Podcast: Speaking of Quality Season 6 Episode 4 Title: Hanging Out with Philly’s Master Brewer Tom Kehoe Episode Transcript:

Maxine Cuffe 00:03 

You’re listening to “Speaking of Quality” with Hank Smith, a podcast by The Haverford Trust Company. On “Speaking of Quality,” Hank features authors, business leaders and wealth management experts who share stories from their careers and insights on topics that impact financial wellness. And now, here’s your host, Hank Smith. 

Hank Smith 00:24 

Hello, and welcome to another episode of “Speaking of Quality.” I’m your host, Hank Smith, Director and Head of Investment Strategy at The Haverford Trust Company. On this podcast, we explore topics ranging from leadership and economics to civic engagement and community building. Today, I’m joined by Tom Kehoe, Founder and President of Yards Brewing Company, based in Philadelphia. For over 30 years, Yards has been leading the way in Philadelphia’s brewing scene and has done it with a commitment to sustainability and community. Welcome to “Speaking of Quality,” Tom. 

Tom Kehoe 01:01 

Thanks, Hank. I’m really fired up to be part of this. This is great. 

Hank Smith 01:05 

Let’s go back to the beginning. You studied engineering at Lehigh; you got a business degree at McDaniel College, formerly Western Maryland for those of us that have been around long enough. And when did you decide brewing was something you wanted to pursue, not just as a hobby or a passion, but as a business? 

Tom Kehoe 01:37 

Well, it really happened my final year at Western Maryland. What had happened, I ended up visiting a brewery and sort of saw what they were doing there, and we were home brewing in our dorm. And we saw what they were doing there and realized this is not much more than what we’re doing. I mean, it’s just on a bigger scale, and it’s the exact same, I guess, process. And I was amazed at that thinking like, wow, their process isn’t any different. It’s just using big vats and so forth. And so, we ended up working there during the summer, volunteering, and eventually they paid us a little bit. I guess that’s when you’re pursuing your passion, being paid isn’t one of the big things, but it happened one night where we were delivering beer to a bar in Fells Point. It was a cask ale, which is kind of how we founded our company on cask ale and English-style ales, and two of us were carrying the cask in to be put up on top of the bar, and we weren’t both going to fit through the door with the keg. So, I said “I got it,” and carried it through into the bar. The entire bar parted their ways and gave me room to go to the bar and put it up on top. The owner’s there ready to tap the firkin, which was a cask, and he banged the spigot in, and he served the beer. And I just sat there and helped them and just handing out beers. And I think at that point I said to myself, this is what I want to do with my life. It was so exciting. It felt so good, and we were giving people something that they really wanted, and it was making them happy. And that was my goal right there, to be able to do that and to be able to do that on my own. 

Hank Smith 03:44 

So, you got a near-hero’s welcome bringing in a keg of beer. Yes, exactly. Well, that can certainly stoke one’s ego. There’s no question about that. 

Tom Kehoe 03:57 

Absolutely. It was fantastic. 

Hank Smith 04:01 

And your business studies – was that helpful in terms of getting Yards started and kind of those first few years, which I’m just assuming for any entrepreneur can be very, very challenging years. 

Tom Kehoe 04:23 

It was, of course, the lean times, and we were doing whatever we could to make things happen, make things happen the right way, and just the understanding of why things need to be done, understanding of the business sense of your basic accounting and just knowing how to balance your checkbook in a sense. It was all part of those early years just getting things going. And I’m not going to say that we weren’t the best at it because we weren’t, but we kind of lived every day just like, okay, we have to figure it out. And we did. And because of school and things like that, you have the tools, and you’re able to attack things in a well-thought-out manner. And I think that was one of the best things that happened with us. 

Hank Smith 05:13 

Tell us a little bit about the landscape in 1994 in the Philadelphia brewery scene in terms of how many local beers were there then, obviously the national beers had been around forever, Miller, Budweiser, et cetera. But what was that scene like? 

Tom Kehoe 05:40 

It’s funny, Philadelphia had a real strong sort of ability for the imported beers. There was a lot of imported beers; there was a lot of people trying new beers and new different styles. When the craft beer scene came into that, they were 100% welcomed with open arms. So, Philadelphia was a great place to bring your craft beer, your new microbrew beer, your beer made in the US that could be like beer made in England and Germany. It was perfect because they were already sophisticated enough to be a little bit above the macros, I would say. I think that was, there was a few in the area, some craft brewers that started the same time as me would’ve been Independence, Red Bell, Gravity. Stouts was already established out in Adamstown, PA. There was Flying Fish in New Jersey; Iron Hill was just getting started. So, we were in that first wave of breweries that were starting to say, “Hey, we’re making local beer; give us a try.” And not every bar had multiple taps. That was the way to drink craft beer was on tap. A lot of them had just only a few, and it might’ve served a couple beers, and that sort of drove bars and restaurants to get more taps and have more craft beer because you were getting it in bottles, maybe, you were not getting it in cans at all back then. So, it was a real different time that craft brewers were taking advantage of their popularity and the localness of what they were doing. 

Hank Smith 07:35 

And would you characterize Philadelphia as a beer town? I mean, it’s one of the oldest cities in the United States, and it must have had hundreds of beers a century or two ago, but do you still view it as a beer town? 

Tom Kehoe 07:56 

It absolutely is because back in the day, when there was hundreds of breweries in the town before Prohibition, we were an emerging industrial powerhouse, and in factories and industries, people would drink beer. It would be the kind of drink of choice, and the people that came in from the other countries would want to drink beer like they had back in their countries of European origin or whatever that you would say. And I think that’s a big part of Philly’s beer heritage. And that stuck around for a while because some of those older breweries were still around up until the sixties and seventies. 

Hank Smith 08:41 

So, you started in ‘94. If you knew today what lay ahead of you in terms of the increasing competition amongst available beer options – I mean, I go to my local beer distributor here in Bryn Mawr, Pennsylvania, and there are so many brands, and you can barely find the national brands. There’s so many brands, the increasing competition in the beer category, the legalization of marijuana, the competition, and you have a phrase “we’re being canned,” and the competition with Truly and White Claw and other canned beverages, even mixed beverages like Jack Daniels and Coke that you can buy in the state store are ready to drink. And now the weight loss drugs, the GLPs, given those headwinds, if you knew that, would you even bother starting Yards? 

Tom Kehoe 10:06 

Well, real easy answer: of course. And the reason is it’s not really because of the headwinds; it’s because of the culture and the development and the pride of what we’re doing really stands as what we love to do. And it makes things very difficult, and it gets us struggling at times because we need to come up with smart, innovative ways to keep the bottling machine pushing out bottles and the canning machine turning and throwing out cans. That’s, it would be great to know the next great style. You can look back on that and go, yeah, we were doing that, and then we didn’t think it was the best idea and turns out it was the best idea. And so, we can just pivot and do that. There’s been a lot of pivoting with the way the whole business has changed during COVID and things like that, but it’s just a matter of really loving what we’re doing. And I think that is why we got into it. We didn’t make a lot of money in the beginning years, and in the middle years we were struggling, and it’s like it wasn’t about that. It was about the culture and passion and how we wanted to grow ourselves. And fortunately, things started working out. 

Hank Smith 11:42 

Tell us a little bit about innovation, marketing new styles of beers, and, at the same time, maybe displacing beers that aren’t selling as well as you think. Talk us through how you think about that. 

Tom Kehoe 12:08 

It’s funny. It’s a combination of a bunch of different things. We go through, we’ll have meetings specific to talk about where we’re going with our new brands and what we’re trying to accomplish. Are we trying to fill a niche in the brands that we offer, something that we’re not doing? So, we have an IPA; we have a pale ale; we have a stout, but we don’t have a porter. Okay, let’s make a porter. So, to fill that niche. But at the same time, we might be thinking, let’s bring back a historic porter to get that nostalgia, which is so popular with beer drinkers. So, we might want to do a nostalgic beer, bring that back, and hopefully that becomes popular, or it becomes the next sort of fad beer to do. Sometimes, when we were first going, there wasn’t very many sour beers, and now there’s sour beers out there, and we can do sour beers. And we’ve done a few, we’ve never really taken it to the point where we’re going to try to make it our number-one product, but it was just an offering that fills the niche. And it’s always interesting to see how people’s, the reason they’re changing what they’re drinking isn’t always that they’re looking for something new. They get distracted, and we need to keep their attention. And I think that’s the biggest thing about how we market and how everything goes. Getting the attention of the consumer and keeping them having a Yards because they might stray and try something else, and they might love the thing that they tried something else. You always got to keep their attention and keep them coming back to Yards. And I think that’s where our innovation really wants to travel. 

Hank Smith 14:09 

Yeah, it’s a fine line between sticking with what works but also being innovative. How often are you and your team tasting all the competition? And if you are, that must be kind of a fun exercise to do on a weekly basis. 

Tom Kehoe 14:36 

Well, I do love seeing what people have. I mean, I’m a guy that will go and visit our neighboring brewery to be neighborly and to see what they’re doing and ask them what they’re proud of. And I think that’s part of how we figure out what’s going on. We go to beer festivals where there’s a hundred different beers to try, but you’re always going to seek out that one that’s like, okay, this person’s doing something interesting. It’s not doing the same thing every day. Or this person’s marketing themselves in a way that is really getting great attention for them. 

Hank Smith 15:14 

So how does sustainability work with Yards Brewing? 

Tom Kehoe 15:20 

Well, we realized that in the industry we’re in, we use up a lot of energy. We’re using a lot of electricity; we use a lot of gas, to cool things down, to heat things up, to make the brew. We’re really conscious of that, and the purpose of how we’re brewing and the products that we’re brewing, the brands that we’re brewing, that’s not our personality to be wasteful. We really want to be good stewards and do things that is good for the environment, good for the company and all that together kind of really accentuates that point. 

Hank Smith 16:03 

And does that transcend into Yards’ connection with the community? 

Tom Kehoe 16:13 

100%. I mean, “Brewing Unto Others” is exactly what we’re doing. We’re taking our brewing, our company, and we’re sharing it. We’re sharing with others. We’re sharing the things we do in our community by being good stewards of whether it’s the environment or whether it’s just making sure things are nice, our properties taken care of the right way, little things like that. It’s constantly part of “Brew Unto Others.” And I think that’s a big part of our personality and our culture here at the brewery. 

Hank Smith 16:47 

So, you started in Manayunk, but now you’re in Northern Liberties. Tell us about that move and what precipitated that and the challenges around that. 

Tom Kehoe 17:03 

So, in 30 years, we have moved the brewery five times or four times. This is our fifth location, and every time was to get a little bit bigger. When we started out in Manayunk, we only did kegs, then we moved to Roxborough, we did kegs and then bottles on a real small bottling line. We moved to Kensington from there, did kegs in a real small bottling line. We got to Delaware Avenue in the Northern Liberties section. And then at that point we still did kegs and bottles only, but at that point, we added a tap room, so people could come and visit us, do tours, do events there after we had closed and things like that. And we would have food trucks. And then we decided we need to get more rooms so we can do bottles and cans and kegs and have a tap room and have an event space. So that’s when we moved over here to Spring Garden, and we’re in 70,000 square feet. It just really works for us. We’re able to do weddings; we can do beer; we can even do beer for other people. We have the capacity, and we got big tanks that sit outside on Spring Garden Street. And you know you’re visiting a brewery when you walk by. 

Hank Smith 18:29 

Do you do any private labeling for organizations, whether they’re clubs or other, affinity-type organizations? 

Tom Kehoe 18:40 

We do. We do beer for other breweries, and we do beer for some organizations that might need something to celebrate something that they’re doing. I mean, heck, I did a beer for my 40th high school reunion that was also the school’s 175th reunion, and we did a beer for that –  

Hank Smith 19:12 

With its own label? 

Tom Kehoe 19:13 

With its own label and everything and registered with the proper authorities, so it could be sold if we wanted to do it that way. 

Hank Smith 19:21 

Well, your school must have been thrilled with that. 

Tom Kehoe 19:23 

Yes, it really, really went over really well. So, it was great. 

Hank Smith 19:28 

Well, I hope they still have a supply of that. And then recently in the last year, you’ve collaborated with two other breweries to offer contract services to smaller beer makers in need of help in manufacturing and logistics. Tell us a little bit about that. 

Tom Kehoe 19:51 

Yeah, so what had happened, especially during COVID, we found that we had excess capacity. A few breweries like us had excess capacity, and we took it on to make beer for breweries that weren’t ready to invest into bigger and better equipment, but could have some beer made with us and that could explore how much more beer they’re going to sell because you always have to worry, with scarcity comes demand. So, when you get enough beer for everybody, you don’t sell as much as you think. So, it’s a good idea to make beer with somebody else, bring that product to market and see how the demand is as they go forward. And we’ve had a few that have done well enough where they’ve invested in the bigger breweries and have brewed their beer with us for a temporary time, and then they were able to brew more themselves. So that’s something that we’re doing, and we’re finding that a lot of breweries and even more than just breweries, other beverage companies, can take advantage of what we do and our facilities and be able to sell and make more beer or more of other kind of drinks that are out there and being sold. 

Hank Smith 21:13 

So, looking out five years from now, do you have a vision in terms of where you would like Yards to go, or are you just playing it day by day? 

Tom Kehoe 21:34 

It’s not day by day because getting things accomplished and getting those goals out there of kind of “Brew Unto Others” is us doing business the right way, can kind of influence other people to do business the right way. And we want to keep those, I guess, good practices moving forward. I mean, if we get bigger, and everything is going great, we want to keep chasing the things that we love and so that we can be better citizens, be better people to our community, and be a business that we can be proud of, that people will look up to and try to be like us, able to be like Mike, that’s the idea.  

Hank Smith 22:23 

So how many employees are at Yards today?  

Tom Kehoe 22:27 

So, we’re at about 150. A lot of that’s hospitality in the taproom. 

Hank Smith 22:34 

And I’ve got to assume that also it’s a fairly big logistics staff as well, making sure the beer gets where it’s supposed to get to and that the end user, the tavern, the pub, the restaurant is satisfied. And are they also involved in marketing as well, that logistics arm? 

Tom Kehoe 23:06 

The logistics arm isn’t as much involved in marketing except when it depends on whether you include our wholesale network, which would be we sell our beer to a wholesaler who then sells directly to the taverns and pubs and so forth. So, logistically we get it to them, and then they get it to the bars and restaurants, and they definitely are a big part of our marketing. They have a sales force of their own, which works with our sales force to get the beer out there and to really make all the wheels turning in the same direction. We do really well together, and we have wholesalers throughout all the different states that we’re in. We’re only in four states, but we have a nice network that really everything works well together. 

Hank Smith 24:03 

So, are there any aspirations that perhaps this can be beyond a regional brand and closer to a national brand? 

Tom Kehoe 24:15 

It absolutely could, and my thinking is we should be able to do that. The problem to me is the hard thing about being able to let go of your baby, almost say you got to be able to have it go a little bit further away where you’re not going to have the control over it as you do now, keeping everything closer, and I think we’re getting to that point where that’s something we want to do and something we’re looking forward to doing. The whole thing with that is “local is king” in a lot of these places when you’re a small brand, so you’ve got to be a bigger brand with a little bit more momentum and get anticipated sales out ahead of it. So, if I can’t get Yards in California, but someday when it comes there, I’m going to buy it. 

Hank Smith 25:16 

So, let’s segue, and this is a topic that comes up on almost all of our podcasts and that is philanthropy, and you talked about Yards being connected to the community and being involved in philanthropic activities, but you personally are very much involved in philanthropy and talk about some of those passions, if you will. 

Tom Kehoe 25:53 

Yeah, the one board that I’m a trustee of is the Schuylkill Center for Environmental Education, and it’s a real treat and honor to be part of this organization because they are landowners in Philadelphia that is basically, they have set up nature walks; they do nature preschool; they do camps during the summer for kids to get more involved in nature and the environment and just try to be good stewards to the community and how to think about the environment first when you’re doing stuff. And it was just really attractive to me, and I just thought it was something that I wanted to support, and it really has been an honor to be part of that. 

Hank Smith 26:43 

Yeah, I think it’s part of the fabric of what makes this country so great is so many people like yourself give back to the community. Tom, I look forward to having you back in four or five years. I want to hear the updated story of Yards and the continued growth. I wish you nothing but the best. It’s just been so much fun to meet you and to learn about how you took this little passion out of your dorm room in college and turned it into 150-person organization selling I don’t know how many gallons of beer, but it’s a lot. And so, I hope in five years to have you back and you can talk about all the growth between today and then. So, thank you so very much. It’s been a pleasure to learn about one of Philadelphia’s most successful businesses and to hear your journey from a small brewery to a major player in this region. Thank you for listening to this episode of “Speaking of Quality.” Our next episode will be released shortly. In the meantime, please send suggestions or questions for me or the Haverford Trust team to podcast@haverfordquality.com. And don’t forget to subscribe, rate, review, and share this podcast. Until next time, I’m Hank Smith. Stay bullish. 

Maxine Cuffe 28:28 

Thank you for listening to this episode of “Speaking of Quality” with Hank Smith. To hear future episodes of “Speaking of Quality,” please subscribe on Apple Podcasts, Spotify or wherever you listen to podcasts. To learn more about The Haverford Trust Company, please visit https://haverfordquality.com/. This podcast is provided as general commentary and market overview, and should not be relied upon as research, a forecast or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt an investment strategy. Any opinions expressed are as of the date this podcast was recorded and may change at any time and are the opinions of that commentator, not Haverford. Any opinion or information provided are believed by Haverford to be reliable at the time of this podcast’s recording, but are not necessarily all-inclusive or guaranteed for accuracy. Before making any financial decisions, please consult with an investment professional.