In Budweiser's Shadow: The Success of St. Louis' Second Biggest Brewery
We all know the story of David and Goliath. The boyish underdog David takes down Goliath, the giant warrior, with a single stone from his slingshot – and then David cuts off Goliath’s head and carries it around for a while. (Oh,did you not know that last part?) But though the story works well as a parable, in the real world, such David and Goliath situations are not always so cut and dry.
The Saint Louis Brewery, makers of the Schlafly brand of beer, know what it’s like to be a metaphorical David taking on the brewing industry’s version of Goliath. Up until Schlafly began pouring in 1991, no one had made beer in St. Louis since 1977—no one besides Anheuser-Busch, America’s largest brewer. When Saint Louis Brewery co-founder Tom Schlafly published a book about his experience in 2006, he called it A New Religion in Mecca – a title the speaks to how he felt about the magnitude of this undertaking (as well as a title that got me a lot of strange looks as I read it on an airplane).
25 years later, The Saint Louis Brewery is still going strong as I saw first-hand alongside Tom at the brewery’s annual Hop in the City Beer Festival. Despite having six different tents (and over 45 beers on tap), the lines were so long in the massive parking lot that housed the event, everyone simply blended into a sea of patient beer drinkers. The irony is that ever since international brewing giant InBev purchased Anheuser-Busch in 2008, the Schlafly team has been the largest American-owned brewery in St. Louis. “It dawned on me then that the brewery was going to outlive me,” Schlafly told me as we discussed his company’s history – a realization that would shape his plans for the brand moving forward.
But at production levels of only about 60,000 cases a year with distribution in just 15 of 50 states – an amount that doesn’t even land them in the top 50 among craft brewers – The Saint Louis Brewery occupies a strange middle ground: the biggest fish and most visible name in St. Louis’ craft beer pond, but a more medium-sized player when compared to craft breweries nationwide. And if you toss the metaphorical Schlafly fish into the massive international ocean occupied by their crosstown adversaries, Schlafly would once again look like a guppy.
In recent years, plenty of breweries with similar ages and production levels as The Saint Louis Brewery have decided to sellout to larger brewers. To many craft beer fanatics, this move is equivalent to David growing up to realize it makes financial sense to join the Philistines. Tom Schlafly admits his company has had its tough business decisions as well, but The Saint Louis Brewery has looked for unique ways thrive on its own terms.
In late 2011, Schlafly and company sold a 60 percent stake in the brewery to Sage Capital, a local private equity company. Though some might see this move as a sellout, Tom Schlafly, now in his late 60s, saw it as a chance to prepare for the future, establishing a plan for ownership succession. “I wanted to ensure continuity,” Schlafly says. “In 40 years, 30 years, someone else is going to own the brewery. It’s either going to be orderly or chaotic.” By working with a local investor of his choosing, Schlafly saw the opportunity to keep his namesake beer in the city he loves.
But outside investment also eventually brought with it another outsider. Last year saw the addition of CEO James Pendergraft, a man who, among other gigs in the beer industry, spent over a decade working for none other than InBev. Not to slingshot our biblical analogy to death, but the Pendergraft choice has the outward look of bringing on one of Goliath’s own to help plot David’s next move. In speaking to him though, Pendergraft presented his jump to Schlafly in the opposite light: as a chance to get away from big business tactics and instead focus on a strong local comapny. “I’m used to being in a situation [where] you’re kind of forcing a story that maybe isn’t really there,” he tells me. “This is a company that has so many rich stories.”
Those rich stories impart a number of lessons. In simply getting the Schlafly brand off the ground, the business proved the ability of an independent brewer to find a foothold even in the most tightly-gripped of markets. But in its continued growth and current changes, the brand is a perfect example of a new reality in the craft beer world. Though new breweries are popping up all over the country every day (around two per day actually), the forefathers of craft beer who represented the first boom during the 1990s are aging and facing tough decisions about what to do with their brands and their businesses. If these people got into beer looking to sellout, they certainly took a long time to show it. But at the same time, it’s not quite logical to think these now beloved brands should simply die an honorable death to stand behind some unspoken craft beer credo.
When Tom Schlafly helped launch the The Saint Louis Brewery in 1991, the choice truly was a David versus Goliath situation. But possibly the most important lesson from this whole story is that, in the real world, victory isn’t always just a matter killing your enemy with a single stone. Sometimes you win the battle, and then you and Goliath are left growing old together in the same city, even learning some lessons from each other along the way.