Tapping Community

A rise in community-supported breweries is a good thing for craft beer, and for communities

September 1, 2012 By Whit Richardson

If you ask David Flynn what prompted him to buy a membership share in Seattle’s Flying Bike Cooperative Brewery last year, he’ll give you an honest answer. “I have no idea.”

It was a purely emotional decision, he says, driven by a love of beer, brewing and community—three things in one package that struck the right chord. “I heard they were putting Flying Bike together and just had a gut feeling that it was something I needed to be part of,” says Flynn, a tech recruiting professional.

In retrospect, Flynn can list dozens of reasons why it was a brilliant idea to get involved, but at the time a gut feeling was all he needed to invest $150 in a lifetime membership in the cooperatively owned brewery, which has, as of late May, 515 members and is growing steadily. The brewery itself doesn’t exist yet, but the cooperative is active, sponsoring events and holding homebrewing competitions for members, of which the winning recipes are brewed under partnerships with other area breweries. “Building a business that is owned and managed by the community it serves just strikes a chord with me,” he says. “Oh, and that business is a brewery? Well that is just icing on the cake.”

Flynn is not alone. Around the country, startup breweries are adopting nontraditional business models and tapping their communities for the funds and sweat equity it takes to get a brewery off the ground. Cooperative breweries. Brewer co-ops. Community-supported breweries based on the CSA (community-supported agriculture) model pioneered by local farms. Crowd-funded breweries. They’re all on the map now, and it’s the engaged communities and individuals like Flynn who are the driving force behind a new generation of breweries. The alternative business models and community support are also allowing a new cadre of entrepreneurial and creative brewers to enter the profession who otherwise may never have been able to make that leap.

The Rising Tide

While small breweries have always needed to be creative to stay viable, the increase in alternative business models and creative funding methods in the craft brewing industry are due to the success that craft brewers experienced in the past decade, says Julia Herz, craft beer program director at the Brewers Association. “The small breweries of today are now in a much different position than they were in the 1970s, 1980s and 1990s, because it seems like the financing is much more open and available because of the success of the overall segment of craft brewers,” she says.

The craft beer sector doesn’t seem to be slowing down, either. Today, there are about 2,000 craft breweries operating in the United States, the highest number since before Prohibition, with another 1,000 in the planning stages, according to Herz. “So in a way,” she says, “the success of creative business models is because a rising tide floats all boats, and the rising tide of the successful breweries in the last few years that has brought us to more than 2,000 breweries now has helped change the business paradigm.”

While the majority of these new breweries will take a traditional business route—starting a limited liability company, securing a bank loan, mortgaging a home, etc.—many are tapping into their communities to get their dream off the ground.

Cheers, Times 100

Tim Dery was just another homebrewer in Seattle in the summer of 2010 when he read on a local beer blog about a meeting for individuals interested in creating a cooperative brewery in the city. Besides daydreaming about owning his own brewery—a blue-sky idea shared by every homebrewer at some point—Dery had never seriously considered the idea. But he was intrigued by the idea of a cooperative, which according to the International Co-operative Alliance, is an autonomous association of persons united voluntarily to meet their common economic, social and cultural needs and aspirations through a jointly owned and democratically-controlled enterprise.

Dery ended up joining the cooperative that would eventually become known as Flying Bike and became a member of its steering committee. He is now a member of the board. The nontraditional business model drew him in. “I like the community building that is centered around beer,” Dery says. “It’s a different mind-set than my day job in tech; it’s a different set of challenges, and I like that.”

Flying Bike started soliciting members in April 2011. The co-op is still looking for a space to convert to its brewery. It also plans to have a taproom. “It’ll sort of be like Cheers, times 100,” Dery says. “Where not only does everyone know your name, but all our members are owners.”

However, Flying Bike is not blazing new ground. Black Star Co-op Pub & Brewery in Austin, TX, opened in September 2010 as the first cooperative brewpub in the United States—and, as far as anyone can tell, the first in the world, says Jeff Young, Black Star’s head brewer.

Young, a professionally trained brewer, had just moved to Austin from Alabama in 2006 when he attended one of the co-op’s organizational meetings. Initially, he didn’t even know what a co-op was, but he believed in its basic tenets. “It basically put a name to what I wanted to do, which was have some sort of brewery or brewpub that worked very closely with the community and the owners and take some of the production or the design of the beers, take some of that responsibility and spread it around and get more input, and feedback, and help,” Young says.

Black Star’s genesis was similar to Flying Bike’s. A group of like-minded individuals interested in starting a local brewpub, but without the wherewithal to go the traditional route, got together and made it happen. “None of us had the money, and none of us could go to the bank and say: ‘Hey, I got this wonderful idea. Give us half a million dollars,’ ” Young says. “So we really had to start from zero dollars and, in some aspects, zero experience.”

It was a slow process, and one without a playbook. It took three years to get the co-op organized and functioning, and an additional two years to build the brewpub, Young says. He acknowledges there were doubts as to whether the cooperative model would even work, but a core group remained committed to the idea.

The lengthy process gave Black Star time to solicit thousands of members and gather a $150, one-time fee. By the time it was ready to open last fall, the cooperative had roughly 2,800 eager members waiting to visit the brewpub. “The word spread very easily with this kind of business model,” Young says, adding that Black Star has members in 15 countries. “As soon as we opened our doors, we had 3,000 people anxious to come visit us, so we didn’t really have an initial lull. We were more afraid that we would initially get our ass handed to us with too many people and not be able to keep up, and that’s kind of what happened. I mean, it’s a good problem, but our problem was too many people knew about us.”

That built-in customer base is one of the benefits of a community-supported brewery, says Herz at the Brewers Association. “When breweries go to their networks for fundraising, it often gives them instant cheerleaders right out of the gate that are more heavily invested in their success than the average beer lover from down the street.”

It also brings with it a stable of volunteers and pro bono consultants who can lend their varied business expertise to the co-op’s success. “It’s their brewery. They want it to succeed,” Dery says. “Truly, our greatest strength is having membership.”

For instance, Flynn, who works as a recruiter in the IT world, uses his skills to help recruit members for the co-op. Roger Baty, another Flying Bike member-owner, works in marketing and has produced marketing and advertising material for the brewery. “I do what I can, when I can,” Baty says. “They know I’m here and that I can help them.”

Bellingham Beer Lab in Bellingham, WA, is another brewing business with a nontraditional business model that is trying to harness the power of its community. Leading the effort is Jim Parker, who during his 24 years in the industry has been a brewer, publican, beer writer, all-around beer promoter and former administrator of the Institute for Brewing Studies in Boulder, CO. He wanted to open his own brewery, but was a bit wary of the traditional path. He tried to open a brewery once and lost a house in the process. So he wanted a different route this time. He looked at several alternative business models, but none exactly matched his vision. “So, we’ve decided it will be a conglomeration of all of them,” he says. “It’s a cooperatively owned brewery incubator with five brewing entities sharing one production facility and tasting room.”

Parker saw a gap in the local brewing community and the larger craft beer world. He wants to create a place, an incubator, where aspiring brewers are able to build their brewery business without bearing the significant financial investment on their own. He drew his inspiration from Oregon’s wine industry. Specifically, he wanted to replicate the model used by Carlton Winemakers Studio, which provides shared production space and a tasting room for a number of up-and-coming winemakers. “It’s a great model for a beer business because the biggest chunk of capital is in brewing equipment, but it sits idle for most of the time,” he says. “There’s a lot of time that system isn’t being used, so why not join forces?”

The Bellingham Beer Lab already has five startup breweries committed to the project, including Parker’s, Happy Valley Brewing, which will share production space and a tasting room. The co-op doesn’t have a location yet, but Parker is hoping to have one secured in the latter part of 2012.

Parker held the first fundraising event in November. His goal is to attract 1,000 members, who would each pay a one-time, $150 fee. In addition, Parker hopes to sell annual subscriptions, or shares, for $300, which would entitle the buyer to a predetermined amount of beer over the course of a year. The community-supported-brewery model is borrowed from small-scale farmers who generate some much-needed operating income by selling community-supported-agriculture, or CSA, shares to customers, and then delivering to them a steady supply of veggies throughout the year. “If we can get 1,000 members at $150, we can open a moderate brewery,” he says. “And with some CSB subscriptions, we can get the ball rolling.”

The incubator would allow breweries to build their businesses at a fraction of what it would cost to go it alone. “For one of us to open our own brewery, it would be next to impossible without mortgaging our house and begging, borrowing, and stealing from our friends and relatives,” Parker says. “Then if it doesn’t work, there’s some real major pain on a lot of people’s parts. In a co-op no one has more than $150 at risk.”

When one of the breweries outgrows the space, it would  recoup its investment and make room for another aspiring brewer, who would be chosen by a member committee, Parker says. “When it comes time and they move out because they’ve grown too big, it gives them an easy way out,” he says. “No one gets rich, but no one loses their house.”

Old Path, New Kicks

Even breweries with more-traditional business models are realizing the greater role communities can play in their business.

Page Buchanan, a former homebrewer, launched House of Brews in August 2011 in Madison, WI. To fund the venture, he followed the well-trod, though risky, path of many aspiring brewers. He secured a Small Business Administration loan, took out a second mortgage on his house, sold bonds to family and friends and reached into his own pocket. Currently, the brewery is up and running with keg-only production, which he supplies to local bars. But a farmer friend in his local homebrewers club turned him on to the idea of selling CSB shares. “It seems so obvious that I can’t believe that more people hadn’t thought of this before,” he says. He plans to sell six- and 12-month shares to customers, which would provide the subscriber with the equivalent of two or four kegs, respectively. He hasn’t started selling them yet, but already has a waiting list.

Other CSB startups around the country include 7th Settlement in Dover, NH, and Big Beaver Brewing Co. in Loveland, CO. However, Buchanan points out that a brewing co-op might not be legal under  some states.

About the same time the Black Star cooperative was getting set up in Austin, Ethan Cox and some homebrewing buddies in Buffalo, NY, were hatching their own plans to launch a cooperative brewery. However, they hit a wall when it came to licensing. “We got as far as the New York State Liquor Authority,” Cox says. “The problem is everyone”—in a co-op, that could mean 1,000 owners—”would have to have a thorough background check and fingerprinting, like owners of breweries do. Because alcohol is such a highly regulated industry, they laughed at us.”

Cox and his partners changed direction, and chose a more traditional route. While they gave up on the co-op model, they didn’t give up on the underlying spirit of the co-op when they founded Community Beer Works. “Even though we are your basic LLC, we definitely aim to emulate a lot of the practices your cooperative business would normally endorse,” says Cox, CBW’s president.

And though Cox and his partners couldn’t recruit member-owners, they could still source a portion of their startup funds from the community. They produced a video that introduced themselves and their plan to build a community-supported brewery in Buffalo and posted it on Kickstarter.com, a website that allows organizations and individuals to propose projects and seek donations from the public. In return, donors receive gifts, the poshness of which depends on the amount invested. For a $10 investment, CBW offered a CBW sticker, the right to sign your name on the wall of the customer service area, a tour of the brewery and free high-fives from the CBW owners. For $1,000, investors received an invite to an exclusive brewmaster’s dinner. CBW asked for $15,000 in total, only a fraction of the $160,000  Cox estimates the business launch will cost, but still a good chunk of startup funds. Exceeding expectations, CBW raised more than $17,000 in 20 days from 237 donors. “That really confirms to us that we’re not going to have any trouble selling this beer, if there’s that much interest and it was that easy to raise that money,” Cox says.

Using Kickstarter was a good way to do a couple  of things at once, Cox says. For starters, a crowd-sourced brewery is unusual enough that it provided some good local news coverage and marketing opportunities, which in turn encouraged more people to donate to  the brewery. It also retained a bit of the co-op feeling, of getting locals to invest in a vision. “Even if we’re not a co-op, you can still feel a part of the company because you donated a little to help us get off the ground,” Cox says. “We don’t just have our hats out. There’s a little quid pro quo and we like that. People feel invested in the brewery even though they’re not investors, and we think there’s real value in that.”

As of December 2011, there were 21 breweries that were either actively soliciting funds on Kickstarter or had already met their funding goals. While Community Beer Works asked for only $15,000, some breweries—Pipeworks Brewing Co. in Chicago, Mystery Brewing Co. in Hillsborough, NC, and Wilderness Brewing Co. in Kansas City, Mo.—have each successfully raised more than $40,000, a significant chunk of startup costs. However, raising funds through Kickstarter is in no way a sure thing. Several brewery projects had failed to meet their Kickstarter funding goals, which means pledged donations were returned.

Brian Castner is one community member who saw value in donating to Community Beer Works. Though he knows nothing about brewing, he admired what Cox and his partners  were trying to do and wanted to do what he could to help. So he threw in $100. “I want to live in the kind of city where a thing like CBW can exist,” Castner says. “So if a little capital helps get them there, then I’m happy to do it.”

Castner reaps the benefits of his donation whenever he enjoys a glass of The Whale, CBW’s brown ale. “But it’s the intangibles that are the best,” he says. It’s cool to help start a brewery, and he likes knowing he helped create something that supports the local community and economy. “It’s hard to get more crafty or local than a nano-brewery that distributes out of the back of a car to its immediate neighborhood,” he says. “I admit the Kickstarter model is a bit odd at first—why would I essentially donate money to a for-profit business? Shouldn’t I save my donations for actual charities?”

He pondered the question, but ultimately was satisfied with his justification. “I think society in general is getting more and more conscious of where our money goes,” he says. “Every consumer choice is a de facto investment. I’d rather spend my money at CBW than Walmart, and I’d rather ‘pay extra’ to do it.”

Creating community

Breweries owned and operated by the community are also more apt to offer educational and incubator-type opportunities.

Just because Flying Bike doesn’t have a brewery yet doesn’t mean it hasn’t been busy getting the community involved. It held its first homebrew contest in September 2011—“we’re in Seattle, so of course it was an IPA,” Dery says—and out of 35 homebrewed entries, members chose one IPA as winner. A local brewery, Three Skulls Ales, produced the beer, called Fly PA, and it was available on tap in the Seattle area for several months, Dery says.

Young at Black Star also tries to integrate the brewpub’s members into the operation, whether with beer tastings, which educate members and foster feedback, or with what Young calls “member-owner design forums.” Last summer, Young invited interested members to join him in creating a new summer brew. “I needed a light, wheat beer, but I didn’t have anything in my arsenal that I had in mind,” Young recalls. “So for all the people that showed up, I said, ‘Hey, here are the parameters I want you guys to work within. I need an American wheat beer with my house yeast. Go.”

After much discussion and some tasting of spices, Young had a crowd-sourced recipe that he could take back to his brewery. The result was Elba, an American wheat beer spiced with lemongrass, grains of paradise and bitter orange peel. It turned out to be of the brewery’s most popular beers. “I was only going to do a batch or two, but I sold it for three or four months it was so popular,” Young says. “And it was designed by the community, which is a really cool aspect.”

The Pendulum Swings

Flynn, the one who had no idea why he bought an ownership stake in Flying Bike Cooperative Brewery, can now list plenty of reasons why investing in a co-op brewery is a good idea. “From my vantage point, we gain a community cornerstone,” Flynn says. “A social hub, a revenue engine for community causes, a consumer of local goods and services—family farms, local business, etc.—a creator of jobs. The list goes on and on, but the focus is always our members and our community. I think that focus is what differentiates us, and other co-ops, from other businesses.”

Not only will the rise of cooperative breweries and CSBs and brewery incubators have a powerful impact on their communities, they’ll also have a powerful impact on the larger craft beer world, says Herz at the Brewers Association. “The entrepreneurial spirit is clearly alive and well and with that spirit you tend to have more creativity and more diversity of what’s produced and put into the marketplace,” she says. “So overall I think the biggest positive is the more alternative business models that are sought out, the more freedoms today’s small breweries have, which means more creativity and, frankly, in the end is better for today’s beer lover.”

The relationship between craft breweries and their communities is really at the root of the entire craft beer movement, but it’s undergone a long evolution and almost a role reversal. In the past, craft brewing’s pioneers put everything on the line to build craft breweries without knowing if the community would support the endeavor. They stood up against the macrobreweries and courted their local communities by consistently brewing a stellar product. It wasn’t always smooth sailing, but judging by the fact that craft beer sales are up even in the face of overall declining beer sales is a good sign that communities have embraced their craft brewers. Now, the pendulum has swung the other direction, and it’s the communities and their growing demand for craft beer that is driving a new generation of craft breweries staffed with individuals like Dery, Young and Parker, who without their communities may never have had the chance to brew their beer outside their own kitchen. And that can only be a good thing.