Paul Shipman -- Red Hook Founder Shapes Up To Roll Out More Barrels

-- Name: Paul Shipman

-- Age: 38

-- Position: president, Red Hook Ale

-- Focus: Preparing for growth

-- Quote: ``What happened with Red Hook is that the city was extremely polite while we figured out how to make beer.''

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Every afternoon, a taupe-colored station wagon pulls into the parking lot of a Fremont health club. Paul Shipman, a slightly overweight man of six feet, grabs his gym bag and heads for his daily workout. Something is on his mind.

Climbing aboard a stationery bike, the president of The Red Hook Ale Brewery begins pedaling until his feet churn in a steady pace. His breathing and pace quicken. Sweat rolls down his face. Ten minutes later, a buzzer sounds, signaling the end of his workout, but Shipman keeps pedaling anyway.

At 38, he is searching deep inside himself for the energy he had a decade ago when he began to build a microbrewery that industry analysts now consider among the nation's most successful specialty brewers. That success recently won Shipman the U.S. Small Business Administration's title of Small Business Person of the Year for Western Washington.

Now, Shipman is getting himself in shape to handle the biggest risk of his life: the building of a new $18 million brewery - one that will be four times the size of his present facility in Seattle's Fremont neighborhood and will thrust the company into a larger, more perilous arena.

``The idea of building another brewery seems more daunting than starting one up in 1982, because I know how difficult it will be,'' Shipman says, pedaling away on the bike. ``One challenge of the entrepreneur that is overlooked is the physical challenge of doing it, the hours and the demands. Your body and mind have to be alert.''

With sales of its European-style specialty beers expected to climb 25 percent this year to $5 million, Shipman says Red Hook doesn't need to sustain that much growth, but somehow needs to accommodate it. Indeed, some analysts already are wondering how much longer Red Hook will be considered a microbrewery.

``In a sense, they have outgrown that category and have achieved distribution in a lot of friendly markets in California, Chicago, Boston, I believe,'' said Jeff Mendel, associate director of the Institute for Brewing Studies in Boulder, Colo.

Red Hook expects to make about 30,000 barrels of beer this year. His new brewery will have the capacity to make 200,000 barrels.

``They are what a lot of micros aspire to be,'' said Mendel. ``And when people think of the top micros in the U.S., they probably think of Red Hook and Sierra Nevada, partly because they make damn good beer, and partly because they have greater name recognition.''

In December, Shipman bought a warehouse across the street from his Fremont brewery. Yet, he finds he needs ever more room. While he has plans for the Fremont facility to continue making ales, he now wants the new brewery for lagers that appeal to a broader number of palates.

``We view the next opportunity as making a brand of beer more competitive with Heineken, Beck's and Corona,'' Shipman said. ``It will be a brewery that doesn't compete with Anheuser-Busch, but does a good job of meeting specialty-beer needs.''

Before his workout, sitting in the Trolleyman Pub with Strauss' ``Blue Danube'' playing in the background, Shipman sips a cup of decaf coffee.

As he speaks, his eyes brighten, he smiles a lot and his zeal for talking about the company doesn't diminish, even as he refers to its rocky start. His voice has the laid-back quality that actor Jack Nicholson's might have after a few brews. Now, feeling rather philosophical, Shipman leans back in his chair, and describes the world according to Paul.

His thoughts move quickly across town to rival Rainier Brewing Co. Its parent company, G. Heileman Brewing Co., has filed for Chapter 11 reorganization, and the outcome will have a bearing on Red Hook's expansion plans.

For now, the Rainier brewery continues to operate. However, if it were to close or its operations were consolidated with another out-of-state facility, Shipman's new brewery, which he hopes to have built by late 1993, would be poised to take up the local slack. ``The closure of Rainier brewery would create a gap in the marketplace,'' he said, ``and it would be incumbent for us to fill that void.''

But for Red Hook to soak up some of those customers would require some luck. Shipman strokes his chin and recalls a well-known University of Washington professor who said the harder you work, the luckier you get.

``I really believe that. I never knew a successful person who did it all with luck, or all with hard work. It takes a little of both.''

Shipman has used both of those qualities to turn Red Hook from a company that struggled in the beginning into a giant in an industry that is small but growing fast.

``He has an unusual combination of intelligence and enthusiasm,'' said Gordon Bowker, vice president and director of Red Hook, who also was a co-founder of Starbucks Coffee Co. ``You see people who are able to become very excited about some idea, but people who do that are not always the most qualified. I've been struck many times by that unusual combination.''

It's not unusual for Shipman to order his employees to stop working and listen to his latest joke. Or, to drift downstairs to the pub and play German beer songs on the stereo. ``Paul's in the pub,'' employees say as they cover their ears.

Shipman is a believer in delegating. He walks through the brewery twice a day, taking a look at how things are running, relying on his senses to tell him when or if he needs to exert himself.

``He sets out goals and ideas and lets you do it,'' said Pamela Hinckley, the company's marketing director. ``He makes sure you accomplish your goals and guides you, but he won't bug you about how it is going.''

Added Larry Baush, president of the Microbrew Appreciation Society of Seattle: ``He is very adept at finding the right person for the right job. As a consequence, his role at Red Hook has evolved quite a bit to the point that it almost runs itself.''

When not watching foreign movies or adding to his Italian wine collection, Shipman enjoys karaoke. Usually performed in Japanese restaurants, volunteers step up to a microphone and croon their favorite tune to recorded music. The crowds are so polite that even off-key singers are applauded.

It is that same spirit of civility that saved Red Hook from an early death.

When Shipman started looking for investors in 1981, the nation was in the throes of a deep recession. In building a European-style brewery, he thought his biggest challenge would be finding 20 investors willing to pay $17,500 each. Though it took six months - about twice as long as he expected - he found them as his seed money was running out.

But never did he realize a bigger problem would be the beer itself. Shipman wanted to make a highly distinctive beer but, as it turned out, his beer became too distinctive.

Original Red Hook, a heavy Belgian-style ale, had a fruity flavor that appealed to such a small number of people that Shipman jokes he knew them by name. But it was no laughing matter as the company lost wads of money - $1,000 a day.

``It was hemorrhaging,'' Shipman said. ``It was really a hard time. I remember telling my wife, Patty, `I don't know if the business will make it.' We realized we had to make a product that appealed to a larger segment of the market.''

As sales sputtered along, debts mounted. Shipman felt the heat as credit lines, and other financing options, were drying up.

``What we learned about running a business over that period of time is that I was one tough S.O.B. I got tough. I would fire people. I learned to say `no.' I learned to squeeze blood from a turnip. I learned how to take charge of the business in order to survive. In those days, it was essential.''

Shipman knew what had to be done. He bet the company on a new ale called Ballard Bitter. And he had 60 days to turn Red Hook's sales around. If it failed, he would be out of luck and out of business.

Tasting the first batch, Shipman's prayers were answered. Revenues climbed dramatically to more than $5,000 per day. Ballard Bitter's daily sales surpassed Original's monthly totals.

A year later, in 1985, Red Hook was running out of space and Shipman eventually opened a new brewery just a few blocks away that also had room for a bottling operation.

``What happened with Red Hook is that the city was extremely polite while we figured out how to make beer,'' Shipman said. ``We couldn't have gotten away with it in the East. The people there would have given up faith.''

With his 90-minute workout coming to an end, Shipman changes back into a shirt and tie and says he feels good. He's practically counting the days, like a boxer does, when he steps into the ring against his foe.

``Pursuing the future of the business is something I never seem to get tired of,'' Shipman said. ``It's a constant search of defining the future of the business. That makes me tick, and gives so much meaning to my life.''

Profile appears weekly in the Business Monday section of The Seattle Times.