St. Louis, Missouri is one of the more enjoyable cities to drive into, especially going from East to West. Down I64 from Louisville, Kentucky you drive along the Ohio River bend beginning with the hills and forests of southeast Indiana. Eventually you start to get a little flatter as you approach Illinois and finally the mighty Mississippi River, at which point St. Louis is unmistakeable.
This is the second trip we’ve made thus far through the Gateway to the West and it truly never gets old to look far to your horizon, slight left of center and see the Gateway Arch. It’s just miraculous and provides a personal feeling of where our country started and a symbol of great explorers looking to the future of our great land.
That’s a perfect segway with American beer and breweries within our country, and if St. Louis is the Gateway to the West, it’s fitting to talk about the past, present and future of brewing at Schlafly Beer.
James Pendegraft, the relative newcomer to Schlafly has had a whirlwind journey in his career that’s taken him all the way through big beer and now to the CEO of Schlafly.
What led him into his journey started with convenience store chains, one being QuickTrip out of Tulsa, Oklahoma. Pendegraft had been working with them while he was in college and as he transitioned out of college he stayed the path. “I jumped ship to RaceTrac Petroleum in Atlanta, Georgia, and just had some interesting views on category management, the consumer decision tree and how retailers and suppliers needed to be more consumer-centric,” he said. “It caught the eye of someone at Interbrew and then there was a conversation that happened over a couple of years. Then I eventually came on to launch their category management capabilities.”
Pendegraft’s role at Interbrew began in 2003. He was part of bringing brands such as Stella Artois and many others to the U.S., which have become major sellers. He was also part of the joining of Interbrew and AmBev, which we all now know as InBev.
Working for big beer has given Pendegraft a lot of insight into the larger brewing business picture. He eventually left InBev and became a co-founder of North American Breweries, which possessed several brands throughout the U.S.
For Pendegraft, being from St. Louis, he dreamed of bringing his family back to have that Midwest upbringing that he enjoyed so much for himself. “I was actually content with my situation,” said Pendegraft. “I had moved back to St. Louis, I was actually not doing anything, and that was my intention. We sold [NAB] and that was kind of a great windfall for me and my family.”
Dan Koppman had approached Pendegraft to come check out the brewery. “As I was checking it out and hearing these incredible stories, this commitment to doing things right, it just spoke to me,” he said. “Also, how much the company had been advancing local initiatives.”
Schlafly actually goes to Pevely, Missouri to get bottles. Pendegraft noted that they could easily go to Asia to get bottles and save a lot, but it’s been important for the company to keep as much local as possible. “We support a local glass manufacturer, and that local glass manufacturer, by the way, has a spouse of one of our employees,” said Pendegraft. “It’s neat because we see ourselves as this company that can really take care of the community.”
Those continuous stories Pendegraft heard struck a chord with what he wanted for his hometown and his passion for beer. “I think Tom Schlafly doesn’t get as much credit and praise by the St. Louis community that he deserves,” said Pendegraft. “He’s not seeking it out, he’s not that type of person. To be able to rub shoulders with people like him is very neat.”
When Pendegraft came into Schlafly he said he definitely saw himself as an outsider. “Especially coming in at the position I came in at sort of raised eyebrows,” he said. “I think people have to learn and I have to demonstrate my commitment to doing things right. We’re from the “Show Me” state, which I didn’t know what that meant until I left. I’m not going to tell employees I’m committed, I’m going to show them.”
When Pendegraft speaks about procurring locally and investing in existing spaces, he has to ensure that those commitments are met. “When I talk about not expanding this business, because it would be very easy to do a pipeline fill — trust me, I have the relationships all across the United States, if not internationally, where we could just fill the pipeline — but long term it’s not right for the business.
“There was a lot of trepidation on the part of the employees, but they were also very accepting. I think I was very quickly adopted into the family. Some of our employees have 25 years. This isn’t a two- or three-year-old organization. Twenty-five years of history, 25 years of building those relationships and trust, and 25 years of growing up together.”
The reason Pendegraft explained for his role was to see the future of Schlafly through. It has already seen 25 years, both of building a successful brewing business, but what Pendegraft’s CEO role is about is establishing a strategy that will continue Schlafly for many years to come.
“I think there are some capabilities that I bring to the organization that they didn’t have before,” he said. “We really didn’t focus on the commercial side of the business — the sales and the marketing side, really at all. We have the ability to tell our stories more than we have in the past. You won’t see us with some slick campaigns … no Super Bowl ads … but, getting out and connecting with the consumer. Sometimes that means we have to separate our personal taste to where we think the consumers are, and that means challenging ourselves on our portfolio and offerings.”
Challenging the entire company has been exactly what Pendegraft has accomplished, from working with employees that have been at Schlafly since the beginning, to implementing educational programs to help the development of newer beers to be understood and sold better.
“Our bottling line modernization that we just concluded at Bottleworks — this was something that had been talked about for a long time,” explained Pendegraft. “Kind of figuring out how to fund it, pay for it, was always a question mark. Through us changing a few things around we were able to pay for it out of our working capital, which is great.”
Pendegraft stated that Schlafly “isn’t a corporation sitting on a bunch of debt” either, which can allow them to maneuver as the company desires for the future. “I credit that to the discipline of the team before me,” he said. “But I would also say that sometimes not taking on debt we passed up on some pretty big opportunities, so it’s a matter of balancing that.”
Everything Pendegraft states falls back to the consumer. “We really had to enhance our consumer touch points,” he said. “What I mean by that is we had to really focus on the fact that we have these two brew pubs, these kiosks at the airport, and make those more brand extended. We were putting on events out in our parking lot and we really had to make those brand experiences work. When people come to the tap room, they get an experience that they can’t get anywhere else.
“I remember kind of in my initial days I probably about 90 days of sitting down and listening to everyone in the organization. I was talking to a manager actually, and I asked ‘what does it mean to be the manager of a restaurant connected to a brewery?’ His comments back to me were kind of a wake up call for me. His comments back were, ‘I can’t have the same beer that other places can have, so that’s kind of a problem.’”
According to Pendegraft there was sort of a view that the restaurant and brewery were separate. “What we’re really trying to do is integrate those two and lead with beer,” he said. “Our beer menus are now bigger than our food menus … physically. We change them every week when new beers come on and off.”
Previously the restaurant had seen the sampling as more of a lot of work because they felt that so many customers had already tasted all of Schlafly’s beers. “People are coming here for a beer experience,” explained Pendegraft. “How do we get our beer up to the level of where our food is. Our restaurants have been recognized in local and national publications, but we really needed to integrate that beer into everything we do.”
To fix the problem Pendegraft worked with his marketing team to promote internal promotions educating the rest of the team about the beers. They designed a Sharepoint program that all employees can go through to learn about the new beers that have just come out of the brewery. Pendegraft said that this has helped build excitement among employees, which in turn helps them to sell more beer.
One of the difficulties was adjusting the culture so that employees felt inspired and engaged by the beer. “We’re doing a lot of things, but one of the things we recently started is what I call Schlaf-Chats,” explained Pendegraft. “It’s very simple, but I do a video blog. It’s a couple minutes long, and I just talk about the topic of the day or the week. I’ve taken the team through styles, events and what’s going on. Trying to get everyone engaged and put it into a medium that everyone can digest.”
Pendegraft said the team is continually running and gunning, and going so fast that they end up creating what he referred to as operational silos. “It’s a matter of bringing people together,” said Pendegraft. “For example I took a cross-functional team — that sounds so corporate, but oh well — I took members of different departments together, we got them off-site, had a house and talked about our portfolio and challenges. We really started to document those things and share.”
While it sounds simple, it’s not really easy to get everyone adjusted and on the same page. While Pendegraft comes from more of a corporate environment, he’s strived to implement knowledge that designs a strong company, but also keeps the values that employees and Schlafly had set prior.
“That’s a really big challenge,” he said. “For myself and for a lot of other people inside this industry and other businesses, where in a very creative space. I don’t believe people aspire to be corporate, but they do aspire to be smart. And if you can demonstrate a way to do things smarter, then people will buy into that. When everyone has the same access to the same set of information everyone feels individually empowered. It’s really about creating an environment that encourages people to make smart decisions, think about ways to scale what they’re doing, rather than thinking it’s corporate.
“If I came in here and was all business all the time, that’s probably not a lot of fun. We can have a lot of fun in this business. We have a record player I brought in and we play records in our office. I don’t think you’d find that in a lot of companies.”
Pendegraft also said that beer had escaped the team in meetings, which he emphasized had to return. “I don’t think that’s a big deal, but it’s part of making sure that’s happening,” he said. “It actually wasn’t happening before. I think everyone has a lot to do, and we can over-do meetings.
“I think if you have relationships with individuals, the whole corporate thing falls away,” he continued. “When someone sees a process that they now have to comply with, and if they don’t see the value they’re going to resist. And an easy way to resist is to feel it’s a corporate thing. Our business can only handle so much analysis, it’s not that big.”
Going into the future Pendegraft said he’s focused on keeping with Schlafly’s safety and quality trends. “We haven’t had a microbial issue in our beers for over a year now,” he said. “Not one thing present. If we ever did, that stuff doesn’t go out to market. But our preventive maintenance inside that we’re doing has basically stopped that. So I’m really proud of where we are from a quality perspective. Also our safety record, the accidents that happen at a brewery have gone away almost entirely.”
Schlafly hasn’t moved into new markets since Pendegraft has come aboard and he doesn’t plan on doing that in the next few years. He wants to see the brewery diversify its offerings to consumers to keep engagement up. “I think Schlafly is one of these brands that, if it’s not already, is synonymous with high levels of integrity and quality.”