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Q&A with Jim Koch, Founder of Samuel Adams Brewery
Cincinnati native and Sam Adams founder Jim Koch returned to the Queen City this summer to host a speed-coaching event for food, beverage, and craft brewing small business owners. He stopped to chat with Cincinnati Magazine about Brewing the American Dream, starting the world’s most decorated brewery, and his hopes for Cincinnati’s Historic Brewery District
What are the origins behind the Brewing the American Dream Program? We did one of those company team-building philanthropic events where we went to paint a local community center. We had 30 people there painting all of the rooms, lobbies, halls, and so forth. Everybody thought it was a really feel-good activity, but I remember walking back to my car and thinking “I’m supposed to feel good about this.” I didn’t and I was trying to figure out why. I realized we had 30 people from the company from all levels and we probably did about $2,000 dollars worth of bad painting. The value of those people’s time was much more than that, so as a businessperson it bothered me that I had not created value. We had taken $5,000 worth of management time and turned it into $2,000 dollars worth of mediocre painting.
How do we create real value? How do we multiply ourselves? How do we take our core skills and use them to benefit our larger community? That’s the true origin of the Building the American Dream Program.
How did your early Sam Adams experiences influence the program? The entire company was two people. I really could have used access to loan money instead of having to raise equity from friends and family, and I would have been even more grateful for solid, nuts-and-bolts business advice. I have a Harvard MBA and I had almost seven years of management consulting at Boston Consulting Group, and yet, when I started my business—I knew a lot about beer and brewing—I didn’t know about the nuts and bolts of a small business. It took about four years for us [to get legitimate funding]. I started with my own savings and friends and family. I couldn’t get any bank money whatsoever. We finally got an industrial revenue bond to help with building out the brewery site. But that was four years in and we were doing pretty well by that time. At that point, I didn’t really need the money. It’s the old story, if you really need the money banks aren’t going to lend it to you.
What benefits do the program provide? Whether it’s negotiating a real estate lease, designing a label, making a sales call, or dealing with distributors. All of those things I had to learn by trial and error. As a small business, you really don’t have a lot of room for error—a few bad decisions can put you under. We provide coaching and counseling on real world nuts-and-bolts business problems and access to loan money. Nobody wants to lend to the really small businesses. Even the small business administration rarely makes loans under $50,000.
How has the program progressed? Our repayment rate is around 98 percent. There’s synergy between the lending and the coaching and counseling—banks can’t deal with lots of care and mentoring. We spend a lot of time working with applicants, just teaching them financial literacy. Some small businesses don’t have a balance sheet or an income statement; those are the things banks ask you for.
What role do you think micro-lending plays in fueling urban development? An awful lot of our businesses turn out to be in urban environments, where you need economic growth. We know because in Cincinnati our brewery is on Liberty Avenue, right by Findlay Market. It’s an area that is just ripe for economic development, stabilizing the neighborhood and upgrading the housing stock. It’s starting to happen. Those things make a huge difference in a community. In Boston, our brewery was in an old, abandoned brewery that was a big site for gangs and illegal activity. Thirty years later the area is now an attractive part of Boston to live in. Houses that used to be $35,000 are now $400,000.
What are your hopes for Cincinnati’s historic brewery district? I saw it with what we were able to do with our community in Boston. It’s starting to happen, but I’ll tell you it’s been really slow. For 35 years I’ve been waiting for Over-the-Rhine and the Findlay Market area to develop into the next Mt. Adams. And it should. It’s a 10-minute walk to Fountain Square. It’s a 20-minute walk to P&G. It’s the kind of urban environment that has been revitalized all over the country. Young people want to live in urban places.
How do you help local companies? We’ve financially assisted four Cincinnati companies through the program thus far: Just Great Foods, Colonel De Gourmet Herbs & Spices, JC Sweet Tea, and Robin McGee. But our sweet spot is craft brewing. There’s a guy named Jason Roeper at Rivertown Brewery, who was actually a very talented home-brewer before opening his brewery. We have a competition for home-brewers called LongShot, and the winning brewers come to Boston, brew their beer, and we release it nationally. That was kind of his launching pad and now he’s got his brewery, which ironically is right across the street from where my dad’s business was.
When did you know you wanted to open a brewery? It was 1983-84. When my dad got out of brew master school in 1948 there were almost 1,000 breweries in the U.S. that were all doing pretty well. By the time I started Sam Adams 36 years later, [that] 1,000 had dwindled to about 40. My dad as a brew master, particularly in the late ’40s and early ’50s, had a hard time of it because the breweries were all shutting down. He was kind of skeptical to say the least. I believed that there was a chance to create a beer revolution in the United States and I wanted to be the one that helped start it.
How does it feel to be the poster child of the American beer revolution? I never thought it would be this successful. My original business plan was to grow to 5,000 barrels in five years and then level off. If somebody had told me that we’d own the Hudepohl-Schoenling brewery in Cincinnati (or win more awards than any other brewery in the world)… You’ve got to realize I started in my kitchen. I keep expecting my mother to wake me up and say “Jim it’s time for school.”
For more information about Brewing the American Dream. visit samueladams.com