“How Fargo of You!”

Open Road — Week Four by Team RAZA

It’s dark in the Aquarium, save for a few laser lights, and the bar is crowded with patrons clamoring for a drink between sets. We order some beers and take in the sounds of local favorite band The Human Element while we wait for our check. But it never comes. Instead, our round is covered by a mysterious figure at the end of the bar. As we make our way through the fog-machine haze, our free-handed friend reveals himself to be Lee, an employee of Fargo Brewing Company. It’s no surprise that we’d run into someone from our Week Four partner tonight. We’ve discovered through trips to the gym, local entrepreneur meet-and-greets, run clubs, and community barbecues that Fargo’s eponymous brewery is woven into the very fabric of the city.

Jared Hardy and Aaron Hill founded Fargo Brewing Co. in 2010 with the mission of bringing craft beer back to their hometown of Fargo, North Dakota. When they distributed their first beer, Wood Chipper IPA, in 2011 they immediately became the oldest and largest brewery in the state. They’ve since grown to employ fifteen other beer enthusiasts and distribute beer to over 1,000 accounts in four states. In fact, Fargo Brewing Co. was so successful that they inspired others to join in on the fun. There are now seven breweries in the Fargo-Moorhead area, and fourteen statewide.

During our first year at Ross, we learned about first-mover advantage — the potential competitive edge gained by the initial occupant of a market segment. Fargo Brewing Co. certainly benefited from being the only brewery in town for a while. But during our time in Fargo, we observed some first-mover dis-advantages. By blazing the trail for craft brewing to return to North Dakota, they made it much easier for competition to enter the market. In many ways, they’re a victim of their own success.

Fargo’s increasingly competitive craft beer industry is a microcosm of what’s happening in the industry nationwide. After five years of double digit volume growth, the market is nearing saturation and growth has started to slow. This has left many of the original trailblazers seeking new ways to expand. Many have chosen to sell to larger brewers like Anheuser-Busch and MillerCoors to leverage their balance sheets and extensive distribution networks. Others, like Left Hand Brewing and New Belgium Brewing, have taken a different approach. Instead of selling to outsiders, they’ve sold to their own employees through an Employee Stock Ownership Plan (or ESOP).

Our task this week was to explore the benefits of establishing an ESOP for Fargo Brewing Company. When we first arrived in Fargo, we weren’t completely sure how this project would generate social impact. In our preliminary research, we learned that many companies use ESOPs as a tool for the current owners to cash out. In other instances, if a company commits to an ESOP too soon it can have adverse effects for everyone in the business. We wanted to understand Fargo Brewing Co.’s end goals.

Our curiosity was settled after a conversation with Aaron in the middle of the week, where we discussed exactly what they were trying to achieve with an ESOP. He recounted the hard work and sacrifice that their entire team committed to found the brewery — many worked pro bono during the first few months of launch. Establishing an ESOP was not an exit strategy, but rather would allow Aaron and Jared to pay it forward to their teammates who have been critical to Fargo Brewing Co.’s success. Just as it was Lee’s nature to take care of us at The Aquarium, it is Aaron and Jared’s nature to take care of their employees. As famed local author Marc de Celle would say, “How Fargo of them!”

By working toward an employee-owned company, Aaron and Jared can ensure that Fargo Brewing Company will always be owned by members of the Fargo community. Any growth they experience will translate into growth for the City of Fargo. That is a goal at the core of Fargo Brewing Co.’s values and which the company will always pursue, regardless of how the market changes.

Week Four offered us a special opportunity to contrast two of our partners in the same industry. Our Week Two partner, Chicago’s Vice District Brewing Company, made us consider the challenges for a new brewery as it scales production and distribution. For a more mature brewery in Fargo Brewing Co.,we had to answer a different but equally challenging question: Now that their initial mission has been accomplished, what’s next?

We learned that sometimes the best way to invest in a business’s future is to entrust it to the employees. Fargo Brewing Company was founded with the grand proclamation, “Fargo loves beer and I love Fargo! I shall bring a brewery to my homeland!” They’ve made good on that promise in a big way, and are now committed to establishing their brewery as a lasting asset for their beloved community of Fargo. Cheers!