In Rebuke of Big Beer Buys, Modern Times Establishes ESOP

Michael Kiser

THE GIST
In a move that seems inextricably tied to both its internal business philosophy and external politics, San Diego’s Modern Times Beer announced today that it is now employee owned. In a statement, the fast growing company says it has repurchased shares held by outside investors and, as a result, 30% of the company is now held in an employee stock ownership plan (ESOP).
 
Modern Times claims to be the first employee owned brewery in California, one of the most brewery rich states in the country.
 
“This is my single proudest achievement as Founder & CEO of Modern Times,” says Jacob McKean, still a majority owner, in a press statement. “I’m supremely excited for our deserving employees, who have shown an almost perverse degree of dedication over the last 4 years. Now, they will benefit directly from the company’s success as co-owners. This is as it should be.”
 
Long term, Modern Times says the goal is to become 100% employee owned.
 


WHY IT MATTERS
Since being founded four years ago, Modern Times has positioned itself as one of the most outspoken and hardline critics of Big Beer’s well-financed encroachment of BA-approved craft beer’s turf. Last September, McKean took to his own company’s blog to sound off on the acquisition trend, writing that to team up with the likes of Anheuser-Busch InBev is “the fastest, simplest way to turn equity in a craft brewery into cash. That’s the only reason to sell to them. Anyone who claims otherwise is full of shit.”
 
As such, Modern Times establishing an ESOP feels ultimately inevitable. And indeed, McKean speaks today about this route having been preordained by its founding principles. More than that, McKean seems to be suggesting his company is a proof of concept: 

“Our trajectory shows that a company can grow at a meteoric rate while handsomely rewarding all of the people who made that growth possible; in fact, we show that it is necessary. Our values and culture are competitive advantages that have propelled us to where we are today. Modern Times is proof that a start-up brewery can compete and win in the craft beer market without selling out, all the while taking outstanding care of our employees and rewarding our investors.”
 
 Now, McKean says, it’s about building a “culture of ownership,” so employees feel they are “owners in practice, not just on paper.” And regarding that “meteoric” growth, as reported by MarketWatch, Modern Times grew production 82% in 2016, producing 40,500 barrels and now employs 118 people. Which is to say, in less than half a decade, Modern Times has built a no-joke sizable operation in one of the most cluttered beer markets in the United States.
 
The deal also stands out geographically, as San Diego compatriots Ballast Point and Saint Archer have in recent years sold to Constellation Brands and MillerCoors respectively, two multinational brewing giants that Modern Times has been publicly critical of. 

But it's not as though the ESOP in beer is entirely unique. Craft beer titans like New Belgium, Harpoon, Deschutes, Left Hand, and Odell have all moved toward employee ownership. However, in the past, the official line regarding motivation has been one of staying true to internal principle. Such is the case with Modern Times, too. But here, the decision is very bluntly being made with a certain clarity of vision for the broader craft beer industry at large, which is a vision that has been highly contentious for years with all sides now only digging deeper into their respective trenches.
 
Adds McKean, “My hope is that this will point the way forward for other businesses in our industry and beyond."
 
- Dave Eisenberg