J.D. Harrison (c) 2014, The Washington Post. WASHINGTON — Jim Koch didn’t have to craft his own beer recipe. It was handed down from his father, and it’s essentially the same blend his company still uses to make Samuel Adams signature lager.
Cobbling together the right ingredients to build a successful beer business, on the other hand — now that took some work.
“It was a lot of trial and error, and I made more than my share of mistakes,” said Koch, the founder of the Boston Beer Co., the firm behind Samuel Adams. “Luckily they weren’t in the really important areas.”
In three decades, the Boston Beer Co. has grown into a nearly $3 billion business and is now one of the two largest American-owned breweries. In an interview, Koch took us back to the early days at the company, including his pitch to investors and his run-in with a brick wall. Excerpts:
Q: Let’s rewind. What were you doing before you started making beer?
A: I grew up in Cincinnati and went to public schools there, and then I moved to Boston for college. I went to Harvard and wound up getting my MBA and JD. I had a pretty good job as a manufacturing consultant for a place called Boston Consulting Group, but I had pretty much learned what I was going to learn, and I didn’t want to be a consultant for the rest of my life. So I started thinking about starting my own company.
Q: Why beer?
A: I come from a long line of brewmasters. I’m the sixth oldest son in a row in my family to brew beer, and we had this old trunk in our attic filled with my dad’s course materials from brewmaster school and other family recipes. He picked one out, what we called Louis Koch Lager, and I went down and made my first batches at home in our kitchen.I thought, ‘I would love to make beer for the rest of my life — that would be the coolest job in the world.’ It didn’t look like it was going to be easy, but I committed myself to making that happen. I never thought we would take off like this, or that the craft industry would take off like it has.
Q: What pushed you to try to turn that into a career, rather than just a hobby? How did you finance the company early on?
A: I had $100,000 saved of my own money, and I raised another $140,000 from friends, relatives and drinking buddies. It’s amazing how easy it is to raise money when you say, “Included in this is free beer for the rest of your life.” People were like, “Wow, here’s three grand.” It took me about a weekend to raise the money.
Q: Many of us have seen the commercials featuring your brewing facility up in Boston. What did it look like when you first found it?
A: It was this falling-down set of buildings in what was then a pretty dangerous neighborhood in Boston. There were trees growing out of the facade. There were no windows. There were pigeons nesting inside. I fell in love with it, though. It had been a brewery, the last one operating in Boston. I decided that was where I wanted to put my brewery.
Q: How much did you pay for it?
A: It was basically abandoned, so the space was 80 cents a square foot a year. We originally rented 1,000 square feet, so it was 800 bucks a year — and worth every penny.
Q: Did you go it alone?
A: Originally, the team was me and a woman named Rhonda Kallman who had been my secretary at Boston Management Consulting. She loved bars, that was really her natural habitat, and she would bar tend at night. I knew how to make beer, and she knew bars. We made a great team.
Q: Why the name Samuel Adams?
A: I would love to tell you that was the name from the get-go, but I had lots of ideas. It took me about nine months to transition from my old job to get this going, and during that time, I kept thinking of names and making lists. I had about 800 of them at one point, and then I started cutting it down.
It came down to two names, and I just kind of mentally flipped a coin and picked Sam Adams, who also came from a line of brewmasters. Now it seems so obvious. What else could it have been but Sam Adams?
Q: But had the coin fallen the other way . . .
A: The other name was after one of the first clipper ships ever built. It was built in Boston, a beautiful ship called The New World. So it would have been the New World Boston Lager. That would have been OK.
Q: What were some challenges you faced as you built the business?
A: There were many. One of the things entrepreneurs don’t think about is how much you need to know and how ill-prepared you inevitably are going into it. I mean, I had six years of management consulting, I had a Harvard MBA, yet I knew about this much [holding his fingers ever so slightly apart] when I needed to know this much [spreads arms far apart].
When you start your own business, you’re the CEO, but you’re not the Chief Executive Officer, because there’s nobody there to execute for you. You’re the Chief Everything Officer. Immediately, you have to start doing these things you’ve never done before, and it ranges from, for us, how do you design a label? How do you make a sales call to a bar? How do you negotiate a real estate lease? I had never done any of that. All these practical nuts and bolts of the business that, if you do them really badly, they can kill your company.
Q: Can you give me an example of an early misstep?
A: In the beginning, a truckload of beer arrived that I had to put away into the little warehouse we had. I had never driven a forklift before. I had driven tractors and gators and things like that. But a forklift, I learned, steers from the back, which is a little different if you’ve never done it. And you have this pallet of beer in front of you, so you can’t really see through the front.
So I get the beer off the loading dock and start driving it to the brick warehouse, where the door into the building is only about six inches wider than the pallet. So I come rolling toward the door and — bang — the forklift hits the side of the door, takes out two courses of brick. The beer gets knocked off and half of it breaks. It took me an hour to sweep up. I never bothered to fix that door, though. I figured if I fixed it, I would just hit it again.
Q: What was your primary focus in those first few years?
A: I realized early on that everything comes down to people. The product is important, but everything that happens happens by, with and through people. So I focused a lot on hiring, and I was hiring for talent. Not resumes, not experience, but on who you were as person. How did you behave? What were your values? What was your energy level?
Here in D.C., for example, there’s a bar called Rumors. I met a woman who was a waitress there when she came to a beer seminar we were giving to try to educate servers about quality beer. She was very interested and energetic, and she had great personal presence. I said, “Coleen, have you ever thought about selling beer?” I pretty much hired her on the spot; never saw her resume. She was with us for 10 years.
Q: You were a local brewery. How did it take off across the country — was there one pivotal moment?
A: (Laughing) No, there was no one explosive moment. I wasn’t on “Oprah.” I wasn’t on the Super Bowl. It basically took 10 or 15 years of very slow, bar-by-bar selling, just building it from the grass-roots, from the street, by word-of-mouth. That’s what it took, and I think that’s true for a lot of small businesses.
We’re all hoping it’s going to happen fast, but the reality is, it’s a marathon, and you really have to commit yourself to the fact that there’s not going to be one magic moment where all the doors open. You have to knock on them one door at a time.
Q: You’re now shipping millions of barrels a year. Do you feel you have graduated to big-business status?
A: In our business, we’re still small. In an industry dominated by huge, global conglomerates, you have to stay an entrepreneur. You can’t lose that small-business mentality.
It’s still an important part of our culture, and it’s one of reason we developed our philanthropic program called Brewing the American Dream, where we now work with other small businesses to help them overcome their challenges and their problems — because they are still pretty much the same as our problems and our challenges.
Q: If you could give other up-and-coming entrepreneurs one piece of advice, what would you say?
A: A small business is going to consume your life. If it’s doing well, maintaining that growth will consume your life. If it’s not doing well, trying to break even or become viable will consume your life. Do something you love and believe in. Then those long days don’t seem like long days.