The Wirth Chair in Environmental and Community Development Policy

UNIVERSITY OF COLORADO AT DENVER & HEALTH SCIENCES CENTER The Graduate School of Public Affairs

New Belgium Brewing Company: Brewing With a Conscience

By Christopher Asher, Elina Bidner and Christopher Greene
January 2003

The Wirth Chair in Environmental and Community Development Policy The G r a d u a t e S c h o o l o f P u b l i c A f f a i r s University of Colorado at Denver & Health Sciences Center Campus Box 133 | P.O. Box 173364 Denver, CO 80217

New Belgium Brewing Company: Brewing With A Conscience

Christopher Asher Elina Bidner Christopher Greene

Faculty Advisor: Thomas J. Dean Leeds School of Business University of Colorado at Boulder

Introduction
Jeff Lebesch and Kim Jordan founded the New Belgium Brewing Company in 1991 (NBB), with a mission to operate a profitable company which is socially, ethically, and environmentally responsible, and that produces high quality beer true to Belgian styles. From this initial vision, they developed a set of core values and beliefs that guided the company through its early, fast paced growth. Fueled by the success of their flagship beer, Fat Tire, New Belgium Brewing Companys growth greatly outpaced that of regional competition in a highly competitive industry that exploded on the Colorado scene in the early 1990s. NBB was able to withstand intense pricing pressures and maintain continuous growth, becoming the 6th largest specialty brewer in the United States by 2002, and winning numerous awards along the way at the industrys most prestigious events. The companys focus on energy efficient brewing processes and environmentally friendly technologies and practices were reflected in their mission statement and core values. By holding true to these beliefs, NBB has set new standards for efficient brewing operations, environmental stewardship, and employee happiness for the industry. The 1995 design of a new brewery and operations facility, which became the industry paradigm for energy efficiency, indicated the companys level of commitment to minimizing environmental impact. In 1999, NBB became the first brewery to purchase 100% of their electricity from wind-generated power. The latest expansion, which was completed in 2002, displayed the intent of NBB to continue growing in a way that is environmentally sustainable and their commitment to maintain the quality of their products as batch sizes increased to help supply a wider range of distribution and greater overall demand.

The Brewing Industry

The brewing industry in the United States had evolved from an industry dominated by numerous small local breweries (pre-Prohibition), into one dominated by few very large companies that had survived Prohibition. From the 1930s, until the late 1980s, large domestic brewers dominated the market, and beer drinkers did not have many options on the shelf. Then the introduction of Sam Adams, by the Boston Beer Company, in the early 1990s helped spur a microbrew craze that spawned over a thousand breweries in the United States in the next decade. The Boston Beer Company used clever radio advertisements featuring the companys founder, James Koch, to help educate beer drinkers about the difference between all-malt craft brews and the mass-produced domestic beers made with only about 60% barley malt and 40% rice, or corn (as a cheap substitute). In the following 20 years the craft brew market matured, with many breweries going out of business, and others consolidating operations or merging with other small operations. While the entire beer market did not grow significantly during the 1990s, the market share of craft brewers grew every year between 1980 and 2001 (Beertown.org, 2002) (Exhibit 1 displays the craft brewing industry facts from 2001, as well as industry definitions.) Even though craft brews only accounted for about 3% market share of the national beer market in 2001, large domestic brewers paid close attention to this movement that had carved a $3.35 billion dollar 1

market out of a pie that wasnt getting any larger. In 2001 craft brewers received 6.5% of the revenue in a $51 billion market, and only produced 3% of the countrys volume. Since the inception of the craft brew industry, major brewers branched out into several new specialty products, many successful microbreweries expanded to become regional specialty brewers, and the number of other brewpubs and microbreweries around the country continued to grow. These two trends resulted in the U.S. having the largest number of specialty brewers in the world. While California boasted the largest number of breweries (over 100), Colorado produced the largest volume of beer with just over 80 breweries (partly due to the production at Coors and Anheuser-Busch breweries.) Colorado has some of the purest water in the country as a result of being in such close proximity of the continental divide, and is close to many of the top grain producing states; making it an ideal location for brewing operations. Denver, Colorado was also home of the Great American Beer Festival, Americas premier industry showcase; over 1,500 beers from 300 breweries around the country are judged by category and awarded medals. (Beertown.org, 2002)

Environmental Issues and Sustainability in the Brewing Industry Some of the major inputs involved in the brewing process are water, electricity, malted barley, natural gas, and packaging materials such as glass, cardboard, and plastic. The major outputs are wastewater, spent grains, carbon dioxide, heat, and recyclable packaging materials (see Figure 1 for beer production life-cycle analysis model; see Exhibit 2 for the Asahi Brewery Environmental Output model, which is the result of life-cycle analysis.) Spent grains, mixed with other by-products (yeast slurry and trub), were generally sold to cattle farmers for feed. Wastewater is one of the most significant by-products, with a large amount resulting from cleaning tanks and other equipment. Breweries can use up to 8 gallons of water for every gallon of beer packaged. More and more breweries, both domestically and worldwide, attempted to modify their processes to minimize the environmental impact from their operations. To accomplish this, many breweries attempted to close the loop by converting waste into sellable products, or inputs for other production processes. While new technologies made the brewing process more efficient, it remained an energy- and water-intensive process that required continuous improvement.

Figure 1

New Belgium Brewing Company

Everyone loves a good rags-to-riches story, and in terms of turning a dream into a business, the New Belgium Brewing Company is a classic. Jeff Lebesch came up with idea of brewing fine Belgian-style ales while mountain biking across Europe in 1986. Jeff, an electrical engineer, had always dreamed of opening a brewery back home in Colorado. As soon as he arrived home, he began developing home-brewed trials of ales inspired by those he had experienced in Belgium. Not long after these trials began, the taste tests of these pilot brews began to earn enthusiastic approvals from all of Jeffs friends. Jeff knew, however, that there was more to a successful commercial brewery than good beer. Kim Jordan, his wife, had always suspected that Jeff saw more than just a wife in her; she speculated he also saw his brewerys marketing arm. In 1991, Jeff and Kim brewed their first commercial batch of New Belgium beer in the kitchen and basement of their home. The brewing operation had a capacity of 8 barrels per week, and Jeff and Kim did all of the work, with some help on bottling days from their son Zack. A neighbor created the watercolors that were used as artwork for beer labels. Kim, who was also in charge of calling on the accounts and delivering the beer, would often pull up between two 16-bay Budweiser trucks in her Toyota station wagon to make the delivery. Kim commented on the early days, The contrast was amusing, to say the least. (Wann, 2001) The Fat Tire Amber Ale (named after Jeffs memorable bike ride) and the other New Belgium beers quickly developed a small but steadily expanding following first in Fort Collins and then in the rest of Colorado. Soon, Jeff and Kim had to hire a small crew, including the first employee-owner, to help with the brewing operations. The brewery quickly outgrew its basement operation and then overflowed a second location at a former railroad depot. Finally, in 1995, NBB moved into a new brewing facility, which quickly became a nationally recognized paradigm for energy efficiency. In 1998, the entire NBB staff agreed to the financial commitment to make their facility the first wind powered brewery in America. (Source: NewBelgium.com). New Belgiums Growth Fueled by the success of their flagship beer, Fat Tire (which accounted for about 75% of production), New Belgium Brewing Companys growth had been exceptional in an industry that exploded on the U.S. scene in the early 1990s. By 1996 there were over a hundred breweries in Colorado, and competition was getting fierce. While many breweries in Colorado slashed prices in an attempt to increase sales volumes, NBB maintained their high price-points on all of their products. Slashing prices in the beer industry can easily turn into a vicious downward spiral. Once a brewery starts selling kegs at $50, their perceived quality is lowered and no one will be willing to pay higher prices in the future. Not only did NBB maintain their high price point, but achieved growth rates that have made them the largest specialty brewer in Colorado and the entire Mountain West Region (New Brewer, Aug. 2002). Table 1 displays their production volumes for 1992-2001:

Table 1
New Belgium Brewing Co. Yearly Production (in 31gal bbls.) 1992 Barrels % Growth 993 1993 1994 1995 1996 1997 1998 104,835 31% 1999 147,950 41% 2000 165,000 12% 2001 230,000 39%

5,837 18,951 31,770 55,000 80,028 488% 225% 68% 73% 46%

(Source: The New Brewer) In 1998, as demand for Fat Tire increased, and the brewerys capacity became strained, NBB began construction of a "tank farm" that would house eight new 600-barrel fermentation tanks and allow plenty of room to add more tanks in the future. This addition to the Fort Collins plant almost doubled New Belgium's capacity from 75,000 barrels to 140,000 at a cost of about $3.5 million. (BCBR, 1997) In 2001, the New Belgium Brewing Company was ranked the #6 regional specialty brewer in the United States, based on volume produced. (Jones, 2002) NBBs Belgian-style ales have won numerous awards at such well-known events as the Great American Beer Festival and the World Beer Cup.

New Belgiums Commitment to Sustainability After a year of working at NBB employees were rewarded with a new cruiser bicycle. This bike symbolized much more than just the companys flagship beer, Fat Tire, but also the founders commitment to running a sustainable business. On a nice day, typically a third of NBBs employees could be seen riding their cruisers to work, usually including one of the founders, Jeff or Kim. The companys focus on energy efficient brewing processes and environmentally friendly technologies and practices were reflected in the companys mission statement: to operate a profitable company which is socially, ethically, and environmentally responsible, that produces high quality beer true to Belgian styles. (Farrell) By holding true to their mission statement, NBB had been setting new standards for brewing operations, environmental stewardship, and employee happiness. Their commitment to sustainability and environmental stewardship had been recognized with several environmental awards and certifications (listed in Exhibit 3). Visitors to the New Belgium Brewery quickly realized that there was something very different going on. Besides the enormous fermentation vessels, shiny copper kettle and maze of stainless steel piping, there was an obvious vibe about the place that was unique to the 150 employees who worked there every day. As you walked up to the beautiful facility, you would notice the several dozen bicycles occupying the well-used employee bicycle racks outside the front door. Once inside the brewery, after speaking with employees, it would be easily apparent that they enjoyed their work and took great pride in their beers. Describing the mindset during the early years, Jeff said, There were never aspirations to shoot for the big bucks; it really was beer passion at the top of the list and still is. Kim added,

We talked about being environmental stewards before we ever made beer. From this humble idea, NBB developed a list of ten core values and beliefs that became the threshold for all company decisions. The employees of NBB have helped maintain the culture originally envisioned by the founders, and many of the original employees are now employee-owners that continue to place importance on environmental stewardship. NBBs core values and beliefs are as follows: At New Belgium Brewing Company, We Believe In: - Producing world-class beers. - Promoting beer culture and the responsible enjoyment of beer. - Continuous, innovative quality and efficiency improvements. - Transcending our customers' expectations. - Environmental stewardship: minimizing resource consumption, maximizing energy efficiency and recycling. - Kindling social, environmental and cultural change as a business role model. - Cultivating potential: through learning, participative management and the pursuit of opportunities. - Balancing the myriad needs of the company, staff, and their families. - Committing ourselves to authentic relationships, communications, and promises. - Having fun! (Source: NewBelgium.com)

Choosing Sustainability Over Profit: Wind Power In 1998, NBB conducted an in-house environmental audit of their brewery to determine what their largest source of CO2 emissions was. Most in the company had previously thought that their largest source of emissions would come from the CO2 that is emitted as a by-product of fermentation. However, it was discovered that the electricity NBB consumed during the brewing process had the largest adverse impact on the environment. (Figure 2 displays the result of the environmental audit. The focus of the electricity analysis was the CO2 emissions from the coalburning generating plants of the local utility company.) Figure 2

Total: 22.5 kg/hl

fermentation 23%

electric 34%

natural gas combustion 28%

purchased 15%

When the audit team presented these facts at a subsequent staff meeting of owners and employee-owners, where 72 employee owners were present, Lebesch proposed the idea of meeting the facilitys entire electrical needs with wind power. He explained that the company would have to pay a premium for the power, and that the expenses would come out of the companys profits, possibly affecting employee-owner wages and bonuses. (The switch to wind power would increase their power costs by roughly $.025 per kWh.) There was stone silence in the group as they thought about it, described Lebesch. But the silence didnt last long. Within a minute or so we had decided to become the worlds largest single user of wind power. (Wann, 2001) In 1999, NBB became the first brewery to power all the electrical needs of their business with electricity generated from wind power. (Figure 3 shows the results of the same environmental audit, with wind power replacing conventional power generation methods.)

Total: 14.9 kg/hl

fermentation 36% electric 0% purchased 22% natural gas combustion 42%

Figure 3 The ten-year contract to buy wind power at a premium price from the City of Fort Collins allowed the Platte River Power Authority wind site near Medicine Bow, Wyoming to build a new 660 kW wind turbine to support NBBs power needs. Since becoming 100% wind powered in 1999 through August of 2001, NBB has saved 8,277,998 pounds of coal from burning and reduced CO2 emissions by 15,231,515 pounds. (NBB) The unanimous employee-owner decision to use 100% wind power was important to the company for many reasons. It was a defining moment for the culture of the company, and solidified NBBs stance as an environmental steward by staying true to their Core Values and Beliefs. The company has not only served as a role model for the sustainable industrial practices, but also for employees, of which 15% subscribed to wind power at home. (NBB)

Employee Ownership an Open Book Management Philosophy Since early in the history of the company, NBB desired to create a living, learning community amongst the staff. Essential to this principle, the company provided an EmployeeOwner Plan which allowed the employees actual ownership in the company. In addition, the company practiced a unique and innovative combination of an open book management philosophy, and a consensus model for decision-making. Open book management philosophy includes employees in the financial planning of the company, and the consensus model is used to aid decision-making and conflict resolution; thus providing the information and voice to complement an employees financial interest. Heavy investments were also made in employee education as evidenced by the advanced taste training in the sensory laboratory. Each employee underwent tasting sessions in order to determine those with advanced palate capabilities who could be used for quality control. Employees with 5 years of experience were also sent to Europe to visit breweries and gain a better understanding of the German and Belgian approach to brewing beer. These philosophies have allowed many of the original employees to move up in the company and earn better salaries, buy a piece of the company, and learn new roles in the company. Examples of people moving up in the company by learning new roles included the CFO who started on the NBB packaging line, and one of the first bartenders ever to serve a Fat Tire draft has moved up to regional director of Beer Rangers (distribution managers). (NewBelgium.com)

Quality Beer = Employee Pride When asked to describe how they felt about NBB and the beer they produced, employees often used the word pride. Environmental responsibility was important to the employees, and they were proud of being both a community and an industry leader in actually putting into action what everyone else was merely talking about. Even with all the interest generated by the environmentally friendly practices, innovative brewing methods, the state of the art facility, and the creative management, NBB maintained that these were never necessary as a selling point because the beers had won plenty of gold medals and loyal customers on the basis of taste alone. NBBs commitment to producing the best beer could be seen not only in the companys rigid enforcement of daily test panels in three separate labs on site, but also in the extraordinary decision to produce a collection of proprietary yeast strains in order to make sure that the quality of such an important variable in the brewing of their beer was preserved. In fact, in 2001, the Brewery was voted the best mid-sized brewery in the U.S. at the industrys largest gathering, the Great American Beer Festival a huge honor among those in the industry, and a source of great pride for those at NBB.

Fun Atmosphere While the innovative processes and infrastructure received the majority of the attention, it was the people of NBB and how they treated each other that really made NBBs culture apparent. The company prided itself on maintaining a fun atmosphere at work. Besides her role as CEO, Kim also handled duties as the Chairman of Fun. It was not uncommon to hear the tunes of Pink Floyd blaring from the sound system in the bottling room. At other times, the music of choice may have even been The Wedding March, during one of the four intrabrewery marriages the Warehouse Manager officiated.

Philanthropy and Community Participation While much of the effort at NBB appeared to focus on the company, the company actually went one step further by reaching out to the various communities they were a part of in order to share their knowledge. Several of NBBs core values focused on participation in and contribution back to the brewing and business communities, as well as the local community in general. The brewery pledged that $1 per barrel brewed each year would be donated to philanthropic causes, including cultural, social, environmental, and alcohol awareness programs. Commented Jeff of the program, In 1999, we had $104,000 to contribute to organizations such as The Nature Conservancy, Emily Griffith Center, The Hope Center, and other non-profit organizations. (Wann, 2002). NBB was also a common sponsor of many local events including bicycle races and musical events. In addition to typical contributions of products and money, the brewery took advantage of the event to set up information booths at these events to present the brewing processes and the environmental practices used at NBB. The purpose of these presentations was always to encourage audiences to take personal environmental steps in their own lives. The New Belgium Guest Relations Team also traveled to various conferences and corporate meetings to make similar presentations in order to demonstrate how the company was bringing its corporate values to a reality. The primary message in these presentations was that any company could demonstrate environmental stewardship by minimizing resource consumption and maximizing energy efficiency and recycling.

Innovative Design and Techniques Innovation was always one of the key components of any corporate action at NBB. From the executive offices to the bottling line, the company was not afraid of being the first to try an unproven way of doing things. When the company built a new facility in 1995, NBBs design team insisted on a higher level of innovation than is typical for a brewing facility. Design by default was not what we wanted, said Lebesch. If ideas such as natural day lighting with light-pipes are included in the design phase, they are much less expensive than if they are later added on, and they can begin to save money right away. (Wann, 2002)

As a result, these sun light-pipes were incorporated into the design of the brewery to help lower energy costs. Natural day lighting was further utilized with large windows and skylights around the brewery coated with a special glaze that allow large amounts of light in, but minimized glare and heat. Where (or when) additional lighting was needed, fluorescent light fixtures and bulbs were used in conjunction with motion detectors to further enhance energy savings. (NBB) As of October 2002, New Belgium finished its latest building expansion phase. In line with New Belgiums environmental agenda, its newest facility was designed and built complete with features that would increase energy efficiency. For example, the truck dock area incorporates a hydronic snowmelt system that utilizes waste process heat. The warehouse is cooled with a highly efficient, custom-designed glycol cooling system and the brew-house is naturally cooled using thermal chimneys. Radiant floor heating was utilized with steam produced from a boiler and circulated through a series of pipes buried in the floor of the tasting room. The heat could be kept 10 degrees cooler than other heating methods and achieve the same level of comfort. They also had two swamp cooling systems: one in the office addition, and one to cool off the condenser for the glycol (cooling) system. The construction company was also able to incorporate green building materials - wood structure, floor coverings, paint, tacking surfaces and systems furniture from 98 percent recycled materials - not only to be environmentally correct, but also to create a "hip, fun and funky" image for the company (Neenan, 2002). Operational Efficiencies This proactive approach was not only applied to the plan of the building, but also to the design and layout of the brewing process. When researching more efficient operational methods, NBB looked to the German beer industry for inspiration. In Germany breweries had been forced to be more efficient due to the high costs of energy and water discharge. From these and other sources, NBB researched innovative methods of heat exchange and refrigeration. They decided to invest in a cooling system using ammonia (rather than traditional Freon-cooled) that would cut energy consumption in half and pay for itself in five years. Ammonia can be toxic when inhaled, but it is less harmful than Freon exposure, and the closed system used in refrigeration reduces this risk. Other efforts to research and implement more efficient methods of refrigeration included, natural draft cooling, that draws air from the outside when the temperature is below 40 degrees Fahrenheit, rather than using refrigerated air. (NBB) A heat exchanger was also installed on the stack of the kettle to utilize the heat and steam that is discharged from the kettle (water is heated and the steam is condensed to recover the water). Another heat exchanger was used to cool the wort (unfermented beer) to proper fermentation temperatures on the way from the kettle to the fermentation vessel with cold tap water. The hot water resulting from these two processes was then used for brewing and cleaning tanks. (NBB)

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Waste Water Treatment NBB has also made efforts to reduce the amount of water used in the production process. Most breweries typically use 7-8 gallons of water for every gallon of beer produced; New Belgium used 3-4 times the amount they packaged. (NBB) Obviously, brewing is a waterintensive process, and NBB had made significant efforts to reduce their water consumption. By use of mathematical models they also attempted to determine the minimum amounts of water needed for cleaning and rinsing tanks. Despite their efforts to reduce water consumption, the fact was, a brewery of their size created a considerable amount of water waste. At the 2001 production rate of 230,000 bbl/yr, they produced approximately 24 millions gallons of wastewater from brewing operations at the NBB facility. Obviously concerned with having to treat an increasingly large amount of wastewater, the City of Fort Collins approached NBB to resolve the issue. The City told them how much it would cost to build a new water treatment facility to treat their output, which NBB would have to fund. Instead of funding this new facility, NBB conducted a financial analysis and discovered they could build their own treatment facility for much less. An onsite wastewater treatment facility would not only pre-treat the brewing waste to reduce solids before release in the city sewer, but also the methane generated in this process can be captured and used to co-generate electricity at the brewery (projected to provide 80 percent of annual power needs). (Neenan, 2002) In May of 2002 they finished construction of their biological process water treatment facility, which used a combination of anaerobic and aerobic digestion ponds, commonly known as a bio-digester. The methane gathered from the anaerobic ponds is then used to run a cogeneration plant for an additional power source used to reduce energy consumption from the grid during peak hours when it is more expensive, or to use in the case of a power outage. Just the savings in power expenses were expected to pay back the initial investment of the project in just 2 to 3 years. (NBB)

Other Miscellaneous Green Practices at New Belgium Recyclable and reusable: Brewing by-products. Spent grain, trub (protein and hops left in kettle), and yeast slurry were combined and sold as cattle feed. Spent DE (diatomaceous earth) was sent to local organic farmers for use as a soil amendment. Brewery-wide waste. Recycling of materials included: cardboard, aluminum, glass, plastic, Styrofoam, chipboard, wood, wire, paper, and many others. Cleaning products. Many citrus-based cleaners were used in the packaging area. Spent chemicals went through a neutralization process that broke them down into salt and water.

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Recycled, reused, and friendly: Office furniture. Office furniture was made from compressed newspaper and woodchips, recycled tires and cardboard. Carpets were provided by Interface and were cradle to cradle. Wall hangings were made from recycled and recyclable fibers and cellulose. Computers used thin screen monitors, which were made from less hazardous materials and resulted in less waste. Office supplies. All paper products used were made from recycled materials (from office paper to toilet paper.) Spent ink cartridges were given to local non-profits and children of employees who could redeem them for funds. Packaging materials. Bottles, mother cartons, chipboard dividers and 6 pack carriers all contained recycled materials and were recyclable. Organic Patagonia T-shirts. Most T-shirts sold by NBB were Patagonia Beneficial Ts, which were made from organic cotton and used non-toxic dyes. They were the largest corporate consumer of organic shirts from Patagonia in the country.

(Source: NBB)

Zero Emissions Research Initiative (ZERI) The New Belgium staff also closely examined the concept of Zero Emissions, which is a production model that seeks to eliminate all waste products. As Gunter Pauli, founder of the Zero Emissions Research Initiative (ZERI) stated, Zero Emissions represents a shift in our concept of industry to integrated systems in which everything has its use. Sustainable industry of the future will mimic natures cycles and industryrather than expecting the Earth to produce more, well learn to do more with what the Earth produces, In respect to the brewing industry specifically, Pauli explained that, An integrated bio-systems approach to the brewing of beer demonstrates that competitiveness, jobs and sustainability go hand in hand. (Wann, 2002. The ZERI methodology is outlined in Exhibit 4.) Pauli and the ZERI foundation developed a model of zero emissions production for the brewing industry. The Tunweni Brewery in Namibia was the brewery that the ZERI foundation constructed to produce beer using this model. It was the only existing commercial brewery in the world in operation using this zero emissions model. (The model is outlined in Figure 4.)

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Figure 4

Although the model appealed to the New Belgium staff, applying zero emissions to New Belgium required a further expansion of expertise into the generation of energy and farming. Major output factors from the brewing operations could be used for mushroom farming, chicken farming, biogas generation, algae production, and fish farming. The net result would have been no generated waste, only sellable products. (Woidasky and Wolf, 1998) Spent grain can be used for cultivation of mushrooms, and is also an excellent source of protein. By introducing earthworms to spent grain, it is possible to extract that protein. The earthworms eat it, converting vegetable protein into animal protein, and the worms can be used (or sold) as high-quality chicken feed. Marketable algae can be produced in the alkaline wastewater. Wastewater from the plant could return beer production after treatment and other waste could be processed in an anaerobic bio-digester, which generates methane gas that produces steam for the brewing process. The waste from the digester can be then used as feed for fish farming, and treated wastewater can also be used in the fish ponds (Butler, 1996). Carbon dioxide from beer production can also be captured and used as a heating source for greenhouse 13

vegetable cultivation. These vegetables can be then either sold to local eateries or used onsite (for example, in the case of brewpubs.) (Taylor, 1999/2000)

Opportunities for Improvement Identified by New Belgium New Belgium has 50 acres on-site, and Jeff and Kim are interested in further resource integration at the brewery. They have researched the ideas of a farm or greenhouse to add on to their cornerstone brewery for more efficient utilization of their waste stream. The spent solid wastes from brewing are currently sold to local farmers for feed. Other possibilities for utilization for the spent grain that have been researched include: growing mushrooms, raising earthworms, and composting. A problem Jeff encountered was that, When we researched the growing of mushrooms, it seemed like our re-used resources could supply enough shitake mushrooms for the whole country. I dont know if we want to take on a venture of that scale. (Wann, 2002) The most likely short-term element to emerge from this analysis would be a greenhouse that would be heated with process waste heat, irrigated with recovered wastewater, and supplied with CO2 (from fermentation) for consumption by the growing plants. (Wann, 2002) Other Possibilities for New Belgium PET Bottles and Aluminum Cans Concerns about the energy costs of manufacturing and shipping glass has inspired New Belgium to research the use of plastic, PET (polyethylene terephthalate) bottles, which are now being used by a few large American brewers and several European brewers. While this would considerably reduce the weight of bottled beer, the shelf life is cut in half because oxygen permeates the plastic bottles. Plastic bottles could also contribute to a lower quality perception by consumers. Aluminum cans would probably have the same effect of lowered perceived quality by consumers. A canning line would also represent a huge capital investment, whereas the PET bottles could be easily substituted for the glass ones used on their existing bottling line. Organic Ingredients New Belgium uses organic ingredients when they can, but unfortunately there is not a readily available supply of organic barley of consistent quality to support their relatively high volume consumption of malt. (Soref, 2000) For a significant change to be made here, NBB would have to influence the supply chain of barley farmers to shift to organic farming methods and for malt suppliers to purchase organic barley. This would be a difficult task, but not impossible. They do use organic hops, which tend to be more acidic, and many breweries (including New Belgium) have found that they could use less hops to get the same bittering effect (Hill, 2001). In addition, they do use organic fruit in many of their seasonal beers.

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CO2 Recovery In 1998 the Alaskan Brewing Company became the first microbrewery in the country to install a CO2 recovery system. The system recovers the CO2 that is generated as a by-product of fermentation. Not only does this eliminate CO2 emissions during fermentation, but the CO2 is also reused for purging tanks and carbonating beer later in the process. The Alaskan Brewing Co. had been spending about $100,000 a year for CO2 purchasing, storage, and distribution. (Alaskan Brewing press release, May 4, 1998) In the event of an implementation of the Kyoto Protocol or other carbon trading markets, these could be easily measurable reductions of CO2 emissions for potential sale. (*Note: CO2 recovery systems vary in size and cost, and are custom installed, therefore it is difficult to determine what this would cost NBB without a specific supplier estimate.) Water Re-use and Air Rinse Technology Before bottles are filled with beer, there is generally a water rinse to remove any dust that may have settled in the bottles (to prevent contamination). A typical bottle rinser discharges 9,600 gallons of water in an eight-hour shift (OxiDyn, 1998) There are methods of filtration, involving the use of ozone modules, so that this water can be re-used. In addition, Miller, Pepsi, and Coke have greatly reduced their water consumption by using air rinse technology on their bottling and canning lines. (Payne, 2001) Supply Chain There is an opportunity of leasing pallets and kegs or using transportation alternatives for cleaner distribution. By outsourcing some of these services to environmentally conscious firms, NBB could possibly save costs and reduce their environmental footprint. Third Party Certification A logical next step could be certification with CERES or other institution that vouches for environmental sustainability. Green Marketing Are the goals of being an environmental steward and an award-winning brewery compatible in the competitive brewing industry? NBB was created with the purpose of producing top quality beers; the reduction of environmental impacts was ancillary. Does this split of NBBs focus have positive or negative consequences on the quality of the final product? What about the company as a whole? What are NBBs core competencies? How does environmental stewardship fit in? Are NBBs sustainable practices going to help or hinder a high-growth strategy? There are some risks (real or perceived) that can be readily associated with green marketing for NBB. Green marketing could potentially lead to a lower perception of quality among consumers. Moreover, NBB would be running a risk of alienating the browns, who

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may perceive green-marketed products as being only suitable for environmentalists. Of course that would lead to the question of where the browns are even a part of NBBs target market. Many companies did not promote their green practices due to a fear that consumers would equate green with inferior quality. A good example of this practice could be observed in the wine industry, where many producers utilize sustainable practices, but never mention this in any marketing material targeted to the general public. NBB also need to consider whether environmental claims would result in more scrutiny of their practices, and create the potential for a backlash of negative publicity. Consumers do not look favorably upon companies that misrepresent, or even exaggerate, their environmental practices. This breach of trust can easily alienate a substantial portion of the companys core market. Many companies have decided the risk of this backlash far outweighs any potential gain from making the claim in the first place. NBB would have to consider carefully every claim they made, how they made it, and what benefits and risks are involved with each of those claims.

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EXHIBIT 1 Annual Craft Brewing Growth Statistics, 2001

Craft Brewing Industry Definitions Microbrewery: A brewery that produces less than 15,000 barrels (17,600 hectoliters) of beer per year. Microbreweries sell to the public by one or more of the following methods: the traditional three-tier system (brewer to wholesaler to retailer to consumer); the two-tier system (brewer acting as wholesaler to retailer to consumer); and, directly to the consumer through carryouts and/or on-site tap-room or restaurant sales. Brewpub: A restaurant-brewery that sells the majority of its beer on site. The beer is brewed primarily for sale in the restaurant and bar. The beer is often dispensed directly from the brewerys storage tanks. Where allowed by law, brewpubs often sell beer to go and /or distribute to off-site accounts. Contract Brewing Company: A business that hires another company to produce its beer. The contract brewing company handles marketing, sales, and distribution of its beer, while generally leaving the brewing and packaging to its producer-brewery. Regional Brewery: A brewery with the capacity to brew between 15,000 and 2,000,000 barrels. Regional Specialty Brewery: A regional brewery whose flagship brand is an all-malt or specialty beer. Craft Beers: Generally, all-malt, domestic beers produced using 100 percent malted barley. Craft beers that are not all-malt sometimes substitute a percentage of malted wheat (for wheat beers) or malted rye (for rye beers). Their inspiration can be traced to British, German or Belgian

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traditions or is often uniquely American. Craft beers range from pale to dark in color and from mild to strong in alcohol content. Sometimes they include unusual ingredients such as fruit, herbs or spices. Compared with other beers, their emphasis is more on flavor, and less on appealing to a mass market. (The best-selling American beers are brewed using 30 to 40 percent rice or corn adjunct, resulting in a paler, lighter-bodied and lighter-flavored beer). Craft Brewer: A brewpub, microbrewery, regional specialty brewery or contract brewing company whose majority of sales is considered craft beer. Source: Beertown.org

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EXHIBIT 2 Asahi Brewery Environmental Output

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EXHIBIT 3 Environmental Awards and Certifications (from 1999 on) Certificate of Achievement in Pollution Prevention, awarded in 1999 by The Pollution Prevention Partnership, Colorado Pollution Prevention Advisory Board and Colorado Pollution Prevention Forum. Environmental Stewardship Award, given in 1999 by the Larimer County Commissioners/Environmental Advisory Board. Climate Wise Certificate of Participation, awarded in 2000 by Climate Wise. Thank You for Supporting Public Lands, awarded in 2000 by the U.S. Forest Service, Headwaters Trails Alliance, Park Service and Bureau of Land Management. Green Power Partnership Founding Partner Award, given in 2001 by the Environmental Protection Agency and the Department of Energy. Waste Saver Award, given in 2001 by the North Front Range Solid Waste Action Group. Green Business Practices in Education Award, given in 2001 by the Colorado Alliance for Environmental Education. Special Recognition Award in Business, given in 2002 by the Wirth Chair and its Advisory Board. LEED-EB Pilot Program Participant, accepted in 2002 by the U.S. Green Building Council. Special Recognition Award in Outstanding Business or Commercial Recycling, given in 2002 by Colorado Recycles. CO-OP America Member, beginning summer 2002.

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EXHIBIT 4 ZERI Methodology The 'Zero Emissions Research Initiative' (ZERI), developed at the United Nations University in Tokyo, has as its goal 'zero global emissions, zero water waste, zero solid waste, and zero waste in the air'. This can be done by using nature as a model for process and product design, and by increasing resource productivity through industrial 'clustering'. The concept of zero emissions has been developed into a methodology that can be applied to any industry sector. The ZERI methodology, as proposed by United Nations University, is as follows: 1. 'Total throughput' A review of the industry identifies opportunities to minimize inputs and maximize outputs. The aim is to make full use of all the inputs; i.e. total throughput. If this cannot be achieved, the next step of the methodology is applied. 2. Output-input models An inventory is created of all 'wastes' - i.e. outputs not consumed in the final product or in its process of manufacture. An active search is then initiated to identify industries which could use these outputs, or modified versions of them, as inputs. 3. Industrial clusters The output-input models are used to determine potential candidates for industry 'clustering'. The next step is to identify optimal clusters in terms of size and number of participants. 4. Breakthrough technologies In cases where current engineering expertise and process technologies are not able to secure effective and economical coupling of outputs and inputs, research into 'breakthrough technologies' or system designs is initiated. 5. Industrial policy The identification of suitable industry clusters, and of the breakthroughs required, must be accompanied by appropriate government policies. Where sectors with no previous history of working together are combined, collaborative efforts involving policy makers, industry representatives and academics are needed. This methodology has been applied to over 50 sectors of the economy, ranging from beer to coconuts, textiles, steel scrap, vegetable oils, pulp and electronics. The first commercial application of the ZERI methodology was in a brewery in Namibia.

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Bibliography Aubrey, D. New Belgium Brewing Co., RateBeer Feature (August 2002), http://www.ratebeer.com/Story.asp?StoryID=77 Butler, S. Green Machine, Fast Company (June 1996), No. 3, p. 112 Beertown: Home of the Association of Brewers, http://www.beertown.org Beverage Industry, http://www.oxidyn.com/beverage.htm Colorado brewer puts green beer on tap, Environmental News Network (March 1999), http://www.enn.com/news/enn-stories/1999/03/031699/wind_2160.asp Colorado brewery becomes largest private consumer of wind energy, Wind Energy Weekly (March 1999), Vol. 18, No. 838 Farrell, J. Colorado brewery focuses on efficiency, Energy Services Bulletin (June 1998), Vol. 16, No. 3 Farrell, J. PRPA expands wind energy program as demand grows, Energy Services Bulletin (December 1999), Vol. 19, No. 1 Fort Collins Utilities. Congratulations, New Belgium! Watts in the Wind (Winter 1999), http://www.ci.fort-collins.co.us/utilities/winter99.php Gleeson, C. Organic Beer and Wine, Shared Vision (August 2000), http://www.sharedvision.com/old_site/y00m08/storyc01.html Hill, M. Founders Brewery Organic Beer, Soil & Health Association of New Zealand Inc. (March 2001), http://www.organicnz.pl.net/pastissues/marapr01/organicbrewery.htm Institute for Brewing Studies. Craft Brewing Fact Sheet, (November 1999), http://www.beertown.org/IBS/news.htm Jones, C. Statistics Show Craft Brewing Industry at an All Time High, Association of Brewers press release (April 2002), http://www.beertown.org/PR/pdf/2002_stats.pdf Motavalli, J. Green Beer: Delicious Organic Brews Offer Healthier Alternative, eMagazine (January 2002), http://www.emagazine.com/january-february_2002/0102gl_eating.html NBBs Steps to Being Green company brochure Neenan Co. Outstanding Environmental Project: Gold Hard Hat Award, Colorado Construction (October 2002), http://colorado.construction.com/COCN/CO-Oct02/COcover13Oct02.htm

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New Belgium Brewing Company, Inc. website, http://www.newbelgium.com/frames.html New Belgium Brewing Company, Incorporated What in the Wind?, NBB Steps to being Green, and company brochure New Belgium Brewing Wind Power Plan Makes Mother Earth Happy, Northwest Beer Notes (August 1999), http://www.beernotes.com/northwest/articles/000412.html New Belgium Brewing Company Yearly Production, 1992-1996. The New Brewer (May/June 1997), Vol. 10 (56). New Belgium Brewing Company Yearly Production, 1997-2001. The New Brewer (May/June 2002), Vol. 19 (56). Payne, D., et. al. Memo Re: Natural Capitalism Potentials in the Beer Brewing Industry, Rocky Mountain Institute (May 2001) Settle, E. Blue Watts: A Different Shade of Green, EnergyPulse (October 2002), http://www.energypulse.net/centers/article/article_print.cfm?a_id=40 Soref, A. It Aint Easy Brewing Green, New Hope Natural Media Online (October 2000), http://www.naturalinvestor.com/nfm-online/nfm_backs/Oct_00/beer_s1.cfm Taylor, R. B. From Micro-Brew to Eco-Brew, From the Ground Up (December 1999/January 2000), http://www.ecocenter.org/199912/brewery.shtml The Boulder County Business Report (BCBR). Northern Colorado Briefs, online edition (November 1997), http://www.bcbr.com/nov97/ncbrbrf.htm The big pitcher, The Economist (January 2001), online edition, http://www.economist.com/PrinterFriendly.cfm?Story_ID=481937 Trail, R. The New Belgium Brewing Wind Program, The Student Association of the Institute of Food Technologists (January 2001), http://www.ift.org/iftsa/featurearchive/brewingwind.html U.N. University. Zero-emission processes, Business and Sustainable Development: A Global Guide, http://www.bsdglobal.com/tools/bt_zep.asp Wann, D. Brewing a Sustainable Industry: New Belgium Brewing Company Aims for Zero Emissions, Terrain.org (Spring/Summer 2001), No. 9, http://www.fastcompany.com/online/03/gunterp.html Wann, D. The Winds of Change Across Colorado, Terrain.org (Spring/Summer 2001), No. 9, http://www.terrain.org/articles/9/wind.htm

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Woidasky, J. et. al. Field Trip to the Tunweni Brewery on 19 October 1998, http://www.zeroemission.de/brewery/traveltsumebbrewery.htm ZERI Foundation. Eco-brewery mushrooming Microbrewer hopes to grow commercial mushroom crop from spent barley, ZERI Newsletter (August/September 1999), http://www.zeri.org/news/1999/as/as_storm.htm

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