Brewing Success (The Fun Way)
The Brewery That Acts as a Sustainability Leader and Engages Employees to Be Best for the World
New Belgium Brewing Co. was founded on bikes, fun, good beer — and a social mission that has driven the company’s culture through decades of growth.
By Marc Gunther
their company’s success and fun-loving culture.
Photo courtesy New Belgium Brewing Co.
Back in 1991, before they sold their first bottle of beer, the newly married founders of New Belgium Brewing Co. took a hike in Rocky Mountain National Park, a jug of homebrew in hand, to decide what kind of company they wanted to build.
Kim Jordan was a social worker raised by liberal parents and educated at a Quaker school. Jeff Lebesch, who was trained as an electrical engineer, was inspired to become a brewer after a bicycling trip to Belgium.
“Codifying what’s going to matter to you seemed really important to me,” Jordan says. They came up with four core values: to create world-class beers; to promote the culture of beer; to be responsible environmental stewards; and to have fun.
Twenty-five years later, much has changed at the company, but the core values remain. New Belgium treats its employees well — in fact, they own the place, through their employee stock ownership plan (ESOP). The brewery, headquartered in Fort Collins, Colorado, is a sustainability leader in its own operations and in its advocacy. It’s also a force in the local community, supporting, among other things, sustainable agriculture and bike commuting. Its values have helped New Belgium practice employee engagement by attracting good workers, run a lean and green operation, and earn the loyalty of beer drinkers. Its success, the company says on its website, has come “not in spite of our social and environmental efforts, but because of them.”
These qualities have earned New Belgium recognition as one of B Magazine’s Best for the World companies in 2016.
New Belgium says it is a profitable business, although the company would not disclose numbers. It has grown from a mom-and-pop operation into the nation’s fourth-largest craft brewer in the $19.6 billion industry in 2014, and it generated an estimated $225 million in sales in 2015. New Belgium employs about 780 people, sells in 45 states, and in May of this year opened a second brewery, this one in Asheville, North Carolina.
New Belgium is serious about its sustainable beer: It operates five internal laboratories using sophisticated instruments such as mass spectrometers to test its water, yeast and finished beer. But it’s also serious about making work enjoyable — so much so that it has a director of fun, whose job is to make sure the company and its workplace culture celebrate successes. Says Jordan: “If you can’t have fun in the beer business, I’d suggest your fun meter needs a little massaging.”
Transparent Work Culture Makes New Belgium a Seriously Fun Place to Work
At most companies, your anniversary may earn you a cupcake or a note from HR. At New Belgium, you get an exclusive Fat Tire cruiser bike (which shares its name with the company’s flagship sustainable beer and is not available for sale anywhere except sometimes on eBay). Five years on the job earns an expenses-paid trip to Belgium to experience the beer culture that inspired the firm. After 10 years, workers get a four-week paid sabbatical. Employee engagement perks like these — plus daily benefits that include not only office foosball and table tennis but also an on-site yoga studio, volleyball court and climbing wall — have helped New Belgium earn a place on Outside magazine’s Best Places to Work list almost every year since it began in 2008, when New Belgium topped the rankings. It probably doesn’t hurt that workers get to take home a 12-pack of beer each week.
The company offers an array of more fundamental benefits, too — including fully paid health insurance, paid maternity leave, and adoption assistance. Last year, the brewery hired a doctor and is wrapping up construction on an on-site health clinic.
Photo courtesy New Belgium Brewing Co.
This workplace culture, insiders say, is the key ingredient to the company’s success, and it includes two other critical features. One is called open-book management. Shared ownership is the other.
Jordan brought open-book management, which is the practice of sharing financial information and strategy with all employees, to New Belgium in 1996. She had read The Great Game of Business by plant-manager-turned-entrepreneur Jack Stack, who argued that the best way to operate a company is to give everybody an understanding of how the business works, a voice in saying how it should be run, and a stake in the financial outcome — for better or worse.
Inside New Belgium, open-book management is about more than sharing numbers. New Belgium provides employee engagement courses to help workers learn the ins and outs of balance sheets and income statements, with the expectation that “everyone will be conversant with the business of running the business,” Jordan says.
None of this is easy, Christine Perich, who took over as CEO for Jordan late last year, says. She communicates constantly with staff and writes an internal blog about corporate issues. “It takes a lot of work. It’s expensive. It’s time-consuming,” she says. But she’s convinced the investment pays off: “People are engaged at a different level. You don’t come in, sit in your silo and do your thing. It’s much more fulfilling to think you’re part of the bigger picture.”
From the start, Jordan and Lebesch wanted to share ownership of New Belgium with the employees. “We rely on our co-workers to help us run the business,” Jordan says. “We’re all in this together.” They began with a deferred compensation plan and later introduced the employee stock ownership plan (ESOP), which grew to own nearly a third of the company. In 2009, the couple divorced, and Lebesch sold his shares back to New Belgium. The ESOP’s stake in the company bumped up to 41 percent.
In 2012, Jordan decided to sell her shares as well. New Belgium workers who gathered at that year’s companywide annual retreat found an envelope on their chairs. She told them to open the envelopes to see the new owner. Inside each was a mirror, signaling that the brewery had become 100 percent employee-owned.
Jordan might have been able to command a higher price by selling to a rival brewer or a private equity fund. But, Jordan says, she sold to the company’s workers — actually, to their retirement plan — because she thought that was the best way for New Belgium, as a sustainability leader, to preserve its existing culture. This was the same year the brewery codified its values by becoming a Certified B Corporation.
In her own way, Jordan was also confronting the problem of income inequality. “One of the biggest threats we face in our world is the widening gap between the wealthiest part of the population and everyone else,” Jordan has said. “Employee ownership can change that equation.”
Photo courtesy New Belgium Brewing Co.
New Belgium’s employee turnover rate is remarkably low at just 3 percent per year. Workers rave about the place. “I love my job,” says Katie Wallace, assistant director of sustainability. “I get to work at a dream company in a dream role.” Wallace, who has a master’s degree in positive psychology, wrote her thesis on workplace cultures and believes they are an underappreciated driver of business success. “When people feel safe, connected and empowered, they move toward their highest potential,” she says.
New Belgium’s culture of sustainable leadership and encouraging workers to share ideas to promote efficiency sometimes pays unexpected benefits. In 2009, Don Rich and Marc Finer, who worked on the bottling line, figured out that the company could eliminate the need for cardboard dividers in 12-packs by slightly shrinking the size of the outer cartons, which packed the bottles tight enough to prevent breakage. Getting rid of the dividers reduced waste and saves the company about $280,000 a year. (Note: This figure has since been updated by the company to be $850,000 annually.)
Some sustainability initiatives require sacrificing short-term profits for long-term gain. In 1998, the city of Fort Collins asked the company to invest in a grid-tied wind farm. Before agreeing, New Belgium executives asked the company’s 55 workers what they thought, because the higher cost of wind power would reduce profits and thus reduce end-of-year profit sharing for the staff. “They unanimously agreed to wind,” says Jenn Vervier, director of strategy and sustainability.
The company has since moved from paying a premium for wind power to investing in on-site power generation, including a solar-electric array and the creation of biogas from its wastewater. Last year, New Belgium produced 12.6 percent of its own electricity from these renewable sources. These are long-term investments — solar can take up to 20 years to pay back. To finance that power creation, as well as energy and water efficiency, New Belgium created a fund by taking the 2.5-cents-per-kilowatt-hour premium they were paying for wind and turning it into an internal electricity tax that adds up to about $200,000 per year.
A Look at Employee Ownership
Employee ownership at New Belgium delivers many benefits. Workers act like the owners they are, stewarding for the environment and company resources, they say. It’s a great asset to the development of workplace culture. They share in the company’s success and, as long as the company continues to grow, build wealth they can use when they retire or leave the company. They also share in the company’s risks, including any debt the company took on to buy the founders’ shares. New Belgium will not reveal how much the workers paid the founders for the company.
The employee-owners do not run the company. Nor do they get a seat on the board of directors. Their shares in the company are held by an ESOP, which is a tax-qualified, government-regulated retirement plan. It’s managed by a trustee, who is selected by the board of directors.
And who selects the board of directors? The trustee.
If this sounds circular, well, it is. But it’s also fairly typical of the way ESOPs work at most of the 7,000 companies that have them, according to Corey Rosen, the founder and senior staff member at the National Center for Employee Ownership. ESOPs differ from worker cooperatives, in which workers control as well as own their companies. Unlike traditional corporate shareholders, ESOP participants in privately held companies generally are not allowed to vote shares, except in the event of a sale of a company.
Legally, the workers’ financial interests are protected by the trustee — in New Belgium’s case, First Bankers Trust Services, an Illinois firm. The trustee has a fiduciary duty to make sure the ESOP is operated in a way that protects the long-term value of its assets. An independent agency assesses the value of the employees’ shares every year, and New Belgium’s ESOP participants are entitled to direct the trustee on how to vote shares on most change-of-control transactions.
At New Belgium, workers get a voice through an elected group known as POSSE (ESOP, spelled backward, with an extra S), which meets regularly with company executives. It was created after workers were unhappy when they weren’t told in advance or asked about layoffs in the early 2000s — the only time the company has reduced its workforce. The POSSE also helps explain the employee-ownership rights and responsibilities to all the brewery’s employee-owners.
Rosen, who has worked on employee-ownership issues for decades, says studies have found that formal governance matters less than giving workers a voice in company operations.
“The single most important thing is the degree to which employees are involved in day-to-day decisions about their work,” Rosen says. “The best employee-owned companies — and New Belgium is definitely one of them — create these very high-involvement management systems.”
New Horizons: New Belgium Expands to Asheville, North Carolina
A historic stockyard, auto yard and tobacco barn were among the buildings that once stood along the French Broad River in west Asheville, where New Belgium opened its East Coast brewery and Liquid Center (tasting room). Instead of demolishing the buildings after it acquired the 18-acre site in 2012, New Belgium hired a salvage firm to “document, catalog, value and deconstruct” the buildings, then store the scrap to reuse in the new brewery. The painstaking salvage operation wasn’t cheap, but it hewed to the company’s values, says Vervier, who has been with New Belgium since 1993. Rather than building on undeveloped rural or suburban land, the company chose a brownfield site in the city, which also means employees can walk or bike to work.
The Asheville brewery, which owners hope will soon earn LEED (Leadership in Energy and Environmental Design) certification, will serve most of the eastern half of the United States, thus reducing New Belgium’s transportation costs and carbon footprint. At a cost of more than $100 million and with a 500,000-barrel capacity, which increases the company’s total capacity to 1.5 million barrels (equivalent to 372 million pints), it represents the latest and largest of the company’s investments in environmental advocacy. The new plant, along with a $7 million expansion in the Fort Collins facility, will give New Belgium expanded distribution on the East Coast.
Its growth could make New Belgium more attractive to potential buyers. Industry giant Anheuser-Busch InBev has acquired seven craft brewers in recent years. Company executives say they have no plans to sell.
Instead, they say, they’d like to influence other companies, big or small, to emulate New Belgium’s approach by sharing ownership with workers, inviting them to participate in decision-making, and investing in local communities through environmental advocacy.
So long as a company is profitable, Jordan says, it has the option to share those profits with its workers, the community and the environment. Since New Belgium’s early days, she says, “It really, very quickly, became clear to me that business could be a force for good.”
Photo courtesy New Belgium
Acting as Sustainability Leaders, Beyond Sustainable Beer
The highly stressed Colorado River, which stretches from Le Poudre Pass Lake, just west of New Belgium’s hometown of Fort Collins, all the way to the Sea of Cortez in Mexico, supplies half the water for the company’s sustainable beer through an elaborate system of diversions across the Continental Divide. In 2010, New Belgium, with support from Patagonia and Clif Bar, started an activist group called Save the Colorado to fight “irresponsible water projects” and support alternatives to dams and diversions.
Save the Colorado is one instance of environmental advocacy through which New Belgium has tried to drive environmental and social change. The company belongs to Business for Innovative Climate and Energy Policy, a coalition of companies that lobbies for action to curb climate change. A few years ago, New Belgium joined a group called Brewers for Clean Water led by the Natural Resources Defense Council with the aim of strengthening federal clean-water legislation. And this year, with beverage giant Diageo and the Glass Packaging Institute, the brewery convened a coalition of businesses and nonprofits to improve the efficiency of U.S. glass recycling.
“We have an opportunity and perhaps an obligation to use the power of our brand to raise awareness and move practices in a more sustainable direction,” says Jenn Vervier, New Belgium’s director of strategy and sustainability. For supporters of such initiatives, buying the company’s Fat Tire and Ranger IPA beers demonstrates activism as much as their taste in beer.
New Belgium practices plenty of conventional philanthropy, too. Since 1995, the company has donated $1 to nonprofits for every barrel of sustainable beer it sells. About $8 million has flowed to groups that support environmental education, sustainable agriculture, smart growth, bicycle advocacy and water conservation.
Some recipients are controversial. After the company donated about $9,000 to an activist group called WildEarth Guardians that sued to block the expansion of a coal mine in northwestern Colorado, people in the nearby mining town of Craig organized a boycott and persuaded bars and restaurants to stop pouring New Belgium. Company representatives visited Craig, explaining that the donation was made to support WildEarth Guardians’ work to protect watersheds and not to support the lawsuit, but the backlash continues. “We’re not selling much if any beer in Craig,” says New Belgium spokesman Bryan Simpson. “You have to chalk it up as a cost of engaging in advocacy.”
Learn more about the 2016 Best for the World Overall Honorees.
B the Change gathers and shares the voices from within the movement of people using business as a force for good and the community of certified B Corporations. The opinions expressed do not necessarily reflect those of the nonprofit B Lab.
