Founders Brewing Company’s ambitions to be known as a national brand took on a whole different meaning last week, as press from across the country shared the latest developments in an ongoing racial discrimination suit against the business by a former employee. Outlets like The Washington Post, Newsweek, and NBC News all picked up the story, first reported by the Detroit Metro Times, that during a recent deposition, Detroit taproom general manager Dominic Ryan wouldn’t admit whether he knew if Tracy Evans, a former manager himself, was black.
Or Barack Obama. Or Michael Jordan.
It led to a week of backlash online and in bars, as customers and owners turned their backs on Founders. Some boycott efforts already started in early 2019.
Now, on the heels of what was reportedly a near-$200 million pay day for the brewery, after it sold an additional 59% stake in the company to Spain's Mahou San Miguel (which already owned 30%), Founders’ long-term goal of being one of the largest and most prominent American breweries is in crisis. The conflict comes during what may be the brewery’s slowest period of growth by far since Mahou first took a minority stake in 2014, according to MLive.com. Year-end estimates hover around an annual production of 600,000 barrels, which would be an increase of about 6.5% from last year. That’s well above craft’s average national growth rate, which is around 4%, but a significant drop from the previous four years, when Founders’ year-to-year production went up by no less than 21%.
Businesses like Washington D.C.'s Capitol Lounge; West Allis, Wisconsin’s The Drunk Uncle (in the suburbs of Milwaukee); and a host of bars in Detroit and Chicago were among the first to announce discontinuation of sales. Founders even announced it would skip a beer festival in Detroit and close its Detroit taproom, cancelling a special release party for its Canadian Breakfast Stout that had potential to be one of its more lucrative events of the year.
Last fall, Evans filed a lawsuit against Founders, though, at the time, news mostly stayed within Founders’ home state of Michigan before spreading through the national beer community. In the suit, Evans, who is black, claimed that an alleged racist internal corporate structure prevented him from professional advancement, and that racial slurs and attempted jokes by co-workers created an uncomfortable work culture. When he tried to report the issues, Evans said he was met with pushback from supervisors.
"Most humans, and particularly most people of color, will tell you that they don't have this idea that, 'If I just come forward and say I was discriminated against,' that it's going to work and people are going to believe me and justice is going to do whatever," Evans told Detroit’s WDET in an interview this week. "I saw this as a chance for me to actually use my voice and tell my story, and help others and actually receive some sort of justice."
In the interview, Evans said that the “company is not changing, they're not doing anything to change the culture of what they're doing.”
That’s also the interpretation for businesses no longer selling Founders beer.
“Ownership, company ethos, and company culture—those are all things that go into consideration when we’re purchasing something from a supplier,” says Zak Rotello, beer director at Rockford, Illinois’ Olympic Tavern. He doesn’t consider himself a “hardliner” when it comes to permanently removing breweries from his taplist—macro or craft brands owned by conglomerates like MillerCoors or Anheuser-Busch InBev can still be found—but the case with Founders may push things too far.
“I would much rather extol the virtues of a brewery or brand I’m proud of for the work they do than talk about negativity around a brand, what they’ve done, or what they’ve been accused of,” Rotello says. “This is not a brand I’ve put a lot of focus on.”
In fact, the Olympic Tavern has only had one Founders’ beer on tap since the news of Evan’s lawsuit broke in October 2018, and that was an unexpected delivery Rotello wasn’t there to correct. “Everyone deserves their day in court to defend themselves,” Rotello says of the brewery, but trying to explain the situation to inquisitive customers creates a host of challenges.
"I've got 280 seats in my restaurant and a staff of 50 people," he says. "Information about a weekend dollar-off special can be hard enough to get through the pipeline, let alone allegations of racial issues within a company's structure."
Still, while the reverberations of the courtroom exchange are felt in media and drinking establishments, it’s bound to be some time until a measurable impact can be determined beyond a public relations emergency. Through the first three quarters of 2019, the Founders portfolio of beers was up almost 9% compared to the same timeframe in 2018, as tracked by IRI, a market research firm that compiles scan data from grocery, convenience, and other chain stores. In the brewery’s hometown of Grand Rapids, Michigan, sales have been flat over the past 52 weeks, while they're up about 7% in Detroit owing to sizable gains from Centennial IPA (11%) and Solid Gold Premium Lager (41.7%).
Production may be slowing, but in-store sales are still strong, which could at least potentially balance out any on-premise slumps caused by the loss of accounts in Detroit, Chicago, and elsewhere. But most important, this week’s news raises a pivotal moment of introspection for Founders’ management. In January this year, Founders co-founder and CEO Mike Stevens told Good Beer Hunting that the lawsuit forced him to reflect on what happened within the company to allow for a potentially toxic and racist culture.
"It's hard because you go home and lay up at night and think, 'Are we that?'" Stevens said at the time. "Did we screw up somewhere and didn't realize it?”
For at least one person, the answer is yes. In January, the company hired Graci Harkema as diversity and inclusion director to lead training in the hiring process and beyond. On Friday, Harkema posted a resignation letter on her Facebook page, writing about her frustration over the brewery paying lip service to issues of diversity instead of making deeper changes to its company culture.
"In every conversation and with every action, you've been most concerned with winning the lawsuit," the letter states. "You are most concerned with the ego of 'winning' than you are about the loss of customers, loss of reputation, and loss of employees' wellbeing."
The letter went on to note that problems weren't "a staff issue" but "a leadership issue."
"Your actions have explicitly shown you are more interested in the optics of my face, than the impact of my voice," the letter reads.
“Tracy Evans doesn’t work for us because he didn’t do his job,” says co-founder Dave Engbers. Founders has denied wrongdoing surrounding Evans’ departure from the company, saying from the start it was based on performance.
In a conversation with GBH, Engbers repeated a commitment to inclusion, authenticity, diversity, and community as core principles of the company, noting that “we abhor any type of racism at Founders.” However, one claim made by Evans in his original court filing last year was multiple uses of the word "nigger" in the workplace, which was not disputed by the company. Engbers did not respond to a follow-up request for comment about the discrepancy.
Underlying the decisions made this week to back out of a local festival and close the Detroit taproom, Engbers cited safety concerns for employees. He says he isn't aware of any physical threats to people or property, but "this is a racially-charged case and there's that potential," adding that "we have to err on the side of caution." Heather O'Brien, who identified herself as a Detroit taproom employee on Facebook, called for a peaceful protest "to address discrimination against Minorities/LGBTQ+/Women in the workforce," while not specifically referencing Founders or if the protest was aimed at Founders. O’Brien wrote: “Some of us have been threatened, some professional lives are being destroyed, some of us feel this will scar our professional reputations and know that this will (and has) affected our jobs.”
Any employee who isn't working in Detroit because of the closure will be fully compensated for time away until the taproom reopens, Engbers says. That timeframe is undetermined as leadership evaluates the situation each day.
Throughout his conversation with GBH, Engbers noted how reaction on social media has been damaging to the company, saying he wants people to "read beyond the headlines," but couldn't specify what he meant, pointing to Founders' 22-year history of using beer "as a conduit to bring people together."
Despite blowback online and in the media, Engbers says "our brand is strong and we’re confident in this lawsuit," even as its reputation is questioned. "We know there are some people taking beer off draft and people are hitting the pause button until they see what happens with this case and how Founders reacts," he says. News of Evans' lawsuit has been around for a year and hasn't shown to impact sales—so far.
But that still doesn’t detract from the real outrage expressed toward the company in tweets and comment sections. When asked about what he's learned from the situation in the past few days, Engbers first noted that "there is a lot of love for our company," mentioning supportive texts and in-person conversations with others. Pushed to consider the perspective of those upset with the company, he noted that "what we're learning and we've known is you can't control social media."
On a third attempt for clarification, Engbers says that "any time someone feels like they haven't been heard ... it hurts and you want to come to their defense."
“Right now, we feel we're getting painted in a very negative light, which is untrue," he continued. "It's hurting a lot of people and we want to continue this conversation with people and we want them to know who Founders truly is."
Who is the company? "The island of misfit toys," Engbers says, referencing how the company started by bringing together people of different backgrounds and experiences and continues to see that ideal as a guiding force.
What that means in terms of community outreach isn't clear. Engbers says that the company will have a "very strategic focus" to work with groups in Detroit to engage in conversations about "issues that our society has," but hasn't identified who those groups are or what those conversations may be.
“We’re constantly trying to improve what we do in our process and how we can be better stewards of the beer community,” he says.
So what does actually happen from here? Beer industry outlet The Full Pint contacted a few prominent bars and retailers, hearing that the HopCat gastropub chain of 17 Midwest restaurants wouldn't comment on whether or not it will continue to carry Founders beer. The same response came from Craft Beer Cellar, which has 27 locations around the country.
There are some venues that have already stated their plans to drop the brewery’s beers, but it’s unclear how wide those protests could get, and if they would add up to a detrimental impact on the brewery.
The closest kind of backlash comparison is seen after a multinational company like MillerCoors or Anheuser-Busch InBev buys a brewery, which often results in some drinkers and stores boycotting the brands. Sales of flagship beers typically increase in the time after the acquisition, however. Elysian Brewing Company's Space Dust IPA shot up 345% in IRI stores the year after the brewery was bought. Saint Archer IPA grew 89% for MillerCoors in the same context.
These are not apples-to-apples comparisons, but at least highlight how consumers may or may not make ongoing purchase decisions because of controversy. The situation with Founders is different—and more serious in nature—but the company hasn’t lost its sales trajectory yet in 2019. That, of course, can easily change as more readers and viewers around the country catch wind of the crisis.
The lawsuit against Founders and its fallout will continue during a time in which the beer industry is struggling with change and diversity. Evans’ experience echoes broader issues raised by community members like Dom Cook of Beer Kulture, with Cook long questioning the beer industry’s commitment to people of color and leaders across beer pushing for more active efforts to show dedication to diversity and inclusion.
But what it all means for Founders’ bottom line is still an open discussion.
Words by Bryan Roth