Taking money your brewery has earned after opening and deciding how to invest it can be a tricky proposal. It could mean growth in many ways, either by paying off debt, buying into more capacity or space, adding a workforce or a variety of other options.
After opening in 2013 with 2,000 barrels and growing to more than 40,000 BBLS in 2016, Modern Times in San Diego announced recently a move to sink money back into its company by repurchasing shares from outside investors to give 30 percent of the company stock to its employees. It’s a first for a California brewery to have an ESOP (Employee Stock Ownership Program) in place for its workforce.
“Now, [employees] will benefit directly from the company’s success as co-owners,” wrote majority owner and founder Jacob McKean in a newsletter post. “This is as it should be.”
Modern Times joins New Belgium, New Glarus, Harpoon, Odell and others in the craft beer industry as an ESOP.
It was a move intended to help attract and retain talent.
“Investing in human resources is investing in growth,” explained McKean. “It’s shortsighted to think that only buying equipment or real estate is investing in growth. The people who work at Modern Times are our single most significant competitive advantage. Investing in motivating them, retaining them, and attracting more people like them is the smartest strategic play we could make.”
McKean noted that the brewery already has ‘very high employee retention,’ but becoming an employee-owned company will only make it more rewarding for people who want to build their careers at the brewery.
“I’m extremely excited to see the kinds of people we can attract with this equity program,” he said.
While the company is 30 percent employee-owned to start, it is the goal to work towards 100 percent employee ownership.
“Our trajectory shows that a company can grow at a meteoric rate while handsomely rewarding all of the people who made that growth possible; in fact, we show that it is necessary,” McKean said. “Our values and culture are competitive advantages that have propelled us to where we are today. Modern Times is proof that a start-up brewery can compete and win in the craft beer market without selling out, all the while taking outstanding care of our employees and rewarding our investors.”
McKean added that he wants the move to employee-ownership to set an example for other breweries.
“If we can do this after only four years in business, anyone can do it, and I firmly believe that employee-ownership offers the best deal for everyone involved,” he wrote. “It ticked every box for us: achieving an outstanding return for our investors, maintaining our independence, rewarding the employees who have made our success possible, enhancing the collaborative culture that’s so vital to the company, and creating a sustainable ownership structure that will replace me when I’m ready to move on.”
He also noted the tax benefits as well
“[It] means more money for growth and efficiency improvements,” McKean said, adding that the move to an ESOP has helped form a new bank relationship that give the brewery access to vastly more financing than they had before.
“No other options came close to offering all of that,” he said.
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