Greg Koch hoists himself onto the bar and begins his sermon on the importance of craft beer to the gathered crowd. The throng inside London’s The Three Johns pub is mostly formed of assorted industry folks eager to hear the Stone Brewing Co. co-founder speak. There’s also a large range of Stone beers on tap, imported from the company’s San Diego and Berlin facilities.
He delivers a speech true-to-form, regaling the crowd about the evils of multinational breweries and the “fizzy yellow beer” that they produce. It’s a rhetoric that these days perhaps feels a bit tired from overuse, especially considering that Stone is now a multinational brewery itself, with several million dollars of investment behind it. It even makes a fizzy yellow beer via its Arrogant Brewing subsidiary. Nevertheless, Koch still manages to whip his crowd into a frenzy like an effective preacher man—they’re whooping and hollering along by the end of his address.
Observing the cheering faces that surrounded me, I realize just how effective Stone’s rhetoric has been in the development of its brand. Although it might be losing its edge back home, it seems that we’re still hungry for it here on European soil. The fact that BrewDog has studied and reproduced this message almost to the note, and with similar success is evidence of this as well.
Koch flew into London from Berlin earlier in the day to promote the beers being produced in Stone’s German facility. The UK has rapidly become one of Stone’s biggest markets and, in a recent piece, we spoke critically about its aggressive tactics within this market. So it seemed only fitting to sit down with Koch and try to set the record straight at The Three Johns.
Why is the UK market so important to Stone right now?
Firstly, there’s the emotional component of it. I’ve always been such a fan of the UK and I have a phenomenal experience every time I visit. To me, being here just feels natural. The fact of the matter is that the UK has become a significant craft beer market. It’s been growing and part of that is an offshoot of the work we’ve been doing in the U.S. for the last 21 years. We specifically built our brewery in Berlin to serve fresh beers to Europe. And Brexit or not, geographically, the UK is still very much a part of Europe, right!?
From what I understand, most of the beer that Stone is producing in Germany is actually being sold in the UK, is that correct?
A significant portion is exported to the UK. It’s definitely one of our largest European markets.
In that case, why choose a site in Germany over one in the UK?
We actually looked at more than 130 sites in nine different countries in order to find that magical spot. We looked at a number of places in the UK, but ultimately we found a historic gasworks property constructed in 1901 in Berlin that I just fell in love with. It’s a very special and unique destination that has allowed us to really bring our vision to Europe.
How do you see craft beer culture developing in Germany now that Stone has a presence there?
The craft beer scene in Germany is in its earlier stages. There are so many Germans that are interested in craft beer, but they weren’t as familiar with the concept of it.
In my eyes, Germany has always had craft beer in terms of its outstanding Lagers, just without the modern version of that culture, which the U.S. has now exported worldwide.
I think of those really well-made beers as the classical music of beer. I think craft beer, especially the beers we make at Stone, are more rock ‘n’ roll. Our beers are completely different to what they were familiar with. Today, Germany is a very inexpensive beer market, so the expectations for beer have been significantly lowered amongst the populace. They expect to buy something for very little, and it’s not cheap to make the beer styles that we make.
I heard you have some pretty strong feelings about the Reinheitsgebot.
I could actually spend the next couple of hours on the subject [laughs]. It’s the most commonly misunderstood thing amongst both Germans and non-Germans. I think my friend Sam Calagione from Dogfish Head said it best: “It’s nothing more than a modern form of art censorship.” [Reinheitsgebot] is not something I’m interested in. Although most of our beers would actually qualify, we don’t brew them to qualify.
Have you had any resistance from the local market that does see the Reinheitsgebot as the final word on beer?
I’ll sometimes hear an earful from an average German person on the street, so to speak. When I tell them what we’re doing their first question is, “What about the Reinheitsgebot?” [And they’re] saying it with a very dismissive tone in their voice as they’ve got a bottle of Corona in their hand and not seeing the irony.
The bottom line is that Germans are people like anybody else and there’s a certain amount of the public that like things that taste good and are high quality. Some people are never gonna like rock ’n’ roll and some people are gonna listen to their first rock ’n’ roll song and go, “Oh my god, what have I been missing my entire life!?”
You recently invested in a much larger—when compared to Berlin—production facility in Richmond, Virginia. Is there a reason why you decided not to use that as an export hub to Europe in the same way as other breweries on the East Coast like Oskar Blues and Sierra Nevada are doing? Why invest in two new breweries instead of just one?
While I love visiting the East Coast and Richmond is a very important town to us, it doesn’t give me the opportunity to come to Europe on a frequent basis—and I’m a Europhile! Our project here, which ended up being the Berlin brewery, began seven years ago. We only started looking for a site on the East Coast at the beginning of 2014.
What are the chances that we will one day see a World Bistro and Gardens in the UK?
[smiles] I can say that we are currently working on getting our brewery in Berlin up to speed and that’s where our focus is.
You’ve entered UK grocery chains in a big way. As a result of Stone going through that chain as opposed to through specialist retailers, it means your product is often a cheaper proposition than some of the independent craft brewers in the UK. What kind of responsibility do you think a large, global brand like Stone has toward supporting the value chain?
If you look at the beers within the grocery set, you’ll see that we are not the cheapest by far. In fact, we are towards the more expensive end. We have never discounted our beer and we don’t discount our beer for the grocery chains. Our beer’s expensive to make and it costs real money to make. We have to sell it for an appropriate price point, which is not cheap.
We have a very simple philosophy: “Craft beer for the people.” That means that if somebody wants to buy our beer and we’re able to produce it to our standards then we will produce it to our standards and be happy to sell it to them without compromise. So that’s what we’re doing.
How does it feel when a small, independent, specialist craft beer retailer won’t or can’t stock your beer because it doesn’t work on the same margins as a supermarket does?
Interestingly, this isn’t an issue in the United States. Independents sell our beers, as do national chains. Independents are always going to be offering a wider selection, have more knowledgeable staff, and they’re going to be more interested in our special limited releases. It benefits an independent chain to stock beer like ours, which helps push the envelope and to bring people into the craft beer world. It’ll actually make them some money because we’re not selling it to them for more money than we’re selling to a chain.
In the U.S. you’ve helped to drill the idea of the cold chain into the craft beer industry. However, the cold chain and the freshness message in the UK and other markets outside the U.S. isn’t quite the same as what you have over there. How do you begin to drill that same attitude into foreign markets?
Same way we did in the U.S. When we started, [the cold chain] wasn’t a part of craft beer culture. We know that it’s important and we believe people deserve great, fresh beer. That’s why we continue to hammer on that and the industry benefits as a result of this kind of rigidity and passion. We’re not the only ones doing this, either—there’s a lot of breweries passionate about fresh beer. As fellow consumers we’re just part of that large voice that says, “Hey, consumers, we think you deserve something that’s going to be in tip-top shape.”
That was just complete misperception by the folks who were making some online comments. If you have a beer that has one month left on the date code in the United States, people assume that it’s still very fresh. If you have a beer with one month left on the date code in the UK or Australia, people assume that it’s 11 months old and not very fresh. So if we have a 90-day date code, which is what we typically use in the U.S., depending on the beer, it’s understood. But if we bring it over here with a 90-day date code and 60 days have gone by, the beer’s still very fresh, but people assume that it’s 11 months old, which it not correct.
We have a contractual arrangement with our wholesalers, whether it’s in Australia or here in the UK. We have a limited number of days in which we expect to have beer sold and off the shelf. Retailers won’t buy it if it has only 30 days left, because the consumer picks it up, looks at it and thinks it’s old, even though it’s still fresh.
We’ve had to change our system for export because we’re simply speaking a different language. Like putting the month before the day in the date system. If we try and bring that over here people will misperceive the date. So if you’re speaking a different language you have to learn to phrase it in a way that it will be understood. We’re not changing our philosophy, but we have had to modify how we communicate.
In April 2016, you announced a $100M fund called True Craft with the aim of financially assisting other craft brewers. How’s that project coming along?
There’s nothing to announce at this time. We’ve spent an enormous amount of time working behind the scenes, because that’s how this kind of thing works. The unfortunate fact of the matter is that some of the valuations coming from the buyouts by companies such as Constellation Brands and AB InBev have skewed the market.
How did it feel to lose a brewing talent like Mitch Steele?
You know what, in many ways it feels awesome because you know that you’ve been part of somebody’s career and they’ve been a part of yours. There are probably at least 15 breweries that have been opened by ex-Stone employees, and you feel like you’ve done something, watching these folks go out and start up on their own. You never want to lose somebody, you’d love them to stay in the family, but you can’t hold them back and Mitch, he’d been dreaming of something smaller.
We’ve also just seen Peter Bouckaert at New Belgium announce a similar move. What do you make of these brewmasters who have spent so long as ambassadors of their respective breweries wanting to get back to making beer again?
Oh, trust me, they’re still ambassadors! I think that they’re still not going to be making a lot of beer themselves. I can’t tell you what Mitch or Peter is exactly doing, but I don’t think they’ll be spending all day, every day with their brewers’ boots on. It’s funny, I was just talking with somebody who used to work at New Belgium and she told me about Peter and how he’s loving learning accounting, as that’s what he’s spending most of his time on at the moment.
If you have creative, talented people working for you, they’re going to want to go and follow their own muse from time to time. You just have to wish them well and be thankful for the awesome time you spent together. [Mitch] left us in amazing shape. He built an incredible brewing team to the degree that we didn’t feel we needed to replace him, because we had the internal talent and the capabilities that we needed. So that’s actually a testament to Mitch!
I don’t know if Mitch expected to move to Atlanta!
Following Stone’s $90M investment from VMG Partners, your company had to make several layoffs. How did you feel about that and what support was put in place for those folks at the time?
There was no connection between those two things. As a company, we were on an insane growth curve, greater than 40% a year on average over an 18-year period. With some of the buyouts by the big guys, plus the pressure from that and a variety of other things, we just found that our revenue stream and our expenses stream got crossed. We had to straighten them out in order to be able to continue traversing the mountain. It was just crushing. It was crushingly, excruciatingly awful for all of us. But we gave very, very generous severance packages and I remain personal friends with many of them.
What advice would you give to craft breweries so that they avoid having to put themselves in that situation in the future?
Be able to read the future! But the truth is you can’t, and I don’t mean that flippantly. At some point you try to make what you think are the most awesome possible decisions, you try to read the tea leaves and the crystal ball as accurately as you can. You want to maximize your opportunity while also not sticking yourself out too far. But, you now, if you operate for 21 years, you’re gonna make some mistakes. And I’ll admit, we’ve made mistakes.