“There’s a lot of pressure to constantly be reinventing yourself for new generations. But I think the beer speaks for itself. The beer is what’s important.” –Steve Hindy
There’s an excitement about this era in Brooklyn – this time in which growing interest in how our food is grown, is made…in who is growing it and making it…has created a fertile marketplace eager to support those adventurous enough to ditch more stable careers to embrace the risk and chase the rewards of doing what they’re passionate about – growing, making, serving and selling good food, good drink.
There’s a sense that this is all new. That we’re blazing trails that haven’t been blazed before. While in some ways that’s true, in other ways it’s not. Take, for example, the Brooklyn Brewery. Founded by Steve Hindy and Tom Potter, two Park Slope neighbors in 1988, the Brooklyn Brewery was one of the earliest craft brewers on the east coast. They played an instrumental role in introducing a generation of Americans to good beer – something that, almost unimaginably, basically did not exist on these shores, at that time.
We met with founder Steve Hindy at the brewery’s Williamsburg headquarters to learn more about the story behind the biggest little brewery in Brooklyn, and the challenges that come with being ‘big’ in a time when ‘small’ seems to have all the cachet.
So Steve, what’s the story behind the Brooklyn Brewery? How did you become interested in brewing, and how did you come to be actually open the brewery?
Well, I started out as a journalist – a foreign correspondant. I lived in Cairo from ’81 to ’84, and while I was there I met this guy Jim Hastings, who was the Inspector General for the U.S. Agency for International Development – the government agency that managed the government aid program in Egypt. I was working on a series of stories critical of the program, and Jim had issued a number of reports that were critical of the program, so that’s how I got to know him.
I think the first time I met him he said, “Hey, do you like beer?”
I said, “Well, yeah. Of course.”
He said, “You know, I make beer. At home.”
And he went on to tell me about his previous posting in Saudi Arabia. He said there were a number of guys at the embassy in Saudi who all brewed their own beer – because alcohol was banned in the country.
I later learned that the Saudi royal family didn’t ban alcohol until 1954, when all these Americans started pouring into the country to develop the oil fields. They were drinking wine, whiskey and liquor. The Saudis didn’t like that so they officially banned all alcoholic beverages.
When that happened, Aramco, the Arab-American Oil Company, issued a pamphlet to its employees stationed in the country telling them how to make their own beer. So there’s a little bit of a tradition of Americans homebrewing in Saudi Arabia.
Anyway, Jim was the first person I met who made his own beer at home. It seemed kind of incredible that you could do that.
Eventually I tried his beer and it was really good. He knew what he was doing, and he brewed all kinds of different styles of beer — porters, stouts, hoppy ales, malty ales…The only time I’d ever had anything other than a light lager was in Canada. You just couldn’t find those types of beers in the states back then. So I became kind of taken with his hobby. I couldn’t brew over there myself because I couldn’t get the ingredients. He was actually getting hops through the diplomatic mail.
But then my wide got fed up being the wife of a war correspondent. I couldn’t blame her. It wasn’t a very stable life. So I gave it up, moved back to New York, moved to Park Slope, got a job at Newsday and started brewing at home.
I was making beer at home and serving it to my friends and neighbors. In 1986 Tom Potter, who became the co-founder of the brewery, moved into the apartment below us. He liked beer. In the summer of ’86, Tom and I ended up watching our kids together a lot on weekends. We spent a lot of time in his backyard or in Prospect Park, enjoying some homebrew, watching the kids, and watching the Mets on their way to winning the World Series that year.
I started talking to Tom about starting a brewery that summer. I’d read about these small breweries opening up out west at that time. He thought it was a crazy idea. He had an MBA and he’d studied the brewing industry in business school. He knew that the big breweries were getting bigger, distributors were consolidating, and he just didn’t see how a small brewery would fit into the marketplace.
The idea of starting a brewery just seemed like an impossible quest. The idea that people were doing it out West was really exciting to me. I was 38 or 39 years old. I had always had this conceit that I could succeed in business because when I was a kid I’d won a bunch of sales contests. So I was thinking, you know, if I’m going to start a business it’s got to be now, or it’s going to be too late. So the inspiration really came that summer.
But I needed to convince Tom to be my partner because I knew nothing about developing a business. He did. I knew how to make beer. He knew how to run a business. Eventually we decided to do it. Tom knew how to put together an impressive business plan – he put the numbers together in a way that really impressed potential investors. I think that in order to start a business like this, you’ve got to have a business plan that the people who believe in numbers can look at and believe in. You’ve got to get the numbers right, but when it comes down to it, they’re going to invest in you – the people behind the idea.
So you and Tom had a real focus on the business plan right from the start. Do you think the business side is the most critical…
The passion is the most critical. You’ve got to really believe in what you’re doing and you’ve got to believe that it’s the right thing to do and that you’ve got something that should become part of people’s lives. What you really want to do is become a part of life. And to do that you’ve got to intensely believe in what you’re doing, and that you’re bringing something to the market, to the world that doesn’t exist. That’s most important.
But the business side is also critical because passion alone isn’t going to get you to a sustainable business. You’ve got to be able to make money. Honestly, it took us many years to make money. We were not particularly good at making money. We were good at making beer and selling beer, and we were good at raising money, but we weren’t great at making money.
And we paid for that in a lot of ways. As we brought in more and more outside money, we sold bigger and bigger parts of the business and our share of it shrank. But ultimately we figured it out. We’re here. We were able to get over the hump.
In Brooklyn today, there are a lot of people venturing into the food business, doing everything from starting urban farms to making chocolate or opening restaurants. Looking back at your own experience with the brewery, what do you see as some of the biggest challenges to transitioning from a small entrepreneurial venture to a sustainable business?
You know, Edible Brooklyn had a really good piece last year about a bunch of local food businesses, none of whom were making money. They were all quite honest about it. To me, making that transition from being an entrepreneur to being a manager of a successful business is the biggest challenge. Starting a business based on a product you make and you’re passionate about and managing a business – employees, logistics, finances – are very different things.
A bunch of my colleagues have started very successful breweries, but they never really made it to the other side – the managing side. That’s something that you kind of have to think about from day one.
You have to think about things like margins from the beginning. You’ve got to have good margins if you’re going to pay yourself, your sales people, your marketing people. If your margins are too thin you may be doomed because that means you’ve got to sell a very high volume of your product to become profitable, and it can be hard as a small operation to produce and sell at a high volume.
Somebody’s got to be thinking about those things. There are cases where people start a business and just instinctively make an incredible product and they kind of look around at a certain point and realize that more money is coming in than is going out, but I think that’s quite rare.
At some point the brewery took some heat because while you were always based here, you weren’t actually brewing in Brooklyn. I know that’s changed, but why weren’t you brewing in Brooklyn?
We started out contract brewing with a brewery upstate, and we never tried to hide that. We had learned a lot by studying the New Amsterdam brewery, which was one of the first small east coast craft brewers. It was founded by Matthew Reich in the early 80’s, and he started by contract brewing upstate.
Matthew is one of my closest friends now – we were not so friendly way back when. When we were just getting started, he was quoted in an interview as saying, “I hope they fall flat on their faces!” Every time I tell that story now Matthew says something like, “Steve likes to remind me of what an asshole I used to be!” He really was, too!
Our goal from the beginning was to build a brewery in Brooklyn, but we didn’t want to do it until we had a solid foundation. We knew that running a brewery in the city would be a pretty tricky business. It’s very complicated – you have cost overruns, you have to deal with the city bureaucracy, even mobster-types. We had to be cautious.
And that was another lesson we learned from Matthew’s experience with New Amsterdam. He eventually built this absolutely beautiful brewery in Manhattan. We were green with envy. We thought, “Wow. This guy is so far ahead of us.” But building the brewery ended up killing the business. The project ended up costing so much more than anticipated that New Amsterdam closed within a year and a half.
So the contract brewing model was a good one for us. We wouldn’t have been able to afford to do it any other way. It allowed us to brew without spending a lot of money on equipment and our own physical space — It allowed us to develop our product and our brand. Jim Koch, the founder of Sam Adams followed that model too.
We still brew our large-production beers like the Brooklyn Lager in Utica. We’re only now getting to the point where we’re probably ready to build our own big brewery north of the city. We brew our Brewmaster’s Reserve line of specialty beers here in Williamsburg, and we’ll always do that. We’re significantly expanding our brewing capacity here in Brooklyn right now.
Tell us a little more about the Brewmaster’s Reserve line and the brewing operation here in Brooklyn.
We started the Brewmaster’s Reserve around 2004. We do about four specialty beers a year. We started doing them for places like Spuyten Duyvil and Barcade – places that didn’t really want to carry Brooklyn Lager because everyone carries Brooklyn Lager – they wanted something special. And we wanted to brew something special.
We had wanted to get into more creative brewing from the very beginning, but ended up being somewhat of a struggle getting to the point where we could.
It all went back to the fact that we got into the beer distributing business. We got into distributing out of necessity – not necessarily because we wanted to. When we started out, it became apparent that we weren’t going to get much attention from any of the distributors that were out there at the time. There were some that would have taken our beer, but we knew they wouldn’t promote it the way we wanted to promote it.
So we decided to distribute our own beer. For the first couple of years we just distributed our beer, and then we began to realize that the distributing part of the business wasn’t going to work financially unless we started distributing other beers. So we decided to distribute European craft beers. When we made the decision to focus on making the distributorship viable, things got complicated. We got so occupied with running the distributorship that we couldn’t really find a way to develop the more creative, specialty brewing part of the business.
Even though we knew the real value was in the brewery, the distribution part of the business sucked up a lot of the money. It sucked it up in salespeople, in trucks, but most of all in money going out into the market in credit. We had to give 45 days credit to customers. If you always have $4-5 million in accounts receivable instead of in the bank, that’s money that you can’t invest in developing the business.
Another problem was that we were one of the biggest distributors of Chimay outside of Belgium, of Duvel in the U.S. They were our suppliers. There would have been issues if we were making beer that competed directly with theirs.
So there were a lot of things we couldn’t do as brewers when we were distributing, and that’s why we got out of distribution. The value of distribution companies now is probably twice what it was when we sold our distributorship. A lot of people look at that and say, “Don’t you wish you’d kept it?” And the answer is no. It was holding us back. It was diverting attention away from the development of our beers and our brand.
Getting out of the distribution business finally freed us up to produce the more creative, small-volume specialty beers that we’d always wanted to produce.
We’ve done all sorts of fascinating beers with the Brewmaster’s Reserve line. Garrett Oliver, our amazing brewmaster, and his team just keep coming up with new and more interesting beers. The newest one is the Companion Ale, which was just released in conjunction with his book – The Oxford Companion to Beer. It’s a wheat/barley wine – really interesting.
My favorite so far was the Manhattan Project. It’s a strong rye beer that we age in Rittenhouse whiskey barrels. We add the kind of herbs that are in vermouth and bitters, and we add organic sour cherries. So it essentially has the flavors and aromas of a Manhattan, in a beer. Very inventive. We did a small run of that about a year ago and it went very quickly. I hope we can bring it back. It’s really a pain to make, but everyone swooned over the beer so we will bring it back.
The Brewmaster’s Reserve line is what allows the brewers to really exercise their creativity and to think outside the box. That’s a really important part of what’s happening with the craft brewing movement.
At the same time, Brooklyn Lager is 50% of our production. It does very well in a lot of places in the U.S. and beyond, and we have great pride in that part of our business. As a brewery, we can walk and chew gum at the same time. You don’t have to give yourself over to mass production to succeed. Finding more balance between the bigger-volume products and the more artisanal products is important. I think you’ll see all the bigger craft brewers moving in that direction, if they’re not already doing so.
Speaking of the size of the business, of the brewery – in the current climate in the food world, there’s a kind of cachet that comes with being small. People like small producers who do everything by hand. Have you struggled with the perception of the brewery because of your size or success?
Oh yeah. Definitely. Some people see us as too big. There’s some irony in that. We started out as two guys making beer here in Brooklyn. If you’re into local, you can’t get any more local than the beers we’re making right here. But a lot of people look at us and say, “Oh those guys are huge now…a big corporate company.”
I think that’s just part of the baggage of success. It’s happened to my colleagues around the country who’ve started breweries that have grown into successful businesses. It’s something we talk about all the time.
Actually, I’ve been going out and selling in Brooklyn again recently – just to reestablish my connection with customers – to let them know that I’m not some corporate jerk in an office tower somewhere. I live here and I’m part of the community. I started this business because I love good beer and I love Brooklyn. I’ve been able to sell a lot of great places here in Brooklyn that weren’t serving our beer before because they had a perception that we were too big.
It is ironic – when you started the Brooklyn Brewery, you struck out on the same path that so many local food entrepreneurs are starting out on now. You did it 25 years ago, when far fewer people were doing that sort of thing, and now some see the brewery as too big or corporate…Does that bother you?
We’re not new. We’re not small. We’re not young. And that makes the story less interesting to a lot of people. It’s the way of the world. That’s a challenge for the craft beer breweries of our generation. There’s a lot of pressure to constantly be reinventing yourself for new generations.
But I think the beer speaks for itself. The beer is what’s important. Garrett’s amazing and his team is amazing. I’ll put them up against anybody for innovation, creativity and quality in brewing.