The kitchen counter in Alan Newman’s house is lined with fancy bottles of beer. Craft brews in big, brown bottles with corks in the top and enigmatic names such as 13th Hour.
Years ago, these might have been beers made by Magic Hat, the quirky craft brewery Newman started in Burlington in 1994. But they’re actually part of the Barrel Room Collection brewed by Boston-based Samuel Adams. Newman purchased them from the brewery on a recent trip to see founder and brewer Jim Koch.
Newman has called Koch a friend and competitor for almost 20 years. Now he’s calling him something else: boss.
Fourteen months after he was forced out of Magic Hat, Newman is jumping back into the beer business. Only this time, he’s not doing it on a shoestring. Last week, Newman announced a partnership with the biggest name in craft brewing: the Boston Beer Company, owners of Samuel Adams. Koch has tapped Alchemy & Science, the company Newman founded with fellow Magic Hat exile Stacey Steinmetz, to serve as a craft-brew incubator for the Boston Beer Company.
Newman won’t have anything to do with the Sam Adams brand. Rather, his five-year contract charges him with developing new recipes and beer styles on independent labels that will become part of the Boston Beer Company family — “distant cousins” of Sam Adams, as Newman describes them. He and Steinmetz will also hunt for new breweries and brew pubs for Sam Adams to invest in or buy, subject to approval from Jim Koch and Boston Beer’s CEO, Martin Roper.
Even Newman isn’t entirely sure where his nebulous mission will lead.
“Ask me in a year,” he says over coffee at his Burlington home overlooking Lake Champlain.
Newman was almost ready to retire. The 64-year-old spent last winter in New Orleans penning a memoir titled High on Business: The Life, Times, and Lessons of a Serial Entrepreneur — which he self-published in September — a prerequisite for his imagined “retirement gig” as a public speaker. Newman’s last beer adventure ended on a sour note; after the financial crash of 2008 thwarted his plans to merge Magic Hat with Seattle-based Pyramid Breweries, he was contractually forced to sell his shares in the company.
He went into exile, but it wasn’t long before new business ideas starting bubbling up. For this self-described “opportunity junkie,” entrepreneurship is something of an addiction.
Alan Newman is best known as the founder of Magic Hat Brewing Company, creator of the apricot-flavored #9 ale and other concoctions, but it’s far from his only achievement. Back in 1988, he founded Seventh Generation, turning a worthless catalog company called Renew America into one of the leading sellers of Earth-friendly cleaning products with the help of clever branding and marketing. And early on, Newman had a creative hand in Gardener’s Supply Company, based in Burlington’s farm-filled Intervale.
Burlingtonians not familiar with Newman’s résumé may know him as the guy with the bushy gray beard and funky yellow glasses riding a Vespa around town. Along with Steinmetz, he’s also the person responsible for Burlington’s Mardi Gras parade. An exemplary partier, he donned an outrageous purple costume every year to lead the procession.
He is jolly, yet opinionated, with a sharp and irreverent sense of humor. Think Santa Claus meets Rodney Dangerfield.
Raised on Long Island during the height of baby-boom suburbanization, Newman moved to Vermont in 1970 “to avoid the traffic of metro New York” and to find other “long-haired, bearded folks.” He fell in with a class of hippie entrepreneurs, such as Ben & Jerry’s cofounder Ben Cohen and Jerry Greenfield, who charted a different path to profits, one now referred to as “socially responsible business.” Placed beside that tradition, Newman’s new Samuel Adams gig looks surprisingly buttoned up. No longer the scrappy underdog, he’s now working for someone else — the big dog of the craft-brewing world.
And Samuel Adams’ top dog says he expects big ideas to pour forth from Newman’s brain.
“I’ve been making Sam Adams for 27 years,” Koch says in a phone interview. “I’ve made hundreds of beers in that time, probably more beers than any brewer in the world. And Alan’s got ideas I haven’t thought of.”
Newman’s memoir, penned with Chelsea Green Publishing alum Stephen Morris, reels through his entrepreneurial evolution: from a pot-smoking hippie selling Karmelkorn at a Massachusetts shopping mall to founder of what was the ninth-largest craft brewery in the United States. In between, Newman ruminates on the rungs of his own socially responsible career ladder and the successes and failures along the way.
A considerable chunk of the book is devoted to the events that forced Newman out of Magic Hat. He recounts that he was on a motorcycle trip in Maine in June 2010 when he got an email summoning him back to Burlington to meet the “new owners” of Magic Hat.
“The new owners?” Newman remembers thinking. “Up until that moment I thought we were the owners of Magic Hat. And by ‘we’ I really meant ‘me.’ Hadn’t I started the company? Didn’t I pour my heart and soul into it for 17 years?”
The die had been cast four years earlier, however, in 2006. Magic Hat was “rolling in dough” at the time, Newman recalls, and brought on a financial partner, Connecticut hedge fund Basso Capital Management, to help it acquire Pyramid Breweries for $25 million.
“When we did the Pyramid deal, I went from majority shareholder to minority shareholder and, in doing so, I gave up some rights,” Newman explains. “It seemed like a good idea at the time because no one knew that the economy was going to tank in 2008.”
When it did, the Pyramid deal went belly up. The bank that was financing it pulled out, and Basso was looking to unload Magic Hat “as quickly as possible,” Newman says.
He made one request: Do not sell the company to KPS Capital Partners, a private equity company that owns North American Breweries, makers of Labatt Blue, Genesee, Dundee and Honey Brown. Newman wanted an owner that would be a “good fit” for Magic Hat’s brand — “maybe a European brewery looking for a strong foothold in the American craft-brewing market.”
Just the opposite occurred. Magic Hat went to North American Breweries.
Newman was in no hurry to start a new business after Magic Hat.
“I was enjoying the Burlington summer, which is about as good as it gets,” he says on a recent weekday morning. “I had my new house, which I’m totally in love with. I’d walk down to the bike path, walk downtown. My girlfriend was here. Every once in a while I’d follow my nose and explore a business idea.”
Newman’s nose quickly led him to a slew of companies he considered buying. Perhaps the unlikeliest was Burlington Telecom, the municipal phone, Internet and cable provider that has become synonymous with debt, mismanagement and political scandal. Newman wasn’t scared by BT’s $17 million debt to Burlington taxpayers or by the federal lawsuit brought by the company’s creditors.
Ever the optimist, Newman envisioned reversing BT’s fortunes by ditching the cable TV division and focusing exclusively on providing high-speed Internet, particularly to businesses that need significant bandwidth. He went so far as to contact the consulting firm brought in to manage BT, Dorman & Fawcett, but says his phone messages were not returned.
Newman also explored buying Vermont Castings. He’d owned one of the company’s woodstoves during his “hippie, back-to-the-land days” and dreamed of rekindling the brand by turning its Randolph foundry into a tourist destination, throwing parties and reaching consumers with social networking. But the vagaries of manufacturing, the sum required (upward of $80 million) and the complexities of running a foundry scared off investors, Newman says.
“It was trying to overcome the belief that serious manufacturing was dead,” Newman explains. “Do I believe that I could have overcome it? Possibly. But then I got distracted with chips.”
Specifically, Madhouse Munchies, the South Burlington-based potato-chip maker. Newman’s plan to make Madhouse a powerhouse? Build a “Willy Wonka-esque” potato-chip factory in Burlington.
“I’m kind of a one-trick pony,” Newman says. “I was going to follow the Ben & Jerry’s/Magic Hat model. I was going to come out with wacky names and unusual flavors and tie it into social causes. I saw clearly how to do that business.”
So did Newman’s investors. With money in hand, he made a bid for Madhouse Munchies. He received a counteroffer and was preparing his response when the phone rang. It was Jim Koch. He wanted to talk to Newman about a job.
The deal with Samuel Adams came together, appropriately, over a beer. In August, Newman took his daughter to look at law schools in Boston. While he was in town, he dropped in at the brewery to hear Koch’s pitch. The one-year non-compete agreement he signed with Magic Hat was just expiring.
Newman is a huge admirer of Koch, calling him “probably the smartest guy I’ve ever met. Seriously.” Koch, in turn, describes Newman as “one of the most innovative and creative forces in the success and growth of the craft-brewing industry.”
But working together? At first, Newman was skeptical.
“I said, ‘Jim, I don’t work for people. I’m not good at that,’” Newman recalls. “He said, ‘That’s OK. We don’t want you to work for us, because we’re really good at Sam Adams. But we’re really not much good at anything else.’”
Ultimately, Koch convinced Newman by offering him a “white sheet of paper” — which he understood as the freedom to write his own ticket with the financial backing and institutional support of Sam Adams. That could mean buying up craft breweries, starting one from scratch (Newman won’t say whether a Burlington brewery is a possibility) or producing single beers using Sam Adams facilities.
“At the moment, the funnel is wide open. They’re not saying no to anything,” Newman says, before adding one caveat: “As long as I keep my grubby little hands off Sam Adams.”
Under the deal, Alchemy & Science becomes a wholly owned subsidiary of the Boston Beer Company, a publicly traded company whose revenues grew by 12 percent last year, to $463 million. Based in Burlington, Alchemy & Science will operate out of a waterfront office in the gray stone building at the corner of Maple and Battery streets that once housed the Dockside Restaurant.
Koch confirms he’s given Newman virtual carte blanche in his new gig.
“Frankly, I have a lot of respect and trust for Alan’s judgment,” he says. “The whole idea here is, we’re going to fund him, we’re going to support him, and we’ll share the value created with Boston Beer and Alan and Stacey. There’s going to be some really cool things that will come out of it.”
Ben & Jerry’s cofounder Ben Cohen is a longtime friend of Newman’s and wrote the forward to his new book. Cohen calls Newman “a great guerrilla marketer” who built such a strong brand with Magic Hat that Cohen himself made a small investment in the company. If anything, Cohen says, Newman’s weak spot is “the financing and control part of the business,” as evidenced by his forced ousters from Magic Hat and Seventh Generation (see sidebar). For that reason, Cohen predicts the Sam Adams gig will be a “perfect fit” for Newman.
“Alan is a promoter, and he is really, really good at it,” Cohen says. “I don’t know if his strength is really running the day-to-day aspects.”
With the new job, Cohen notes, Newman gets to “find cool businesses that have potential and to use his marketing skills to build on it. And then he has all the support of Sam Adams to do all the operational aspects of the company.”
Newman’s gift for brand building was evident at the furniture stores where he and Steinmetz shopped last week for desks, swivel chairs and a conference table for Alchemy & Science’s new office: At the W.B. Mason warehouse in South Burlington, a table held a random display of Seventh Generation cleaning products, such as dishwashing detergent and shower cleaner. At Myers New & Used Furniture in the Old North End of Burlington, a mini-fridge for sale was plastered with beer and skiing stickers, including a big, silver Magic Hat decal.
As brands go, Samuel Adams is the 800-pound gorilla of the craft-beer world — double the size of the next-biggest brewery. Newman believes that “nobody does it better” than Sam Adams, but says the new brands he creates will remain small and independent by design.
“Independence sells. Different sells,” Newman says. “Everything we do will have its own story.”
Still, he anticipates the affiliation with Sam Adams will create some “perception issues… which I’m really bad at, because my basic attitude is Well, fuck off, then!” Newman says. “I’m really not good with people who objected to Magic Hat because we were too big or because #9 was too drinkable. Drink something else, but don’t put us down because we’re bringing more drinkers into the craft category.”
Maintaining the craft category itself presents another challenge. With more drinkers looking for craft beers, more breweries are getting into the craft-beer game — and some of the behemoths are creating what Newman calls “faux crafts,” such as Coors’ Blue Moon and Anheuser-Busch’s Shock Top. Then there are the craft-like concoctions, such as Budweiser Chelada, with Clamato.
“Did you ever expect to see a beer/tomato juice/clam product from Budweiser, the King of Beers?” Newman writes in his book. “Are they looking to be the King of Clams, too?”
Accordingly, there’s growing confusion about what a “craft” beer is. All that, writes Newman, spells “challenging times for the craft beer business ahead.”
Newman has five years under his contract to redefine craft brewing and create hit beers for the Boston Beer Company. At that point, he’ll be 70 — and, he warns, “We don’t know what I’m going to be like at age 70.”
Even if he retires for real, Newman won’t live out his days swinging golf clubs in Boca Raton. “I think of this as my last act,” Newman says thoughtfully, “but then, I thought Magic Hat was, too.”