How Elementary School Friends Turned A Microbrewery Into A Major Brand
Seventeen-and-a-half years later, Covaleski has built that business into a well-known brand that brews nearly 100,000 barrels of beer a year, sells in 30 states, and is in the midst of building a new brewery that will more than double its capacity.
The pair have figured out the secrets to maintaining a decades-old friendship while rapidly expanding their business.
You could say Victory started in 1973, when Covaleski and Barchet met in the fifth grade on a school bus in Montgomery County, Pa. Years later, Covaleski was inspired by his home-brewing father, a man from Pennsylvania's coal country who made just about everything for himself, to buy his friend a brewing kit for Christmas, which started a friendly competition over who could make the best.
The love for beer ran deep. Barchet eventually quit his day job as financial analyst to make a career of brewing beer, taking a job at the Baltimore Brewing Company. Covaleski took over for his friend when Barchet went to study brewing at the Technical University of Munich at Weihenstephan, the highest-rated brewing program in the world. Eventually Covaleski followed him to Europe to study at the Doemans Academy. That was about the time they knew they wanted to create something for themselves, using their European training in America.
"On New Year's in 1993, after some strong Belgian beers, we convinced our wives to let us write a business plan and maybe go into business on our own," Covaleski says.
The beer business may sound like lots of fun, but the early years were tough, marked by long days and sleepless nights.
"As a very small, local business with shallow pockets, hiring the right people was a serious proposition, one that we couldn't afford to do from the get-go," Covaleski says. "So we overworked ourselves, which is probably still true." Especially in the early days of craft beer, convincing people to pay a higher price meant you had to convince them that it would taste better and was made to higher standards. Connecting with customers and introducing them to the product was one of the reasons they started out with a 144-seat restaurant attached to their brewery. The restaurant doubled to 300 seats in 2008. It also funneled insight and investment back into the brewing business. "Having a direct connection with the audience is not only good for cash flow, but it's great for research and development because you're in contact with your consumers on a daily basis," Covaleski says. "As you might imagine, if you put a couple of pints of beer in them, they'll tell you very honestly how they felt about your product."A strong regional foothold in the Northeast - 36% of their product is sold in Pennsylvania and 11% in neighboring New Jersey - and a steady flow of customers from the restaurant has been the base on which the company successfully expanded. A new, larger brewery will help kick its growth into the next gear, with the capacity to produce more than 200,000 barrels a year.
When asked what key advice drove his success, Covaleski points to a core philosophy that's shaped his business.
"It's just the experience of adaptation, and not necessarily clinging to a belief," Covaleski says. "It's what you refer to as the school of hard knocks: You run into walls and try to make your way around them."
At the same time, the importance of having a founder and partner that you really trust can't be overstated, he says.
"The fact that we have a long-standing friendship is a real benefit because we recognize that there's somebody else who's equally invested in the success of the company, who is going to be reliable," Covaleski says. "We've adapted very well over the years, recognized opportunities, and moved decisively as they've formed."Looking back, if he could do one thing differently, Covaleski wishes he had known more about the complexities of the beer industry when he started. "We were a little naive," Covaleski says. For example, since they knew nothing else, they thought that selling to a wholesaler and trusting them to grow their market share was the way forward. But they found out that the distributors have so much power that small brewers can feel like they have little agency or control.
"Literally, your entire future and prospects are tied up into these contracts you have little control of," Covaleski says. "I wish I had understood that a bit better. Inevitably, the valuation of your company becomes intrinsically tied to your wholesalers. I just never stood back and appreciated the magnitude of that relationship from the outside getting into this."
Covaleski has a few goals for the future. The first, maintaining quality, is actually surprisingly straightforward for him. Quality is a never-ending series of decisions and choices, he says. Since beer-making is "at its heart, still manufacturing," quality equipment, deep monitoring, and constant investment will keep quality high.
Second, the pair may have been trained in Europe, but they have no interest in just copying its beer culture; they want to continue making great American beer.
"What makes our beers American is the fact that we've taken this knowledge and experience we've gained in Europe and brought it here and essentially amplified it to make it more exciting for the American palate," Covaleski says. "We feel that we're in a privileged position because there's less structure to American beer styles, and there's a tremendous range of experimentation with a base of knowledge that's traditional."
What's most important to him isn't making money, but repaying the people who believed in them from the start. The company essentially has only friends and family as shareholders. The new brewery is a big bet, and Covaleski holds himself responsible.
"I want to make sure that the new plant in Parkesburg is producing 250,000 barrels in five years or less," Covaleski says, "so everyone's comfortable with the investment we've made, and so that there are more jobs and a much bigger Victory family. I just want to give everybody a return on their investment and on their faith in us."