This Partnership Breathed New Life into Hops and Grain

The future of a brewing company that had built notoriety and momentum in Texas over the span of a decade suddenly seemed uncertain in 2020, when Hops and Grain found itself facing an expiring lease, rising rents and a worldwide pandemic.

Founder Josh Hare had opened the brewery for business in 2011 before Texas breweries could legally serve pints for sale in taprooms, but Hops and Grain quickly became embedded in East Austin’s growing entertainment scene. Once it was legal, it began serving pints and put in indoor and outdoor seating to accommodate a growing appreciative Austin fanbase. Murals adorned the exterior walls at that flagship location, which was located in a part of town known for being artistic and edgy.

In 2019, Hare’s company began producing its four main beers at its new 25,000-square-foot production brewery 30 miles away in San Marcos but still had the East Austin location in the high-traffic area. It proved to be a cash cow for on-premise sales and having brewing equipment that was being used to make seasonal, experimental and one-off beers. Hare said they started hearing from distributors in January 2020 and things seemed to be on the up and up.

The 10-year lease at Hops and Grain’s East Austin location was up for renewal and rental rates in the area had risen astronomically, including in the building they had occupied since their inception.

“Hindsight being 2020, we would have known 10 years later what market rates for rent were going to look like,” Hare said. “At that point, we were the only tenant in the building that wasn’t an office and we were going to have to pay East Austin tech startup rent or move out.”

With the San Marcos facility being financed primarily through debt and rent set to rise — along with the onset of the COVID-19 pandemic — Hare said Hops and Grain’s strategy shifted to survival.

“I felt like if we could keep revenue coming in Austin, we could maybe float the two facilities with a tiny bit of revenue by shipping out of San Marcos to distributors, plus the revenue in Austin, I thought we could cover basic costs,” Hare recalled. “We were in survival mode for six months and we just ran out of money. If you cut yourself and you never stop bleeding you eventually run out of blood.”

Business slowdowns from COVID hampered business at the East Austin location, where taproom sales made up about 50% of revenue. About half of the distribution from the San Marcos location went into on-premise accounts, and that also evaporated.

With the loss in revenue leaving it unable to pay the rent or other operating costs, Hops and Grain was forced to shut down its physical locations. While Hare had another business that was thriving — Pint and Plow, a brewpub in Kerrville, Texas — he wasn’t giving up the fight to save his original Texas venture.

He began exploring contract brewing as an option. It took him nine months to find a solution he was satisfied with: a deal granting Austin Beerworks exclusive rights to produce Hops and Grain beers. Hare said that when it came to contract brewing, finding a partner you trust is key. He considers himself fortunate to have made a deal with Austin Beerworks.

“A lot of people had capacity they weren’t able to fill anymore because there wasn’t a lot of keg beer going out the door,” Hare said. “Maintaining the quality of the product was important to me. I wasn’t going to sacrifice that … I’d spent 10 years building the reputation of Hops and Grain.

“These guys are incredible partners. They’ve been friends of mine for a long time, so there’s no need to bat an eye at quality control. It wasn’t part of my business plan to contract, but it’s great to have our brand back in existence. I’m happy to see it back on the shelves and happy that people are happy to see it again.”

Hare said the partnership with Austin Beerworks was structured more like a licensing agreement than a traditional alternating proprietorship. They own the exclusive rights to produce Haze County, a Double IPA; Lupulin Rodeo, a Juicy IPA; A Pale Mosaic, an American Pale Ale and their flagship, The One They Call Zoe, a Lager.

“I worked with their team, got the recipes to them and scaled them to their brewery size,” he explained. “They run production top to bottom with all of their team.”

Having a partnership with someone who is into your product also helps.

“It’s hard to be a brewery that contract produces because you have to get the team excited about producing someone else’s beer,” he said. “The relationship we already had with Austin Beerworks ensured they’d be at least ambivalent about brewing us.”

Make sure you find someone who respects your recipe, he said.

“They were cool about not taking creative license on creating these beers,” Hare said. “They make them like we all remember them tasting. I think they just knocked it out of the park.”

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