The Exchanges

Q you've written a book about, about these early days, and you wrote that, um, and by September, 1980, you're running out of money quickly, and you, this is a quote from your book, uh, psychologically, we, you and Paul, we're starting to break down. What, what, what do you mean? What, Just from the stress of, of watching, you know, nothing had money going out, like, what was the breakdown?

A Well, there were a few, um, points of desperation, and we were getting there. Um, we were out of money for, I don't know, the 10th time, and, and had, uh, gone to, you know, family and said, you know, we just need another 5000, or 2000, 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, uh, we just, uh, you know, didn't have everything together to start brewing, and, uh, I needed a cold box, uh, refrigeration system for where we were going to age the beer, and I remember a friend of mine said, well, I know of this, uh, backyard butcher shop that the county shut down, that's got a old refrigeration system with a coil on it, and, uh, you can probably have it or get it for a few bucks, so, Went over there, and, and, um, in his backyard, he would butcher chickens and hogs and things for, for neighbors illegally, and, and, um, uh, there was a little cold box there, so I took it to the brewery and, you know, started to clean it up, and it was covered in blood and feathers, and, uh, it was just completely corroded, and I…

AI assessment note: “if we're down to this desperate of, uh, A situation... we're not gonna make it.”

Q people, or most people were saying, ooh, this is a, this is a, I don't know about this. So how did you, how did you start to sell it? Like, what was your first, I mean, did you go to bars? Did you, were you going to sell it on tap? Were you going to sell it to shops? What, how are you going to get people to buy it?

A Well, um, you know, we looked at, um, you know, how we were going to go to market. We, 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, we would buy used bar bottles at 85 cents a case from, uh, bigger breweries who had surplus bottles they were willing to sell us, and we would charge a nickel a bottle, so a dollar 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, we bought an old van from a, a friend of ours, um, took the seats out, and that was our delivery van. Um, I hired, uh, an old high school friend of mine, um, Steve Harrison, to be our, our first employee and salesperson. Um, he would help bottle during bottle days, and he would drive the van around and try to sell beer. If you go back to, you know, that era, there wasn't a lot of, Uh, options for draft beer. So if you went into a normal bar, they might have one or two or, you know, maybe three taps, but it was normal just for one or two beer taps. So we actually did not go into the, the bar trade at all initially. Um, we, At least not on draft. We, we just said there's not enough money there, not enough tabs.

AI assessment note: “he would drive the van around and try to sell beer”

Q It was just a, it was just like a, a shut down brewery, you just bottled their equipment out?

A Um, I bought their whole brewing side, so didn't get their packaging equipment, but bought the brew house, and paid, uh, Basically the scrap value, uh, 15,000 dollars to buy all the equipment, and we, um, spent more, more than that crating it and shipping it back to the U.S. 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 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. And we just, uh, came up with every way possible to expand productions. 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, 12,000 barrels or a little less than 12,000 barrels, uh, in 87.

AI assessment note: “I bought their whole brewing side, so didn't get their packaging equipment”

Q 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 he, you felt like you were working 10:15 hours a day, and, and that he was working fewer hours. And, um, and that tension seemed to kind of continue. Um, what, what happened between the two of you?

A Well, that, that there was certainly what, 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, ah, 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, and, um, you know, we were fifty-fifty partners, it, it started to feel that I was doing a disproportionate amount of building value in the company, and so we started to have Discussions, um, in the late eighties of, um, this is something I'm, I'm not gonna, uh, going to continue doing for much longer, and we've got to come to some resolution, so, um, As we moved into the new, uh, brewery, um, in the late eighties and into the nineties, it became, you know, a bigger and bigger sticking point.

AI assessment note: “we did end up adjusting compensation, so I was making, um, I don't know, double”

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

A No, they weren't. And, um, You know, I don't know what percentage of my friends actually liked the beer, or the ones who told me they did, but, um, um, I'm sure it was off-putting for, uh, The majority of people who were used to drinking, you know, regular lager beer, um, and it was even that way when we first started the brewery, you know, you'd go to a tasting, and 90% of the people were like, wow, this is way too bitter, I, I, I can't drink this, or I don't like this, and, uh, but then you'd find somebody who's like, god, I just love that bitter character, and so the, you know, the human palate, um, certainly interprets those flavors differently, and I think as, uh, craft brewing and as beer, uh, Culture evolved. I think people became much more appreciated of, of, of beer styles that really have a lot of character.

AI assessment note: “No, they weren't... I'm sure it was off-putting for the majority”

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

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

AI assessment note: “once we started leaving Chico and went to the Bay Area, It was a real slog.”

Q What were they valuing in the company at the time, in the, in the nineties, late nineties?

A The valuations across the industry were sort of all over the place, but also were going up, uh, pretty steadily, um, and, you know, 30,000,040 1,000,050 million, and this, uh, you know, me buying Paul out took Years, um, 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, and continue to grow it? So, yeah, it was a really challenging time for me personally, um, You know, we were, uh, in a market that was sort of exploding from, um, some of, some of our competitors were making big moves, and, uh, we were becoming hampered by our facility.

AI assessment note: “30,000,040 1,000,050 million, and this, uh, you know, me buying Paul out”

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

A Uh, it was. So, um, there were actually some, um, homebrew supply stores just getting started, and you could buy beer and wine making supplies, uh, it, at that point, Humpering was still illegal, but they did, you know, nobody got arrested for, 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, of some pretty lousy hops, but there, there were ingredients that were still available, I guess, from the prohibition era. And no good information on how to make grape beer at home. It was just, uh, you know, for those people who wanted, uh, you know, brew a batch of homebrew.

AI assessment note: “Uh, it was. So, um, there were actually some, um, homebrew supply stores”

Q So you meet him, you meet him at this, at this conference?

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

AI assessment note: “Well, I didn't meet him at the conference, I actually went over to his brewery”

Q 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, was she like, I don't know, was Katie ever, ever like, hey Ken, like, this is nuts. What are you doing?

A It was tough, and, um, we made a lot of sacrifices. She made a lot of sacrifices. Um, you know, we didn't have any money, and I was working all the time, so, um, If I wasn't studying, uh, if I wasn't welding, if I wasn't working, because I was still having to work another job, um, if I wasn't building at the brewery, I mean, I was, it was seven days a week, um, 12 hours a day. And I had the, I guess, the early opportunity right when I was, uh, committing to build the brewery to actually buy one of the bike shops I had worked in. Uh, the owner was, uh, getting out of the business and, and, um, 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 could buy this bike shop and probably make a decent living. Um, and it's a sure thing. But I was, you know, in my mind thinking, you know, am I gonna then question, ah, 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 A thoughtful discussion, Katie and I, about what should we do, what should I do, and came down to, you know, I think you got to follow your, your passion and, um, you know, see if, if that's what you want to do, you should do that.

AI assessment note: “we had a A thoughtful discussion, Katie and I, about what should we do”

Q 23 at this point. And I read that you, you, you guys sat down, you wrote a business plan, like a pretty detailed business plan, um, and you figured it, you figured that you'd need 50,000 dollars to Actually start a, a, a beer company, a brewing company. Uh, so you went to the banks, right? And, and, well, what did the banks say when you showed them the plan?

A 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, uh, you know, printed off articles of, of sort of the trends that were happening in beer, you know, one on Fritz Maytag, and One on sort of what was happening in the import space starting to grow in the U.S., and the demise of sort of much choice in the beer industry we thought would give us a small slice 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 dollars total, and went to banks, and we, we actually started 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, um, anything that, that gave me access to use forklifts and drill presses and welders and everything else I needed to, to weld all the pieces together. Took some business classes. Took, um, refrigeration repair. I took a couple semesters of that. Started just to build skills and started to build the equipment as we were trying to raise money. Um, the banks pretty much said, uh, there's no way. And if you were, uh, a banker of Uh, of any sort back then, and you researched the U.S. brewing industry, you would have seen…

AI assessment note: “the banks pretty much said, uh, there's no way.”

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

A Well, so we explored, uh, again, I didn't think it was possible for me to buy him out, and so, um, we met with every group you could imagine, uh, you know, venture, lots of venture funds, and, um, you know, I had lots of dinners with groups that, uh, you know, told me they were going to be my best friend, and, um, but I got caution from other people saying, watch out, um, you know, if things go south, you'll be in trouble, and, So I started having real angst about, ok, so I'm gonna have a, an investment group in as my partner. They're gonna have some really, um, tough metrics that I've gotta meet to give them the returns they're looking for, and then they're gonna want out in five or seven years, and I'm gonna be right back where I am today, but in a worse place. So I, you know, really got cold feet about doing a venture deal.

AI assessment note: “So I, you know, really got cold feet about doing a venture deal.”