RJ Banat: Brewing Tax & Beer

My husband, Matthew Ehrlich, a writer for Playback:stl, was interviewing RJ Banat, co-founder of Jagged Mountain Brewery recently. Since JMB is the location of an upcoming Happy Hour and fundraiser for FTL, Matt was nice enough to let me throw in a few Tax-related questions. After all, RJ is a Federal and State Income Tax Manager at United Launch Alliance, as well. Following is a copy of Matt’s article from that experience. Please stop by JMB on July 15th, 2015. Not only will a portion of that day’s sales go to FTL, but RJ will be giving tours of the brewery to those attending the Tax celebration Happy Hour.

RJ Banat, ULA Tax Manager by day, cofounder of Jagged Mountain Brewery by night

RJ Banat, ULA Tax Manager by day and cofounder of Jagged Mountain Brewery by night

My wife, Ashby Walters, and I recently met RJ Banat, a co-founder of Jagged Mountain Brewery, which is located at the intersection of three great Denver Neighborhoods (Lodo, Union Station, and the Central Business District.)

During our visit I was able to sample two flights of Jagged Mountain’s brews, and can honestly say that RJ’s answer to Question 11, below, is spot on. They do an exquisite job of making “adventurous beer for adventurous people”. I was especially fond of the Belgian Wit and the Brown Ale, but found even beers outside my comfort zone (I’m not big on hoppy beers but loved the Barelywine, which has a “massive pine hop aroma”) were all worth trying. All were delicious, whether they were types I was trying for the first time (the barley wine) or unique twists on more common brews (Whiskey/Cocoa Barrel Aged Session Porter).

So, while my interests mainly centered on the beer and the brewery, my wife (a Tax Director) was interested in how being a ‘tax person’ influenced RJ’s involvement in Jagged Mountain. RJ was nice enough to answer our questions via email (his answers are in blue,) with the first set of questions being mine, and mainly beer-centric, while the last set is from Ashby and relates more to the business side of RJ’s involvement.

1. How did JMB get started and how did you get involved?

The three owners of Jagged have known each other for over a dozen years, back when we were all living in Michigan. We initially knew each other through volleyball leagues. Eventually, our mutual love of the outdoors led us to organize and take trips together – mountaineering in Peru, canyoneering in Utah, backcountry hiking in Wyoming, etc. It was on a trip to climb Jagged Mountain (a 13er in southwest Colorado) where we decided to open a brewery together. Wayne had been brewing professionally for almost two decades, so he would lead production. Randy was an actuary who was looking for a reason to change careers, so he decided to take over the taproom manager role. I manage the financial aspects while still juggling my full-time role as the federal and state income tax manager for an aerospace company.

2. What were some of the biggest surprises you’ve experienced?

The growth of the craft beer market and the number of breweries, in Denver particularly, has been crazy since we opened. When we were pounding the pavement trying to find banks willing to provide us a business start-up loan, not a single lender really understood what a taproom was. “You don’t serve food? How does that work? So…you, like, only sell beer?” (And then the underwriters would of course use restaurants as the baseline to compare our projections. Sigh.) This was three years ago! We don’t have to explain our business model much anymore. But to answer your question: While we expected to see more breweries popping up around town, we didn’t expect the sheer numbers that have opened since we did a little over a year and a half ago.

3. How have your beer and alcohol tastes and interests changed since getting involved?

I appreciate and enjoy many more kinds of beer styles and nuances than before. Now, that doesn’t mean I can describe the beer I’m tasting any better – Randy and I joke that our vocabulary when describing beer is limited to saying it tastes “good”, “hoppy”, or “malty”. On that note, it’s safe to assume that any beer descriptions you see from Jagged are not written by either of us.

4. What was your brewing experience before you started?

Our current brewer, Adam Glaser (who replaced Wayne this year), has been brewing for years. It started off as a hobby, but he began winning amateur competitions and really enjoyed it. He took a job as an assistant brewer at Fort Collins Brewery, and worked his way up the chain to ultimately become their head brewer. He’s a very talented guy, and we’re thrilled to have him be part of our team now.

5. What was the goal in starting JMB and why?

We want to continue to make great beer and have an environment in our taproom that our customers and employees enjoy. It’s beer – it should be fun.

6. How did your/your partners’ interests in brewing develop? What drove it (e.g. crafts or big domestics)?

The craft beer industry is an extraordinarily united group of people that provide remarkable support for each other. I’ve never seen another industry where supposed competitors are so interested in the genuine success of each other. The reason for this is the craft beer market, despite witnessing about two decades of significant growth, is still less than 10% of the total beer market in the US. Many people believe the ceiling for the craft beer segment will be between 20-30% of the total market. So, if the brewery down the street or across the country can turn someone into a craft beer fan, the entire industry wins because there is one more craft beer fan who will support the industry. Hooray for great beer!

7. What was your favorite beer(s) before starting JMB?

I gravitate towards darker and less hoppy beers, and there’s many I have enjoyed for years. Locally, Dry Dock’s Vanilla Porter is a beer I’ll never say no to. As far as a Michigan-based brewery (since I lived there prior to moving out to Colorado), New Holland’s Dragon’s Milk is fantastic. I also haven’t met a sour beer I don’t love. I happily have Trinity’s Damn It Feels Good to be a Gangsta whenever I see it around.

8. Are there other forms of alcohol you/your partners have been interested in crafting?

Nope – we’re interested in just doing beer.

9. What would you warn or advise people considering entering a similar business or just brewing for fun?

Craft beer is such a hot industry right now. Everyone is getting into it, and it sure seems the market can support the growth…for now, at least. When it comes down to it, though, you need to be making great beer and need to ensure it cash flows. I think brewing for fun is a much less stressful strategy.

10. What are the short and long term plans of JMB?

Short-term we would like to ramp up our production so we can begin distributing more to local bars and restaurants, while long-term is doing more of the same but with a larger footprint. The long-term strategy would require us to open a second, production-focused facility.

11. How is JMB different from other craft brewers?

Our theme is “adventurous beer for adventurous people”. To us, that means offering a selection of beers that are unique, different, or a little off-center from the traditional style. Our brown ale, for instance, was dry-hopped and has plums added. We barrel-aged some of our 3.8% ABV porter and added cacao nibs. Our black saison is a truly unique beer with a complex and amazing flavor profile. We’ll be releasing a Gotlandsdricka soon (a smoked, juniper beer from Viking times). Adventurous beers can also mean high ABV beers: We just released a 14.5% triple IPA…and have an even bigger beer we will be releasing later in the year.

Outside of the beers being unique, I think our community involvement and non-profit programs you ask about below is something I hope distinguishes us from other breweries.

The following are Ashby’s questions:

1. How did Jagged Gives come about and how has it evolved?

This is one of the aspects of our brewery that we are very proud to have developed. Breweries historically have been meeting places for neighbors and friends, and have had an active role in the local community. We’ve attempted to embrace this role with our Jagged Gives program. In this program, we donate $1/beer sold to a local non-profit on the day we host them in the taproom. We promote the organization to our customers, and give them free use of our space on the day of their event. Our hope is that this program helps expose great, local organizations to more people in our community while also giving back to them. To date, we have worked with or will be working with 40 organizations in our community. Our page dedicated to this program as well as our Backpack Project (where we collect backpacks and supplies. And provide them to local people in need) is here: http://www.jaggedmountainbrewery.com/jagged-gives/.

2. What are some of the interesting Tax and Accounting aspects of being in the brewing business?

There really isn’t much different than any small business. We do, however, pay federal and state excise taxes based on the amount of beer sold. There is currently legislation being discussed that would grant small brewers a much lower excise tax rate at the federal level, so that’s mildly exciting. Really, though, a small production brewery is a very simple business compared to a lot of other businesses out there.

3. How do you balance your day job and night work?

Juggling my day job, brewery work, and family life requires attention – but I don’t think it’s different than many families who have parents that work regular amounts of overtime. (My wife is a director for a health care company.) That being said, my family is my priority for me, so I ensure I’m not sacrificing time with them. That means I typically find myself working on brewery items after the kids have gone to bed, in our weekly meetings, or as items develop throughout the day.

4. What are the most interesting responses you’ve received from Tax and Accounting professionals who learn that you’re also part owner of a brewery?

The most common response is, by far, “That sounds a lot more fun than (fill in the tax/accounting job).” (Spoiler: It is. But it’s not without its own challenges.)

I also hear, “I could never do something like that.” I frankly never thought I could either – come on, us accountants are a conservative bunch – so it’s still weird when I realize/acknowledge I am a small business owner.

5. Have you received awards or recognition for your photographs? What is your background in photography?

I have received some recognition/awards for some of my photographs, but, not surprisingly, photography has taken a back seat to other things. It’s unfortunately been an afterthought. Example: I recently had a customer ask about one of my pictures in the taproom, so I directed him to my photography website. I soon learned that the website I used to host my site had gone out of business…months ago. Constructing a new page is now on my to do list, but I’m not sure when I can get to it.

My background is that I have a history of taking a lot of time off of work. Four weeks here, three months there, three months somewhere else, another three months somewhere else, etc. I’ve been known to quit jobs and book one-way tickets to other continents. I wouldn’t necessarily say I have a skill in photography as much as I have been a witness to some really incredible and amazing places that are not very accessible. I think you’re bound to get some great shots when you take thousands of photos in these places.

6. What are some of your other hobbies and accomplishments?

I love being outdoors. Over the years I’ve done quite a bit of backcountry hiking, ice-climbing, rock-climbing, canyoneering, and mountaineering. Once or twice a year I’ll organize Banatpolluza, a small trip with friends where we will essentially just go out and do something adventurous. We have had some great trips – climbing over 20,000 feet in the Andes, doing a second descent of a slot canyon in Utah, etc. – and it’s always something we look forward to.

7. What’s next for you? What else are you working on or planning?

I think right now it’s staying the course and making sure Jagged is everything we think it could be (and there are some exciting things we are currently discussing).

I know I can’t wait. And in the short term, I’m looking forward to attending the Jagged Gives event on July 15th that is in coordination with Future Tax Leaders, www.futuretaxleaders.org, a non-profit co-founded by Ashby. It is one of many chances Jagged Mountain Brewery provides customers to support deserving non-profits while enjoying their very adventurous drinks in a super convenient location, at their fantastic taproom. Hope to see you there!

-Matt Ehrlich