Beer Buddies

By Jyoti Thottam

When Steve Hindy and Tom Potter founded the Brooklyn Brewery in 1987, the rest of America was drowning in Bud Light and loving it. There were only 33 other microbrewers in the U.S., and few people knew or cared why a 100% malted-barley lager might taste better than the King of Beers. The pair rarely thought about getting rich. "Mostly the motivation was not going broke," Potter says. At one point, they worked in an unheated warehouse, wearing fingerless gloves while filling out invoices.

Twenty years later, the big boys are out in the cold. Although mass-produced beer is still the most popular alcoholic beverage in the U.S., it has been steadily losing ground to wine and liquor. In the first half of 2005, the big brewers shipped 1.2 million fewer barrels than in the year before. But Americans haven't totally lost their taste for beer. "They may not be drinking more, but they're drinking better," says Gary Hemphill, vice president of the Beverage Marketing Institute. Specialty beers, benefiting from a nationwide trend toward affordable luxury, grew 7.1% in the first half of 2005.

But any beer lover hoping to jump on the bandwagon ought first to take a lesson from Beer School, Hindy and Potter's recent book about how they built their company. Microbreweries had their own version of the dotcom boom and bust in the early 1990s, when it seemed that a brew pub was opening (and soon closing) on every corner. The ones that survived "were willing to do the nitty-gritty hard work," says Ray Daniels, marketing director for craft beer at the Brewers Association, an industry trade group.

In other words, it wasn't just about the beer. Early on, for example, Hindy, a former newspaper reporter, called legendary designer Milton Glaser (best known for his I cH- NY logo) every day for weeks to persuade him to create their logo. Glaser's name lent them some instant cool, and that distinctive B is now a familiar New York City signpost. When distributors balked at selling tiny lots of their beer, Hindy and Potter drove the trucks themselves and found salesmen who would patiently teach bar managers and convenience-store owners about specialty beer. They even started distributing rival beers, turning that into a hugely profitable business. "It kept us alive when almost all the other small breweries in our area went bankrupt," Hindy says.

They faced their share of troubles too. Hindy once stared down some union toughs "straight out of central casting" who wanted a piece of the construction work on their brewery. A disastrous foray into online beer retailing lost them a million dollars and nearly destroyed their friendship. They survived: last year sales grew 18%, to 53,100 barrels, and the company became one of several craft brewers to enjoy double-digit growth, according to the Brewers Association.

With about 3% of the market, specialty beers are not taking over the beer world, but mass-market brewers are paying attention. Anheuser-Busch is leading an effort to elevate the image of beer and focus its ads on taste and quality. Anheuser and Miller have their own reserve beers. "They've tried this before," Hindy says, but he isn't worried. Big brewers have never been able to duplicate the mystique of craft beer. In an industry long dominated by giants, it's a good time to be a little guy.