How to Run an Iconic Craft Brewery for 40 Years

Sierra Nevada Brewing Company and its iconic Pale Ale turn 40 years old this year. We caught up with founder Ken Grossman to discuss all things craft beer.

This year, Ken Grossman’s Sierra Nevada Brewing Co. turns 40 years old. Grossman was among the first wave of homebrewers who ventured out and decided their approach to beer making had a place in American bars. Four decades later the craft beer industry has taken roughly 13 percent of the U.S. beer market from the macro breweries while Sierra Nevada has become synonymous with good, consistent beer and steady production (as the third-largest craft brewery in the US, they make 1 million barrels a year). All this while remaining 100 percent family-owned and operated.

To celebrate 40 years, Grossman and team brewed a celebratory Hoppy 40 Year Anniversary Ale as a tribute to the Pale Ale that put the brewery on the map. It has a more citrusy and less resiny hop character and is a solid nod to their roots while fitting in with that classic American Pale Ale style. We spoke with Grossman on what he’s learned through four decades of beer making and what it means to make craft beer.

Where classic Sierra Nevada Pale Ale is made with just Cascade hops, the anniverary celebratory beer is made with Cascade, Cluster and Centennial hops. It’s available nationwide for a limited time (look for the black and gold label.)

Q: Pale Ale is a classic now, but it was very different when it first came out. What were you trying to make?
A: Well, I guess going back to when we first created it 40 years ago, we were trying to do something that was not an English IPA. We wanted to Americanize the beer we were producing, so we featured the Cascade hop and a pretty interesting, and what’s now pretty well-loved, yeast strain that we found. And we hopped it up and made it distinctive. We knew we weren’t going to sell a lot of beer and thought we’d better have something that was memorable at that point in time. And so, we created a beer that had a lot of hop character.

Q: What you made was nothing like what the rest of America was drinking at that time, though.
A: There were right around 40 breweries in the whole country at that point, and almost all of them were producing a pretty similar style of beer. For the most part, it was really a light lager landscape. And there were a handful of imports. But most beer drinkers drank American light styles. We had to educate the consumer certainly, but also the retailers and the wholesalers, because they didn’t know what a craft brewery was, or microbrewery as we were called back then. We didn’t have any advertising, we didn’t have any salespeople. So, you’d have to go down and hand-sell the beer to a bar.

Q: You couldn’t get into stores and most bars turned you away immediately. How did you sell any beer?
A: We found Irish bars in San Francisco were willing to try something a little different, but they were few and far between as far as getting the bar owner to try it. Once they wanted it then you had to convince the wholesaler to carry the beer and deliver it to them. So, it was a lot of beer festivals and a lot of hand sampling. And then it started to take off in the early 80s. Insert the articles about the craft beer and about this new wave. And it happened on both coasts, but really first on the West Coast. California and Colorado were where the first handful of breweries primarily opened up. It was tough getting any traction back in the beginning.

Q: Was there a moment you realized, Oh wow, this is catching on and maybe we’re onto something?
A: In 1983, there was an article in The San Francisco Examiner Sunday magazine section all about us. This little brewery in Chico and we were making unique beers. And so, that coupled with the fact that we have a college here in town, Chico State. One of the beer buyers for one of the big grocery store chains’ daughter was going to Chico State. He’d come to visit her and he was a beer fan and he came by the brewery. So, he started promoting our beer without us really knowing about it. He’d run ads in their flyers. All of the sudden, we got a huge amount of orders and then that article came out and it was, ‘Oh geez, we can’t keep up.’

Harvesting hops grown on Sierra Nevada’s Chico, Ca. property.

Q: How did the brewery grow from not keeping up with small town demand to one of the biggest productions in the US?
A: We struggled our first couple years and the brewery back then was only 10 barrel capacity. Our initial volume was 1,500 barrels a year and we pretty quickly realized that we couldn’t make a living off of 1,500 barrels a year in that era — or at least not much of one. The costs were high and it was hard to sell. And so, we pretty rapidly started expanding.

We kept adding more and more tanks and then I went over to Germany at the end of ‘82 and bought a defunct brewhouse, which we brought in ‘83 — a German 100-barrel brewhouse. And we wrote a new business plan and thought we were sort of on the cusp of something big and could not get anybody to loan us a penny. We just didn’t have enough of a track record. We’d been in business for three years and we weren’t making enough money. And if you’re a banker and you did any research on the U.S. brewing industry you would see that it had been shrinking pretty quickly from the repeal of prohibition time. We actually put the equipment in storage for nearly four years and just kept making more and more beer, brewing around the clock. We got our original little brewery up to about over 10,000 barrels. And then, at that point we had enough of a track record that we got our first real loan to build the initial brewery here on 20th Street in Chico. That was in ‘88. And then, we had capacity to really grow. So, we grew 40, 50 percent a year for a number of years.

Grossman cranking the generator that drove the original Sierra Nevada brewhouse. Grossman’s first brewing setup, which he used to make the first official Sierra Nevada beer (a stout), was built out of repurposed dairy equipment.

Q: Today’s craft world is wildly different than it was then. What’s the biggest challenge facing craft breweries right now?
A: Overall, the challenge today is that we have 8,000 breweries. The smallest ones that have their business built around a taproom or a pub or a small local marketplace where they self-distribute, they may be able to persist and grow and have a future by that business model. The brewers that are sort of in-between that have to rely on distributors and retailers in far-flung areas, they’re having a tougher and tougher time as the retailers start to rationalize their shelf space on what’s selling and how many square feet of shelf is taken up by brands that aren’t selling well. There’s becoming more and more headwinds for some players in our industry.

Q: What excites you about craft beer right now?
A: I think sort of what’s next and how do you stay true to your roots without following just trends. We do need to pay our employees and try to increase wages and benefits and all those things. And so, business needs to move forward and find a way to grow. On the other hand, you got to keep your soul and try to do it in a way that feels good for the company to pursue rather than just jumping on everything.

Q: To that end, what do you envision the next 40 years has in store for Sierra Nevada?
A: I’m just trying to think about next year. My goal for myself is to hopefully put the company in good hands to continue to succeed in an ever-increasing competitive world. So, trying to do things now to set the company up for future success. Target, predict what the next generations will want to do. I’ve got one of my daughters involved in the business with my son in North Carolina. There’s family presence all the time. We do have an outside CEO, a non-family member CEO. A very experienced person in that role. And I think we’re in good hands with his leadership. Hopefully, we can put all the pieces together, or keep them together. And figure out how to keep the company growing and thriving and independent.

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