. It's like, that's such a hard place for so many people to come to. So what advice would you give to an owner who is considering a transition?

[00:16:56] Wynnee Odell: Boy, there's lots of things I'd recommend if you're considering a transition, or actually, even if you're not considering a transition, a lot of things that I would recommend. And a central one is to make it so the world of your business doesn't revolve around you. Start delegating, start passing off responsibilities. helping build capacity and capabilities in your team and the individuals and make it so at some point you become irrelevant. And this is not me admitting that I'm relevant or acknowledging that I'm irrelevant, but it's the idea of making it that when I leave, it doesn't create this huge tsunami that knocks everyone off their feet. What do we do next? When I leave, it's seamless. She was here yesterday. She's not here tomorrow. That's a good point.

[00:17:38] Justin Kendall: And somebody else had mentioned to me it's like hiring to like replace yourself.

[00:17:43] Wynnee Odell: Absolutely. It is. And that I think every business owner, every manager should have that in mind. They should be grooming the person who's next in line to move into that. Well, they're thinking about what their next step is. My next step is retirement. But through this whole process of getting to where we are, that process has been grooming stage by stage the people who work with us. And I shouldn't give myself credit for grooming Eric moving into this. together for 25 years. He's his own force. He brought his own talents. He has his own skill set. I was just fortunate that he came into the company when we did so that we could together build that culture that he now is inheriting. How is he different?

[00:18:25] Justin Kendall: What do you think he'll do with the company that, you know, you guys weren't doing?

[00:18:30] Wynnee Odell: You know, I would have a harder time coming up with anything Eric and I had in common. Really? Yeah. He is a remarkable human being and we are very, very different. He is outgoing. He is creative. He's big picture. He loves activity. He loves people. And I am much more of an introvert. I am much more reluctant to participate in group activities. I like to do my thinking on my own and then come back and reaffirm and discuss and reform with a larger group. So we just have very different personalities.

[00:19:08] Justin Kendall: Yeah. Well, it's going to be interesting to see play out over time. But in the meantime, you're still going to be sitting on the board and the employee owners have a ways to go before they pay you all off, right?

[00:19:22] Wynnee Odell: Yeah, there'll be at least a couple more years before they're done with that. And then our board structure will change a little so that the executive team will have control of the board where the founders currently do. But all of us will still be in the room, but the voting structure will change some.

[00:19:38] Justin Kendall: It'll be a three to two split at that point to executive team once it's all paid back and two founders and two founders.

[00:19:46] Wynnee Odell: Again, all six of us, all six direct shareholders will always be sitting in the room. And one thing I should share that we are in the process of putting in place is. adding an advisory board, we're calling an advisory council to consult with our governance board. So these will be people in the industry, we've already solicited a few, we're going to set this up next year, have them actually start coming in. In part, so we have outside perspective on what's going on, because we're so inbred, everyone on the board works or did work at the company, owned stock in the company, to give us outside advice, but also to help us with that transition of the founders no longer knowing what's going on day to day, so being a little more distant, so the management team that still is in place is going to have to be very thoughtful about what material they provide to both the advisory council and the founder half of the board. I think it'll be really helpful so we don't ever get in the us versus them between founders and the continuing management. And we're certainly not in that position now, but when our perspectives change as the founders are further and further removed from the day-to-day, I think it'll be important to have a larger set of voices in the room to be able to make sure we're staying on track.

[00:21:05] Justin Kendall: So what does retirement look like? I think we discussed this before. Is it, you know, yachting?

[00:21:11] Wynnee Odell: Yeah, you had me yachting on the wholesalers boats. That's great. No, I don't think I'm going to be doing that. No, it's all the things I've loved to do until now and more of it. I really look forward to travel. I really look forward to spending more time on my bike. I really look forward to coming down to the brewery on a Friday afternoon and having a beer. I'm not starting another job. I intend to continue to be an evangelist for having well-informed transitions and that's about it.

[00:21:37] Justin Kendall: Well, that's a lot.

[00:21:38] Wynnee Odell: Yeah, I'm absolutely looking forward to it. A continuation of what I already enjoy.

[00:21:43] Justin Kendall: Well, congratulations and thank you for all your time. I really appreciate it.

[00:21:47] Wynnee Odell: Oh, absolutely. Thank you for inviting me. Cheers. Cheers.

[00:21:53] Justin Kendall: All right, that was our interview with Wynnee Odell and Sierra're going to run our interview with Ken Grossman right now. Ken is going to talk a little bit about getting his old brew house back and going on the road with that. But we also talk about transitioning as well out of the CEO role and taking a step back and basically a decade of delegation. So here's our interview with Ken Grossman. This is Justin Kendall for the Brewbound Podcast, and I'm here today with the founder of Sierra Nevada, Ken Grossman. Thanks for having me on the show. Yeah, thanks for doing it, man. I know you're super busy. We're at the Great American Beer Festival, and you've got your old brew house here.

[00:22:36] In Episode: Yep. I've got the home built sort of cobbled together brew house. I started building in 1979 and it was assembled from Gary equipment. I think the mash tun is a old cheese vat and the kettle was some old steam cooker that had rusted through that I ended up putting direct fire burners under. So it's pieced together and actually the whirlpool I welded up all myself, so a lot of home-built equipment that I hadn't seen in almost 30 years. I sold it in 1988 to Mad River Brewing and just got it back last year.

[00:23:10] Justin Kendall: So last year, and you didn't have to pony up any cash for this.

[00:23:15] In Episode: No, we worked out a swap, so they had some equipment I wanted, and I wanted my old brew house back, and we came up with a swap. I think I gave them just a little bit of money to make it equal, but it was pretty much an even trade for equipment.

[00:23:28] Justin Kendall: That's awesome. And it's still operational.

[00:23:31] In Episode: It will be operational. So we've converted it to propane and we've made it so it can be roadworthy. So we put it on, built a frame and then actually just put wheels under it a week ago. And we drove it out to the Great American Beer Festival through sleet and storm and snow. It just arrived last couple of days and they rolled it into the Great American Beer Festival Hall.

[00:23:55] Justin Kendall: And you're taking it on the road from here?

[00:23:56] In Episode: Well, it's going to go back to Chico for some final plumbing, and then we're going to take it on the road and brew some five and ten barrel batches various places around the country next year. Are you going with it? I'm going with it. You are? Yep. I don't know if I'll be with it the whole time, but I will be there to brew. Okay. Where do you go? We're going to kick things off San Francisco Beer Week. Okay. And then we're going to go to the Homebrewers Conference, and we got various other places we're talking about, so we haven't totally firmed up our travel schedule.

[00:24:26] Justin Kendall: Yeah. Well, that's awesome. I want to get into 2019 with you because this seems like a very transformational year for Sierra Nevada. You officially handed off the reins to Jeff White as CEO, and you guys made your first acquisition in Sufferfest from San Francisco. So I want to get your thoughts on how you're going to reflect on 2019 once it's over.

[00:24:51] In Episode: You know, 2019 is, you know, we started off the end of or the end of last year, the beginning of 19, you know, having lived through the campfire. So that was, you know, pretty significant for our community and for our employees. And so that was sort of, I guess, a negative way to end 18 and to start 19. And then we've been, You know, sort of building from there, Jeff did take the reins. He had been with us for a number of years in the COO role, and I was backing out of some of my day-to-day responsibilities the last almost two years now and handing them off to him. So it's been a change, but I'm still involved in the technical aspect of the brewery, which is the part that I've loved doing. So I get to, I just came back from hop selection last week. I still keep my fingers in the brewing process quite a bit. So that's where my love's always been. And he's dealing with a lot more of the business challenges and the people challenges and all the things that aren't necessarily fun for brewers to have to deal with, but have to deal with if you're running a business.

[00:25:53] Justin Kendall: That was a very quiet and organic sort of handoff. Why did you guys sort of, you know, keep that to yourselves?

[00:26:00] In Episode: I don't know that we kept it. We did an announcement. We didn't do a big press release about it, though. And I think that was in part both of us' decision that, you know, I'm not leaving the company. I'm not going away. So I think our decision was to, you know, as we transferred responsibilities and as I continued to stay involved in what I've always done as far as the brewing side, we didn't want to make a big deal about it just because it wasn't, you know, a huge shift in the operations.

[00:26:28] Justin Kendall: Yeah. When you're making a move like that, because you said it, you first started to think about it about two years ago, you start handing things off. What's that process like for you? How do you sort of take that step back?

[00:26:42] In Episode: So it actually, I started handing stuff off probably 10 years ago when I was first thinking about building Asheville. And I hired a plant manager, Al Spinelli, and I started handing off sort of a lot of my responsibilities back then. And then Jeff came in and he took over. He started out as an operations person. His discussion with me was, I want to take anything off your plate that you don't want to do, and that's preventing you from doing what you do want to do and what you're good at. So I thought that was a great way to make the transition. It was, I guess, a relief in some ways to be able to step back from some of the stuff that was really keeping me from being involved in the brewing process that I loved.

[00:27:24] Justin Kendall: I was going to say, I wondered if it was difficult to sort of take that step back. For a lot of founders who have been involved from the beginning, being able to delegate is such a hard thing to do for them. But it sounds like you were very willing and into delegation.

[00:27:42] In Episode: I mean, if you go back to our early history, so, you know, I got to deal with all the HR issues. I mean, there was a lot of stuff that were distracting me from beer and brewing and the process of making beer that I just had to deal with. It was just, you know, we didn't have a big team. So, yeah, I guess I welcomed somebody who was willing and willing to step up to the plate and take on a lot of that stuff. That is an important part of running a business, but not necessarily an important part of making beer.

[00:28:12] Justin Kendall: Yeah. And so you're back to beer making. That's where you are.

[00:28:16] In Episode: That's my focus. Yep. Beer and other stuff. So, you know, we're looking at kombucha and so I've jumped in on that side, but I'm always somebody who loves to be involved in the nuances and details of the brewing process. So I still get my hands dirty and I get to have a lot of input into process and plant.

[00:28:35] Justin Kendall: What sort of excites you at the moment about brewing? Are there styles? Are there beers that you guys have coming out? What's sort of lighting the fire for you?

[00:28:44] In Episode: Lots of beers coming out. So we have a very active R&D program we have for years. So we've got quite an engaged team that's doing test brewing, pilot brewing, barrel aged stuff, wild stuff, sour stuff. So that's interesting for me to branch out from where I started, which was a pretty simple brewing program with Pale Ale, Porter, Stout. We didn't do a lot of innovations. We did dry hopped IPAs with Celebration Ale back in 81, but as far as our range of styles, we were pretty limited until probably 20 years ago. We put a small research brewery in and we now have a team that Gets to do that, we've got a half barrel brewery, a 10 barrel brewery, a 20 barrel brewery, and then a 100 and a 200. So we've got a lot of opportunities to experiment and got a separate sour cellar at both breweries. We've got a whole barrel program. So those are fun things that I never got to play with when we had one brewery building and you really couldn't do that stuff there.

[00:29:46] Justin Kendall: Yeah. So I'm really sort of curious on the founder taking a step back role and letting the day to day go and how that process and that mindset works. And you've sort of touched on that, but I want to go a little deeper on that. And I'm curious what advice you would give to other founders who are in a similar position and you know, maybe looking at that type of delegation. I'm not sure I'm the perfect example.

[00:30:19] In Episode: I'd say I do like to keep my fingers in the pie in a lot of the areas that probably I should back out. Two of my three kids are involved in the business and fairly regularly they're like, you shouldn't be involved in this. You should not be looking at the daily pub sales every day.

[00:30:33] Justin Kendall: You're still doing that? Oh, yeah.

[00:30:35] In Episode: I get that data and I was like, well, you know, I like to keep a pulse on the business and it's something that I look at. I try not to micromanage those operations. I probably do to a small degree, but, you know, I have not abdicated my role. I've delegated a lot of it. So I still think it's important to at least pay attention to, you know, what you've built and your operations at some level.

[00:30:58] Justin Kendall: And that's what you'd tell someone who is, you know, maybe looking to take a step back?

[00:31:03] In Episode: Yeah, don't abdicate all your responsibilities, but figure out a role where you can add value and have some oversight, but allow your team to grow and make mistakes on their own.

[00:31:13] Justin Kendall: Yeah. We talked a little bit about one of the big moves that you guys made in 2019, which was the acquisition of Sufferfest. What was it about Sufferfest that, you know, made them the one brewery that you guys wanted to acquire?

[00:31:30] In Episode: So that was actually one of Jeff White's projects. So he had met Caitlin just about a year ago today. They were speaking at Bill Anderson's Blue Box presentation in Southern California. So that's where they met. And actually Joe Whitney had run into Caitlin before that and said, really interesting Brad Avery different consumer than typical Sierra Nevada consumer. And it's a category that we think is going to continue to grow. So lower calorie, low carb. gluten reduced. And so it was an intriguing category that we didn't think that doing a Sierra Nevada version would necessarily attract the same consumer just because of the history of what Sierra Nevada has produced over the years. So we thought, you know, having a different brand platform and having a real person who knows that segment, who knows that tribe of athletic consumers would be helpful to launch a brand platform like that.

[00:32:30] Justin Kendall: So when Jeff and Joe come to you and they're like, there's this thing called Sufferfest, you know, this brewery called Sufferfest, and we're sort of interested in acquiring it, you know, how do those conversations go? Lots of them.

[00:32:44] In Episode: You know, just, you know, understanding the segment and the rationale. And so it took quite a bit of discussion for all of us to think it was the right move.

[00:32:54] Justin Kendall: When do they bring you in? Is it immediately? Pretty immediately.

[00:32:58] In Episode: Yeah. Yeah. So we have plenty of opportunities crossing our desk almost daily from around the industry, from, you know, brewers struggling, from brewers wanting to get into the segment, from outside of beer, people wanting to leverage our distribution network. So we have quite a few opportunities that get put in front of us.

[00:33:20] Justin Kendall: Yeah. You're getting a lot of those across your desk now. How many of them do you review and how many of them do you take seriously?

[00:33:29] In Episode: You know, for a stretch there, we were looking at a lot of them, but it's time consuming and distracting. And, you know, for us, it's like, okay, why would we be looking at this? What's it do to the Sierra Nevada business? How do we get synergies? What's it do to our portfolio? What's it do to our Salesforce focus? I mean, there's a lot of concerns we have about a lot of these opportunities. And I think we've gotten more choosy in the ones we're even looking at today.

[00:33:55] Justin Kendall: So are you still sort of looking or are you open to the idea of potentially more acquisitions?

[00:34:03] In Episode: I would say we're still keeping our eyes open, but at this point we're not driven to go find something to buy, no. It would have to be a really unique situation for us to have interest.

[00:34:12] Justin Kendall: And that's where Sufferfest sort of checked a lot of the boxes that made them the one.

[00:34:18] In Episode: And again, that was a year ago, and that was a unique situation. I think we probably looked at 10 or 20 or 30 since then in and outside the beer category, and we probably looked at 100 before then. So there's still a lot of people who need some kind of partnership to survive.

[00:34:37] Justin Kendall: Yeah, it's definitely one of those times where, I mean, we're definitely at an inflection point in the industry, and there are a lot of breweries out there who are struggling to make it. So I'm curious to get your thoughts on where we are in craft brewing. You know, where is this thing going to go in the next year or two?

[00:34:58] In Episode: You know, I think as an industry, beer is pretty flat. I don't need to tell you the numbers. I'm sure you're very aware of sort of we're not growing as a category. There are certain segments of the category and today it's a lot of non-beer kinds of beverages that are seeing growth. We think craft beer is here to stay. We think that the segment will have some kind of a rationalization of players and marketplace, but it is probably harder today than it's ever been on the distribution front, on the distributor focus front, on the consolidating distributor network and the lack of the ability to brand build through those distributors. You've got to really do it on your own. So there will be, I think, quite a shakeout in the next few years of brewers that are heavily leveraged, brewers that have investments from funds and investors who want liquidity. We think there'll be a few years of pretty rough sailing. We're hoping that there will be, you know, some rationalization of the consumer as far as you know, supporting brands that make great beer and, you know, less faddish in the consumer eyes. But I see it being pretty challenging the next few years. I don't see it getting a lot easier anytime soon.

[00:36:13] Justin Kendall: Do you believe that we sort of hit this faddish moment? Yeah. Why is that?

[00:36:18] In Episode: maybe faddish isn't quite the right word, but you know, there's been a, the newness in a lot of people's mind, new equates better, different. And it's not necessarily that way. You know, not everybody's making great beer.

[00:36:30] Justin Kendall: And I mean, it's the local thing too. Like local also doesn't equal, equal, great.

[00:36:35] In Episode: No. And I think, you know, there will be, and there are, there already is, you know, a lot of players that are, aren't making great beer that are struggling. I mean, if you have a, a brew pub that makes great beer and has great food and you've got a great location, you might have a good business. But if you miss any one of those, you're going to struggle and probably not survive long term.

[00:36:53] Justin Kendall: That's such a hard place to be, too, because even if you are making great beer and even if you are doing all the right things, you might not make it. I mean, there are no guarantees, obviously, but I mean, even when you're hitting the right bars, it's like, It's a hard business.

[00:37:08] In Episode: It's a very tough business. The margins. I mean, a lot of people on the outside think it's really rosy and there's big profit margins. But running a small brewery is very capital intensive. There's running a restaurant. So if you've got a brew pub that you've got to make great food as well, and that's a very hard business. I mean, most restaurants don't make it. So if you've got a brewery that's got high input costs, high capital costs, high employee costs, and high rent, you know, add all those things up, the margins can be really slim, and you have a downturn in the economy, or you have some local issue and you struggle. So we've talked to a lot of brewers in markets that are bad weather in Southern California, San Diego, those areas. We've talked to brewers that are seeing some challenging numbers last year because of cold weather and people aren't going out as much.

[00:38:01] Justin Kendall: Is California in a recession?

[00:38:03] In Episode: I don't think California's in a recession. Certain pockets of California have had challenges for sure.

[00:38:08] Justin Kendall: And you're telling me that craft brewers aren't all rich? No.

[00:38:13] In Episode: No, and I think that's going to come home to haunt a lot of them who did take on a lot of debt, who did take on a lot of investment money, and with the hope that there's going to be 30 or 40 percent a year growth for the foreseeable future, and you get somebody who built their business model on growing year over year, some double-digit number, and their business is flat, those economies just don't work.

[00:38:37] Justin Kendall: Why do you think people were so confident in that double-digit growth, that high double-digit growth continuing?

[00:38:43] In Episode: naivete in part, you know, it had been pretty rosy for 8 or 10, 12 year stretch, whatever, you know, wherever you look in whatever part of the segment. So people saw, you know, 30% growth in the segment and I'm going to jump in now and, you know, the next year it was 20 and then 10 and then zero. And I say a lot of their business plans don't work anymore if they took bank debt and or investor debt.

[00:39:08] Justin Kendall: Yeah. When you do look at the landscape and there are still, I think the number was like a thousand new breweries coming online, you know, and the closings are nowhere near the same pace. I mean, they're up. I think we're going to see about 300 closings this year. I guess for those brewers who are coming online, who are trying to join this industry, what advice would you give to them?

[00:39:36] In Episode: You know, I think some business models will still work well and be successful. So I'm not saying that there's gloom and doom across the whole industry, but there are business models that are going to be more challenged. And certainly if you were planning on opening a packaging regional brewery today, that would be a pretty tough market to enter into. But if you're You know, you're in a community that isn't overly saturated with breweries and you've got a good chef and good restaurant plan and somebody who knows the industry on that side and you've got a good brewer and you've got friendly money or your own money to invest that doesn't expect an immediate return. I mean, you can make a go of it for sure.

[00:40:15] Justin Kendall: Do you think that the window for someone to be the next regional packaging brewery has closed?

[00:40:24] In Episode: I think it's going to be really hard if you were to be starting up today and you wanted to be a 200,000 barrel brewery or even a 50 or 100,000 barrel brewery. That's a pretty tough business model today, just getting distribution. I mean, if you can self-distribute in your state and you've got a community or a city where that works well, that might be a way you can get to market. But I wouldn't go into it thinking that you're going to be a multi-state distributed through a wholesaler network without huge resources. When we started out, we had no salespeople and no marketing budget. We were very opportunistic in our distribution choices. Somebody wanted our beer, we were like, great. We didn't have to support it much. We didn't sell a lot of beer. But it did allow us to sort of get a national footprint or close to national footprint 25 years ago. You couldn't do that today. They would expect a marketing budget, a sales force, representatives giving him business goals. All the stuff we didn't do is an expectation. Now you've got to do that with a wholesale network.

[00:41:30] Justin Kendall: Well, and just look at retail, because an on-premise retailer, they're anywhere from 20 to 40 to 70 taps at any of these places. And, you know, well...

[00:41:43] In Episode: It's really hard. When I started, they were, you know, lucky if there were three. And if you normally, if you got a tap, you might keep it for years. Yeah, it was the Sierra Pale tap. Yeah, today it's one keg, and then we're going to rotate into the next guys.

[00:41:55] Justin Kendall: Man, there's no loyalty.

[00:41:57] SPEAKER_??: Nope.

[00:41:58] Justin Kendall: And it's definitely a different time. So when you're looking at Sierra, and you're looking into the future, and you're looking 10 years from now, where is Sierra Nevada? Where is Ken Grossman?

[00:42:13] In Episode: Well, hopefully I'm still doing OK. I'm 65 this year, so I'm starting to want to figure out how I can play more. And I know I'm not going to live forever, so I've got to figure out how to split my time between working hard and playing hard. The focus of our company now is how to stay relevant and trying to make sure we put products out that people want to drink and that we support the legacy brands as best we can with Pale Ale and the other brands we've been doing for years. But we're open to investigating, spreading our wings a bit as far as what we brew. We want to always make sure that whatever we produce resonates with who we are as a company. So I don't think we'll come out with alcoholic water anytime soon. No hard seltzers? Probably not. I'm not going to say never to anything, but I remember years ago, my kids told me, I said never to cans. But then I was the one who pushed them hard probably 10 years ago. So I did realize that they had a place and that they were probably the package of choice in the future.

[00:43:17] Justin Kendall: What does playing hard look like for Ken Grossman?

[00:43:21] In Episode: I sail, I cycle, I dive, I fish, travel quite a bit. You're the model Sufferfest customer. A little bit of that, but I also, I love projects, so I weld, I still do some of that stuff. If you saw what I did in my spare time, you'd be pretty shocked. I drive tractors, I put in water systems, hydroelectric plants, you know, all sorts of fun pursuits.

[00:43:50] Justin Kendall: You have a different definition of fun than I do with the...

[00:43:53] In Episode: I got to keep busy, so I've always had that challenge. I like to keep my mind busy and my body engaged, and I like to accomplish stuff.

[00:44:03] Justin Kendall: Awesome. Well, any final thoughts you want to leave our listeners with, Ken?

[00:44:07] In Episode: It's uh you know this is my 40th year so when I started there were you know just a handful of breweries in this country and really I think between 78 and 82 six making craft beer and we've come full circle today so we've got I think most amount of breweries ever and we're you know the trendsetters for the globe, I think, as far as coming up with beer and beer styles and sort of setting the pace. So it's been an exciting, exciting industry to be part of all these years. We'll look forward to the next 40. Well, thanks. Hopefully we can do this again in 40 years. Let's do it. OK. Cheers. Thank you. Bye.

[00:44:44] Jeffrey Klineman: Wow, that Ken Grossman does a lot of crazy stuff in his spare time, doesn't he?

[00:44:49] Justin Kendall: Ken is far more active than I am, and I think he's 65.

[00:44:54] Jeffrey Klineman: You better be nice to him or he'll come over and weld you.

[00:44:59] Justin Kendall: You know, the one thing he said was he wanted to do the interview in 40 years and I'll probably be dead in 40 years and Ken will still be kicking and doing all of these different hobbies that he has.

[00:45:11] Jeffrey Klineman: Well, maybe it'll be your kid. who's doing the interview, and I want to bring up a point here. Ken's got family in the business. I don't know that Wynnee and her family are staying in it, but what's your sense of some of these regional craft breweries as family businesses? Do you see founders wanting to keep their kids in?

[00:45:41] Justin Kendall: I think when you can do that, it's funny how it's played out because it's a lot like the wholesalers and there's like a generational succession plan in a lot of those businesses. And we've seen a lot of those wholesaler businesses sale recently because there was no interest in the next generation and carrying it on. There's no generational leap. Whereas with Sierra, there is family still involved. With Odell, even though that they've gone the ESOP route, there will always be sort of a link there. So I think when you can keep it going, that's obviously the goal is to pass it on.

[00:46:24] Jeffrey Klineman: You know, there are big tax implications for later generations, I think. And some of these wholesaler routes have never been more valuable and the market for them has never been higher. Whereas we're just seeing a surplus of craft brewers come into the market. But what a cool family business to be in.

[00:46:49] Justin Kendall: So Jeff White other takeaways did you have from the two interviews?

[00:46:55] Jeffrey Klineman: Well, I think one thing that we've heard is you've really got to start planning what's next because you turn around and you've been in this business for 20, 30 years and you have to decide, is it a family business? Is it the kind of thing that can survive without you? And we find a lot of founders, even ones who built businesses that can hold up over a few decades, start to get the impression that their businesses can't survive without them. Sometimes that's the case, but sometimes they just get too big for them. And it's always a big struggle, no matter what business you're in, to figure out what your role in it is the years roll by.

[00:47:41] Justin Kendall: Yeah, with Ken, it seems like he's been trying to move some things off his plate for the last decade or so. And when Jeff White came on, he had said it in the interview, you know, it's, I want to take the things off your plate so you can get back to doing what you want to do, which has got to be a great thing for Ken. And then with Wynne, Eric Smitty Smith is taking over and he's been a 25 year employee of the company. So you're, I mean, I mentioned it to win. It's, it's like he is family at this point. He's been there 25 out of the 30 years. That's a pretty good track record.

[00:48:19] Jeffrey Klineman: Neither Smitty nor Jeff White is Ken Grossman or Wynnee Odell, which is to say, what's the impact on the industry overall, do you think, Justin, as these real founding figures start to move to the next stage of their career and eventually off the stage?

[00:48:45] Justin Kendall: I think it hurts the industry, to be honest with you, when they step out from the perspective of a cult of personality, where you've had a founder who has been so omnipresent, you know, such a big force in the industry, and then they step away. Luckily, you know, in Ken's case, in Wynne's case, they're still going to be ambassadors for the industry for many, many years to come. as you lose some of these longtime founders, I think you're losing a lot of your sort of rock stars that have been out there.

[00:49:22] Jeffrey Klineman: Yeah, it's always tough to lose pioneers, but let's hope they never lose their taste for beers.

[00:49:30] Justin Kendall: Yeah, and there's still a younger generation of brewers that, you know, you can look to in whether it's Bryant Goulding at Rheingeist or Tommy Arthur at The Lost Abbey or even even younger brewers such as Peter Bissell at Bissell Brothers or JC at Trillium, you know, you hope some of those personalities rise up. And there's always Sam Calagione of Dogfish Head, which is about as big of a personality as you can get out there?

[00:50:01] Jeffrey Klineman: Yeah, it's funny. There's still explorers in the world, even though Sir Edmund Hillary passed away, the folks who conquered Everest or the South Pole and the North Pole, there are always new worlds to conquer. And we're glad to have so many explorers in the craft beer space to write about and to tell their stories.

[00:50:28] Justin Kendall: Absolutely. That is our show for this week. Thanks for tuning in. We are available on iTunes, Stitcher, Spotify, Google Play, Libsyn, and SoundCloud, which I'm imagining you figured out if you made it this far in the podcast. If you enjoyed the show, leave us a rating and a review and share the podcast with your friends and colleagues. Drop us a line at podcast at Brewbound.com. That's podcast at Brewbound.com if you'd like to be featured or share your thoughts. I'll respond at some point, I promise. Thank you to our audio team, our guests, Wynnee Odell and Ken Grossman, and all of our listeners out there. Cheers!