The co-owners of Vermont’s Switchback Brewing Co. have turned the business over to its employees. The 14-year-old company announced Wednesday that, through the establishment of an employee stock ownership plan (ESOP), it is now 100% owned by its workforce.
Bill Cherry, who founded the brewery in 2002 and will stay on as brewmaster and president after the sale, said his motivation for selling the business to his employees was rooted in keeping Switchback “Vermont-owned forever.”
“Entrusting the brewery to the employees ensures the company will carry on with its mission to provide great beer and great jobs to the local community,” he said in a press statement. “It’s theirs to grow and nurture and reap the benefits. It is the right thing to do and I hope all Vermonters show their support by keeping Switchback beers on their go-to list.”
WHY IT MATTERS
The ESOP has emerged in recent years as a popular alternative exit strategy for brewers reluctant to sell to private equity firms or multinational conglomerates. Harpoon, New Belgium, Odell, Left Hand, and more, all count themselves among the employee-owned. As for why, the answers obviously vary from company to company. At Switchback, Cherry says it came down to whether he thought he’d like working for the new owners.
“Two of my biggest criteria when I thought about a purchase were, well, ‘Would I still like working there?’ Or, ‘Will I leave and cringe at what they do?’” he tells GBH. “Because I really want to keep working. Can I keep working and feel good about the folks that I sold it to? That’s where this falls into place. Nothing changes for us, as far as how the business is run for the next 5-10 years.”
On a day-to-day level now, Cherry still gets to go to work and “be the head honcho,” while, in the bigger picture, he and co-founder Jeff Neiblum collect on a loan given to Switchback over the next 15 years. “It’s an unsecured loan, so it’s risky,” Cherry says. “But if we run the brewery right, everything will fall into place and work fantastically.”
The employees, meanwhile, will receive shares of the company based primarily on salary, and will individually gain company stock—all of which has been transferred into a trust—the longer they are employed. Terms of the deal were not disclosed.
Cherry says he began thinking about his exit strategy four years ago, when Duvel Moortgat acquired Boulevard Brewing. “It got me thinking, I was gonna get old too someday,” he says. “And what was I gonna do?”
After some research, and through exposure to Vermont’s “pretty active ESOP culture,” the decision was made easy. Set on the ESOP, he says he heard from private equity firms, but never let discussions progress past initial contact. “I just said, politely, ‘I’m not interested,’” he recalls. But that doesn’t mean he couldn’t have some fun with the idea of selling to mysterious suits when breaking the news to the new owners.
“I knew I’d only get to do this once in my life, so I did my best acting and hammed it up a little bit to kind of draw them in to what was happening, and kind of scared them a little bit,” Cherry says. “I told them I sold the company and I really thought the new owners would treat them right. I implied I was gonna introduce them to the new owners, and then turned around and said the new owners are all of you."
After that, it was business as usual.
"By the same token the next morning we all came in and everybody’s job was exactly the same,” Cherry says.
Switchback Brewing Company Now Employee Owned [Switchback]