Without Founders Brewing Co., chances are the boom Grand Rapids currently is seeing would not happen, and the title of “BeerCity USA” almost certainly wouldn’t exist. And the Michigan beer industry likely wouldn’t be the same either.
Unbeknownst to most people is how close that reality actually came.
The bolt cutter story is known by anyone who knows the Grand Rapids craft beer scene, and soon will be immortalized in Founders’ 15th anniversary ale.
In 2000, partners Mike Stevens and Dave Engbers had stopped making all their debt payments and lease payments. Eventually, they owed more than $500,000 and had six days to pay it off, or they would see their brewery chained up.
So Engbers bought a pair of bolt cutters. He didn’t have to find out what would happen if he used them. A Grand Rapids-businessman, Peter C. Cook, helped guarantee their loan, and now the rest is history – kind of.
But that foreclosure story scratches the surface of how close Founders truly came to closing, well before it was named the number three brewery in the world. Even after the loan scare, the company continued to bleed money several years following.
“The dark days were a lot darker than people think,” said Mike Stevens, Founders president and CEO. “If Founders ended today and I had an opportunity to start again tomorrow and they said the life cycle would be the exact same as Founders, I would say, ‘No thank you.’”
Stevens’ partner, Dave Engbers, sitting across the desk agreed with the sentiment.
“You don’t want to sound like one of those people who say when I walked to school I walked through five miles of ice up hill, but that’s pretty much what we did,” Engbers said. “But really that was it, it was working 18-20 hour days every day, broke as you can be, zero money, no friends.”
Most companies have their startup struggles, that’s not the unusual part of the story. Most of Founders’ problems stem from starting in an industry that had no base, no foothold to begin a climb to profitability.
Founders has existed for about 15 years, and for 10 of those, Stevens and Engbers lost money in their endeavor. They likened it to an iceberg, where the 75 percent under the chilled water is the company losing money.
Now, the company, growing at a double-digit rate, is safe and one of the leaders of the Michigan craft beer charge. But that charge was close to not having one of its leaders.
“I’d wager to bet, if we had a way out, we would have taken it,” Stevens said. “We had personal guarantees in loans, our wives had signed, we had second mortgages. There was no other option than to succeed.”
The new old guys
Although the Founders guys can’t be included in the pioneers of craft brewing, they are veterans, even if they don’t feel all that old.
When Stevens and Engbers opened the doors to Founders, they looked up to Larry Bell, Ken Grossman from Sierra Nevada and Anchor Brewing. Asked how they felt to be one of the old guys on the block, they joked they feel “fat and slow.”
Engbers said the industry was so slow in the 90s, with little prospect, he thought they had opened their doors too late. It turns out they were early.
“In all seriousness, we do have a different perspective than a lot of folks,” Engbers said. “We’ve made some mistakes along the last 15 years and it’s nice to know we’re looked at as veterans.”
The struggles the company faced in its youth was large in part because of the beers they were making — basic craft beers every craft brewer was making.
Brewers were concerned with making beers that hit a wide market, beers that created Engber’s infamous “well-crafted, unremarkable beers,” saying. Unfortunately, they didn’t stand out, didn’t pull consumers away from mass-market brewers and almost stifled the brewing boom — a whole wave of microbreweries went under.
“When we were trying to hit the wider swath, we were competing with hundreds of breweries,” Engbers said. “By us narrowing our focus to make bigger, bolder, more complex beers, there were only a handful of people playing in that arena.”
Stevens credits the switch to the rapid increase in Founders recognition, and even the craft beer boom we’re seeing today.
“It took us some time to figure out selling one beer to 100 people doesn’t work,” Stevens said, “but selling 10 beers to 20 people works. We narrowed our focus to a beer geek. They were the passionate ones, the people who care about beer, they were the ones that were interested, intrigued and spread the word.”
The lessons Founders and other early breweries learned are lessons new brewers have to know before they start, otherwise, they won’t survive.
“When we started, it was not what is being seen today,” Stevens said. “It is a different dynamic for those starting today. It’s not what we went through and there’s a respect we have because of what we went through, because the industry had to grow around us.”
Lessons from Founders
Founders, and other early microbreweries, had the luxury of trial and error. Although they had to weather ups and downs, they survived making the wrong beers. Today, that won’t fly.
“When we opened up, people gave us multiple chances over a several year period,” Stevens said. “It took us a while to hone in on what we do.”
But new breweries entering the market will not be afforded that chance. Engbers and Stevens said it’s sink or swim from the beginning for new entries.
“It’s a great time to start a brewery and it’s also a the worst time,” Engbers said. “There is no margin for error. It’s going to be pretty brutal, so you better come out knowing exactly what you’re doing and do it.”
Experts expect the Michigan craft beer market share in Michigan to at least double in the next several years, and that leaves plenty of room for new breweries to open up. But with so many entries trying to survive in the market, it becomes cutthroat.
Many in the industry, including Founders and Bells, fear the upstarts that don’t have a brewing background or the pockets to finance those who do.
It all comes back to those startup 15 or more years ago.
“We’ve seen a buildup of really interesting product and now there’s good entries because there’s that room,” Stevens said. “The consumers’ palate has been trained over the last decade or so because the consumer expects a beer to be good. Now if you’re not focused on your product and you’re not doing a good job with your brewery, there will not be that opportunity for the second or third chances, you’ll just be removed.”
The smell of success
Was Founders really close to shutting down, leaving Grand Rapids without its flagship brewery leading the craft beer charge? Perhaps we’ll never know.
But Engbers and Stevens saw the — sometimes “insurmountable” — struggles they overcame to reach the world-reknowned level they know now.
They’re the only ones who can know how close they were to potentially stopping the Grand Rapids beer revolution.
“I love our story, I love to look at it and there’s a bit of victory,” Stevens said. “If you said would you do it over again? I would actually say, ‘No.’”