Greg Koch has a front row view of the seismic shifts playing out in the world of American craft brewing. The co-founder and executive chairman of Escondido, Calif.-based Stone Brewing Co. — the 17th largest brewery in the country — also isn’t shy about sharing his views on the trend of large conglomerates buying up craft breweries. To help combat that perceived threat, last year Koch formed the True Craft private equity-backed fund aimed at capitalizing breweries with minority investments so they don’t need to sell out. Koch stopped in Grand Rapids last week for an event at Logan’s Alley, a local pub. While sipping a sour ale from Comstock Park-based Speciation Artisan Ales, Koch told MiBiz why he believes the tiny West Michigan brewery represents all that’s still good in the increasingly competitive industry.
From your perspective, what’s changed in the craft beer industry in the last few years?
Everything has gone crazy nutty in the most awesome way and the most weird way and in a scary way, all at the same time.
What does that mean?
That’s a good question. What does it mean? I don’t have a crystal ball. I think it’s an extraordinarily valid question with a difficult-to-impossible answer. This beer from (Speciation), this is an easy example of why the craft brewing industry is so awesome right now.
Because things like Speciation can exist. Even just a few years ago, no one would have bought this. Today, thankfully, people have wised up a little bit as populists. They’re like, ‘Wait a minute — that crazy thing that one guy is doing at that one place all by himself, it’s kind of delicious.’ So that’s why it’s awesome.
Over the last few years, breweries the size of Stone have been feeling squeezed on both ends as bigger players like Anheuser-Busch make inroads into craft beer and while local producers increasingly cut into market share. What’s that meant for Stone?
You’re right. We are getting it from both sides. One side is friendly fire, which I’ll take any day, and the other side is the forces of just sheer capitalism and industrialization that wants to obfuscate and control.
What’s happened with the True Craft fund you launched last year?
We’ve not gotten a lot done at this point. There’s not a lot to report. A lot of behind-the-scenes conversations.
So no deals have come out of that yet?
Why did you see the need for this fund?
The forces of industrialization and commodification in this world are strong. They always have been and they always will be. I could elaborate on it a lot, but that really encapsulates it. It’s … for the category of breweries that would be eyed by the industrial conglomerates and we’re trying to give them an alternative.
Given the recent industry dynamics, it seems like competing factions have started to emerge in what’s been a collaborative industry.
Yeah, I’ll acknowledge that’s the case, but I’ll also say that I’m a purist and a believer and a zealot myself. I believe in the authenticity of real craft beer and that’s what I live, die and breathe for. So I think the future is currently unwritten.
What do you mean by that?
I really believe that we as craft beer enthusiasts — and yes, I’m on the professional side, but I’m still a craft beer geek — I believe that the people in this bar, wholesalers, retailers, craft beer journalists, homebrewers … can write our future. It is in our control. Power to the people, the voice of the people. And a lot of people have spoken very clearly.
With the craft beer expansion slowing down, how does Stone go about being sustainable considering the major investments it’s made, including opening a facility in Germany?
You want to grow as smart as you can. The reality is, you can set your one- or two- or three-year plans as carefully and thoughtfully as possible, but sometimes you’ll make an error, a miscalculation.
Are you referring to the circumstances last year that led to layoffs of 5 percent of Stone’s workforce?
That was incredibly challenging and painful. Last year was a rough and emotional year for us. We grew 6 percent, which if any existing company grows 6 percent, they’d be pretty proud of that. For us, that was pretty poor. But we’re at double digits this year. You’ll always have some not-so-good years. I’ve often been asked, ‘Hey Greg, what’s the biggest mistake you guys have made?’
What’s your answer?
The truth is we haven’t made any big mistakes. That’s a very scary position to be in, knowing that your biggest mistake is still in front of you. It’s just the hard, cold reality. The biggest mistake that Stone Brewing has ever made is still in our future. Now, last year we brushed up and hit one. We overbuilt for our future a little bit and then we had to realign. That was hard. It involved just challenging realities.
There were some rumors going around that when Stone first began looking to expand eastward that Michigan and maybe even Grand Rapids were on you radar. Is there any truth to that?
There actually is none.
What made Virginia the ideal place for Stone’s East Coast expansion?
Virginia as a state, and Richmond as a city: They worked their asses off to put together a winning scenario, which includes some state and local incentives, but also helping us locate an actual property. They just took it extraordinarily seriously.
What did they do?
They knew they had to put together all the points. It can’t just be an idea. It’s got to be a full-fledged, three-dimensional ‘this is how we see it working.’ These are the economics, this is where the property is, this is how permits will work, wastewater, logistics. They did that. That became very compelling.
Interview conducted and condensed by Nick Manes. Courtesy photo.