Make No Little Plans: Tony Magee, Lagunitas and the Craft Beer Moment

LISTEN

Unconventionals // Season 3 • Episode 7

A visit with Tony Magee at the new Lagunitas brewery in Chicago

The next time you’re at your favorite bar, take a look at the beer menu and count how many craft choices are on it. Chances are the list is growing each day. So after you order a delicious brew, raise your glass in honor of Lagunitas Brewing Company.

http://www.youtube.com/embed/Qy2aDFkPMPI

Lagunitas reshaped the beer industry when it became one of the first brewers to regularly bottle an India Pale Ale. This helped create a craft beer craze, which is now posing a serious threat to big beer companies like Anheuser-Busch, Miller, and Coors. Lagunitas recently opened a brewery in Chicago — making it easier for them to distribute fresh beer nationwide and further disrupt the American beer market.

In this episode presented by our friends at Craft Beer Cellar, host Mike O’Toole visits Tony Magee, founder and CEO of Lagunitas. They discuss how craft beers have all the momentum with young drinkers — and why the industry giants should be worried.

You can also subscribe to The Unconventionals on iTunes and Stitcher. And be sure to join the conversation on Facebook and Twitter as well.

transcript
x

Speaker 1:

Next, on PJA Radio's, the Unconventionals.

Tony McGee:

"Here, have a beer. It'll make you right," Ernest said to Tarzan. Tarzan had never had the true beer before, and Ernest knew this would not be his last. He drank the beer quickly. It was cold, and Tarzan knew this too. "What is this with the old stuff?" Ernest and Tarzan turned and watched as [Sigman 00:00:19] out of the room strangely. "Sigman," Ernest said, "my old Primitivo, have a beer with us." They all had a beer, and it was good. Ernest said, "Do you remember how I was in Stinson with the running of the dogs and how we ate crawlers and got drunk on the Lagunitas Pale and stole grunion from the young girls at Café de San [Shuckle 00:34]?" Tarzan thought it nothing. They all ordered [inaudible 00:00:38] and spoke not of their big cigars.

Mike O'Toole:

That is Tony McGee, founder and CEO of Lagunitas Brewing Company. He's reading from the label of a Dogtown Pale Ale. Lagunitas is the fifth largest craft brewer in the country, and with a new 500,000 barrel brewery in Chicago, has growth on its mind. Tony's not your typical CEO, but a disruptive idiosyncratic industry needs disruptive idiosyncratic leaders, and Tony is both of these. He's also ambitious, which makes him a good spokesman for an industry that's feeling its oats.

There was a recent article in the Wall Street Journal about the hand wringing going on at Anheuser-Busch. Last year, craft breweries sold 16.1 million barrels of beer, just out pacing Budweiser's 16 million. The thing that has Anheuser-Busch nervous is that craft beers have all the momentum with young consumers. 44% of 21 to 27 year olds, have never tried a Budweiser. This would have been unthinkable in the mid '80s when I turned 21, when Bud was truly the king of the beers, and there weren't that many other choices. Being a Chicago kid, I preferred old style, but honestly there wasn't a big difference.

In the wake of this dethroning of Bud, it feels like a really good time for the young conventionals to look at this upstart industry. Over the next two episodes, we'll look at two stand out brewers who operate at different ends of the scale. Lagunitas this time, and the Alchemist in Vermont, Brewers of Heady Topper next time.

As a kid, our family vacations were in a tiny town call Eagle River in the upper peninsula of Michigan. One thing I can never get my head around is that at its height, 125 years ago or so during the copper mining boom, Eagle River had a few hundred people and seven breweries. One of the things that craft brewing has done is restore a sense of place to beer. I started my conversation with Tony about his move to Chicago and what that meant for Lagunitas.

Tony McGee:

Chicago was, because of the nature of our relationship to a distributor here in particular, it was one of our fastest growing markets, and so it became a place where we were already paying a lot of attention. It was very gratifying to me having been from here to find that the ethos of the brand, which is the thing I authored actually spoke to its homeland. One day I was driving into work, and it became very clear to me that I could trade all of the freight that we were shipping ... We needed to add new capacity in California, but I would be forever paying this freight to get that stuff back East, and it just became clear one day that I could exchange freight debt almost dollar for dollar for bank debt. Bank debt you pay off, the freight you pay forever.

I called the bank that day. I got in, told them they said, "Yeah, we'd do that if it works out like that." Told my CFO and his eyes rolled back in his head and he choked on his tongue. I went over and told my COO's a very cautious guy, he's like, "Well, we have to do research to know for sure that consumers will accept our beer if it doesn't come from California." My feeling was we have to be afraid the people won't accept our beer unless it comes from California. You just identified job one. I said, "Send him on his way" and I bought plane tickets, came back here and found a building in one trip.

Mike O'Toole:

Chicago's the middle of the country so you moved to Chicago to wake, for the reason businesses have always been in Chicago because the middle of the country, freight goes everywhere. Was there anything else about the Chicago thing, culture Chicago, that fit your beer, fit your company?

Tony McGee:

It fit me. In certain ways, at least how the brand sits, I'm the font of that, what informed that. To me, the idea doing it here was epic beyond epic. The truth is too, Chicago's not the middle of the country, Chicago's pretty far east, it's four hours back to San Francisco, and it's an hour and a half to New York? This is pretty far east. It was the most logical thing to do then. Chicago's just ... That whole second city mentality, it's a very powerful place and always a forever underdog, you know?

Mike O'Toole:

Yeah, chip on the shoulder, second city, right?

Tony McGee:

I dig that. Lagunitas, we got something to prove too. Why not come and do it with people you think understand?

Mike O'Toole:

I think that Carl Sandburg too, stormy, husky brawling.

Tony McGee:

That's right. Husky and brawling, the rest of that poem's not always so well known.

Mike O'Toole:

That's not Petaluma though, right? You don't think of Petaluma as ...

Tony McGee:

No. It's beautiful, it's pastoral, it's hippy, it's goth, but it's wine country and there's a loveliness to it that, was it Kurt Vonnegut ... There's a commencement address that was attributed to him and he says, "Live in California once in your life, but not so long that it makes you soft, and live in New York once in your life, but not so long that makes you hard." We've been in California long enough, I think it's time for us to begin moving our ethos east a little bit.

Mike O'Toole:

Yeah, what does Chicago add to that? What was the third verse?

Tony McGee:

Edge?

Mike O'Toole:

Yeah, what is edge?

Tony McGee:

Well, there's Chicago, right? There's a kindness to Chicago that's different from any other part of the country too. Practicality. I was here this entire last winter and I drove around, wore sandals the whole damn winter, and drove around with my Jeep with the wet back windows all zipped out. It was forty below for a few days, and it was the coldest winter ever in the city, and there's times I had two inches of snow in the back seat of the car. There's a practicality that that imposes on people, it doesn't exist on the west coast. On the west coast, everybody has the ability to be special because the world around you is so kind to you all the time. The only thing on the west coast that happens that is even remotely like these things that happen a dozen times of the year back east are earthquakes. They happen once every third blue moon.

Mike O'Toole:

I think there's something about Chicago too that's ambitious too. Not just kind, but ambitious.

Tony McGee:

There's a chip on your shoulder. You got something to prove.

Mike O'Toole:

My favorite quote of all time that has to do with business and building stuff is the Daniel Barnham quote about make no little plans.

Tony McGee:

Make no little plans. Yeah, that's right, exactly right. I incorporate that into all the first press releases, everything I always said that make no little plans, so we're coming here. When I found this building, it was like ... This building was twice the size of what I was looking for at the time, but turns out it's what I needed. When I walked into it I was ... Every other building I walked into I was like, "Okay this might work. We could do this. Okay, this could be adequate." I walked into this one, and it was like this sense of awe. This was six acres under a roof. I walked in, there was nothing in here. None of these structures existed at all. It was just this wide open thing. It set me back hard enough in my seat that I was like, "This is worth trying to do. This is worthy of the effort that it's going to take."

Mike O'Toole:

There's a lot of the history of industry in this country too that feels like it's going the wrong way. Factories emptying out. Did you connect to that at all, like going the other way with it? Building something?

Tony McGee:

It's pretty exciting to be swimming up stream like that. The good news of that is that there's space available now. Other businesses took on the big load of putting up a building like this which is one cost. After that, it's just a rental, or it's just a lease of some sort. It changes the nature of it, but the void of the building represents opportunity. There's nothing ... It's really exciting, moving into a void that sucks you into it. You want to live up to it. It's pretty darn cool.

Mike O'Toole:

You didn't take any public money to open this up?

Tony McGee:

Nope. Didn't in Petaluma either, but Petaluma grew from a seed. Nobody would give a seed money.

Mike O'Toole:

You could have gotten money to come here?

Tony McGee:

Yeah, probably. We didn't pursue it and then say no. We just said, "No." I'm kind of a libertarian minded when it comes to ... Businesses are suppose to bring value, create value, and bring gifts to your community. This Machiavellian ... Maybe it's really important for big publicly traded companies where the soul got flushed a long time ago, and its quarterly returns that matter more than anything else. They can't help but answer to money. If cities are foolish enough to offer money, then everybody else will offer money, and the great pretense is borne. For us, the economically [student 09:35], there's no reason for us to do it. Savings in freight pays for the brewery. If I got that money, it would be like extortion money. What the realtor told me, the one of two days that I spent looking and found this building, on the second he said, "Don't tell anybody if you find a building. It's real important that you not say that you found a building because then they can't make the where-but-for this money clause, that finding."

Mike O'Toole:

What does that mean?

Tony McGee:

Where the city when they finally, or a state, when they finally do the grass, they have to say, "Without this, it wouldn't have happened." They have to make that finding. I got to say, "We're looking at Indiana, we're looking at Wisconsin." I'm not going to be a lily-livered about this. This is what it is.

Mike O'Toole:

You want to be in Chicago.

Tony McGee:

This is the city of broad shoulders. We're here. There's a reason for it, and I don't want to be in Cicero, and I don't want to be in Bedford Park. I want to be inside ... I want to say that on the label because we going to ship this beer from this brewery all over Europe. I want it to say Chi-fucking-cago on the label. I don't want it to say Bedford Park. Nobody is Glasgow knows where Bedford Park is, but they all know where Chicago is.

Mike O'Toole:

When you talked to Tony McGee about how he got his start, it quickly becomes a story that mashes a beer, music, and a Lagunitas Brand.

I wanted to talk about why you started this company and why you wanted to start a brewery, what was that about? Do you remember back then?

Tony McGee:

Oh yeah, it was yesterday, 1983, wasn't so long ago. Let's see. I started the brewery because I'd gotten married 18 months earlier, and I thought I was about to get divorced. I was pretty sure that that was not going to last another 18 months. I had been drinking a little bit up at a cool place were I live in Marin County, the Marin Brewing Company. It's one of the oldest brew pubs in the country. It's a great place, and I was looking behind though the window at the gear. I dig gear and that stuff's sexy, and all of a sudden I realized I might need to do something else with my life. I said, "Okay, I'm just going to start a small brewery, it will be like a little cabinet shop, and I'll make one cabinet at a time and each one will be custom, and I'll just pay my way though the world. I can live in the brewery if I had to." It turned out we didn't need to do that, but that was the sole reason for doing it.

Once we decided to do it, it was like "All right, I think I know something about beer recipes." I studied composition in school, music my whole life, but composition's a very special thing and it's about arranging elements. It's not really so much creating. I mean you create, and you got all these pits and pieces laying on the table in front of you or in your ear, and your job is to arrange them so they begin to make some sense and look for patterns that were endemic but that weren't obvious to start. Everything about a beer recipe's exactly like that. It takes you maybe three four seconds to taste the beer, experience and swallow. That's a little song. There's the intro, there's the main theme, there's the body of it, there's the finish, there's a little [inaudible 00:12:33], a coda where you get the after taste. Beer, it's a little A-Tude. It's a beer recipe. The brand is a 20 year long symphony. Initial statement of themes, development of the themes, introduction of new themes, restatement of the original theme in a new key.

Mike O'Toole:

How much of that symphony for the brand was in your head at the beginning, or is it ...

Tony McGee:

No, it's writing itself. There's lots of things that have come up. Inputs present themselves to you, and you accept them. The way a Jazz musician will be playing and they know the head, but once they go in the solos, the drummer does a little kick down the end of three. The sax player's playing solo. He's probably going to respond to that. In the same way, we're connected to it, and I spend a lot of time listening, trying to understand where the brand is suppose to go next so that I play the right part. I don't know exactly what it is we're listening to, but it seems like the music is tied to reality.

Mike O'Toole:

If people ask you to say what is Lagunitas the brand stand for, or what's it about, what do you say?

Tony McGee:

Just genuineness. Everyone uses the word authenticity. When I start to hear investment bankers talking about, "Well yeah that brand is authentic. Authenticity is this."

Mike O'Toole:

It's time to pick a new word.

Tony McGee:

Exactly, it's one of those words that everybody uses because they don't know what else to call it. Someone says authenticity and everyone in the room goes "Mmm", scratch their chin, they go, "Yeah, authentic, I understand exactly." People don't know what they're talking about. People don't understand what they're hearing. Moving all the way from that idea, authenticity. Even the word craft over time is becoming increasingly meaningless. We just want to be genuine. We want to be genuine. We want to treat people genuinely. We want to be free in that to do what we will do. It's one of the reason why I don't advertise that I smoke pot, but I never hide it because it's ... This is a declaration independence to some degree to say, "By the way, I'm also this, is that cool with you?" I don't know, maybe it means nothing to anybody, but I think it's it just shows commonality.

You put a brand out there, it's what you're hoping, you don't know what people want, unless you're a giant, a Miller Brewing Company, you've done research, and you found a gap in what exists in the market, and you've noticed a desire for something that needs to be filled. That's such bullshit. When you go out though instead, and you try to present yourself and you start finding community.

People go, "Yes, that's how we are too, you recognize us."

Now we go right to them. "Good, now we have a customer."

"Will you make more of that?"

"Yeah, we'll make more of that. How much? Would you like it a different color?" That kind of connectedness, that's just perfect.

Mike O'Toole:

You said there's you're own, who you are yourself, and then there's the brand of the company. Are they pretty close? Is that a pretty close intersection set between what you think of as your own values, or how much is the company live separate from that?

Tony McGee:

I'm kind of a lens. I've got my own ideas. I'm not really sure I could even tell you what they are, but as it comes through that lens, it's like "Okay, I can see, yes, there's a universe on this to this. This represents all of us." I make sure that stuff got out there. It's not so much me, as an idealized version of me I guess. You know Carl Jung has, the philosopher psychologist guy, he's says a true artist or creative entity of any sort doesn't stand astride its work, it's not like "Look what I have done. I've created". Instead the artist stands below his work. It represents his highest aspirations. There's something. That's how we are.

Mike O'Toole:

I like that. I like thinking of brand that way too. I think sometimes of Lincoln's second inaugural where he talks about the better angels of our nature, that feels like what a brand should be. We're not always that way, but if we could.

Tony McGee:

That's right. If I could be anything, this what I would want you to see of me.

Mike O'Toole:

Yeah. The lens idea too, does that mean that you'll see ideas sometimes that come along for the company and you say "That doesn't work for us?"

Tony McGee:

Oh, yeah.

Mike O'Toole:

Give me an example, can you think of something like decisions that could have been made?

Tony McGee:

Go back into the 90s, when we began in '93 and we started bottling early '95. Wheat beers, particularly fruit wheat beers.

Mike O'Toole:

You're a baker.

Tony McGee:

If you made a fruit beer, you could be pretty certain that instantly you would be at capacity. There's a good brewery out of Oregon that made the honey wheat beer. It became huge for about 27 minutes. The thing is, as a company, you end up building behind all of those ideas. When it turns out it's not a trend, it's a fad, and it leaves you behind it's like "Now what?" And you go out of business. It's happened a lot. I saw it happen all around us. What we've tried to do is always say, "All right, look it out in future curves away and eventually you can't see past the horizon anymore, but what's over there?" And try to make the best guesses we can about what's over there and based on our own ideas. Plato said happiness is the movement of the soul in accordance with virtue. You're always taking those things and using that as your compass to what you want to aim at over the horizon that nobody has seen yet.

The reason why we've done those things, we've left a lot of opportunity to grow quickly behind us, and it turns out we grow quickly anyways. The most important things are the things you don't do. When you look back ... When you do something right, you don't learn anything. When something really ... You make a big mistake, that's where all the learning is, self-examination. The stuff that you don't do that turns out you see later was good not to have done, it's like you avoided a mistake, and you actually get to see what the mess would have been had you gone that way instead. You always got to trust yourself.

Mike O'Toole:

There are hundreds of varieties of craft beer out there, but IPAs of a hoppy India Pale Ales are what separates the casual fan from the craft junkie. One of Lagunitas' contributions to the industry is that it was one of the first American craft brewers to bottle an IPA. Tony finds inspiration from a lot of corners. We've talked Carl Sandburg, Daniel Barnham, Kurt Vonnegut. Here, he's made the analogy to Hemingway who talked about trying to write one true sentence. Lagunitas IPA was born from a desire to create one true recipe.

Tony McGee:

Honest to God, this is an old saying that orphan's always ... That failure's always an orphan, but success has a thousand fathers.

Mike O'Toole:

Way more people said they voted for Kennedy than could have ever voted for him, right?

Tony McGee:

Probably right, exactly. When we made our IPA back in '94, the late part of '94, it was the first of its kind, in terms of IPAs, now they're the very common structure. There's Bridgeport Brewery's making an IPA. Anderson Valley made an IPA. There's Shipyard and Harpoon, some of the pubs did, but nobody was bottling one on a regular basis. The late hop edition was something that might have happened no matter what, but it was something we tuned into and did very early, so it's kind of cool.

If you look what happened when the trouble in the industry like late '90s occurred, that's when a lot of the breweries who are now kind of noteworthy and doing well, that's when they were born was the late '90s. I think they would have looked at what was happening in the market and what brands were growing because there are nationals number still available back then. You'd see, we'd be number 50, but we'd account for a third of all of the new cases added to the industry, even when we were that small. I would've ... If I was on my way to become, to see what we were doing. There was a lot of pride about that, that we were right. The good news is because we were doing it early, we have that early mover thing. People trust us. I don't know what could be better.

Mike O'Toole:

Coming up, Lagunitas beer causes polyps and river blindness. The curious Lagunitas brand and how it is scaling in a beer industry that's being disrupted by craft.

Speaker 1:

You're listening to PJA Radio's The Unconventionals. To learn more about the show and join in on the conversation, check out our Facebook page, facebook.com/unconventionalsradio. Our academic sponsor for The Unconventionals is a center on global brand leadership at Columbia Business School, which turns the research of academia's foremost thinkers on branding into practical tools and insight for real world application. For more information, visit globalbrands.org.

Mike O'Toole:

I'm Mike O'Toole, and this is The Unconventionals. We're talking to Lagunitas founder and CEO Tony McGee. The Unconventionals tells the stories of disruptive companies, but it's a lot of fun when we get a two-fer, an iconoclastic brand in an industry that changed the status quo. But now that craft is established, you have another trend, which is big brewers buying craft beers. Chicago's Goose Island and Oregon's Ten Barrel Brewing are two recent acquisitions by Anheuser-Busch. Not surprisingly, Tony has strong opinions on both.

Tony McGee:

Hold on, let me, allow me to back up just a step. Forget about craft. The beer business. Craft itself is a perfect example of The Unconventionals. The biggest breweries in the country were not always the biggest breweries in the country. Go back and watch an old Dirty Harry movie, and I always point out that it's Schlitz he's drinking. That's Schlitz neon on the wall. That was the most important brand in the United States at the time, and these other brands were coming up. It all works its way to an end point of consolidation.

I saw a paper, someone had done a study back in the '30s, the '30s before Prohibition. The minimum scale, economic scale for a brewery was about 50,000 barrels, which is about what it is now. Over the years of consolidation and growth of the United States population, as well as the consolidation of the beer industry into just a handful of big brands, it became 3 million barrels, was the minimum economic scale to open a brewery. You couldn't even enter the industry as it was, without being a 3 million barrel business on the first day, and that's impossible. What craft represents is a resetting of the value proposition that facilitated a resetting of the minimum economic scale. All of the sudden, a brewery could make money at 35,000 barrels again. That's almost a story that really isn't told. There's always these ideas of people, consumers wanting the things they want and companies noticing and filling the gaps. The truth of the matter is, there's sometimes there's these Darwinian gaps that open up, and there's this enormous gap of a niche differentiated beer. Craft itself represents complete fundamental, different approach to the world.

Mike O'Toole:

I buy that. It wasn't even necessarily that people knew what they were missing in the '70s and '80s.

Tony McGee:

It wasn't these breweries were trying to figure out how reset that scale. They just wanted to make a little beer and see if they could sell it. If they could sell it, there'd be a customer, and that customer may tell another customer. The truth is, it's almost like they think about ... Darwin, it seems when it's described, it always seems intentional, like somehow evolution drove it. No, it's complete ... It's a thousand monkeys sitting at a typewriter. Eventually, one of them will type Shakespeare. That's what craft is in itself, a non-conventional. It's the same as Uber. There's this enormous world of fat and happy taxi companies. They call it disruptive technology, but truth is it's just evolution. But craft, the conventional thing for craft is ...

Mike O'Toole:

Now that craft is established as a ...I don't know, what is craft beer, 6, 7% of the beer sold?

Tony McGee:

I think it's 8.

Mike O'Toole:

8%?

Tony McGee:

It's 12 and 1/2% of the dollars though.

Mike O'Toole:

Yeah, so that's an interesting, that's not no longer on the margins. So, it's here. I might think of, if I had to ...

Tony McGee:

And it's growing at a compound 18%.

Mike O'Toole:

It's an interesting place in the beer industry right now. Aren't there brewers out there say "Hey, what I need to do is establish my beer, establish my brand, and then I can sell for a lot of money." It seems to me I see part of that instinct in craft brewers.

Tony McGee:

People sell their business because they're afraid. There's no other reason that you sell your business. You're afraid of something. You're afraid that you'll be unable to continue doing it. You're afraid that the styles will change, and you'll get left behind. You're afraid that now you have money, but in the future you might not. Anybody who's sold a bit of their business to private equity ... There's a couple of them that happened recently, one up in New York and one down in Atlanta. The company's been sold, but the worst part is it's been sold to an entity that will resell it in the next 5 to 7 years. That company, the next ... Whoever the buyer is will probably resell it again. After a while, it very quickly becomes regression to the mean, and the brands become meaningless, and history moves on without the benefit of their presence.

People started asking me a couple years ago is this idea of us brewery founders getting older. What's going to happen? It became the next, big story. It was one of those stupid flames that appears for no reason at all. I had to answer the question. I had to answer the question myself first. I said, "I want my ... I want what I do next, five minutes from now and next week, to be really clear to me. I don't want to wonder about what it is I'm doing, how will I." I said, "I'm on the 'die on payroll' plan." It was a cheeky thing to say, but it also makes everything really clear. Other things can happen because reality can be different, but now everything I do is going to be about thinking about how to set the company up after I am dead.

Mike O'Toole:

To be clear, he's saying "die on payroll," meaning Tony isn't planning on going anywhere. If you're planning for life after Tony McGee, the challenge is how do you take the brand he embodies and drive it through what is a pretty big company these days.

Tony McGee:

I think there's 635 people who work for the company now, and 80% of them were not there 3 years ago. There's an awful lot of talking to ourselves that we have to do to tell each other the story of what it is that you're part of, so people don't come back and reimagine the company, based on their own ideas, that we say "No, this is how it happened. This is who it was. This is who it is, and now you're part of this larger whole." I've talked to some people that have said, "We're really not even in the beer business. This has very little to do ... We're in the tribe building business."

Mike O'Toole:

What does that mean?

Tony McGee:

Stories. Tribes are held together by stories, commonly held understanding of whatever their "we-ness" is, the thing that makes them we. That's not just true within the company. It's actually more true outside the company. That people ... When you build a brand, you can make a better mouse trap, or you can build a mouse trap that people want to have around their house because there's something about it that seems fascinating and flatters their ideas and their own insights.

Mike O'Toole:

Like the Nest thermostat is that way. No one thought about thermostats for forever.

Tony McGee:

That's right.

Mike O'Toole:

But, Nest comes along, and everyone wants one.

Tony McGee:

Personalize it, and make it something that's actually, when you touch it, there's a reason to be touching it, not just to ... It's the same thing for our beer. That's why we spend a lot of time telling stories and communicating ideas of nuance. We make shit up, if you read on the beer labels. That stuff rarely ... None of that happened. A friend of mine told me you should never ... When I started out, he's a conventional designer, Jeff [Eckers 28:59], he's a good guy, and one of our shareholders. He told me, "Oh, Tony." I wrote raw beer on a little tagline, and he's like "You should never leave unanswered questions at the point of sale." That's conventional wisdom because people ask what's raw beer. The funny thing is, he was right. Over the next year, we probably got 50 phone calls. "What's raw beer?" That person took the time to dial the number that was also on the label, call to tag up with us.

Mike O'Toole:

Who does that? They're really ... They're locked in.

Tony McGee:

You engaged them. You created a question. They thought it was worth trying to understand. The trick is asking good enough questions, posing good enough questions. On the labels where we do all that fantasy stuff, the idea is to make people go what?

Mike O'Toole:

Give me an example or two.

Tony McGee:

On our IPA label. I wrote this 18 years ago. Everybody at the time, all of these other brews, they were writing these beer descriptions for beer festivals that describe their beer as "a unique blend of fine hops."

Mike O'Toole:

It's like wine sort of.

Tony McGee:

Wine talk. The dead end, soulless, quasi-poetic nonsense. Just posturing, and it's pretentious. I got tired of that. I started writing that our beers, fans of our beer have contracted peritonitis, polyps, and river blindness. The unique flavor of burning tractor tires and stagnant pond waters, followed up immediately by broccoli and kerosene notes. People at beer fests would be like "I've got to taste that." As soon as you hear that, you know we're on to something.

Mike O'Toole:

While there are exceptions, for most people, craft beer means local and small. Lagunitas is big and all over the country. But why go big? And what does it mean to scale in a craft beer industry that, according to Tony, is still in its zygote stage?

Tony McGee:

So, what's scale? Anheuser-Busch has in the United States, 100 million barrel business, 90 million barrel. Miller, Coors split most of the other 90 million, and then there's craft. This year, if this place rocks, we'll be at about 800,000 barrels. We're less ... We're almost half of 1% of all the beer in America. At what point does the word scale even begin to apply? The fact that you can know about a brew pub, it's like counting parts per billion. It's such a small thing. One thing is that I spend a lot of time talking to my smart guys that I've hired to help manage the group. These guys are all conventional wisdom thinkers. They start talking about the law of big numbers starting to slow our growth at some points. What point does such a tiny number become any kind of a big number? It's relative to where we were yesterday. They'll talk about wanting to treat the brand and really address the industry the way we see it with this very structured approach. I'm like, look. One day it was an egg, the next day it was a zygote. A month later, it's a fetus. It's not even a newborn seven months later. At what point do you start planning its college? I think that craft is really still in that very, very nascent space.

Mike O'Toole:

Awkward as adolescence?

Tony McGee:

Zygote. You can't even sex it yet. Go ahead, do an ultrasound. All you're going to see is a little blot. That's what craft is now. Even talking about scale is a funny misnomer. It's like ants talking about how big beetles are. They're not elephants, you know.

Mike O'Toole:

That's a fair point. Although I would think that ...

Tony McGee:

The question comes out of conventional thinking. I understand it. Even other craft brewers who might think we're big. Dude, we're not really big. However, having said all that, I think the entire global beer industry has reached an end point of consolidation and brand life. The entire global beer industry is being handed over, if we'll accept it, to another generation of brewers and another generation of brands built on a more modern ethos, built on all sorts of things that represent the world that people experience. The idea of stepping up and building scale is really accepting a responsibility. For what it's worth, Lagunitas is a great company now. Personally, on a payroll basis, I'm rich beyond the dreams of avarice. I don't need to go further. I'm still wearing sandals. I drive a Jeep. I'm not like ... It's not a master of the universe play for me. Now, we're doing it out of a sense of obligation and principle. The door has been opened. You're going to walk through it, or are you going to go "Wow, I wonder what's back there?" It's a spirit of adventure at this point.

Mike O'Toole:

And you're responsible to what, an expectation that we can have interesting beer as consumers or what?

Tony McGee:

What if Apple had made the first iPhone and said "That's it. That's as good as we need a phone to be. Our factories in China are already busy, and our engineers, they need some time off." Somebody else would come and make a fucking iPhone and make a better one and a better one, and it would probably be shittier because it didn't have the vision of the person that paved that little bit of landscape in the first place. When you succeed like that, it's almost like you have an obligation to follow the thread out. What if Led Zeppelin had only done one album because they didn't really want to be bothered by it. Would the world be richer or poorer for them having said we're done contributing? We all have an obligation. It's a cultural obligation. At some point, the world might tell us we've had enough of you.

Mike O'Toole:

8% is enough or 15% is enough.

Tony McGee:

Okay, that's right. That last album? Aerosmith? Thank you very much. We're good. I'm going to listen to [inaudible 00:35:08]

Mike O'Toole:

Do you have a sense of where that goes though? Are you a guy that thinks "What this can become is this?"

Tony McGee:

We're the future ... We and breweries like us are the future of beer in America. And there won't be 3 or 4, there'll probably be 20 or 30, but we're the future of beer.

Mike O'Toole:

For a closing thought, we'll often talk to Unconventionals' guests about how their off-center vision for their companies translates into a different approach to marketing and branding. We've talked about the crazy labels, so it's clear Lagunitas isn't afraid to wear its uniqueness on its sleeves. But Tony actually turned the question around. The question isn't about how a brewer uses tactics like social media, but how social media is inspired by beer and its culture.

Tony McGee:

Here's a weird thought. Social media and how you present your brand to the world. Beer is like nothing anything else that you can possibly be involved with. We could have a distillery and make whiskey or vodka. We could make wine. You could make energy bars, but beer is like nothing else in all of humanity. A) It's available everywhere on earth. We've been making it for a minimum of 15,000 years. They found a proto-brewery in, somewhere in the mountains of Turkey, where they found little depressions in the rocks that had these grooves hewn into them, and inside of those grooves, they found little deposits of calcium oxalate, which is what you get from malt when you make beer. It falls out, this mineral does.

People talk with us about working on social media, engaging more on social media and how important it is. Beer is actually the original Facebook. Beer is the original Twitter, the original MySpace, the original ...

Mike O'Toole:

Because people want to talk about it.

Tony McGee:

That's right. You know why they call them pubs? Public houses. That was the house that everybody in the neighborhood would go to where there was beer served, where they could talk, commune. Beer was the safest drinking water you were going to find any place. You'd get the news. You'd tell your stories. The tribe would get someone together over and over and over and over again around beer. There's nothing like it on Earth, aside from talking with other humans. Beer is that fundamental. It's one of those bizarre, who knows why, things but it's here, and it's as much us as we are it.

Mike O'Toole:

Thanks for listening to The Unconventionals, and a special thanks to Tony McGee for his hospitality in Chicago. Thanks to Tony and his band, Alice Drinks The Kool-Aid, for the music you've heard throughout the show. Join us next time as we continue our dive into craft beer. We'll be up in Vermont, talking to founders of the Alchemist Brewery, makers of Heady Topper, which was named by Beer Advocate as the highest rated beer in the world, and has inspired a pack of rabid fans who think nothing of driving hundreds of miles for a 4 pack.

Speaker 1:

The Unconventionals is written and produced by Mike O'Toole and Reed [Mangann 38:13]. Host production and technical direction by Reed Mangann, with Anthony Gentles. Promotion and digital distribution by Greg Straface and Graham Spector. Our executive producer is Phil Johnson for PJA Advertising and Marketing. I'm [inaudible 00:38:28]. Special thanks to this week's promotional sponsor, The Craft Beer Seller, a brick and mortar craft beer retailer. Find your nearest location at craftbeerseller.com.

Mike O'Toole:

This is PJA Radio.