Fresh off his launch of a new partnership dedicated to advancing the craft of beer brewing, the cofounder of Harpoon Brewery pauses to share the lessons he’s learned in 35 years in the business.
Note to readers: This interview kicks off the Mentor Q&A Series from The Equipped Brewer. Each of these monthly interviews will feature a craft beverage maker who has achieved success on a large scale and is willing to share the hard-won knowledge and real-world experience he or she has garnered along the way. Any growing brewery, cidery, distillery, or winery owner or producer will benefit from insight and advice from industry pros.
This first installment features Rich Doyle, a cofounder and previous owner/operator of Boston-based Harpoon Brewery, a staple of the Boston beer world since the late 1980s before he sold his interest to Harpoon employees. Doyle recently started up Enjoy Beer, LLC, a new venture designed to help smaller craft breweries compete with larger breweries. The following interview has been edited for length; a more complete transcript is available for free download, and a full recorded version is available via free podcast.
Few professional relationships are more valuable than that of mentor and mentee. In previous careers, I was never lucky enough to have someone who could guide me and help me make good decisions that would benefit my career. As I started my hard cider business, though, there was someone who became a mentor to me without even realizing it.
We met by pure chance. I was having dinner with my husband in Boston’s Seaport District. The bartender had served us each a cold cider.
A woman came over to ask if the seats next to me were taken, then signaled to her date that the seats were free. Next to my glass of cider was an empty glass bottle; our cider company hadn’t launched yet and we were still trying to select the perfect packaging. She overheard us talking to the bartender. She introduced herself as Kate and asked if she could see the bottle. “We make cider, too,” she said.
“Very cool,” I said. “Do you homebrew or — ? Does it have a name?”
Very nonchalantly and friendly in tone, Kate said, “It’s called Harpoon.”
By the way the phrase came out of her mouth, I certainly did not expect “It’s called” to be followed by “Harpoon," one of the most successful breweries in the Boston area.
She introduced her husband, Rich Doyle, the mastermind behind Harpoon Brewery, and the four of us started talking. Rich and Kate shared stories of the early days of Harpoon, and Kate recounted helping out on bottling days with baby in tow. They shared some advice that night that I’ve repeated to myself daily as the business has taken shape this past year and a half — the most important in my eyes being to support each other, be patient, and don’t give up.
After dinner that night I bumped into Rich a few times at the gym. We were spinning next to each other one day, and I was sharing how the business was progressing. I forgot exactly what was going on at the time, but he said (paraphrasing) “That’s what I call a ‘so what’ moment. Good, great, you did that — so what?! What are you going to do now?” Good point, Rich. Noted.
He didn’t know it then, well, maybe he did, but he instantly became a mentor to me and someone to whom I wanted to ask a million questions. You don’t just meet someone like Rich on a daily basis, and yeah, I could probably bump into him or others like him at tradeshows every once in a while, but why wait for that when there’s a lot to be talked about right now? This is why The Equipped Brewer is launching a Mentor Q&A series, so any brewery, cidery, spirits, or winery owner or producer can have access to insight and advice from industry pros every single day. To kick this off, I emailed Rich and asked him to be The Equipped Brewer’s first Mentor. He quickly he responded, “Melanie, I’d be happy to.”
Cheers to Rich for being the first mentor for The Equipped Brewer, and here’s hoping that all of you business-minded craft beverage folk can put his advice to use so your businesses can grow and succeed financially.
In the Beginning
When you were in Harvard Business School you wrote the business plan for Harpoon. I'm curious what your peers and professors thought about building a craft brewery back then when it was a new concept in New England. How did it pan out?
Rich Doyle: Yes, I did write my business plan there, and overall, people were encouraging. I was the odd-man out though by actually starting my own business
We did a lot of work and a lot of forecasting, and the forecasts were pretty good. We were a slow-growth company for five years when we broke even, and then we had rapid growth. We were on Inc.'s 500 companies twice during the last seven years. I've transformed the company and we’ve had a more double-digit growth phase for the past 10 or 15. Different things happen at different times.
A lot of the more successful companies I have spoken with have said that they didn't start out as MBAs, but at some point had to bring in an MBA-type. How much of your success do you attribute to your schooling and background?
RD: I attribute a lot to it. My focus was general management and I use everything from financial projections, accounting, marketing, human resource management, and more. I didn't study sales, and it's important too.
The ability to understand financial modeling, forecasting, and accounting is very important. It was important for me to understand what was going on and what the situation was, and how one thing led to another.
What were some of the biggest personal sacrifices that you made in the early days of the business? How much money did you use for start up? How did you raise it?
RD: Time and money. It took a lot of time and I made no money at the beginning. We started with about a half a million dollars. The term today would be angel investors, but then it was friends and families, and some friends of friends.
How much capital do you think startups need nowadays?
RD: That's the last question to answer, not the first. You have to look at the business plan and make a lot of basic business decisions before you can answer. For example, how much capital expenditure will you have? What equipment do you need? What's your operating model? How many employees?
What would you recommend a new craft brewer invest in first?
RD: You need to get your production stuff together — brewing equipment, packaging equipment, and lab equipment to make sure that you are producing good beer. There are a lot of intangibles that you must invest time into so you can sell your story. Why would people be interested in another investment?
Harpoon's Early Years
In 1990 you thought that you might go out of business. What was going on?
RD: In 1990 my original two business partners left the business. We downsized and sold our bottling lines. We had a keg business in Boston and I decided to do a beer festival before we went out of business. I did the first Octoberfest in 1990 and we broke even. If we hadn't broken even or if we'd lost a lot of money, that might have done us in. Now Octoberfest is identified with the brand and it has enhanced our business. We built some new products, and from there grew the company 75% a year for 7 years. I'm glad I stayed.
Location, Location
How important is it to start this sort of business in a city?
RD: You can be successful in any locale. The most important thing is to figure out what your business model is and put it where you want it. For us, being a local Boston brewery was part of the business model. That's why we did it.
GROWING THE BUSINESS
Harpoon self-distributes in Massachusetts and then works with wholesalers in about 25 other states. How did you know when it was time to enter into a new state? Was that strategic or did those opportunities come your way?
RD: It is strategic. There are very few instances that wholesalers come to you. Once you have a brand and people recognize you, you're ready to be distributed. Next, decide where you want to be? Which wholesaler goes to those stores? Who do you want to work with?
On the other hand, if you're trying to be a global product, maybe you want to be in big cities and you don't really care about rural parts of your state. It just depends on what your brand is.
What should a new beverage company focus on first — a tasting room/brew pub or distribution?
RD: Again, giving advice is difficult because there are so many variables. One direction is not right and the other wrong, they are options. If you have few people and a home-based business, then doing sales on premise makes a lot of sense. But, if you want to be the beer of a certain regain, you must get a wholesaler interested and get out to retailers.
Three Tips from Doyle
What are the things that people overlook that you would advise them not to?
RD: I think three things. First, be comfortable working with your own numbers. Make sure you understand your cash flow cycle. Don’t subcontract finance, financial modeling, and understanding your numbers to somebody else, because it's really important to have the feedback loop projecting what you think will happen, what is actually happening and then knowing what to do from a management standpoint.
Second, don't be afraid of sales. You must be able to create relationships with your biggest customers. Don't hide in the office!
Third, take responsibility to create the type of company culture you want. It won't happen on its own.
Keep Your Eyes Open
You talked a little bit about rabbit holes, such as cash cycles, what other things should new craft breweries avoid as they scale their businesses?
RD: I think the biggest thing to keep in mind is: How is what I'm doing different from what's already being done? What's my reason for existence?
Make sure you don't fall into the trap that "Beer business is really cool. I'm really cool, therefore I'm going into the beer business." This is not good logic. Your logic should be, "I can do something and offer customers something that they're not being offered now.”
How can you be different? Can you do something better, cheaper, different. There is a lot of good beer out there. There are over 3,000 production breweries and 3,000 brew pubs in the United States. What makes yours different? Being cool is not enough.
How should pricing be approached?
RD: I think pricing is of critical importance, for two reasons. One, it is obviously a transfer of goods and it's an important element of your revenue. If you can't sell something at a given price, you're not going to be in business. Two, it signals to your customers something about you.
People tend to think of pricing simply as Economics 101, the less something costs, the more you'll sell. That's not necessarily the case with consumer products. Sometimes people pay more for something because there's higher perceived value
If you're in the market where other products are available, you must perform a comparative analysis. What else is at what price point? Do we want our brand to be identified with these other brands? If we price it higher than that, then we have to justify that price point by being better than them in some way, or at least perceived. The liquid in the bottle, what the packaging looks like, what the communication around the product is, what the story is, what the buzz is, something has to be enhanced over that other competitive product or it's not going to work.
Credit terms with suppliers are complicated. How much can that be negotiated in your experience
RD: You can negotiate this a lot. First of all, think of the accounts receivable person at the supplier as somebody you need to have a relationship with
At Harpoon, if we realized we couldn't pay a bill on time, we would call that supplier and say, "Listen, I just wanted to call you. We've got an invoice due next Thursday. We're not going to be able to pay that in time. I promise you that check will be in your hands by the following Wednesday."
If you call before it's due and you're good to your word, 9 times out of 10 you will get the extra credit because you've asked for it upfront, as opposed to hiding and ignoring the problem, as some people do.
The other day when we were talking I mentioned something that my cider company had accomplished and you said, “That’s what I call the so-what principle.” Explain what you meant by that and also why you believe that it's important for business owners to follow that philosophy.
RD: It's similar to what I was talking about earlier, that beer is cool, I'm cool, etc. In that first year you have many milestones, and you have to be careful not to consider those milestones destinations. In the first year you are busy getting your doors open, you raise money, get licensed, find property and equipment, and more. You finally put that all together, it's out the door, and you sell a product. It took a lot of work, congratulations! It's really hard to do that.
Then, say in two or three years (or so), you break even. Again, this is a milestone, but "so what?" What's next? What's driving you to continue? Sometimes people are so worn out getting there that they lose the "so what?" principle. But, it's a milestone, not a destination.
Any other advice that you'd give to new brewers?
RD: Advice to new brewers? Make sure you have a reason for being in the industry because there are a lot of people serving a lot of needs right now. You need to serve a new region, a new need, a new type of product, something you're going to do that other people aren't.
I think the other thing is to make sure you understand the risk profiles of your business partners, co-investors, and the like, because that's a pretty important thing. What's their tolerance for failure and risk? If they're married or have significant others, what’s their significant other's tolerance?
What does being an equipped brewer mean to you?
RD: When I think of equipped, I think of prepared. Having an understanding of the financial realities of your business model, some what-if scenarios, that’s equipped. I think making those decisions on production equipment is part of that as well.
Last Words from Doyle
We can't predict who's going to do well and who isn't. There are some great brewers out there who haven't started yet and I wish luck to everybody.
