Harpooning the Big One

In 2014, Dan Kenary gathered his employees. He told them that he was introducing them to the new owners of a large minority stake in Mass. Bay Brewing Company (aka Harpoon Brewery), where he served as co-founder and CEO.?

The room grew tense. It was a nerve-wracking time in the beer industry as craft breweries throughout the U.S. were being sold to large corporations and private equity firms. Harpoon had been an independent brewer for nearly three decades at the time — were they really giving into the trend of selling out??

“You could hear a pin drop,” Kenary says now.

Look at the person to the left and to the right of you, Kenary told his employees. “You’re the new owners of 48% of Harpoon,” he told them. They celebrated, cheering — and some crying — as they raised their glasses.

“It was awesome,” he says. “The night we made the announcement is one I'll never forget.”

WORKING SHOULDER-TO-SHOULDER

In 1986, Kenary and his partners founded Harpoon Brewery, making it one of the few craft breweries in the country at the time. And they were certainly one of a kind in Boston — their Massachusetts brewing permit is No. 001.?

Harpoon’s unique value proposition and tasty beers quickly helped it grow from a microbrewery into a multimillion-dollar company. But in 2013, after nearly 30 years together, Kenary’s last original partner wanted to liquidate his shares of Harpoon and move on. This meant that Kenary needed to figure out how to pay his partner a lump sum of $70 million, while also navigating Harpoon’s future.?

Kenary had no interest in selling to a corporation or private equity firm. “That's not what my life vision is,” Kenary says. “We built this company with an extraordinary group of people — 150 to 200 employees who stood shoulder-to-shoulder with us every step of the way. I started looking into alternatives.”?

Kenary wanted to find a business model that could reward Harpoon employees for their loyalty. He read about employee stock ownership plans (ESOP), which would give employees ownership shares that pay out as part of a retirement plan. If the company improves, employees earn more money.?

“We could get my partner a full and fair price for his shares, we could reward our long-term employees, and I could stick around running Harpoon as an employee-owned company,” Kenary says.?

After shareholder approval in March 2014 and four months of scrambling, Harpoon’s ESOP launched in July after Kenary took out a $70 million loan from five banks to buy out his former partner and offer employees their ownership shares of the company.?

The loan came at a tough time. Competition was heating up in the craft beer world, and corporations were looming. The loan also took nine years to pay off, with Harpoon completing the final payment this year. But Kenary doesn’t regret the loan or changing Harpoon’s business model. He says he believes that the ESOP will keep Harpoon thriving for years.?

And just like Kenary’s Vistage group helped talk him through the hard years of buying out his partner and becoming an ESOP, Kenary finds it rewarding to have the support of his employees through tough times.?

“Having people in the trenches with me has made it so much better,” Kenary says.?

LEADING AN EMPLOYEE-OWNED BUSINESS

Aside from a few more regulations to mind, the ESOP hasn’t changed operations at Harpoon. Kenary — along with a small group of friends and fellow managers — still owns 52% of the company, and he is very much the CEO, continuing to make executive decisions. Harpoon even makes new acquisitions; the company bought Vermont’s Long Trail Brewing Company in 2022.

The main change to business with the ESOP has been employee engagement, Kenary says. Employees get a letter each year telling them how many shares they own and their current value. It’s a bonus, an extra layer of financial security, and a huge incentive to be engaged at work, he says.

“We always had a highly engaged culture here, but the ESOP just took it to a higher level,” Kenary says.

Employees often stay late with a smile on their faces, Kenary says. They come together during tragedy, as they did recently when they held a memorial for a coworker. And they share ideas on improving Harpoon as a business.

Harpoon staff have offered ideas on improving retail operations, packaging improvements, and how customers should be treated. These employees have their pictures on the wall of the brewery’s tour room, posing with the ideas they gave.

While Harpoon employees are more engaged, Kenary says that it’s hard to put a dollar sign on ESOP’s value to the company, especially since the pandemic and increased competition have been tough on the beer industry.

But employee engagement and retention rates are high, Kenary says, and that’s more important to him. “ESOP was the right thing to do, makes me incredibly proud and gives me joy,” he says.

THE BIGGER PICTURE

Kenary, now 63, is starting to plan for what’s next in his life. He’s hired a new senior executive, whom he hopes will one day replace him as CEO.?

He also has a goal for Harpoon: To become a 100-year business.?

Kenary knows he won’t be around to see Harpoon last until 2086, but he believes that becoming an ESOP makes it possible to thrive for decades, as it has made employees the heart of the company. This shared spirit of coming together to help the larger community is at the core of Harpoon and the heart of being an ESOP business.

This is why Kenary believes that ESOP can be an option for other CEOs looking for an eventual exit plan, so long as they have a champion to carry the ESOP torch after they’ve left. The employees can continue the legacy a great executive created.

But for Kenary, the best part of being an ESOP business is giving back to the people who have made Harpoon great.

“And at the end of the day, I don’t believe that we're judged by how big our checkbook is,” he says.

Read more member stories in the latest edition of Vistage Perspectives magazine: https://perspectives.vistage.com/winter-2024