Sierra Nevada Brewing Company: Ken Grossman

Ken Grossman was experimenting with beer before he was old enough to buy it. As a high school student in the late 1960s, he bought his first home brewing kit and mixed the ingredients in a bucket, hiding his early batches from his mother. About ten years later, before most Americans knew what craft beer was, Ken decided to build a brewery in Chico, California. With $50,000, a few piles of scrap metal and some hand-me-down dairy tanks, Ken and his partner built Sierra Nevada Brewing Company, and crafted a beer with a distinctive, hoppy bitterness. Today, as the third largest craft brewer in the U. S., Sierra Nevada Brewing Company – like so many other businesses – faces unprecedented challenges due to the Coronavirus crisis. See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Guy Raz?

  Hey, really quick before we start the show. We're launching a regular video conversation every Friday at 12 noon Eastern time with a different founder to talk about creative ways to build resiliency in the midst of this crisis. This week, join me and Susan Griffin Black, co-founder of EO Products. She'll talk about all the hand sanitizer they've been making. You can join the conversation and ask questions by going to facebook.com/HowIBuiltThis. And you don't need a Facebook account to watch. Bring your questions for me and Susan this Friday, April 3, at 12 noon Eastern time. Facebook.com/HowIBuiltThis.

• 0:43Speaker 01

  We were out of money for, I don't know, the 10th time. It had gone to family and said, we just need another 5,000 or whatever, and we can get the doors open. We did that a bunch of times. And so we were at a point where it's like, we can't go ask for money again. We've told them this was the last time, like, five times ago. And I just thought to myself, if we're down to this desperate of a situation, we've got no money, we're not going to make it.

• 1:19Guy Raz?

  From NPR, it's How I Built This, a show about innovators, entrepreneurs, idealists, and the stories behind the movements they built.

• 1:30Guy Raz?

  I'm Guy Raz, and on the show today, how Ken Grossman went from brewing batches of bitter beer in his closet to building America's third-largest craft brewery, Sierra Nevada.

• 1:47Guy Raz?

  So just a few days ago, Ken Grossman and I were supposed to be sitting side by side onstage at the Sidney Goldstein Theater in San Francisco for a live How I Built This show to hear how he built one of the biggest craft beer companies in the country. But instead, that event, like every other event, was canceled.

• 2:09Guy Raz?

  But we didn't want to miss out on getting a chance to hear Ken's story because it is too good and too inspiring to wait until we can all go out again. So we asked Ken to record himself from his home just outside Chico, California. And by the way, that's how it's going to be for a while because our staff, our guests, me, probably many of you, we're all at home now and starting to adjust to this very weird new reality. And I'm going to confess something here. I feel a little bit conflicted about doing a show that celebrates building and creating when so many businesses are in trouble now and so many people are worried.

• 2:51Guy Raz?

  But I also think of this show as a place of hope and possibility. This is going to be a long, challenging journey for all of us. And we're going to need stories of people who can inspire us with the challenges they've overcome and the battles they've waged and the odds they've defeated to build something truly special like Sierra Nevada. Now, before we even get into Ken's story, we wanted to hear from him about how things are going with managing the crisis so far. And of course, in one way, the company is in better shape than most because lots of people are in need of a beer these days. So in places where they can get it, they are buying it. They're buying a lot of it.

• 3:33Guy Raz?

  And when I spoke to Ken a few days ago, he told me his production facilities are still open, but he has no idea how long that might last.

• 3:41Speaker 01

  You know, a lot of the businesses that we depend on to sell our products are severely challenged right now. And having this kind of financial disruption happen to tens of thousands of small, family-owned and run bars, restaurants, liquor stores across the nation is going to have a huge toll on the lives of those people and the economies in those communities. So it's been one of the most difficult and stressful weeks in our existence. I've had a lot of them over 40 years.

• 4:21Speaker 01

  There's been a lot of sleepless nights, but this is sort of at the pinnacle of things for us to have to work through and to make decisions about.

• 4:32Guy Raz?

  And yes, over the course of building Sierra Nevada Beer, Ken has had a lot of sleepless nights, starting with trying to build a craft brewing company in his 20s with barely any money when people didn't really know what craft beer was. In fact, when Ken introduced his now legendary Sierra Nevada Pale Ale to his friends in 1980, most of them thought it was undrinkable. But today, his company is the third-largest craft brewery in the US after Boston Beer Company and Yenling. And Ken and his family own 100% of Sierra Nevada. But making money and becoming rich from beer was far from Ken's ambition.

• 5:12Guy Raz?

  At his core, he is a beer brewer, not a businessman, totally obsessed with the process, with the hops and the barley and the malt and the strains of yeast. And his interest in brewing and fermentation actually started when he was a kid growing up in LA's San Fernando Valley.

• 5:30Speaker 01

  We had a small neighborhood group of boys growing up through elementary school. So I met my neighbor, I think it was second grade, and his father was a, even back then, was making home beer and home wine and was a sort of a very progressive person for the time. He was into cooking and baking and fermenting and sort of the culinary arts.

• 5:57Guy Raz?

  Yeah.

• 5:58Speaker 01

  As well as being a cyclist. So he was into bikes, which later I got into cycling and touring. And also was a scientist. He was a metallurgist and worked for Rocketdyne. And so he sort of had all those passions of life. And I guess it really appealed to me. So I was around fermenting beer from probably the age of seven or eight or so and seeing things boiling on a stove every weekend when he would brew. And his son and I were best buddies for many, many years. I ended up moving up to Chico when he attended Chico State.

• 6:36Guy Raz?

  What was your friend's, what was his dad's name? What was his name?

• 6:41Speaker 01

  Cal Moller. He's since passed away, but Calvin Moller. He was, they say, a very early adopter of the science of brewing. So most homebrewers back in that day were using...

• 6:57Speaker 01

  English, old, sort of crude, books on how to make cheap beer, but not necessarily, you know, how to make great beer and how to do it at home with sort of a science-based.

• 7:08Guy Raz?

  Yeah.

• 7:09Speaker 01

  So he approached from a pretty scientific side.

• 7:13Guy Raz?

  So here's what I'm wondering. You are in high school, and I guess, from what I've read, you bought your first home brewing kit around that time, which I think a lot more high school juniors today would do it, but in the early 70s, certainly not, or late 60s, certainly not common. Did you want to make beer because you just liked it and wanted to drink beer? Or what was your thinking behind buying a home brew kit?

• 7:38Speaker 01

  Um, you know, I was young, so I couldn't buy beer.

• 7:42Guy Raz?

  Right.

• 7:43Speaker 01

  And so I just wanted to experiment with making beer.

• 7:46Guy Raz?

  Hmm. That was it?

• 7:48Speaker 01

  Yeah.

• 7:49Guy Raz?

  And, you know, today, if you want to brew beer, you just go on the internet and order the hops, they come in pellets, and, you know, whatever you need, and then you just do it. Was it a little more complicated in 1969?

• 8:00Speaker 01

  It was. So there were actually some homebrew supply stores just getting started, and you could buy beer and wine-making supplies. At that point, humping was still illegal, but they did, you know, nobody got arrested for buying malt or hops. But if you, I guess, think back to that era, there was still a bit of a carryover from prohibition brewing. And so you could buy malt extract even at hardware stores. And it was, you know, sold with a crock and a package of yeast and a little block of some pretty lousy hops. But there were ingredients that were still available, I guess, from the prohibition era. And no

• 8:43Speaker 01

  good information on how to make great beer at home. It was just, you know, for those people who wanted to brew a batch of homebrew.

• 8:49Guy Raz?

  And how were your early batches? I mean, were they drinkable?

• 8:55Speaker 01

  Terrible.

• 8:56Guy Raz?

  Okay. Like, you put them in a closet in your house? Or like, where did you?

• 8:59Speaker 01

  Well, I had to hide them from my mother. And I actually made a batch of wine first, which was pretty tragic, which was out of Welch's, a can of Welch's grape juice and some bacon yeast.

• 9:11Guy Raz?

  A can of Welch's grape juice. They don't even make it in cans anymore, okay?

• 9:17Speaker 01

  Yeah.

• 9:18Guy Raz?

  Wow.

• 9:19Speaker 01

  And then I got some malt extract and bought some yeast in a plastic bucket and started brewing a little bit.

• 9:29Guy Raz?

  How did you not, how did you know you weren't like making like, you know, botulinium or anthrax or something?

• 9:37Speaker 01

  Well, I guess one of the things about beer making is that things like that don't grow in beer.

• 9:43Guy Raz?

  I got you, okay, fine. Good to know.

• 9:46Speaker 01

  The alcohol, the pH, and the hops are all inhibitory to toxins. Not that you can't make bad beer, but it's pretty impossible to make beer.

• 9:56Guy Raz?

  To kill yourself.

• 9:56Speaker 01

  Those kind of toxins, yeah.

• 9:57Guy Raz?

  All right. So you, you're, you know, doing home brewing and I guess when you graduate high school in 1972, you decide that college isn't really going to be your thing, that you want to kind of just get out of LA, move up to Northern California, and you go, you end up in Chico, California, a small town in the foothills of the Sierra Nevada. The idea was that's where you wanted to be for a while?

• 10:24Speaker 01

  Yeah. So I got a job at a bicycle shop, which was a family-owned business with a father and two sons working there in a pretty frictional environment. The dynamic was not great and after less than a couple of months, I sort of had a change of heart and said, well, maybe I should go to school. And so I applied at the junior college to study chemistry and ended up eventually transferring to Chico State and continued to take science classes. I met my girlfriend and then later wife through a mutual friend about the same time.

• 11:03Guy Raz?

  This is, this is your wife Katie that you met, you met her at Butte Community College?

• 11:07Speaker 01

  Well, I met her, she was going to Chico State and I was transferring to Chico State and we connected and been together ever since.

• 11:16Guy Raz?

  All right, Katie will factor back into this story later on, and we should just mention here that she, when you met her, and I think to this day, does not drink alcohol. She's a teetotaler, right?

• 11:26Speaker 01

  Yep.

• 11:26Guy Raz?

  Okay, okay. Important to know, important point to know, the third largest craft brewery in America, founder's wife doesn't drink. Okay. All right, so you meet Katie, 73, you're, gosh, you guys are, you're a baby, you're like 18 years old. It's cra- I mean, you were so young.

• 11:44Speaker 01

  Yep.

• 11:44Guy Raz?

  And I guess, I guess you, you got a job in that area around Chico, in a town called Oroville, managing a bike shop for a while.

• 11:53Speaker 01

  Yeah, I had, my, after my parents got divorced, you know, I didn't get a lot of support. I think I got a hundred dollars a month, go away, go away to school, and so I had to keep working, so I kept a part-time job as I went to school, and then eventually I got the opportunity to go manage one of the bike shops that the owner in Chico had recently purchased in the town of Oroville. And so the two of us got a dinky little one-room house, sort of in the foothills of Oroville, and I ran that shop for a few years. Our daughter was born, Sierra, and born at that house, at home, we had all of our kids' home birth.

• 12:38Speaker 01

  And then I had a neighbor who loved my homebrew and convinced me that I should open up a homebrew supply store.

• 12:46Guy Raz?

  And this is your neighbor, Ron, and what was his name?

• 12:48Speaker 01

  Ron DeJesus.

• 12:50Guy Raz?

  Ron DeJesus, okay, so he's your neighbor, and I guess you should point this out, you are like 20, 21, still homebrewing.

• 12:58Speaker 01

  Yep.

• 12:59Guy Raz?

  Presumably, you've gotten better over the five years, six years that you've been doing it.

• 13:02Speaker 01

  Oh, yeah.

• 13:03Guy Raz?

  And you, because most people probably in 1976, 75 are drinking like-

• 13:10Guy Raz?

  Mass-produced beer, right, in America? They're, right, it's just like the big Budweiser, right? Is that what most people drank?

• 13:16Speaker 01

  Yeah, it was pretty much approaching the low point of the US brewing industry. The breweries that had survived prohibition, you know, the family-owned regional breweries were in very difficult place with trying to compete with the national brands. And so the beer industry was consolidating very, very rapidly through the, well, really since prohibition, but 50, 60, 70s, hundreds and hundreds of breweries went out of business. And it got down to right about the year we started, 1980, for the brewery got down to the low point of 43 independent breweries in America.

• 13:54Guy Raz?

  In the US, it's amazing.

• 13:56Speaker 01

  The whole US, yeah. And that included the biggest and the small amount of small brewers that hung on there.

• 14:02Guy Raz?

  So, but going back to this time in like the mid 70s, right? Like when Ron to Jesus, when your neighbor, like when you met him, he would have, before he met you, he would have just normally been drinking like Budweiser probably, or one of those beers?

• 14:16Speaker 01

  Probably not even anything that expensive. So, you know, again, we were young and didn't have a lot of money, so we were probably drinking, you know, Buckhorn and the spring beer out of Meyer Brewing Company in Los Angeles. I mean, there were a handful of cheaper beers that were probably what our age group would be drinking.

• 14:36Guy Raz?

  And these were not high-quality beers? It's just like...

• 14:39Speaker 01

  They were certainly not interesting beers.

• 14:41Guy Raz?

  I got you, okay, got you, all right.

• 14:43Speaker 01

  I mean, the US brewing industry has had a history of making, you know, generating good-quality products, but they're not necessarily products that have a lot of character.

• 14:53Guy Raz?

  So he meets you and you're brewing this beer. And what was the style of the beer you were brewing at home?

• 15:00Speaker 01

  I was probably fairly advanced by that time, so I was doing a little bit of roasting my own grains in the oven and sprouting my own wheat to make wheat beer. And so I was pretty experimental and at that point, my wife and I were... Sort of back to the landers. We had a small herd of goats. We had chickens. We were making cheese and baking bread and so making beer sort of fit into our lifestyle.

• 15:30Guy Raz?

  So your neighbor Ron says, hey, this beer's great. You should sell it. And I guess that's sort of what, from what I understand, it sort of inspired you to open up like a home brewing business, like a little shop where you could supply people, right? Is that, is it right?

• 15:49Speaker 01

  Yep. So we found a little teeny building in what had been an old downtown hotel in Chico that was being converted into a bunch of little shops and studios. And so for, I don't think it was about $60 a month rent, we could rent this

• 16:07Guy Raz?

  Wow.

• 16:07Speaker 01

  little, little room. And it was just a bare shell, which we ended up doing all the woodwork and finishing up and turning into just a little shop. You know, next to us was a potter and a used record shop and jewelry store and a little teeny antique store. And so there were just a bunch of little artisan crafts and shops up there.

• 16:30Guy Raz?

  Sounds so idyllic, especially from 2020.

• 16:34Speaker 01

  Well, we couldn't, we couldn't pay the rent some months. And so we worked out a deal where we'd be the janitors for the, for the place in lieu of rent. So Katie and I did that for a while.

• 16:45Guy Raz?

  You couldn't, you couldn't sell 60 bucks worth of home brew supplies?

• 16:48Speaker 01

  It was, you know, we could sell $60 worth. That would be a really big day. But out of the $60, you made maybe 20. And then you had to pay the lights and

• 16:57Guy Raz?

  Sure.

• 16:58Speaker 01

  you know, a little bit of money to take home. And so, no, we didn't make a lot of money selling home brew supplies.

• 17:03Guy Raz?

  And, and what were home brew supplies in 1976?

• 17:08Speaker 01

  So it was malt syrup primarily, although we were pushing and teaching classes and trying to get people to actually brew from grain, which is the, back to the beginning of the process, you buy malted barley, which is barley that's been soaked, sprouted and germinated and dried in a maltster. And that creates the base for then converting the malt into sugars and then Sugars are boiled with hops and so we stocked hydrometers and crocks and tubs to brew in and glass carboys.

• 17:45Guy Raz?

  So which you could brew, which you could brew the beer in, I got you.

• 17:47Speaker 01

  Right, ferment the beer in.

• 17:49Guy Raz?

  Here's, here's what I'm wondering, Ken, right? In the, in the late seventies, right? This is still a subculture, like, like craft brewing today, right? Like, half of, half of, half the staff of How I Built This goes to craft brewing festivals, right? Like, it's just a very mainstream thing. Like, every bar worth its salt has craft brews on tap or in bottles, right? In 1976, this is, this is a subculture of people, like, like Dungeons and Dragons.

• 18:15Speaker 01

  Yeah.

• 18:16Guy Raz?

  So I'm just trying to understand something, because obviously you've proved everybody right, but when people said to you, and they're like, Ken, this is just like gross, I don't, what do you like about this? What, why do you like the taste of this? What would you say?

• 18:29Speaker 01

  Well, yeah, there was no knowledge of craft beer and homebrew was, you know, not necessarily viewed in a positive light and, you know, based sort of on what most people had tasted, if they ever tasted homebrew. It was highly alcoholic, acidic, and it looked murky and, which today is in again, but back then, you know, beer was supposed to be clear, and so most people were pretty put off by it. But I made some pretty decent beer and I started to have a following of friends who, you know, wanted my homebrew.

• 19:06Guy Raz?

  Well, what did you like about it? Like, here's, that's what I want to know. Like, when I talk to somebody who is really into wine, right? There's just the complexity and the different flavors and the, it's almost like, I don't know, it's like, it's like somebody who's, who's really interested in, in like mysteries. They're, they love the nuances. Is that what beer was like for you, like, making it just?

• 19:29Speaker 01

  Yeah, I mean, part of it, I think, was the allure of the alchemy, you know, just the ability to take. Things such as disparate as, you know, a bitter leaf off of a plant, the hop, and the sweet malt from barley and yeast, and sort of see that magic happen of converting those basic raw ingredients into something that has lots of nuances and character and flavor and can bring joy in a social setting.

• 19:57Guy Raz?

  Yeah.

• 19:58Speaker 01

  So I think the process was as intriguing as the finished product.

• 20:03Guy Raz?

  Because in the late 70s, it would have been an unusual taste, right? Like, our taste buds were not attuned to, you know, multi-hopy beer.

• 20:15Speaker 01

  No, they weren't. And, you know, I don't know what percentage of my friends actually liked the beer or the ones who told me they did, but I'm sure it was off-putting for the majority of people who are used to drinking, you know, regular lager beer. And it was even that way when we first started the brewery. You'd go to a tasting and 90% of the people were like, wow, this is way too bitter. I can't drink this, or I don't like this.

• 20:42Guy Raz?

  Yeah.

• 20:43Speaker 01

  But then you'd find somebody who's like, God, I just love that bitter character. And so the, you know, the human palate certainly interprets those flavors differently. And I think as craft brewing and as beer culture evolved, I think people became much more appreciative of beer styles that really have a lot of character.

• 21:06Guy Raz?

  All right. So you've got this little storefront. At what point did you think, you know, maybe I should actually make beer and sell beer? Was there like a conversation? Did somebody encourage you to do this? Was there... Because you've got the store and presumably, like, you know, you could make that your career. Like, we could be talking today and you could have started the, you know, a chain of home brew supply shops, right? But at what point did you think, maybe I should just sell beer?

• 21:37Speaker 01

  Well, I actually, I went down to a conference in Oakland. And on that trip, we arranged a tour to go see Fritz Maitag at Anchor Brewery.

• 21:50Guy Raz?

  Fritz Maitag was the guy who founded Anchor Brewery, which makes Anchor Steed, right?

• 21:55Speaker 01

  Well, he didn't found it, so he purchased it, so.

• 21:58Guy Raz?

  It's an old brewery. He purchased it. Yeah, it's an old, old brewery. But he kind of revamped it. Yeah, revamped it, right.

• 22:05Speaker 01

  So, he helped sort of create what is now the craft brewing industry by realizing that if you're going to be a small boutique brewery in this country, you better, one, produce a unique product, and, two, figure out how to charge enough of a price that you can survive as a small producer.

• 22:25Guy Raz?

  So, you meet him at this conference in Oakland?

• 22:28Speaker 01

  Well, I didn't meet him at the conference. I actually went over to his brewery, and he gave me a tour, me and a small group of folks. And, pretty primitive at that time. It was a lot of, no automation, and not a lot of sophistication in the brewery. And I was fairly sophisticated as a home brewer, and culturing some of our own yeast, and doing things like that, and making 20-gallon batches. And I think at that point, he was making maybe 50-barrel batches. And that sort of inspired me a bit, that, you know, maybe you could do it as a startup, as a home brewer. And then I went and visited New Albion, which was really the...

• 23:10Guy Raz?

  In Sonoma, right?

• 23:11Speaker 01

  Yeah. Jack McCullough, who started that brewery. And he had sort of gone, pretty much, home brew, and opened up a commercial brewery with all-home-built, primitive, basic equipment, very small batches, about 45 gallons per batch. And after seeing his operation, I realized that, you know, it was feasible to do as an independent, glorified homebrew setup and sell beer commercially.

• 23:39Guy Raz?

  So, you were actively kind of exploring the possibility of doing this. When you contacted... You know Fritz, or when you went to go visit New Albion, did you say, hey, I'm thinking about doing this myself. Can I, can I come talk to you? Or did you just say, oh, I, I've got this shop where we sell equipment. Can I come check you out? Like, what was your, what was your approach?

• 24:00Speaker 01

  Well, you know, thinking back then with Fritz, I don't think I yet had the notion that I wanted to try to, to go commercial. When I went and visited Jack, it was starting to gel that, yeah, this is maybe something I can do. And I got together with one of my homebrew shop customers, Paul Camuzzi, and he was buying homebrew supplies for me and from, from other homebrew suppliers. And, you know, we decided, let's see if we can raise some money and open a brewery.

• 24:32Guy Raz?

  Wow. So that, so basically you thought, all right, this guy seems to know what he's doing. And you knew what you were doing. And, because you were like, I don't know, 23, 22, 23 at this point. And I read that you, you guys sat down, you wrote a business plan, like a pretty detailed business plan. And you figured, you figured that you'd need $50,000 to actually start a, a beer company, a brewing company. So you went to the banks, right? And, and what did the banks say when you showed them the plan?

• 25:04Speaker 01

  Well, I mean, I guess in hindsight, it was not a pretty detailed business plan after seeing, you know, more formal business plans. It was what we thought was a good business plan. So we had, you know, printed off articles of, of sort of the trends that were happening in beer, you know, one on Fritz Maitag and one on sort of what was happening in the import space, starting to grow in the US and the demise of sort of much choice in the beer industry, we thought would give us a, a small slice of, of the pie that was rapidly being cut up. So I think we wrote several drafts of that business plan. The original one, I think, called for $50,000 total and went to banks. And we, we actually started.

• 25:49Speaker 01

  So we started to pool our money. I started to buy equipment. I started to build equipment. I enrolled back At the junior college at Butte in welding classes, machine shops, anything that gave me access to use forklifts and drill presses and welders and everything else I needed to weld all the pieces together. Took some business classes, took refrigeration repair, I took a couple of semesters of that. Started just to build skills and started to build the equipment as we were trying to raise money. The banks pretty much said, there's no way. And if you were a banker of any sort back then and you researched the US brewing industry,

• 26:33Speaker 01

  you would have seen that it was pretty rapidly declining, at least small brewers were.

• 26:38Guy Raz?

  You would not have given a loan, A, not only to a craft brewing company, but to like two guys in their twenties trying to start a craft brewery.

• 26:46Speaker 01

  Yeah, who had no experience, no experience in the brewing industry. You know, we'd never worked a day for a brewery or a beer distributor or anything like that. So, yeah, not a very likely investment to make from a banker's standpoint.

• 27:01Guy Raz?

  Got it. So you need 50K. How much money did you and Paul have between you?

• 27:06Speaker 01

  So, we had assembled $17,000 and I-

• 27:10Guy Raz?

  Between the two?

• 27:11Speaker 01

  Between the two of us. I had sold my home brew shop for $3,000 or $4,000 and I had some savings and my grandfather had given me some bonds to go to college. I cashed all those in and Paul had similar, sort of, all his savings. Not a lot of money.

• 27:32Guy Raz?

  So how did you get the rest of 50K? You still needed like 35K.

• 27:37Speaker 01

  Well, so we went to all of our family and eventually some friends and got $5,000, $10,000 investments and thought we had enough money several times, but kept running out of money. And we were so low on cash that we did not hire pretty much anything out. So, we did the framing, the sheet rocking, I did the plumbing, I did all the electrical, I did all the refrigeration.

• 28:06Guy Raz?

  Yeah, where was the location? Where was the site that you found?

• 28:09Speaker 01

  We found a little metal warehouse building, 3,000 square feet, empty shell, had been like a sheet rock warehouse.

• 28:16Guy Raz?

  In Chico?

• 28:18Speaker 01

  In Chico.

• 28:18Guy Raz?

  Right.

• 28:19Speaker 01

  And so, we came in and in order to- Keep sanitation and quality in a brewing world, you need floor drains and you need separation between the brewing rooms and the fermenting rooms.

• 28:32Guy Raz?

  Yeah.

• 28:33Speaker 01

  So we went in and unbeknownst to the landlord, we jackhammered through the floor, sawed and put in drainage and then poured slope floors on top of that. But we did all that ourselves and it took a really long time. I was taking my 57 Chevy and driving up and down the Sacramento Valley, up into Oregon and Washington and looking for old pumps and pipe and tanks and things that we could scrounge for basically pennies on the dollar to use to build the brewing equipment out of.

• 29:12Speaker 01

  And I got pretty lucky and the dairying industry was also sort of at a tough point where these little family dairies were closing and there were hundreds of them scattered throughout that would have one milk tank and it was sort of a side job. I'd get a lead that, you know, go down this road and you might find so-and-so's old dairy. So knock on the door and ask them if they had any old equipment and they'd take me up to the barn and there'd be a dusty pile of pipe and maybe a pump and occasionally I'd get a tank and 300 bucks or 500 bucks, I'd buy it all from them.

• 29:48Guy Raz?

  All right. This is an important point and I want you to explain this to me because I think that people are going to be confused and think that, I hope they're not, that you just kind of figured it out as you went along, which is partially true, but you actually did a lot of research. Like you actually went to UC Davis, which is a huge, has a huge agricultural department, and you like met with a professor there and went to the research library to learn about brewing? What did you do there?

• 30:19Speaker 01

  So yeah, we were fortunate. So UC Davis had one of the only university brewing schools in the nation.

• 30:26Guy Raz?

  Huh.

• 30:26Speaker 01

  It was started, you know, they have a big wine program there as well, but they started a beer program quite a few years back. And we availed ourselves of both their library and I would go down with stacks of quarters. I would either read there or photocopy everything I could get my hands on.

• 30:48Guy Raz?

  Like scientific journals, like scientific academic papers?

• 30:51Speaker 01

  And I've still got boxes of them today. And there were a couple really important scientific brewing texts available and they weren't, you know, they weren't home brewing texts. They were, if you're a brewing scientist, you know, four or 500 page tomes on, you know, the, every aspect of being a professional brewer. And I read them cover to cover and so I was a fairly learned brewer from at least the literature side as we went into brewing commercially.

• 31:24Guy Raz?

  And it also sounds like in this two-year period, because it was like really two years, right? Seventy to eighty when you were kind of ramp, working on ramping up Sierra Nevada and really going public, I mean, selling it public to the public, that the other guys, like the other folks in the craft brewing industry were really collegial, like Fritz Maitag at Anchor Steam and like, you went to these folks for advice and they were really, they were like, yeah. I mean, I'm just, I'm just wondering, were they just good people? Like, because you were, you know, in your early twenties, I mean, they could have just, I don't know, looked at you and thought, who is this kid? Like, why are we taking this guy seriously? But what, what explains, because they were, right? There was a lot of, like, you'd go and ask them for tips and stuff, right?

• 32:06Speaker 01

  Yeah, and I think that, you know, Fritz was probably the, the first one I leaned on a bit and, and he had, had the same experience. So when he was starting out, when he bought Anchor, he didn't know anything about brewing or the brewing industry. And he would go and visit other brewers and, and he was shocked at how open and supportive they were. But we did have a really, I guess, open relationship with pretty much anybody in the brewing industry. I joined the Master Brewers Association, which was really, you know, the big brewers, technical group, very early on. But you could call up a technical

• 32:47Speaker 01

  person at another brewery, whether it was Coors or Anheuser-Busch or Miller, and ask a question, and they would talk to you.

• 32:55Guy Raz?

  Wow.

• 32:56Speaker 01

  And, you know, the commercial guys, the guys who were selling beer on the streets, they didn't have the same relationship. But the technical side of brewing, brewers tend to stick together and to help solve problems.

• 33:09Guy Raz?

  So, in this two-year period when you're ramping up, right, what does Katie think? I mean, you've got a daughter, a baby girl at home. Was she like, I don't know, was Katie ever like, "Hey Ken, like, this is nuts. What are you doing?"

• 33:22Speaker 01

  Yeah. It was tough. And we made a lot of sacrifices. She made a lot of sacrifices. You know, we didn't have any money, and I was working all the time. So if I wasn't studying, if I wasn't welding, if I wasn't working, because I was still having to work another job, if I wasn't building at the brewery, I mean, it was seven days a week, 12 hours a day. And I had the, I guess, the early opportunity, right when I was committing to build the brewery, to actually buy one of the bike shops I had worked in. The owner was getting out of the business, and he would have sold it to me, probably preferentially, if I said I wanted to do that. And there was a point where I thought, you know, I

• 34:07Speaker 01

  could buy this bike shop and probably make a decent living, and it's a sure thing. But I was, you know, in my mind thinking, you know, am I going to then question, could I have ever really pulled off building a brewery and being a brewer for my livelihood instead of a bike mechanic? And so, we had a thoughtful discussion, Katie and I, about what should we do, or what should I do, and it came down to, you know, I think you've got to follow your... Your passion and see if that's what you want to do, you should do that.

• 34:41Guy Raz?

  I read that you, you have written a book about about these early days and you wrote that by September 1980, you're running out of money quickly. And this is a quote from your book. Psychologically, we, you and Paul, were starting to break down. What do you mean? Just from the stress of watching, you know, nothing happen, money going out? Like, what was the breakdown?

• 35:03Speaker 01

  Well, there were a few points of desperation and we were getting there. We were out of money for, I don't know, the 10th time and had gone to family and said, you know, we just need another 5,000 or 2,000 or whatever and we can get the doors open. We did that a bunch of times. And so we were at a point where it's like, we can't go ask for money again. We've, you know, we've told them this was the last time, like five times ago. You know, we'd spent everything we had and I said we'd borrowed enough that, you know, not going forward would have certainly been a big failure. So it was like, no, we got to do this. And we just, you know, didn't have everything together to start brewing.

• 35:45Speaker 01

  And I needed a cold box refrigeration system for where we were going to age the beer. And I remember a friend of mine said, well, I know of this backyard butcher shop that the county shut down. That's got a old refrigeration system with a coil on it. And you can probably have it or get it for a few bucks. So went over there and in his backyard, he would butcher chickens and hogs and things for for neighbors illegally. And there was a little cold box there. So I took it to the brewery and started to clean it up. And it was covered in blood and feathers and it was just completely corroded. And I'm sitting there cleaning it up. And

• 36:29Speaker 01

  I just thought to myself, you know, if we're down to this desperate of a situation, we got no money, making making beer still a few weeks off, we're not going to make it.

• 36:43Guy Raz?

  When we come back, how Ken finally brewed his first batch of beer to sell to the public, and how people began to buy it, not by the keg, not even by the six-pack, but bottle by bottle by bottle. Stay with us. I'm Guy Raz, and you're listening to How I Built This from NPR.

• 37:14Guy Raz?

  Hey, welcome back to How I Built This. I'm Guy Raz. So it's the fall of 1980, and Ken and his partner Paul Camuzzi have basically jerry-rigged an entire brewery out of hand-me-down dairy tanks and random pieces of scrap metal. They're almost out of money, and they're totally stressed out, but they're also almost ready to make beer, except Ken needs one more thing.

• 37:40Speaker 01

  I needed a hop strainer, and I'd been trying to find a suitable used tank or container to use for a hop strainer and wasn't able to find one and didn't really have the money for it. And I had a few pieces of scrap metal, stainless steel left over from something else. And I said, OK, this is it. I'm going to go weld up a hop strainer, and we're going to brew beer tomorrow. And so sort of the last piece or two, we just sort of made do and made five barrels of stout, November 15, 1980. And learned a few things, but it went OK. Took, I don't know, 12 or 13 hours to make 150 gallons of beer and more hours to clean up than that. But at least we were sort of on our way. And then started brewing

• 38:24Speaker 01

  Pale Ale two days later and started to realize we were not able to make batch after batch taste the same. They weren't bad. They were just-- Pale Ale III was actually pretty good, I remember. And we were bottling a little bit and sharing it with friends, saying, I think we're there, or we're really close. And we brewed Pale Ale IV, and it wasn't quite right. And then we brewed Pale Ale V, and it was different. And we ended up dumping all those beers.

• 38:52Guy Raz?

  Can I just pause? Because this is your most famous beer, right? Sierra Nevada Pale Ale is-- and I think it still accounts for like, most of your sales today, the majority of your sales, over half. This beer is got four things in it: water, malt, yeast, and hops, right? Is it? I got the recipe right? For people who don't know anything about beer, right? Like, what was it about? I mean, you're saying you're going through a bunch of batches of that beer, right? What were you looking for? Because you said the first wasn't quite right, the second wasn't right, the third is OK, the fourth wasn't right. Like, what were the criteria you were using in your mind?

• 39:32Speaker 01

  Well, one, we knew we needed to be consistent, and I think that's probably as big of an issue as anything. It's just that they didn't taste the same. So some of them fermented faster, some fermented slower, so they had different nuances in the aromas and character. So I think our concern was we couldn't make the same beer batch after batch, and we better figure that out first.

• 39:58Guy Raz?

  So here's now another question about this, right? Which is, if you go to Germany, right? They've got this law where all German beers, or a certain kind of German beer, has to have water, malt.

• 40:10Speaker 01

  Yeah, water, malt, hops, and yeast.

• 40:13Guy Raz?

  Right.

• 40:14Speaker 01

  So it's the German purity law.

• 40:15Guy Raz?

  The German purity law, right. But when you go to Germany and you drink a lot of their beers, like a Kohl's or like a certain brands like Warsteiner or Bitburg, they're lagers, right? They're very clean, clear, light lagers. You're using the same four ingredients, but you were introducing, or you were bringing into your beer a, like, the hoppiness was like, that was going to be really intense. Like, this was, for some people, the flavor was even going to be slightly, or not more, more than slightly bitter, right? Like, was that something that, I don't know, most beers at the time just weren't focusing on the hoppiness of the beer?

• 40:55Speaker 01

  Well, if you go actually back to Germany in that era, there were places in Germany making really hoppy beers.

• 41:04Guy Raz?

  And what is it about the hops that makes the beer taste more bitter?

• 41:08Speaker 01

  Well, hops are added to beer for their alpha acids, which are the bittering component, or a major part of the bittering component of the hop. And that's Something that is variety specific as far as those levels. So hops are a spice essentially in the brewing process.

• 41:28Guy Raz?

  Right.

• 41:28Speaker 01

  And I guess you could think of them like chilies.

• 41:31Guy Raz?

  And they're basically leaves. They're like miniature leaves that grow like, look like a berry.

• 41:36Speaker 01

  Well, it's actually, yeah, it's like a flower.

• 41:38Guy Raz?

  Flower, okay, I got you.

• 41:39Speaker 01

  And the alpha acids, the bitter acids and those aromatic oils are geographic in some cases. So a variety that's grown in Oregon, maybe different, same variety than it tastes in Yakima or Idaho.

• 41:55Guy Raz?

  I got you.

• 41:55Speaker 01

  Or if it's grown in France or in Australia. You know, in this country, there wasn't really a aroma signature from the US hop industry until us and a few other brewers started to focus on a new variety called Cascade, which was bred up in Oregon State. And it was piney and citrusy and had some real distinct character. But it wasn't what the German brewers who worked at big breweries were used to using. And so it really didn't find favor in the US brewing industry until sort of our wave

• 42:35Speaker 01

  of craft brewers started to punch things up with aromas and characters that were way different than what beer had been before, at least beer brewed in America.

• 42:48Guy Raz?

  All right, so you get this beer down, this pale ale beer down. And how do you, how do people respond to it when they try it? I mean, obviously, I'm sure there are some people who sort of were sophisticated and, but were there other people who were not just, you know, super sophisticated and they tried it and they thought, oh.

• 43:08Speaker 01

  Yeah, most.

• 43:09Guy Raz?

  Like, yeah, really, most people?

• 43:12Speaker 01

  Most people didn't like it, no. Again, if you're used to drinking an American light lager style and you're hit with a very aromatically hoppy and bitter balance in your beer. And, you know, just for a reference point, and the numbers are sort of going to be meaningless, but just as a relative number, today, domestic lager beers might be in the

• 43:38Speaker 01

  Eight to 10 bitterness units. And there's outliers to that, but that's about the range. Our Pale Ale, when it came out, and it still is, is at 38 bitterness units. And so, you know, if you equate that to sort of Chili's, it's quite a bit more than what people are used to drinking. And again, we were trying to feature very aromatic hops, pine and citrus and all these other nuanced aromas that come out of hops. So we were producing a beer that was polarizing, to say the least.

• 44:15Guy Raz?

  Yeah. I mean, but it's interesting because we've had founders on the show who say, who've said in the past, you know, if the thing you're producing is polarizing, then it might just be on the right track, right? Which obviously you were. But, I mean, this was going to be the backbone of your business. And lots of people, or most people, were saying, ooh, this is a, I don't know about this. So how did you start to sell it? Like, what was your first, I mean, did you go to bars? Were you going to sell it on tap? Were you going to sell it to shops? How are you going to get people to buy it?

• 44:49Speaker 01

  Well, you know, we looked at how we were going to go to market. We couldn't afford six-pack carriers. That was sort of out of our budget. So we had individual bottles. And we started out in all-returnable bar bottles that we would charge a nickel deposit on. So we would buy used bar bottles at 85 cents a case from bigger breweries who had surplus bottles they were willing to sell us. And we would charge a nickel a bottle, so $1.20 a case when we sold the beer. And we'd give them a nickel back when we got the empties back. And we pretty much loaded our van up. We bought an old van from a friend

• 45:29Speaker 01

  of ours, took the seats out, and that was our delivery van. I hired an old high school friend of mine, Steve Harrison, to be our first employee and salesperson.

• 45:42Speaker 01

  He would help bottle during bottle days and he would drive the van around and try to sell beer. If you go back to that era, there wasn't a lot of options for draft beer. So if you went into a normal bar, they might have one or two or maybe three taps, but it was normal, just for one or two beer taps. So we actually did not go into the bar trade at all initially. We, at least not on draft, we just said, there's not enough money there and not enough taps.

• 46:13Guy Raz?

  Right.

• 46:14Speaker 01

  So we priced ourselves at the highest price we thought we could get by with. We did no market research.

• 46:20Guy Raz?

  What was the price?

• 46:21Speaker 01

  Eighty-five cents a bottle.

• 46:23Guy Raz?

  And that was at that time in 1980, 81, that was expensive for a bottle of beer?

• 46:28Speaker 01

  That was what the, you know, the higher-priced imports were selling for on the shelf. So we thought, well, we're gonna price ourselves and stylistically try to be like a unique import beer.

• 46:39Guy Raz?

  And you were just going, like, how were you distributing this? I mean, presumably it was just you guys, right?

• 46:45Speaker 01

  Yeah, our van. We would just drive around and go knock on bars, restaurants, supermarkets, wherever, and try to see if we could convince them to buy a case of 24 loose bottles.

• 46:58Guy Raz?

  And were most of them dismissive or were most of them, like, interested? Or what was the reception you got?

• 47:05Speaker 01

  In our hometown, we got at least quite a few of the bars and restaurants to take a case. So in the hometown, since we had been in the press a couple of times about this little brewery opening up, we were able to get some placements. Once we started leaving Chico and went to the Bay Area, it was a real slog. You know, there was no craft knowledge, no internet. You know, there was not a way for a business that didn't have any money to get much notoriety. We couldn't pay for any of it. We were, you know, really fortunate that there were a few writers who were intrigued by the whole startup of this craft beer scene and started to write stories.

• 47:51Guy Raz?

  Including in the, what, in like the San Francisco Chronicle or?

• 47:54Speaker 01

  Yeah, San Francisco Examiner, actually, there was a, I think it was a five-page color spread on the brewery, the Little Brewery in Chico.

• 48:04Guy Raz?

  Oh, wow.

• 48:05Speaker 01

  And that was just an amazing shot in the arm. We got this, you know, huge amount of publicity. And we were also very fortunate, there was a beer buyer for one of the large grocery store chains, whose daughter was going to Chico State. And so, he would come up to visit his daughter. And he was into beer, and so he'd come by the brewery and have a beer with us. And so, he started to run some promotions for us.

• 48:29Guy Raz?

  Wow.

• 48:30Speaker 01

  Without us really being involved or knowing about it. All of a sudden, we'd get a bunch of calls from distributors with, you know, wanting beer. And then the Grateful Dead, actually, they somehow, early on, got hooked into the beer. And so, when the Dead would travel around, we'd have to watch where their concert series were. And we'd get all these orders for beer ahead of them hitting town.

• 48:55Guy Raz?

  And how were you able to produce enough beer? I mean, you, right, if the demand was starting to go up?

• 49:03Speaker 01

  Well, so my business plan called for us to brew, hopefully, 2,500 barrels of beer a year. I was able to brew 12 10-barrel batches a month, so three brews a week. That was sort of our phase one. And we had planned in an expansion to go up to 3,500 barrels a year, doing some more modifications of the facility. So, we did that pretty quick. And our business model was so flawed that we couldn't survive at 3,500 barrels of beer a year. It just was not enough. You know, things cost more, and there was always some financial need we hadn't planned on. So, we pretty quickly realized, we better, we

• 49:45Speaker 01

  gotta grow. We gotta figure this out quick. And so, I went over to Germany, I think in end of 82, 83, and I bought a defunct brewery over there.

• 49:58Guy Raz?

  It was just like a shutdown? Brewery, you just bought all their equipment out?

• 50:03Speaker 01

  Um, I bought their whole brewing side, so didn't get their packaging equipment, but bought the brew house and paid basically the scrap value, uh, fifteen thousand dollars to buy all the equipment. And we, um, spent more, more than that crating it and shipping it back to the US. I, I went over with a high school buddy and we spent three weeks in Europe, um, helping dismantle the equipment and, uh, getting it out of the building and, and wrote another business plan and could not borrow money still. So we, uh, you know, had this equipment sitting there in a crate, um, but we needed what we thought at the time was like a million dollars to, uh, sort of move into a new facility

• 50:44Speaker 01

  and to equip it with, uh, enough equipment to, to use that bigger brew house. So it actually sat there for years, I think, uh, almost four years in a crate.

• 50:53Guy Raz?

  Wow.

• 50:54Speaker 01

  And we just, uh, came up with every way possible to expand production. So we knocked out walls, we took over other metal buildings in the little street and put tanks outside and, uh, brewed around the clock. So we eventually got the production up to, um, about, uh, twelve thousand barrels or a little less than twelve thousand barrels, uh, in eighty-seven.

• 51:17Guy Raz?

  Were you just, between nineteen eighty and nineteen eighty-seven, or maybe even longer, were you just, I don't know, were you working like, cause you were the beer brewer, right? You were actually the guy making the beer.

• 51:29Speaker 01

  Yeah, I did all the brewing and all the packaging, um, in the beginning. So I would brew three days a week and I'd package two days a week. And then as we got a, a little bit bigger, um, I was starting to focus on how to grow, uh, on expansion. So I was, um, building tanks and welding pipes and adding things. And so I started to hire some brewers, um, and then hired, um, you know, somebody to run packaging so I could free myself up to, to do all the, the expansion side of the business.

• 52:01Guy Raz?

  Was, was your day like, I don't know, what time did your day start in the early days?

• 52:06Speaker 01

  Oh, boy. Um, four to five.

• 52:10Guy Raz?

  Wow, you had to start brewing that early?

• 52:12Speaker 01

  Yep, start in the dark, because particularly as we grew, we needed to brew as much as we could. And so it was almost 24 hours a day. I mean, we typically have operated 24 hours a day.

• 52:23Guy Raz?

  So, um, something that we haven't discussed yet, but, um, there was, I guess, probably fair, from a fairly early point, um, quite a bit of tension between you and Paul Camuzzi, your co-founder. Um, from what I understand, like, there was tension over work, uh, work commitment. Like, you felt like you were working 10, 15 hours a day and that he was working fewer hours. And, um, and that tension seems to kind of continue. Um, what, what happened between the two of you?

• 52:58Speaker 01

  Well, that, there was certainly, what I felt, and I think everybody around us who were involved in the business, you know, saw as well that, you know, there was a disproportionate amount of effort being put in. I mean, my days were always longer than his and, and, um, more physical. And so at one point, it became a critical issue between us, and we did end up adjusting compensation. So I was making, um, I don't know, double what he was making. And so we, we did try to address it. But, you know, as the business grew and the value of the business grew and, um, you know, we were 50/50 partners, it, it started to feel that I was doing a disproportionate

• 53:42Speaker 01

  amount of building value in the company. And so we started to have discussions, um, in the late 80s of, um, this is something I'm, I'm not going to continue doing for much longer, and we've got to come to some resolution. So, um, as we moved into the new brewery, um, in the late 80s and into the 90s, it became, you know, a, a bigger and bigger sticking point. And, uh,

• 54:09Guy Raz?

  Were the two of you, was it uncomfortable at times? I mean, I imagine it was.

• 54:16Speaker 01

  Yeah, it grew uncomfortable at times. Yeah, I mean, early on, he was, he'd lived in our house. He was, just to save money, he was a roommate.

• 54:24Guy Raz?

  Yeah.

• 54:25Speaker 01

  But then as, as things went on, it became a bigger and bigger friction point.

• 54:31Guy Raz?

  You would go on to buy him out in the late 90s. And I think you had to, you had to really take a bunch of loans to do that because by that point, the business was worth a lot of money.

• 54:43Speaker 01

  Yep.

• 54:44Guy Raz?

  So how did you do it?

• 54:47Speaker 01

  Well, initially, I didn't think that was a possibility. You know, I didn't have any money. And the thought of going into debt at the kind of dollars that we were starting to have the company valued at was just, it wasn't in my thought process that, you know, I could figure out how to do it.

• 55:08Guy Raz?

  What were they valuing the company at that time, in the 90s, late 90s?

• 55:12Speaker 01

  The valuations across the industry were sort of all over the place, but also were going up pretty steadily. And, you know, 30 million, 40 million, 50 million. And this, you know, me buying Paul out took years to work through with attorneys. And so, you know, as that time went on, we were still growing. And so the value of the business was growing. And, you know, I had a really tough decision. Do I, you know, hamper the growth of the company in order to not have the number get bigger and bigger so I could potentially afford it? Or do I do what I think is right for the business and continue to grow it? So, yeah, it was a really challenging time for me personally.

• 55:57Speaker 01

  You know, we were in a market that was sort of exploding from, some of our competitors were making big moves and we were becoming hampered by our facility.

• 56:12Guy Raz?

  Why? What was going on with that?

• 56:15Speaker 01

  Well, the brewery that I had designed and... In eighty seven and eighty eight, when we moved into the new facility, I had designed for sixty thousand barrels worth of annual capacity. You know, if I think back to that time, you know, that was more than Anchor was producing and they were the oldest of the sort of winners in the craft world. And we had produced a little over eleven or thousand or twelve thousand barrels or so in eighty seven. And so I thought, you know, geez, if we could grow four times that big or more than that, that would be an amazing achievement. And so sixty thousand barrels seemed like a pretty lofty.

• 56:55Guy Raz?

  Yeah.

• 56:56Speaker 01

  Projection. And so our first year in the new facility, I think we brewed about twenty thousand barrels, our next year thirty thousand barrels, our next year forty five thousand barrels, and the next year we were out of capacity again. And so we started doing whatever we could. We put tanks outside, we added brewing equipment, we started brewing multiple times around the clock. And I think we got to a point, I think it was nineteen ninety seven, we brewed three hundred and sixty three days, twenty four hours a day. We took Christmas and Thanksgiving off, I think, and just, other than that, just kept going.

• 57:35Guy Raz?

  Wow.

• 57:36Speaker 01

  And that's right when I was trying to figure out how to buy Paul out. So very, very challenging period.

• 57:42Guy Raz?

  Did you have to go into debt, into serious debt to make that happen?

• 57:45Speaker 01

  Well, so we explored, again, I didn't think it was possible for me to buy him out. And so we met with every group you could imagine, you know, venture, lots of venture funds, and I had lots of dinners with groups that, you know, told me they were going to be my best friend and, but I got caution from other people saying, watch out, you know, if things go south, you'll be in trouble. And so I started having real angst about, okay, so I'm going to have a, an investment group in as my partner, they're going to have some really tough metrics that I've got to meet to give them the returns they're looking for, and then they're going to want

• 58:29Speaker 01

  out in five or seven years.

• 58:31Guy Raz?

  Yep.

• 58:32Speaker 01

  And I'm going to be right back where I am today, but in a worse place. So I really got cold feet about doing a venture deal.

• 58:41Guy Raz?

  So what'd you decide to do instead?

• 58:44Speaker 01

  So I had a really great attorney in San Francisco and we started looking at alternatives and he brought in a friend of his who was very experienced with working with banks and structuring deals and it was at a time when money was relatively easy to get compared to how it had been and we got a couple of proposals from some banks and put together a deal that it was as much leverage as I would ever want to have on myself and the company and sort of just rolled the dice and said, you know, if this goes well, it'll

• 59:26Speaker 01

  work. If it doesn't, you know, I gave it a good try. And that was right when, if you look at a graph of the trajectory of craft brewing in America, it was that year that we did the deal that the bottom fell out and the growth rate had been slowing, but it essentially went down, I think, to 1% growth across the industry the next year.

• 59:47Guy Raz?

  Wow. In 99?

• 59:49Speaker 01

  Yeah, 98, I think 98, 99.

• 59:52Guy Raz?

  Why? What explains that?

• 59:53Speaker 01

  I mean, we're sort of there today again and who knows how we'll come out of our current situation, what the industry will look like. But, you know, there was starting to be a saturation of craft players, but the imports really probably sort of reasserted their place in the market and so craft had been somewhat the darlings during the late 80s and mid 90s. But then I think the imported beers started to realize that they, you know, had a place in the market and pushed. And I guess the craft industry also had lost a little bit of credibility. Some of the bigger players back then were contract brewing,

• 1:00:37Speaker 01

  meaning they weren't brewing their own beer. They were going to one of the big brewers and having their beer made. And there was sort of an expose from some of the big brewers saying, you know, here's who's really brewing your special craft beer. It's being brewed at a, you know, at a Stroes brewery or whatever. So there was... Some negative industry PR that also probably hurt the industry a bit.

• 1:01:01Guy Raz?

  So you're super leveraged and beer sales kind of fall flat.

• 1:01:08Speaker 01

  We actually came out of that in a pretty good place compared to a lot of our peers. And the reason was, as we were brewing 363 days that year, we were starting to ration and not ship to all of our markets and not ship all of our brands. And we had some pent up demand. So when we came out of that, I did do a big expansion right during that period of buying Paul out, which also added stress and debt to the picture. But we pretty much doubled capacity that year, 97. And we were able to sort of immediately go into some of that pent up demand.

• 1:01:51Speaker 01

  So we grew, I think, double digits when the rest of the industry was flat.

• 1:01:56Guy Raz?

  Wow.

• 1:01:58Guy Raz?

  So we know what happened, right? Because today, Sierra Nevada is the number three craft brewery after Boston Lager, Boston Beer Company that makes Sam Adams and Yen Ling, based in Pennsylvania.

• 1:02:13Speaker 01

  Yep.

• 1:02:14Guy Raz?

  Ken, when you think about, I mean, just the incredible journey that you took, right? And the unlikely, I mean, maybe not unlikely, because clearly you were motivated and you were learning about different things, chemistry and machining and brewing. You were learning these things all in a very deliberate way. You were talking to people, you were finding mentors, you were going to visit other breweries and reading technical journals.

• 1:02:46Speaker 01

  Yep.

• 1:02:47Guy Raz?

  But still, to me, I don't know, if I met you in... 1980, when you were 25, working on Sierra Nevada, I don't know, I would have thought, I don't know, I don't know about this guy. I don't know if I would, I don't know if I would give him, I don't know if I would part with my money for, to invest in this company. But you, you built the third largest craft brewery in the United States, a company which has an enormous valuation. And, I mean, do you, I don't know, do you think that this happened because of all those things I mentioned, because of your work ethic and your commitment to, to the craft? Or do you think a lot of it just had to do with luck?

• 1:03:24Speaker 01

  The hard work part, I think, was a good component. When I opened, I mentioned, I think there were six of us, and the five other craft brewers that opened in that same era have all failed. Today, I'm the last man standing, so we all sort of had an equal shot at it, I guess. Yeah, timing, I think we were, you know, at the right time in a sort of American culture, when people were looking for better, unique, different, distinctive, you know, there were coffee roasters popping up and bakeries and the restaurant scene

• 1:04:06Speaker 01

  was starting to grow. But it, you know, the work part of it, it's, it's been a lot. And, you know, it was a lot for me, but a lot for my family. I mean, we, my kids grew up in the brewing industry. I have two children still active in the brewing industry. My son's out in North Carolina and my daughter Sierra's here in Chico. So it's been a family business, but it's not an easy business. And even though a lot of people think being a brewer is romantic, you know, it's been hard and it's going to stay hard. And I think, you know, we're still around because we, we're passionate about beer and passionate about having a great company.

• 1:04:51Guy Raz?

  That's Ken Grossman, founder of Sierra Nevada Brewing Company. The ongoing pandemic won't be the first crisis that's impacted the company and the community. At the end of 2018, the Camp Fire destroyed the town of Paradise, California, which is the next town over from Chico, and about 60 employees of Sierra Nevada lost their homes. Ken responded with a relief fund, and Sierra Nevada brewed a special beer called The Resilience IPA. All proceeds from that beer were donated to the long-term relief effort. And thanks so much for listening to the show this week. You can subscribe wherever you get your podcasts.

• 1:05:34Guy Raz?

  And by the way, if you've got a business that's working on ways to tackle the global economic and health crisis, please let us know. We may feature it on our How You Built That segment. Go to build.npr.org to tell us your story. You can also write us at [email protected]. And if you want to send a tweet, it's at How I Built This or at Guy Raz. Our show this week was produced by Neva Grant and Rachel Faulkner with original music composed by Ramtin Arablouei. Thanks also to Candice Lim, Julia Carney, Casey Herman, and Jeff Rogers. Our intern is Raini Toll. I'm Guy Raz, and you've been listening to How I Built This. This is NPR.

• 1:06:23Speaker 02

  We all have moments where our limits are tested. What I want to talk about is how we define those limits and what it means to exceed them. I'm Jay Williams. Check out my show, The Limits, where I talk to people who have overcome theirs and achieved great things in business, sports, and culture. Listen to The Limits from NPR.