There's been a lot of mergers and acquisitions in the craft beer sector lately, and a couple weeks ago it all kicked off with something unprecedented. Greg Hall, former Goose Island Brewmaster, sold his Virtue Cider company to Anheuser Busch-InBev, marking his second acquisition (the first when he was part of his father's brewery, Goose Island) with the multi-national brewing conglomerate in just 5 years.
"I don't know who's gonna catch up to me and sell two companies to AB," says Hall. "I'm the leader in the clubhouse of hate mail, I think, and I'm okay with that."
But long before he sold Virtue to AB, the company was dealing with a lot of frustrations. They lost their head cider maker, Ryan Burk, to Angry Orchard, as well as quality sales people in multiple markets. They strained—and, in some cases, broke—relationships with farmers. They had their federal PACA license that enables them to buy apples get suspended due to debt. From the beginning, they struggled with sales in a variety of ways, partly due to super-premium pricing and inconsistent availability and product. All this while the cider itself was sought-after by cider geeks across the U.S., showing up at Zwanze Day, the Festival of Farmhouse Ales at Hill Farmstead, and numerous collaborations with renowned chefs. The ciders that Burk was once making at their farm in Fennville were among some of the most interesting and progressive in the country.
The acquisition by AB seems to many like a calculated get-rich move by a guy who already knew how "deals with the devil" are struck. But the struggles of Virtue's business, and a cunning plan to blow up and sell out, don't exactly align. Both narratives can't be simultaneously true, at least not with that kind of clarity. More likely, there we're conflicting desires that pulled at the company's vision all along. Perhaps, only in hindsight is there a possible understanding of the real problem: if Virtue was ever going to become the thing Hall hoped it would, it would need to be saved from itself.
Worth noting, I have relationships on all sides of this story. I do strategic and creative work with Goose Island periodically, like now, which includes engaging with Greg from time to time. Also, Ryan Burk, his former cider maker now at Angry Orchard, is one of my best friends. I also do work with other small cider makers and breweries that could be considered competitors to all interested parties. All this to say, I have considerable bias from many angles here, although I'd be hard-pressed to point to exactly where it lies.
So, why write it then? Because every other media outlet is just copy/paste with the press releases or rolling their eyes, and that's a real shame. There are a number of lessons in this conversation with Hall, a polarizing figure by any measure, about what can happen when you step away from your passion to run the business side, try to raise money on a daily basis, get in over your head, and lose focus on your vision in the midst of opportunity. And that's more important to me than being concerned about any particular bias I might have. It always is.
Big week in craft beverage.
Yeah, no shit! Turns out to be a good week to announce a sale, if you’re not interested in talking about it much it’ll disappear. It’s amazing to me that people didn’t see that coming from Lagunitas, though.
The music’s playing and anybody who want to find a partner is going to try and find a partner pretty quick. I’d be very surprised if Deschutes, Dogfish, Great Lakes, if they don’t announce something. At some point if you’re the last man standing that’s independent, it’s going to be hard to grow.
Absolutely. The fact that Tony went to Heineken, or at least that’s the way the story goes, tells me he knew who the biggest player left was that could afford him, and he knew he didn’t want it to be Bud or Miller, so there weren’t a lot of other potential buyers for him.
Diageo or Constellation. There’s a few out there still, and I think you’ll see more of the Duvel-Moortgat types acquire a bunch of big regionals.
Let’s talk about your situation with Virtue. Once you opened yourself up to that being a real possibility, selling to AB-InBev and Goose Island, I know it came together quickly. What were a few of the overriding factors that made it seem like a potential deal was going to occur?
As I’ve said to others, the biggest thing that changed from 2011 to 2015 is the size of the market and the opportunity out there. The demand that we’re getting for 12-ounce and new markets that we have not been able to supply.
I know you were in places like San Francisco and New York, and I think Texas was a recent market entry. What were some of the markets you were having more trouble supplying than others?
What happened is we had several markets that wanted to add us in the last two years. In 2013, we started bottling and that’s when we added a bunch of markets. In 2014, we only added a couple because we were worried we weren’t going to have supply. We were trying to figure out how we were going to 1) supply stuff and 2) support the market. We found, and this is no big surprise, when you support a market with bodies and presence, the market does great. And when you don't support a market, you can struggle.
Early summer of 2014, we started talking to money people, but they were interested in competing against companies like Angry Orchard, so trying to be a low-cost producer. That was not what we wanted to be at all. And while they brought money, they didn’t really bring any of the other resources we needed: the packaging side, sales and marketing, distribution.
I’ve got to imagine that anybody that wanted to put you up against Angry Orchard either fundamentally misunderstood the product you were making or didn’t necessarily understand what it would take to sell cider like that. You were making high-end, artisanal ciders with price-points that reflected that, whereas Angry Orchard was making a quality product, sure, but they were aiming for the heart of the mainstream with their formats and prices points.
Some of the money people we were talking to weren’t even interested in the cider we were making. They just saw we were a name out there that had some good brands, and they thought, with backing, they could blow us up. We weren’t interested in getting into that race. We’re interested, first, in continuing to make cider the way we were and having more support. We changed our focus toward the end of 2014 to partnering with a brewer that would have the sales force and a packaging component that could keep us focused on making cider, on apples and barrels, and everything that goes on at our farm.
I know needing a sales force, a packaging line—these are pricey things to add to any organization. I know capital structure was really holding you guys back in the last year or so. Describe to me some of the factors that contributed to needing a lot of money you just didn’t have.
We basically invested heavily up front in our two cider houses, in that infrastructure, and then we probably over-invested in our sales team in the end of 2013. We had good sales leading into 2013, then 2014 came, and winter came, and it started to fall off much more than we anticipated. We got kind of behind the eight ball. We went back to raising money, but people were interested in things we didn’t really want to do. They didn’t really understand our business or our approach to the business. So that’s when we changed our focus to looking for a brewery partner and looking at Goose. Obviously, number one is my history and relationship there. Even without that, the fact that they’ve got a 12-ounce line, a 750-ml line, a keg line, one of the biggest barrel warehouses and programs in the country, one of the best alternative fermentation labs in the country—all the stuff we do, which is, of course, no coincidence. I started all that at Goose and started all that Virtue, so those are resources that no equity fund could have given us. As we get into it, the lab that Goose has—there’s probably not another brewer on the planet that understands Brett as well as Goose does.
I think I can say that with fairly high certainty, and that is a huge resource for us. I can also say there’s probably not another brewer on the planet that has the barrel program that Goose does. We’re a cider maker that’s focused on doing stuff with wild yeast and alternative fermentation and barrel-aging, so it’s the perfect fit. The fact that they have a sales force that’s used to selling high-end product, like Sophie and Matilda and Bourbon County and the Sisters. It’s not going to be a stretch for them to sell a high-end cider.
Are you imagining that the same person that’s selling things like the Sisters will also be talking about the cider at this point? So the same sales force will be talking about that entire breadth of the portfolio now?
Yes. They have an elite band of vintage salespeople, and their focus is going to be on our cider. We’ll probably be part of the whole portfolio for the Goose team and the overall AB-I high-end team, but we’ll get a lot of focus from the vintage reps.
Looking at the portfolio high and low, I know Red Streak, from day one, was supposed to be that easy-to-say-yes cider from a buyer perspective. That kind of everyday, semi-dry-to-dry cider, that represented the easiest cider in your portfolio. Make a lot of it, use that to support the rest of the higher-end, experimental stuff you wanted to do. But it seemed like it never really, fully delivered on that promise in one way or another. Can you tell me about what the intent behind Red Streak was going to be for the rest of that portfolio and what did and did not work out for you guys with that particular brand?
We launched it in 2012 with 2011 crop apples. That was the only thing we had in the Chicago market in 2012, and we were overwhelmingly successful—more successful than our wholesaler expected and more than we expected. We had a nice commitment from the wholesaler, which was great. River North did a great job for us. We had Michelle Foik, which was certainly a big help. I think the cider was exactly what we wanted it to be. We worked a lot through the fall of 2011, Ryan [Burk] and I, developing Red Streak, and it went exactly where I wanted it to go. Then in 2012, with the next year’s crop, that’s when we had that really horrible crop in Michigan. All kinds of problems with apples and problems with the state liquor commission getting our license for Fennville just because of their backlog.
So we had some problems with quality, as we readily admit. It didn’t live up to the year before. We tried to get that fixed and the following year we just didn’t make as much Red Streak. We didn’t focus as much on it because, in the interim, we’d had so much success with new ciders like Lapinette, Percheron, and The Mitten. That’s what we found as we cycled through the market in Chicago everybody wanted the new stuff, just like they do with breweries. We didn’t focus as much on Red Streak, and as we were capacity constrained, we couldn’t make a lot of everything. We picked the stuff that when you’re a small operator and your capacity constrained, it’s better to make the fancy stuff to pay your bills than the less expensive stuff, so that’s what we did.
I see. It seems like a lot of your competitors—like a Vander Mill, for example—almost take the opposite approach. They make the low-cost, blended hard apple cider in a can to get placements and then try and bring in expensive stuff on the back of that. It seems like from a ubiquity standpoint, at least here in the Midwest, a lot of cider makers are seeing some placement success with that model. Was that a mistake, to focus so much on the higher-end stuff?
Clearly they’re having success. I think what we’re finding in the cider market is it’s going to be just as complex as the craft beer market or the wine market or the spirit market, in that there are different ways to be successful based on who you’re marketing to. I think there are a lot of cider drinkers out there and they don’t always, just like beer drinkers, completely overlap. I think the cider makers don’t either. The cider drinkers that drink the big guys like Angry Orchard and Stella and Smith & Forge—those drinkers are not the same drinkers that Virtue has. In some ways, the stuff that Vander Mill makes is a little closer to that in that they’re very fruit-forward, they balance more toward sugar than tannin or acid, and that’s not a wrong move. Clearly, they’re having great success doing that. It’s just a different drinker than we’re going after.
You had a lot of experience thinking about that kind of target audience during your time at Goose. A lot of what you brought to Goose was blowing the doors open on that upward portfolio. Things that were more speciality made, more unique processes, things the market hadn’t really seen yet or proven could survive there, price points that were pretty high, branding that was appropriate to a category at that level. You were really targeting that wine category back in the day when beer was barely at the table. Is that what you took from Goose when you left to start Virtue from a strategic standpoint?
Very much so. When we created brands like Matilda, there was not a drinker. We created the brand without the drinker, right? If you would’ve gone about it the “big company way” and done a lot of testing in the market, nobody was saying, “Hey, I want a more complex, more expensive Belgian Ale from an American brewer.” There was no demand for that. We created a product that we felt hit a niche that if we did a good job with the beer, with the branding, and with the sales and distribution, that we could create our own niche. I think it proved that we were pretty successful doing that. I feel like there’s probably an even broader niche with cider. If you go to other countries, a big part of the cider market is the farmhouse-style ciders. Other than some guys on the East Coast and the Northeast and the Northwest and a few down in the Southeast, no one’s really making those ciders in the US. If they’re making them, they’re making them on a really small scale, so we figured they’re doing a great job and make great ciders, but they just don’t make enough for the type of scale that the market, at some point, is going to demand.
Do you think you were too far ahead of that demand? You started a lot smaller and slower with Goose’s niche entries.
I don’t think we were too far ahead of it. I think we were ahead of it, compared to all the interest we’ve had and the media accounts. I think we were very early. Just as we were with a lot of things at Goose.
The difference at Goose, though, is they had that entire core portfolio of an IPA and an ESB and 312 and all those beers that paid the bills, right? They kept that thing afloat until the market started really demanding things like the sisters, which are selling even at huge price points because there’s enough market demand. But it took a long time. It looks like there’s definitely a cider audience that’s interested in those products, but it’s still very small. And ciders like this require slow maturation times—you had very limited bottling capacity, you’re in rural Michigan surrounded by a dozen other more mainstream cider makers. You’re not in the heart of San Francisco or New York with access to a large market other than Chicago. Do you think you got outpaced by your own infrastructure not having Red Streak in the place it should have been to support it?
So, up until then, it seems like you were really trying to make a tradeoff between making more of the higher-end, artisanal stuff you wanted to make with the capacity you have, or devoting that capacity to building up a base with something like Red Streak and Prince Hal. For you, that was an in-or-out choice, you couldn’t do both.
It’s amazing how narrow windows of opportunity in this industry can be because I think in that same couple of years that’s when we saw the influx of Vander Mill, who made a huge footprint in the Midwest. We saw Seattle Cider coming in. We saw a lot of fruit-forward, semi-sweet ciders in a can just blow up everywhere. So for Red Streak to have a home at that point, it seemed like a big fight and it had to be something you were really going to get behind or you didn’t have a chance for it, and it sounds like you weren’t in a position to really get behind it.
The other thing that happened in cider, and we’ve seen the same thing in craft beer, in the early to mid-90s, when we tried to get a tap handle in a non-premise account, there was one microbrewery handle, and that was it. If you’re going to replace Boston Lager, you couldn’t do it in 1992 with an IPA. You could only do it with amber liquid, and that’s where we led with Honkers because that’s what the craft retailer wanted back then.
That seems like the crazy position for cider to be in right now because there are producers like yourself and Farnum Hill and the upcoming Angry Orchard farm where Ryan went, making this high-end, artisanal product, but the rest of the industry is still in that 1990s, amber ale stage.
You’re right. What we’re betting on is the amount of time that there’s going to be just one cider tap handle is going to come and go a lot quicker than it went with craft beer. If you look in craft beer, the same thing started but the whole craft category only had one handle in 2000 when Goose Island won a medal at GABF for IPA. We won a gold medal, and we went into bars in Chicago and said, "You should put our IPA on tap. We just won a gold medal. It’s a great beer." And they said, "We already have Sierra. Why would we ever want two hoppy beers on tap?" Now that’s 15 years ago, but obviously we know that’s changed.
The same thing happened in 2005 when we brought out 312. At the time, our second-most popular draft beer in the market was our summertime kolsch beer, which, because people didn’t understand what kolsch beer was back then, we called it a type of German-style wheat beer. That’s how we sold it in the late '90s and early 2000s. When we brought out 312, we said it’s an unfiltered wheat beer, and they said, “Why would we want two wheat beers on tap? We’ve already got another wheat beer.” Then that changed.
I think cider is going to go through that same thing. Right now, IPAs are like European lagers were back in 1992. Everybody probably has too many of them on tap. You don’t really need all of them at once. You certainly may have a selection, and even if they’re the best selling style in a particular bar, they’re not 100%. But they’re treated like they are. It’s the same thing that’s happened in other styles, going all the way back to lagers in the 80s and 90s. I think you’ll see it ends up being the consumer demanding it and not going to a place if they don’t have it on tap.
And you think it will go faster than it did with beer?
I think cider will go faster. And unlike beer, we have a season we kind of own and lay claim to with fall. You don’t have to be educated on cider to know that you pick apples off trees in the fall because half or more of Americans go out and pick apples in the fall. One of the things we had great difficulty trying to figure out at Goose was how to do what we called “demystify beer.”
Part of your plan long-term included an actual farm. You wanted that to feel like a real farm. You wanted animals. You wanted to plant your own apple trees. I know some of the fruit you wanted to put in the ground ended up at another cider maker’s farm in upstate New York when funds got tight. I want to hear why you think it’s important to put fruit into the ground in America. I think it’s critical, but from your perspective, how was that going to tie into Virtue? What is the challenge for cider makers right now about getting that fruit in the ground?
First of all, I want to clear about what I feel is a misconception about making cider with cider fruit. There are certain varieties that are very dominant in the cider market in England—less so in France and Spain—that get a lot of play as being “real, true, authentic” cider fruit. And while they’re great fruit, they’re not the only things you can make good cider with. I remember a certain publicly traded brewery back in the '90s doing a lot of advertising about the Noble hops they used, and how in order to make good beer you had to use European Noble hops. European Noble hops are fantastic, but we grow some pretty decent hops here in America, I’m told. And over the course of the last 20-25 years we’ve seen that even the Europeans like using American hops.
That American brewer that was very dedicated to using noble hops exclusively because American hops weren’t as good, they happen to be the same parent company of the guys saying you need European cider fruit to make good cider. I just wrestle with the authenticity of that statement. If you look at where we were as a country 150 years ago when most people were drinking cider, not beer or wine or spirits, there were virtually no European cider fruits in America. Were they all drinking the wrong kind of cider back then?
Granted, but I think when most people talk about "cider fruit," it’s kind of shorthand for “fruit with more tannin and acid structure, the right brix content, the right overall acidity,” of which there are plenty of examples that have grown and still grown, in a very small way, in America. We have our own heirloom varieties, it’s just such a limited quantity that grow every year. I know you guys use a ton of what people would traditionally call “cider fruit” in your ciders because of the complexity it provides, but I also know it’s a struggle to get a hold of that stuff unless you’re growing your own.
Yeah. It’s always been a minority of what we use. We had one cider that was primarily cider fruits, and while it was favorited by all of our production team, it was kind of our least successful in the marketplace.
Sure. I think a lot of that is because you guys were providing a lot of other things in addition to the fruit character in those other ciders. You had a lot of yeast character, using Brett, or letting it naturally ferment, which is a big part of what makes cider so complex. Are you going to be able to continue that process going forward?
If you grow up in Bordeaux making wine, you’re probably going to have the opinion that you can really only make wine with a certain type of grape variety and a certain type of style. If you’re making that style, perhaps you’re right, but there’s a lot of great wine out there besides Bordeaux or Cabernet Sauvignon. I look at grape varieties very similarly to apple varieties. So can you make a great cider without using high-tannin, English bittersweet varieties? I would argue yes, you can. Can you make the same cider without those varieties? Of course you can’t. But is it diminished because it doesn’t have that fruit in it? I really don’t think so. Same thing with Noble hops, too. To make a traditional, Bohemian-style pilsner, you should probably use Saaz. Using Cascades wouldn’t make it a Bohemian-style pilsner. It wouldn’t make it a bad beer. It’d make it a pretty tasty beer, but it wouldn’t be authentic. I think that’s fine.
I think cider fruit is fantastic, and we’ll use as much of it as we can get to make certain ciders, but in some ciders, it’s kind of inappropriate. It has too much tannin. I think there’s an opportunity for, again, just like the beer, wine, and spirits world, a much larger conversation with the drinker than, “this is the kind of cider that we want to make, and it’s got to be with this kind of fruit.” To me, that’s the most boring set of rules you could ever imagine.
Even going all the way back to your Goose Island days, you’ve been working with fruit farmers as part of Goose's beer-making process, and you would make ciders based on entire farm estates with Virtue, blending al the apples from one farm into a single cider. I also know food and beverage has been close to your heart. You’ve always been part of the Slow Food movement, going way back. When you ended up in that funnel of capital constraint toward the end here, and it was announced that you’d lost your PACA license, losing your ability to buy fruit according to the federal government because you hadn’t paid some farmers for almost two years, what were you feeling at the time? I know it’s something that you, as an individual, would never really have accepted before this.
Right, right. We got behind in our accounts payable. We never really argued with any of our creditors over whether we owed them money. We were just late on stuff, and we always expressed our intent to pay in-full. By the rules of PACA, if you’re overdue, you have to pay a specific amount of interest per month. We planned to do that, and in the case of every apple grower we contracted with, everyone has been paid off and with full interest. It is kind of ironic and troubling that we went at this thing trying to be the biggest friend of the farmer out there, and then we got kind of painted as someone who was trying to take advantage of the farmer, which couldn’t be further from the truth.
Do you understand the way that looks to them, though? Or the frustrations some people must have felt? Some of these debts were in excess of $100,000 two years ago.
Well, it was actually less than that, but with interest it went above that. Most of them were quite a bit smaller, and we paid people off as we could. We paid some people off more quickly than others because that’s what we had the means to do. I think it’s an unfortunate situation that we put this company together and based it on my very strong beliefs that we support the fundamentals of Slow Food, of good, clean, and fair. We wanted to make great cider, we wanted to have as marginal impact on the environment as possible, and we wanted to be the preferred route to market for the apple growers. We wanted them to say, "I’d rather sell my apples to these guys than anybody else because they treat me fairly and they promote what we’re doing." In the case with a lot of them, the smaller guys, we’ll buy fruit that is not necessarily traditional cider fruit, even in the U.S., because they’ve got extra fruit, and we can always find a place for it. That’s what we’ll continue to do. Over time, we will regain our image of being friendly to the farmer because that’s exactly what we’re set up to do. And now that we’ve got resources to do it, we’ll continue on that path.
That’s one of the reasons why we passed on some of the other equity that was out there, because people said, “I don’t understand why you’re paying these high prices for fruit when you could buy apple juice concentrate or you can buy juice, and the cheapest fruit available. Why wouldn’t you do that?” Well, that’s not what we want to do. We want to support the local family farm. That’s part of why we started this business, not just to make great cider, but to support the local family farms in Michigan who needed a market for the fruit. There are still guys who, even around us, are taking fruit like Northern Spy out of the ground because there’s not a market for it anymore. We’ve convinced several other farmers to not take the fruit out of the ground and to keep growing it because we’ll buy all of it.
That makes perfect sense. It must’ve been a hard sell at the time, though, knowing that you were in debt to farmers and trying to tell them, “If you plant this, we’ll buy it. It’ll be worth more.” There’s a disconnect there, obviously, right, If they feel like you might not be able to pay that bill? They’d rather get paid for lower-cost fruit and get something than give you high-cost fruit ahead of time and then wait for the payment.
I think we found even before, in 2011 and 2012, and most of 2013, everybody got paid on time and in-full, and we had no issues with anybody. That was not so much the issue. The issue was that when we talked to farmers they just didn’t want to put new stuff in the ground without a guarantee, and we said, “What do you want for a guarantee?” And there was really nothing we could offer them. I think that's changing. I know that Angry Orchard put a bunch of fruit in. I know Vander Mill is putting a bunch of fruit in. We have a plan to do that ourselves, but we’re not quite ready to announce that plan yet. We think it’s great to put fruit in the ground, but we’re also going to continue to buy heritage apples from the Great Lakes area like Northern Spy, Macintosh, and several other varieties because we feel like the cider we’ve made with those varieties is great cider.
With a lot of that behind you, and now having access to capital and operations that provide the ability to reset a lot of the vision you originally had for this place, do you feel like you have relationship-building to do at this point—either with your team back home that’s been struggling to keep up, or putting a sales force back out there that’s educated, or farmers that you want fruit from, or other cider producers that were frustrated by some of the effects of the position you found yourself in? Do you feel an obligation towards any of that to try and make amends?
I spoke to the gentlemen who filed the PACA complaint against us, and according to what he told me, he’s okay with us. He will give us the opportunity to prove our mettle after this new agreement with our friends at Goose. I talked to a couple other board members from the Cider Association, and they gave me the same kind of, “We’ll see what you do, and we’ll judge you on what you do.” I think that’s the most reasonable way to do it.
All of our apple growers, with the exception of the person who filed the PACA complaint against us, are selling us fruit again this year, so they’re all good. What we got from a lot of them, and what we got from some other people in Michigan was, “Hey, we went through some rough times, too, and we’re glad you made it. We’re glad you’re moving forward because we believe in what you’re doing.” I think that any time someone who is selling against you in the marketplace can use a shortcoming to their advantage, they tend to do that. How did Mark Twain put it? “Rumors of my demise were greatly exaggerated.” We heard a lot from the market that we were going away, and we said, “We were never going away.” I think perhaps other people in the market were saying we were going away to use that as an advantage against us, and everyone’s scared into doing what they need to do to sell their own product.
There’s certainly a competitive advantage to that story, no doubt. But only because there’s a ring of truth to it. It seemed like you guys were in a spot where you either found a buyer you were comfortable with, which wasn't happening very quickly, or you were done. Without this deal with Goose and AB, it sounds like you didn’t necessarily have many options if you wanted to make Virtue the way you wanted.
That was the best option for us. There was no option without compromise, shall we say. Just like my friend Mr. Magee made his choice. I think everybody makes choices down the road, and some people prefer to stay small and keep all the equity themselves, and I think that’s a great plan for them. We feel like there’s an opportunity to grow and an opportunity for the people who work for us to do well if we grow—for our farmers to sell us more fruit. So we were focused more on growth than just staying the size we were. That’s why we were looking for the right partner to believe in the vision I had for not just the cider but the farm, the community, and our place in the community.
It seems like with Goose Island, as a group of people you already have that connection with, there would be no difficulty in translating that vision.
Right, that’s accurate. I think there’s probably other partners that could have been, not quite as good, but pretty darn good, as well. Goose was the best fit, and we’re very happy that things worked out the way they did.
In the release it said you and Steven will maintain creative and operational control. I know towards the end, most of your sales staff was gone. Ryan moved on to Angry Orchard to start their Hudson Valley farm project, his number two guy moved to the cider maker in New York where those trees ended up, and a couple of your marketing folks were also gone. It was a pretty skeleton crew there at the end as you figured out how you wanted to reconfigure after some sort of deal. What’s the continuation of you in terms of creative and operational control look like? What was your role in that capacity before, and what do you think it will be after?
I’m going to be relieved of some of the constraints of running the business. My role has changed considerably from Goose Island, where I was kind of running the beer program both with the beers we made and how we presented them to the market. I touched sales and marketing, but I really focused on the beers and the brands. When you run your own business you have to be focused on every little bit, every single thing. With that, I didn’t focus as much or perhaps enough on the ciders and the brands, so now I get to do that a lot more because we’re going to have support on the sales side, the packaging side, the distribution side, and back-office. We’ve got access to Goose Island's lab and the barrels, so a lot of the things that—not as a cider maker, but a business person—kept me up at night, I’m not going to have to worry about as much.
Beyond that, we’re rebuilding our team. We had a strong team before. We had a lot of talented people, and we feel like we’ve got a really strong team moving forward, as well. I brought in Tony Bowker. He and I worked together for 12 years at Goose Island. He started off as the CFO at Goose and then became the COO and was involved in pretty much every part of the business that I was not involved in, so he’s joined Virtue as our President. I got him out of retirement to do that. He’s going to be running the business side out of Chicago. We’re assembling a very strong sales team and marketing team. We had great people before, and these people just have a wealth more experience—the production team, too. Everybody that was with us in the past left something behind in how we do things at Virtue Cider, and I’ll be forever in their debt, but we’ve got a pretty strong new team, too. We’ll be introducing them one by one as they come on board.
It makes perfect sense to me that you would find your place back in that role where you’re developing the product and the brands rather than handling the business. Do you feel like you might’ve bit off more than you could chew from a skill set or experience standpoint when you tried to run the whole damn thing yourself?
I think I had a fantastic training at Goose working for 23 years with my father who came from a financial background before that. I understood all the stuff and I knew what to do. It’s a matter of we wanted to do everything right. We didn’t want to take shortcuts on anything. We probably were a little under-resourced when we started out, especially when we started to open markets we probably weren’t able to cover yet. If we would’ve stuck to Chicago and Michigan, we would’ve stayed nice and small, we would’ve had less people, and maybe things would’ve taken us down a different path. Where we are right now, I couldn’t have asked for a better outcome. Everybody has their interest and ends up doing what they want to do, no matter what their job description says. What I want to do, prefer to do, is spend time tasting cider, blending cider, hanging out what our cider makers, talking about what we’re going to do to get our ciders where we want them to be, and that’s going to be a lot of my focus. And, beyond that, really advocate for cider in general.
Now, for people watching this from afar who see the bullet points of the story, guy and his dad sell a brewery to AB, he goes and starts a cidery, he sells that cidery to AB, what would you want them to understand about that scenario? Or is that story correct in how calculated it looks?
I think if the original plan was to sell to Goose Island and ABI, we probably would’ve done that a long time ago and not gone through all this rigamarole of the last few years. There wasn’t a lot of benefit in waiting a couple years. They’ve been interested from the beginning, and I wanted to go off and do this the way I wanted to do it. I felt like there’s an opportunity for us to start off small and grow regionally, and we ended up getting, very early on, a lot more interest in our cider than we could end up managing.
You were also not necessarily growing regionally at that point. You were in a lot of different markets at one time.
We led off with Chicago for one year by itself then we went into Michigan and New York City, and then we added Portland. We were kind of happy to motor along like that, and then we started getting calls from wholesalers in probably 40 states, saying, “When can we get this?” A good friend of mine from the Goose Island days who we hired as our sales manager did a great job interviewing all these wholesalers, but basically he ended up spending a lot of time interviewing all of these wholesalers rather than going out and selling cider because we had so much interest in 2013—ay ahead of where we anticipated.
If you could go back in time, would you try and grow a little bit slower right here at home?
There’s always benefits to that, but if you look at where we are now, it’d be difficult for us to be in the same position if we were just in Chicago and Michigan. We probably wouldn’t have had a program with a chef in Portland and San Francisco and Louisville if we didn’t go into those markets. Right now, for 2015, our number two market is Austin, Texas. Who would’ve thought that? I’m pretty happy about that. Austin’s a pretty great town.
It seems like with all of these different types of opportunities presenting themselves, you kind of ended up having two different strategic models happening at once, right? Trying to build a base at home and work on a regional structure, and you’re building infrastructure for that, but then also putting speciality stuff into smaller pockets, especially urban markets, where there’s a lot of foodies and a lot of cider geeks and stuff like that—spreading it kind of thin in that way and getting a lot of different requests from a lot of different players in the game. Some that want to compete against Angry Orchard, some that want to put you in there because you’re a speciality, high-end product. It just sounds like there were at least two, if not more, models that were all competing for your attention at the same time.
Yes, absolutely. There are many states that we had talks with that we ended up not going into. I can think of 10 or 12 that we were pretty close to signing distribution agreements with that we didn’t because we couldn’t keep up with the cider and we couldn’t support the markets. Now, all that changes. It doesn’t mean our ambitions are to be a big, national cider company and take on any of the other national cider companies. What we want to do is make the best cider we can make and support it in the market. If that market wants it, then we can give it to them and we can support it. That’s the biggest change from two years ago when we started rolling the markets.
Now, we feel confident we can make the cider, we can package it, and get it out to them, and we can have bodies in the market to support it. We’re going to grow in the way most successful brands grow: the market will tell us how much to make. Brands that force the market, they sometimes have trouble, and they go up and down. We’re going to make what the market tells us to make. We’ll make some new ciders probably every year, ahead of the market, but we’re confident there’s enough great drinkers out there and publicans and restaurateurs and shop owners that the market will catch up pretty quick.
Beer is so much more than what's in the bottle for the men and women who make it and sell it. There are real livelihoods at stake, and they spend an inordinate amount of time thinking about the industry they serve. These are their forward-looking thoughts, and their critical thinking on what's happening now.See more Critical Drinking™ stories