By Gigi Wood
In 1993, he almost lost it all.
The Goose Island Beer Co., the largest craft brewer in the Midwest, is on schedule to produce 147,000 barrels of beer this year, compared to 127,000 in 2010. The company was acquired earlier this year for $39 million by Anheuser-Busch.
John Hall, founder and CEO of Goose Island Beer Co., spoke at the University of Iowa Oct. 13 as part of the Sandage Lecture Series at the Pappajohn Business Building. The Waterloo-native graduated from the University of Northern Iowaand received his MBA from the UI in 1966.
Before starting Goose Island, Mr. Hall had spent decades in the trucking and packaging industries. While employed at the Chicago-based Container Corp., he was sent to work at a branch office in Sioux City for three years, where he learned “everything about how a business works,” he said.
His work often took him to Europe, where he sampled many locally brewed beers.
“I drank some interesting beers and it kind of stuck in the back of my mind for all those years,” he said.
In 1986, he was stuck at the Dallas airport and he read a Delta Sky article about boutique beers. That story triggered his new career in the brewery business.
In 1988, he opened his brewery on Fulton Street in Chicago. Goose Island produces beers such as 312 Urban Wheat, Matilda and India Pale Ale. As an outward symbol of the cultural heritage of craft brewing, Mr. Hall put his brewery in a building constructed in 1890. In 1993, a developer bought the building and had plans to demolish it. Mr. Hall took the developer to court and won, but the developer tore down as much of the structure as he could, except the brewery. The demolition work and the resulting business obstacles it created, translated into a 25 percent drop in sales for Goose Island.
Mr. Hall put his life savings into the business, saving it from closing. Since then, the company has produced Demolition ale in tribute of that incident.
The company introduced sodas in 1997, which generated about $3 million to $4 million in annual sales for the company. Mr. Hall said the company had no business producing sodas because it is so different from beer, but those sales helped the company through some tough times when the company was growing.
“As a business you’ve got to be successful. Making good beer is part of it, but you’ve got to get the numbers to work,” he said.
Mr. Hall attributed his company’s success to several factors: producing a variety of beers, matching beer with food and educating customers on craft brews. The company offers an MBA (Master’s of Beer Appreciation) program, which will graduate 1,500 customers this year. Graduates fly in to Chicago from across the country to attend the annual reception for graduates. The program aims to teach customers about different styles of beers and encourages them to try new ones.
The company has four brand families of beers, each of which targets a different customer segment and events, he said. 312, for example, targets urban Chicago residents with active lifestyles. Last week, the beer sponsored the Chicago Marathon.
“They don’t run one time a year. We tie into running programs all year long,” he said. “It all gets into experiential marketing. What we want to do is tie into events that are a part of people’s lives. So we become a part of people’s lives. What a great way to associate with customers, as opposed to a jingle. And it works for us.”
One theme he continuously returned to was Goose Island’s connection to Chicago. The company often supports community organizations, organizes tastings of new beers with neighborhoods and has created a beer with a small carbon footprint that is only available in Chicago.
“You have to be successful in your home market,” Mr. Hall said.
The beer, Green Line, is named for one of Chicago’s subway lines, which passes by the brewery. With funding support from the city, Goose Island researched the product life cycle of a keg of 312 beer to measure its carbon footprint. Mr. Hall said the biggest pollutants in the process of producing 312 were the packaging, transportation and refrigeration. To reduce the footprint, all the ingredients for Green Line come from within a 250-mile radius.
The beer business is capital intensive, Mr. Hall said. Goose Island had reached its limit on capacity in 2009 and the company started growing.
“To maintain your position you have to continue to grow,” he said. “If we weren’t going to be successful in Chicago, we weren’t going to be successful, no matter what.”
It was time to increase capacity. When he built Fulton Street, the capital cost was $100,000 per barrel of capacity. These days, the cost is $200,000 per barrel of capacity. It would have cost him $100 million to build the brewery his company needed, he said.
“Today, we’d be looking at doing a half-million-barrel brewery so that we could grow over the next five years, so you’re talking $100 million,” Mr. Hall said. “That’s not in my realm, even if I mortgaged my house.”
So Mr. Hall and his management team started talking with bankers and private investors. Then he received a call from St. Louis. It was Anheuser-Busch, offering to buy the company. Many craft beer enthusiasts in Chicago have balked atGooseIsland’s decision to partner with one of the “big three” beer producers in the country.
“I had to think about it,” he said. “And I had to make sure that my team was all in favor of proceeding down that path. We knew they were a big company with deep pockets, but there were probably going to be some down sides, too. There was no way we were going to go forward unless everyone in management was on board with it. And they all agreed.”
The acquisition by Anheuser-Busch has allowed his company to utilize the corporate giant’s distribution system, which keeps his in-house inventory low and sales increasing.
“I remain CEO and report to one person in St. Louis,” he said. “We’re selling 2.5 times as much beer as we did in 2006. It’s fresher and there’s less beer in inventory.”
Goose Island beers have won countless awards, including medals at the Great American Beer Festival for 14 years, a record.