Home Back Issues October 2008 Q&A: Jack Joyce, co-founder and CEO, Rogue Ales

Q&A: Jack Joyce, co-founder and CEO, Rogue Ales

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Archives - October 2008
Wednesday, October 01, 2008

JackJoyce


When I first called Rogue to request an interview, they gave me your cell phone number. I said something like, you don’t seem to have a media relations department and you said, ‘We don’t even have an HR department. That’s what ruins places’. I thought, well this is going to be fun. So tell me what you meant by that.

I just think that structure is a solution to a problem. When the problem goes away, the structure stays there. And it shouldn’t. It slows everything down. Structure can be an answer to a problem, but you should only use structure just for as long as it is an answer. Because what you’re trying to do is solve a problem. Too many people get diverted by process. It’s a waste of time and it doesn’t make you any better.

We also have a saying around here that anything worth doing is worth doing half-assed. If you do the right things, think of the right questions and do those things, everything is fine. The other 10 or 20 percent can just grind you to death. But it doesn’t matter. If you have a great idea, the execution doesn’t matter as much. If you have an average idea, the execution really matters. But at the end of the day with an average idea you can’t get past average.

You came from Nike and started this company. How did your experience at Nike prepare you for entrepreneurship and starting a business? Tell me about that transition.

The first transition was, I practiced law for 15 years.

What was the focus of your practice?

Construction litigation. Highways, bridges, roads. What the law brings is a lack of fear, or a comfort. Most small business people are uncomfortable with all that stuff, and a little fearful of it. We’re regulated by 50 states, the federal government and a bunch of countries. I can deal with that effectively and without spending too much money. New businesses spend way too much money on attorneys and CPAs, and then they don’t have the reserves that you need when you encounter tough times. We didn’t have to spend that money.

Litigating teaches you to win. What it doesn’t prepare you for is working with a team. What I learned from Nike aside from the obvious — that marketing matters and brand matters — I learned the pleasures of working with a team. Being around the quality people that I was around at Nike, some of it rubbed off on me, just by accident.

The other thing we got out of Nike was a board. Another problem small businesses have is they can’t afford the talent. We started at zero and we couldn’t afford the talent, but we had beer. So we got non-shareholder board that’s been with us for years, which includes the former president of Nike, the former president of Adidas USA and the guy who ran production at Nike.

You were with Nike around the time of the Air Jordan phenomenon. How did that experience help you to establish and build the Rogue brand?

The part of the Jordan story that is forgotten is, the whole Jordan thing wasn’t something that the mainstream could swallow real readily. I was involved in it from day one because it was one of those projects that the mainstream didn’t want. The year before that was the first time that Reebok in America was bigger than Nike. So Nike really needed a lift. And that’s certainly what Jordan provided and the products provided. The products were not mainstream. You didn’t do red and black basketball shoes in 84. But we did. And it started a distinct brand.


Tell me about building the brand for Rogue. What was the goal?

It’s never contrived like that. There were no models on how to do it. Sierra existed, Anchor Steam existed, Portland Brewing, Bridgeport and Full Sail were open. There weren’t many models, maybe 20 nationwide. Did we even look at those 20? No. Even if there were a model we wouldn’t have followed it. Like today we’re in spirits, and there are plenty of models. We’re not going to follow any of them.

But we did know right from the get-go that we had a brand and no money to promote it. But you do have a way to promote it, and that’s the shelves of the retailers, who are kind enough and risk-takers enough, to give you space. So we knew that our bottle had to be that advertising. And we knew from Nike that you really had to make world-class product. Really. Not just say you did. Whatever you think about Nike, they always tried to make the best product there is. We always tried to make the best beer there is.

The third thing is kind of a Nike term. In terms of point of sale, the things that people do to promote their brand, we called it unique thunder. That means that the world did not need another coaster, another neon, another sign. We tried to do unique things, like our just add water bottle. We do our Mr. Bendy, we do rubbers, yo yos—we try to do things that are different.

Rather than the typical 30-second spot on the TV or radio.

We never did any of that.

The fourth thing is community integration. We decided that instead of spending that money to promote your brand on advertising, which is really burdensome because of our backgrounds and because our expectations are so high, instead we take that money and put it back into our communities, whether it be our customers’ charities or our retailers’ or our distributors’. We put it back into the community.

We still do all four of those things to this day.

We do advertise by buying space in the 10 or 20 publications that support our industry specifically but that’s not for advertising, that’s to support the great beer community.

What you’re doing is bigger than beer, though. You brand it as Rogue Nation. It seems like a mindset or an attitude that you’re selling as well.

If we share our perspective, some people will like it, some people will hate it. We don’t think the customer’s always right. That’s a stupid thing to say, how can the customer always be right? Our deal is, the customer is to be treated the way he acts. If he acts like a jerk, he is a jerk. The staff is not here to take shit from our customers so we can make money.

There’s such a thing as Mokita, which is a New Guinean term. It’s the truth everybody knows but is unspoken… We operate on unspoken truth. It’s very appealing to people. We don’t operate where everybody’s bullshitting and lying to one another. We just tell the truth.

I tried the Jazz Guy Ale last night and it was a delicious beer. But it cost five dollars, and I’m wondering, how do you convince Joe Six-Pack, who’s struggling to fill up the tank, to spend five dollars on a beer?

I don’t know the answer to that question. Especially in economic times like this. Unless there’s a list of things you’ll take off your list until things get better and better, and for our customers Rogue is pretty high up on that list. The only thing that explains our continued growth, which flabbergasts us in these times, is that we’re pretty high up on that list.

Tell me about the company’s growth. How many employees do you have?

We probably have 250 employees… We’ve been in 50 states for five or six years. And we’ve been growing at over 30 percent the past three years. (Calls his son Brett over.) What are we up to now?

Brett Joyce (president, Rogue Ales): 32 percent.

Jack Joyce: And last year?

Brett: 36.

Jack: And 2008?

Brett: 25.

Remarkable, considering the economy.

Jack Joyce: You can analyze yourself into paralysis. If you thought about it, you could go nuts. There’s so much going on with the economy that we have no effect on but it sure affects us. A lot of that has to do with cost. Our stuff costs more because it costs more to make. It just costs more to make. Our marketing expenditures aren’t any higher than anyone else’s. Everyone says they use the best quality ingredients, but we use more of them. Here’s how you make money in beer: add water. It’s cheap. We use a shit-load of hops and a shitload of barley. This year our barley prices were up 88 percent. Next year our hop prices will be up 200 percent. Excuse me make that 400 percent. That’s when you glad that you understand pricing, which I suppose I subconsciously learned at Nike.

You’ve built quite a network: breweries in Newport and Eugene, a pub in the airport, another in San Francisco, the distilleries. And now the hop farm. Is this the next big adventure for Rogue?

Adventure is a good way to look at it. We don’t do anything for money. But once we do something, then it’s a matter of pride: We’re going to make money at it… Our instincts about doing a hop farm deal were good. Our analysis as to why we should do this instead of just buying hops doesn’t exist to this day. To us it would just be more interesting and more fun. But behind that must have been some good marketing and judgment, because the City of Independence just loves us. They think we can help restore Independence to its former status as hop capital of the world. Now we’re getting behind their hop festival. They had never poured an independent Oregon craft beer at their hop festival. That’s changing this year.

We’ve already committed to planting 20 more acres of hops in the fall. And we’re also doing 100 acres of barley south of The Dalles. The winter barley we’ll plant this fall.

Is that leased property?

Yeah. What we bring to it is, we’re willing to play the role of the bank. We’ll take all of the economic risk. If the crop got wiped out by hail today that’s our risk because that’s the risk of farming. If we do better than break even we’ll split the profits. You can bet they’re not getting that anywhere else.

We’ll be out picking hops this Thursday and Friday, which educates our staff. We’re going to do a beer with this hops called Independence Ale, which I should get trademarked (scribbles a note to himself). Next year we’ll have the barley and we’ll be producing all-Oregon-ingredient ingredient beer.

Did we think all that through before we started? No. I don’t think that’s our style. Something Knight always said was, bet your job; don’t bet the company. If we’re totally wrong it won’t break us to do it.

If you think of the barley and hop farmers, they’re making a commodity product. You don’t want to make a commodity product. I learned that at NikeTheir product loses its identity when it gets processed. It is no longer an Oregon hop. The brewers may have been around the hop farmers before, but the sales and marketing apparatus weren’t. So we’re starting to hang out with the hop farmers. We do stupid things. Like we have Rogue Hop Farm hats and shirts. And they like that. This guy up in The Dalles is going to put the Rogue logo on his tractor. He likes that. Maybe we can bring that to the hop growers, maybe we can teach them marketing in essence, and give them a value-added product.

All of these things just happen. If you have a great idea, execution takes care of itself. We’re starting to dink at using hops instead of hemp for all those uses of hemp. The problem with hemp is it’s too expensive to grow. Because all you do with the hop vine after you’ve pulled the buds off is grind it up into mulch. But it’s good fibrous material. It leads you to all those fun things.

What percent are you selling in Oregon? What percent nationally and overseas?

Overseas is two percent and growing even though we’ve done it for 16 years starting with Japan. Brett what are our percent of sales in Oregon? They’re always lower than I think.

Brett Joyce: Yeah, it’s about 15%.

Where do you sell well?

Brett Joyce: Our top three states are Oregon, Washington, and California, which makes geographic sense. But from there it goes crazy: Georgia, North Carolina, Pennsylvania, Illinois, New York, New Jersey.

Georgia? I didn’t think there was much desire for craft brewing in Georgia.

Brett: The southeast is growing like gangbusters.

Jack: It’s interesting. It’s only in the past three years that Georgia has had its own craft brewery, Sweetwater. Before that a lot of people tried it and it just didn’t work. I don’t know what that was about.

It must be a constant struggle, to get people to go for beer in the way they go for wine, to be willing to experiment and be open-minded about beer, rather than saying a six-pack is a sic-pack. A lot of consumers just go with price.

We have three percent of the market. 97% is price. But beer is a much better value than wine. The truth is that beer in an economic sense has been undervalued forever, because of who drinks it. Restaurants have always felt that wine enhances your image, while beer detracts from it. We’re getting past that for real. It’s not a dream. Fine restaurants that don’t have a fine beer list are not fine restaurants. They’re not being accommodating and that’s not a good practice in the art of hospitality. I wouldn’t have said that three years ago.

Part of it is generational. It just gets better and better.

When did you launch the spirits and how is that doing?

Five years ago, which is scary. We were the second distill pub in America, the other one being in Boise. And even today there’s only three and we have two of them. Which is strange. We did it because we had three things. We had a guy who was a merchant marine ship’s engineer who knew how to make hooch because he was down in the engine room doing it. Then we had a space up here in the pub where we had a piano and we didn’t want music particularly. And we had a cook who worked for Bardonet, who knew how to distill. Those three things came together, and now we’re distillers. Again, a great idea, the timing was great. As for how that business is going, it depends on your point of reference. If we apply the standard of how we’re doing in the beer business today, we are doing poorly with spirits. If we apply the standard of how we were doing in the beer business when we first started, we’re doing a little better in the distillery business.

We also started this festival. Some people are confused: they think that Colorado is the capital of beer. By any measure it’s Oregon, but the reason people think it’s Colorado is because they have the Great American Beer Festival there. If we want Oregon to be the capital of distilling we’d better have the Great American Distiller’s festival here. So we started that three years ago. I don’t know what that idea was, certainly not a moneymaker, I can guarantee you that. (Laughs.) I don’t even want to think about how much it’s not a moneymaker.

Brett: You’re right. You don’t want to know.

Jack: 25 to 40. But we think it’s a good idea. It helps the industry and it helps the state.

You sell such a variety of products, at such a low volume. This must pose an incredible challenge.

Yeah but there are principles. One principle is, accounting doesn’t run the business. Accounting accounts for what the business did. No business should be on this earth to make things easy for accounting, or their days as a business are limited. Similarly with production. Ours is not a production strategy. We’re not trying to be the most efficient producers. That is not how we will win. So you need to decide early on: Do you have a production strategy, which is just a commodity, or do you have a specialty strategy, which costs more. It’s important to us that our brewers are allowed to be artisans and not make the same five beers over and over again to where they become manufacturing workers. Our products reflect America, and America is very diverse. When our retailers and distributors get confused, we say, have you ever been to a buffet? Have you ever been to a restaurant? You don’t order everything on the menu. You have to make decisions. And those decisions help the retailer differentiate himself from the competition. We’re providing a full menu. And we have no discipline whatsoever.

None?

None. And we can sell most anything. There’s little risk in bottling because we can sell it at cost. If consumers say we don’t want your garlic beer we can stuff it down the throats of our pub customers.

Full Sail has a partnership with Miller Coors. Widmer’s got a minority stake owned by Anheuser Busch/InBev. Have you had offers? Rogue is a powerful brand.

I think it’s safe to say that people in the industry know us. They know me because I sit on industry boards, and they sort of doubt that we can pass the drug test. We’d be a handful to swallow because we’re not shrinking violets. We don’t have a need for money to expand for some vision we have. It’s easier for somebody to say, here’s a brand that’s in 10 states. We can make it five times larger by taking it into 50 states. We’re already in 50 states. It requires somebody to understand brands. We sell in all 50 states but we sell through in all 50 states. Somebody would have to believe by purchasing us that they could take us deeper yet still have us stay special.

And then why would we sell? We’re having fun. And how many of our people would survive? Who built the company? It’s not me. The people built the company and they’d get 10% of what we sold it for. They don’t want that. They want a job. They want to be a part of something that they’re proud of. They’re proud of Rogue. I don’t know that they’d be as proud to be owned by InBev.

It seemed like in the early 2000s there were too many companies trying to do craft brewing and there was a shakeout. What’s your take on how craft beer sales have come back around in the last few years?

I never paid any attention. Because in everything some people do good and some people do bad. I always felt that we would do good no matter what happened to the industry. I don’t mean this to sound arrogant but we’re sort of our own industry. We don’t have competitors. We’re the only player doing what we do.

Having said that, as much fun as this thing is, at the end of the day it’s still a business. So the failures probably stemmed from too much money spent on rent, too much money spent on renovation, too much money spent on equipment. People were making gigantic investments, and they were not brewers they were businesspeople. There was some beer out there that wasn’t quality. The consumer didn’t trust the category for quality.

It sounds like you would have no interest in going public.

(Laughs) God no. We wouldn’t pass the drug test. It’s instructive if you look at the Pyramid/Magic Hat deal — that was to take Pyramid private. The cost of compliance (with public company regulations) is substantial for small companies. On the other hand, Widmer took the other tack. The advantage of that is you can give your employees a tradable employees package, something they can do something with. But no.

Private and independent is the future?

Yes.

And 25%, 30% growth; do you see this continuing?

We don’t do any planning. We’re not public so we don’t have to say what our earnings are going to be. It’s not important to us that we get bigger. It’s important that we get better. Getting bigger can be a result of getting better but not necessarily. If we are getting better and we are flat, that’s fine. Especially if you think about the economy this year or next. We could completely understand being flat. We could probably understand being flat better than being up 25%. But either is okay, as long as we’re doing as good as we can do.

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Comments   

 
Insider Knowledge
-1 #1 Bad Company!Insider Knowledge 2012-01-05 22:59:40
These guys treat their employees horrible, fire people for no reason and make mediocre beer. DO NOT SUPPORT THEM. If you want to support a good brewery who treats people well and make good beer, drink Sierra Nevada.
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Guest
0 #2 Great Company!Guest 2013-06-16 12:16:17
I worked for Rogue and would do so again. They are a great company IF you have a backbone. Are you intelligent? Can you do your job and not whine about it? Are you willing to laugh at Jack and tell him to go f*** himself? If so, he'll love you and do anything in the world for you.

I have worked for a lot of breweries and the only ones I would go back to are Rogue and Bell's
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