How An ESOP Made All The Difference For An Early Entrant Into The Craft Beer Business
Before there was a craft brewery on every corner, there was Mass Bay Brewing Company. Founded on Boston's waterfront by Dan Kenary, Richard Doyle and George Ligeti, Mass Bay was in the vanguard of the current craft beer movement. A postgraduation trip to Europe in 1982 had introduced college friends Kenary and Doyle to the range of beer available outside the American market. Artisanal coffee and ice cream were surging in popularity back home, and the two thought they could do something similar with beer. After brief detours—Kenary tried his hand at banking in Chicago, and Doyle went to business school, where he met Ligeti—they reunited in Boston in 1986 to open Mass Bay.
"We were frustrated beer drinkers, not home brewers," Kenary, now the company's CEO, recalls. "If you're going to start a company, being in your mid-20s with no kids or family, that's the time to do it."
Leaning on friends, family and favorable word-of-mouth, the three began raising funds, eventually buying a property from the city of Boston in the Seaport district. They sold their first kegs of Harpoon Ale in Boston in June 1987, gradually expanding to 30 varieties of beer sold in 25 states.
By 2014, Kenary and Doyle were in a quandary about what to do with Mass Bay (Ligeti had left in 1990). Doyle wanted to exit and favored selling to an outside investor. Kenary planned to stay but hoped Doyle would sell his shares directly to the workers through an employee stock ownership program (ESOP). Their once-small company had grown considerably over the years and both realized the potential repercussions of Doyle's sale. Rather than butt heads, the two decided to seek another perspective on the direction they should take. Mass Bay had done several buybacks since its early days, and Kenary and Doyle both held just under 45% of the company. The remaining 10% was split between six others—two outside investors and four senior managers. "We thought, why not treat those six like a jury?" says Kenary. The pair gathered the shareholders, and each made the case for his preferred approach, then left the six to deliberate. Two hours later they called the shareholders back: All six voted in favor of employee ownership.
In July, they hired an ESOP trustee and began the fundraising necessary to buy out Doyle. That same month they held an all-hands meeting to introduce the employees to the new owners of Doyle's minority stake—themselves.
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Today, Mass Bay sells its beer as far west as Minnesota and employs 200 people. In 2018, revenue was $60 million. The ESOP now holds a 48% stake in the company, and Kenary credits the ESOP with Mass Bay's newfound sense of unity as well as its recent acquisition of Clown Shoes Brewery, whose former owners were drawn to Mass Bay's engaged corporate culture. And perhaps more significantly, the founders have survived to see their dream of a dynamic American beer market become a reality. At the beginning, "we were fighting a lonely battle," says Kenary. "You would go to Europe, say you were brewing, and they'd ask, 'What sort of Budweiser are you making?'"
While the current beer landscape is far more competitive, Kenary sees Mass Bay's employee ownership and culture as giving the company its edge. "Millennials, to their credit, don't want to have a disconnect between their values and those espoused by where they work," he says. "There's a tremendous sense that we're in this together, and that didn't exist before the ESOP."
As seen in Forbes and written by Christian Kezner.