Victoria’s Bridge Road Brewers has launched a new ownership model in which employees will take on shares in the business.
The Employee Share Scheme will see an initial 5 per cent of the business handed to employees, with the aim of divesting up to 30 per cent of the shareholding to employees in the next 10 years.
It is a major move for a brewery, making it one of a small number of breweries globally to have gone down the employee ownership route, and one of the only ones in Australia following the sale of Stone & Wood which was finalised this week.
“The Employee Share Scheme really came out of a culture drive within the business. We started with just myself and Maria and grew slowly to be where we are now. Along the way we had to formalise the structure in terms of management lines and who is reporting to who,” said Bridge Road co-founder Ben Kraus.
“We had a culture we just hadn’t defined it yet, so we took some time to do that, protect it, document and review it so we can change it when we need it.
“So the scheme has really come out of our company culture, making sure our employees are engaged and empowered.”
Brewers have been experimenting with different ownership models in recent years, including co-operatives like Rock & Ranges and Hopsters, as well as equity crowdfunding. In the same way, employee ownership schemes can come in many different shapes and sizes, and deciding on a structure was where most of the preparation work was focused, explained Kraus.
“Because the share scheme can be designed in any way we see fit, that leaves it really open, so there are lots of considerations and things you can’t account for. We had to spend a lot of time thinking if we do this, what happens?”
“We spent a lot of time working out how we model it, so a significant chunk of the business can be given immediately, and allow employees to gain access to greater share and allow more employees to join and grow that over time.”
Bridge Road took inspiration from other breweries including Stone & Wood and several in the US.
“I did have a talk with Jamie [Cook, co-founder of Stone & Wood] a few years ago to see how their model worked, but theirs was very different.
“We were trying to look at other examples out there, but we ended up with our own model really, and there’s flexibility in there to change it.
“And that’s because it’s like when you first make a beer, you wouldn’t be being honest if you said you got it 100 per cent right the first time, there’s room to adjust and mould it.”
There were several intentions behind the employee ownership scheme for Bridge Road, explained Kraus.
“It was like when you have KPIs, those KPIs are there to drive the right kind of behaviours, and a share scheme is not too dissimilar from that. We want businesses to do better as a result, and want it to drive the right outcomes.”
This includes a sense of ownership and awareness of the financial performance of the business and how individual employees can make an impact.
”I’m doing this because I value it and my staff and I want them to value it and have ownership.
“If the valuation of business [based around metrics like profitability in Bridge Road’s case] goes up, then their share value goes up, which our staff deserve.”
Similar to equity crowdfunding which a number of breweries have undertaken this year, the move will mean that Bridge Road shareholder numbers will increase considerably from just the two co-founders, which comes with increased responsibilities.
“They get issued normal shares which means they have opportunity to have a vote. It will also mean more transparency and disclosure to the full team about our financial position and performance.
“There will be more transparency and communication, which gives employees a better and more holistic understanding of the business and how it works.
“It’s also about empowering employees, so they know that what decisions they make on the floor could impact the bottom line.
“The thing I’d want them to realise is that they are now owners, our sales guys can go out on a sales call and say I’m one of the owners of Bridge Road Brewers, I want people to feel that.”
Planning for the future
As Stone & Wood Brewing and New Belgium in the United States have shown, employee share schemes can be a good way to engage staff, however both those experiences highlighted that it’s important for brewers to have a succession plan, which employee ownership programmes can help with.
But Kraus was clear that this wasn’t a step towards an exit in the case of Bridge Road.
“It definitely isn’t a succession plan, we’re not looking to leverage out of the business, but it creates that opportunity to do that if we want to.
“We don’t have any plans to sell the business, not trying to sell the business and ask our employees to share that part of the business. But it doesn’t prohibit the sale of the business either.”
Bridge Road has also taken the big step of acquiring the freehold of its Beechworth home, which will be joined by a second venue in Melbourne next year.
“The opportunity to purchase came up, and the site happens to include the hotel in front of us as well, we don’t control the lease on that, we purchased it with an ongoing lease with a tenant in there.
“We’ve been running for 16 years, and have been 15 years in the Beechworth site. An immense amount of money has been spent on this site, improvements on building, equipment, pretty much all the money from my working life money has gone into it.
“But it made sense to buy the premises given the investment in it.”