Dan Kenary and two friends were just a few years out of college in 1986 when they decided to start a craft brewery in Boston--something that hadn't been done in so long, Harpoon Ale was issued brewing license No. 001 by the state of Massachusetts. They sought to emulate a European-style craft brewery, at a time when there were only a few dozen craft brewers in United States. Through the '90s and aughts, though, the founders wound up at the crest of a wave of independent craft breweries. Today, Harpoon's brewery, which makes other beers as well, is known as Mass Bay Brewing Company, and is just one of the country's more than 4,000 craft brewing businesses. Craft beer sales reached $27.5 billion in 2018, accounting for nearly 25 percent of the whole U.S. beer market. Kenary, now Harpoon's CEO, relates how the founders slowly built acceptance of the business, and the unusual way they settled their conflicting visions for its future. --As told to Christine Lagorio-Chafkin
Thirty-three years ago, we started it. I was in banking at the time. I knew I was not going to make a great banker, and I had always loved beer. I reconnected with a college friend. We both had been fortunate enough to travel around Europe and saw the great beer styles there. We'd each come back saying, "Why is the U.S. coast-to-coast light-yellow lagers?" In Europe, you had all these different colors and styles, made by small breweries right in the middle of town--they weren't out in some industrial park somewhere.
So that's what we decided to do. We went out and raised $430,000. Most people had no idea what we were doing. There were only 100 or 120 breweries across the country--a number that had been declining for the past 100 years, from something like 3,000. My father said, "Look at this decline! You think this is a good time to start brewing?" I said: "This is the perfect time."
Our entire sales strategy was going into bars and introducing ourselves: "We started Harpoon Ale. Here's a beer!" It was brown, or amber--it didn't look like the ales they were used to. It was an educational effort to get the first few bars to serve Harpoon.
After a couple of years, things weren't looking good for us. My partner, Rich [Doyle, the company's chief executive at the time], said: "If we're not going to make it, we've got to at least have a big party before we go out of business." We had a big German-style Octoberfest celebration. We put out kegs and tents, and had 2,000 people show up. It made money, and proved to us we were doing something right.
The next boon for business was in 1993, when we introduced Harpoon IPAs as a summer seasonal. We were the first brewery on the East Coast to do an IPA. It had been a popular style in England, but people in the U.S. were like, "What is this? It's so hoppy." We said, "Stick with it--your palate might adjust." It did so well, we brought it back as a year-round the next year.
One of the partners left early on, and for years Rich was CEO and ran sales and marketing; I was president, running operations and finance. We ran it as a partnership. I remember when we were both nearing 50, which happened around 2010, we talked about the future of the company. He started thinking he wanted some kind of liquidity. We each owned about 45 percent of the business.
I didn't want to sell the company. He started bringing in bankers and private equity. I said, "Out of respect for you, I will meet with and talk to anybody. I just ask you to do the same courtesy. You pursue that. I'll pursue other options. And then we'll come back and talk."
I remember thinking that in a few years I'd be driving down the Boston waterfront where the brewery is, maybe with a grandchild. I'd be pointing and saying, "We used to have a great business there, but we sold it and now they're brewing it in Newark or St. Louis. And all the people we had, I don't know what happened to them."
That's not why I was in business. I was never in business just to get a big paycheck someday. I've got a beautiful life through the business that we built together, and it's been built together with other people. So I brought in experts to discuss another option, using banks to structure an employee stock ownership plan and buy out Rich. Still, we couldn't agree. It was an emotionally fraught time.
I proposed: Why don't we take the other six shareholders in the company, who together owned just under 11 percent of the business, and treat them like a jury? We'll each present our options to them. I didn't want to force anyone to do an ESOP--because all of these folks could have made a lot of money quickly if we sold the business. I wanted them to have a stake in the decision. Friday morning, March 7 of 2014, we presented to them.
The vote came back: All six voted to pursue the ESOP.
So we cobbled together a five-bank group led by Citizens and JPMorgan, and on July 2 completed it. It was a $70 million transaction--which meant the company was in a large amount of debt. It was July 9 when we announced it to employees. We shut down the Vermont brewery for the day and bused everyone down to Boston. There were about 200 people in the room.
I said: "I'd like to introduce you to the new owners of a large minority stake in the business." You could hear a pin drop. Then I said: "Stand up. Turn to the person next to you and shake their hand, because you guys are now the owners!" It was very gratifying.
Since then, the work we've done to build up the engaged employee ownership culture has been terrific. But doing an ESOP is not like flipping a light switch. It's more like steady communications over the years, teaching everyone what it means to be an owner. I'm not looking for people to get up at 3 in the morning like I am sometimes, but you do want people to get a sense of, "Well, if I do this a little bit better, it could really benefit me longer-term."
The free enterprise system is terrific, but it doesn't work without restraint. Greed is a bad thing. We can make changes even at a small level. Instead of greed, everyone can benefit. Trying to turn Harpoon into a mission in people's lives, that's what I'm doing now. I feel incredibly blessed with the people I work with and this opportunity to do this together with them.