The Morning Report
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Saturday, Dec. 9, 2006 | Greg Koch, 42, opened Stone Brewing Co. with business partner Steve Wagner in 1996. The company underwent a big expansion as it turned 10 years old this summer. Stone has left the San Marcos building where it started, expanding last year to a new facility in Escondido. Last year, it brewed 36,000 barrels of beer. In 2007, it plans on brewing 72,000. Stone opened a restaurant last month and can now meet growing demand. Koch, the company’s chairman and CEO was born in Orange County but grew up in Pataskala, Ohio. He sat down with voiceofsandiego.org to talk about the industry, his first beer and what makes San Diego’s hoppy India Pale Ales so tasty. He was talking before we could even ask a question.
“I’ve been waiting for someone to apply investigative journalism into the beer industry both locally as well as the way business is done,” he quipped.
Like Fast Food Nation?
Not just Fast Food Nation. The way business is done. How if you go to Joe’s Bar and Grill, how some of those taps and bottle placements ended up there. Is it consumer demand or other workings that no one sees? What’s legal, what’s illegal, how it’s being done. It’s shocking. I’m used to it because I’ve been in this business for 10 years. But at first I was extraordinarily shocked.
Sounds like CD placement at Best Buy. It’s not because it’s what we want, but because it’s what we’re supposed to want, what they want us to want.
Right. It’s not exclusive by any means, and we’re doing great – I’m not a sour-grapes kind of guy – but we run our business with ethics as just one of the fundamental things.
It gets tiring to look at the ethically challenged aspects of this business. If I wasn’t in beer, I’d probably be a consumer advocate. So I get mad when, as a consumer, my choices are made by somebody else for the wrong reasons. When it’s done with the right kind of motivation, that’s fine. When they’re thinking about me as a consumer and what can I do to benefit the consumer, then you’ve got a better world than the one we live in. And we live in a pretty good world. I like our world.
How do you apply that construct to the beer industry – where our tastes are sometimes predetermined by mass marketing?
There’s that element of it – the world (of) the Wonder Breads and the pre-wrapped “Now With Real Milk” yellow cheese slices and the high-fructose corn syrups. I will cavalierly throw consumers into two categories. Those who make product-based decisions and those who do what the TV tells them. The product-based people … are making decisions based on taste. And not just on taste, but what’s in it and what’s behind it and what am I actually putting into my system? And then there’s the way business is run. … The backroom dealings which in the old days … of the beer industry meant that one brand of beer would buy the saloon and then lease it back to the saloonkeeper to ensure that their brand of beer was sold there.
Now, that wasn’t because consumers said: I don’t really want to have a choice. It was because the way the business models worked. I’m referring to the 1800s – or today, in England. And then today, what are the other things? What’s legal and what’s done?
A lot of times you’ll go into Joe’s Bar and Grill and he might have 12 taps. So it’s not just the fizzy yellow lagers, but they might some specialty brews. A lot of times they’re on there because they gave them free beer, ballgame tickets. It isn’t responding to the consumer. Our team has to convince Joe at Joe’s Bar and Grill that the reason why our beer should be on tap is that people really want it. We don’t have any ballgame tickets, we’re not going to give him any free beer, we’re not going to discount our beer. But he doesn’t really want that. It’s not going to benefit his business to put on something that nobody wants just because he got a free keg. We’ve actually developed a spreadsheet that shows how a free keg of beer costs him money.
How do you draw that conclusion?
It’s a simple conclusion. It’s predicated on the free keg being free because it doesn’t have as much merit as the keg of beer that’s being sold legally for its full price. So in a very simple calculation, the free keg of beer will take two weeks to sell. People will try it, no one will come back for it. Joe sells his beer for $3 a pop, times 124 pints, that’s $375 of pure profit. Then he buys a keg that has merit for $100 a keg. And he sells one keg a week because people enjoy it, it’s good quality beer. Gross profit is still $375, subtract the keg cost, it’s $275 – but multiply it times two. Now you’ve got $550. And if we haven’t been pushed out the door – because it’s tough to tell people how to run their business – then you can also start seeing into the tangible damage to the business. It’s really the same as serving a poor quality hamburger. Just because you got free meat, if it tastes like hell, business will eventually shift. Excuse me, I’m getting on a soap box.
I hear the Drug Free America pitch in there – the idea that a drug dealer gives the first crack rock free to a user to get them hooked. Is that how you view this?
No, because it won’t get them hooked. The hook in this case is just the free one right up front. Because Joe needs a keg of beer. If the really great quality beers who did sort of hook – and I don’t like to use drug references in relationship to the beer industry, because I don’t think they apply – you would get accustomed to having the great flavor profiles, so you’d get hooked that way. But you don’t have to do it that way.
There is an element of that in your Ruination IPA (India Pale Ale, a bitter, hoppy beer), where the bottle boasts that no other beer measures up to its bitterness, that it’s a standard setter.
Although the poke, the elbow-in-the-ribs isn’t so much at other bitter beers. Because we’re more embracing in our philosophy. When you make a great beer, and you brew it full on instead of pulling your punches and holding back and dumbing it down, chances are I’m going to like that too. I enjoy living in that world where there’s a variety. It’s also more contextual. Four-and-a-half years ago when we released it, it was still one of the newer of the double-IPA category. It isn’t the category that it is today, with so many people now producing double IPAs. It was contextually written for the time.
Can you talk a little bit about the double IPA and its place in San Diego. There is this push to have that style called the “San Diego IPA.” Do we deserve to have our own beer named after us?
Do we deserve it? Yes. Would I go there? No. The simple fact of deserving it is that this is where it came from, and so many food and drink items are named for where they came from.
But we of course are in a very different age these days. Our long history of this category is 10 years old – not generations. And it isn’t based on regional growing conditions or weather conditions. Instead, it was a convergence of a happenstance of: This is the way brewers converged, communicated with each other through their beers, and shared their love of hops. And a good hoppy beer is compelling to the palate. When you get there. Not always for the first time, but when you get your palate acclimatized.
What’s the first beer you ever had?
I do not know. It was a regional beer. I grew up in Ohio. It was a found beer, probably two or three cans of a six-pack in a field that somebody had left behind. I stowed them away for a little while. It was of the Schaefer ilk. My parents didn’t drink when I was growing up, so I didn’t have exposure that way.
First good beer? First memorable beer?
That was Anchor Steam.
Al’s Bar, downtown Los Angeles, a little hole-in-the-wall. No name over the door, artists’ enclave in the artists’ warehouse-loft district in downtown Los Angeles. It was probably 1985.
What about it lodged that moment in your consciousness?
Al’s Bar was a smallish place that was always packed. It was a vibrance of artistic and counterculture, it was just amazing. San Francisco has a few divey joints, but the whole place is counterculture. This was a little spot in the middle of this not-much-cohesive-identity metropolis that Los Angeles is. They sold four tap beers. I was a college student and poor. They sold them in two sizes. And the 24-ounce size was a better price per ounce. I never was going in to pound beer. As the beer warmed up, the only beer that didn’t taste like hell as it warmed up was Anchor Steam. This beer, when you actually have to taste it, when the cold wears off, was pretty good. So that was a minor epiphany at that time.
Was there a major beer epiphany down the road?
There were a series of beer epiphanies. Sierra Nevada was definitely the next one, because I was spending time in San Francisco and a girl I was dating was working at a bar. I went in one night and ordered an Anchor Steam and she says, Why don’t you try this one? It was Sierra Nevada. I tried that, and I was like: Damn! That’s pretty good too. And of course the Bay area in the late 1980s, early 1990s was a great place to be exposed to it.
Was there a point at which you made a decision or had an experience with beer that leads you to here, sitting behind this desk today?
Maybe the one, if I could point to it, would be an extraordinarily tough day during an extraordinarily tough work time of several months.
And having someone give me an Anderson Valley Boont Amber 22-ounce bottle early in that day. And me being excited to try it, and putting it in the fridge and having that bottle literally carry me all the way through that day. I can still feel it. It was such a wracking time. And this bottle, just knowing that that was waiting for me, just carried me. When I opened it, it was that good.
It actually lived up to the hype of wanting it so badly. It was the best tasting beer I’d ever had in my life at that point. That was probably 1991. That’s when I think I wanted to know more about this stuff, I wanted to start delving into this world that I was only realizing now existed.
You met your business partner (Steve Wagner) in a Sensory Evaluation of Beer class?
It was an extension course at UC Davis. It was after the Boont Amber epiphany. As a result of me wanting to get deeper into this culture of a beer – I was interested in becoming a beer geek. I’d actually met Steve at my rehearsal studios in 1989 in Los Angeles, where his band used to rehearse. Three years later, we were both in this one-day Saturday class. … We started talking and quickly realized we had some different backgrounds and different skill sets but the same attitudes about what we thought great beer was about.
What defines great beer?
Honestly, what defines great beer for me is what I think great beer is. It’s my own personal palate. But even beers that I don’t personally gravitate towards – there’s a lot I recognize as being outstanding and worthy of respect, such as a really well-made German-style, Bavarian-style Hefeweizen. I enjoy one from time to time, but it’s not really my personal style. But I have a hell of a lot of respect for the ones that are really well-made. I like to bounce around a lot, but hoppy beers and sour beers, full-flavored beers. It’s quite interesting. I’m sure there’s a beer that I haven’t yet had that I’m going to love that I haven’t imagined quite the flavor profile it might have or the way it addresses my mood.
Any home brews you’ve made that wouldn’t work for a larger audience?
That’s the thing about the way we approach our business. I don’t care if it works for a larger audience. I only care if it’s good. And if it works for me, that means it’s good. I’m willing to make that pronouncement: I like this beer, therefore it is good. And I think it’s been our willingness to approach it from that perspective. When we first brewed Arrogant Bastard Ale, we were like: I like this beer a lot, this is really good. Do we think anybody’s going to like it? I don’t know, probably not. But do we want to brew it and release it anyways? Hell yeah.
Did you go into the business expecting that could be a successful business model?
No. I thought we would do a more traditional approach than we have done. We’ve been able to express our creativity and our love of big-character beers. When I wrote the label for Arrogant Bastard Ale, I really didn’t think anybody was going to like it. I wrote what I felt about that beer at that time. When I wrote: “This is an aggressive beer, you probably won’t like it,” I wasn’t writing it (as a reverse psychology trick). I was writing it as a warning.
Because if you have hesitation, I don’t want to sell you this beer. I don’t even want to sell you one bottle. Because if all you’re going to do is buy one and you’re not going to buy it again, you’ve wasted your time, and you’ve wasted my time, and you’ve taken it out of the hands of someone who might have really wanted it. And at that time, that was really an issue because we could only brew so much beer.
Is there a point at which you’ll have expanded as much as you want to?
I see ourselves continuing to grow. I’ve gone on record a number of times: I don’t care how much we grow. I only care how we go about our business and how we go about brewing our beer. And if we steward those very, very carefully – and you could argue that it borders on zealotry on our part – then the growth will naturally occur. Are we willing to grow on our terms, meaning we’ll only make the kinds of beers we think are great, and we’re only going to make them the way we think is great? I never want to have a glass of beer in front of me or hear somebody else with a glass of beer in front of them, who waxes poetically about how good it used to be, before they got big.