Monday, 12 April 2021

Shangri-La Brewery's Gyalzur: "The orphanage changed me"

By Emmanuel Daniel

Songtsen “Sonny” Gyalzur, founder of the Shangri-La Highland Craft Brewery, spoke with Emmanuel Daniel about his journey from a privileged young man to a social entrepreneur.

The Swiss Tibetan shared where he found inspiration to switch gears early in his career and recalled his naivety when he embarked on his craft beer business in China. The decision to combine business with philanthropy hit a rough patch but Gyalzur’s sustainability-focused venture finally found its niche market not only in China, but also in other parts of the world. 

Here are the key points discussed during the interview:

The following is the edited transcript of the story: 

Emmanuel Daniel (ED): This past winter, I visited the fabled city of Shangri-La in China’s Yunnan province. Shangri-La’s real name is Zhongdian, and it is nestled in the snow-capped mountains on what is called “the ancient tea-horse road” or “Cha Ma Gu Dao” that connected the trade routes between ancient Europe, the Middle East, India, Southeast Asia, the northern reaches of Mongolia and greater China to the Tibetan lands.

The town of Shangri-La is home to the Ganden Sumtseling Monastery, the second most important Tibetan shrine, after the Potala Palace in Lhasa, Tibet. It is often called the Little Potala Palace, where priests can still be seen practicing their religion as in ancient times.But the highlight of my trip was an almost accidental visit to the Shangri-La Highland Craft Brewery, a homegrown brewery located just outside the city. Almost in the middle of a rural expanse, perched 3,500 metres above sea level, was this brewery that has placed Yunnan and the Tibetan people on the world map. The three million bottles of craft, lager and dark beer produced annually in this still fledgling brewery, had even won several international awards, including the European Beer Star Competition, the Brussels Beer Challenge, and the China Beer Awards.

There are in total, about 6.5 million Tibetan people worldwide. Six point three million live in China, mostly spread across Tibet, Sichuan and Yunnan provinces. A small number of Tibetans had migrated to India during turbulent times and from there on to the west. The story of Shangri-La Brewery is the story of one such Tibetan family who had found themselves as migrants in Switzerland, coming back to reintegrate with their own people in the city that they were originally from.

The most important feature of the brewery is that it employs 28 Tibetans, almost all from the same orphanage, set up by the founder’s mother. That is a story in itself.

I asked to meet Songtsen Gyalzur, or “Sonny” as he is fondly called by everyone around him. As it turned out, Sonny was stuck in Switzerland for this interview because of the global pandemic of 2020. But we were finally able to connect online on a video call and he recounted to me the fascinating story of his own journey,  why he even wanted to build a brewery, how difficult it was to deploy native highland barley, the benefit and prestige it has brought to his people and how he plans to grow it further.

Thank you very much, Sonny, for speaking with us. You were not born in Tibet. We say you are Tibetan but you were not born in Yunnan, China. But your family comes from that part of the world. Let's start with that story. 

Songtsen Gyalzur(SG): First of all, I would like to say Emmanuel, thank you very much for giving us the opportunity to talk about our story and brewery here in Shangri-La. You’re absolutely right. I look Asian, I look Tibetan. I was born in Switzerland and grew up in Switzerland. I had the chance to set up my business in Switzerland. I started real estate development and had a lot of luck in setting up my own company. I ran that company quite successfully until I was 32. But then at 32, I started asking myself, maybe this is not the end? Maybe there's something else. And that's why I decided to do a round-the-world trip for more than one year. During this world trip, I had the chance to visit my parents. They were living in Tibet already at that time. They were already running an orphanage since 1993. My mom set up that first orphanage in Tibet. During my time in Switzerland, I was not really involved in social work with my parents. I knew that they were doing that with a lot of passion. But I was more into this entrepreneurship and business here in Switzerland. I had the chance to visit them and also visit my roots because I knew that I come from Tibet. During my world trip, I decided to go to Tibet and visit my parents. And that was a game changer for me.

Finding inspiration in an orphanage

ED:Your parents were themselves part of the huge changes that have taken place in Tibetan society over time. Give us a little background on your parents.

SG: My parents were both born and raised in Tibet. My father's family were like landlords and traders in Shangri-La at that time. They were doing the ancient tea horse road which is called “Cha Ma Gu Dao”. During the Cultural Revolution, they didn't have the chance to go back to Tibet from India, then they moved to Switzerland.

The story of my mom is different. She lost her parents and she came as an orphan to India. Then with the Swiss Red Cross, she had the chance to move to Germany. She was raised in a Rudolf Steiner school in Germany. My parents met each other in Germany then moved together to Switzerland and set up a family. I have a younger brother, so there are two sons. That's the background story of my parents.

ED: A 32-year-old Swiss entrepreneur, successful man going around the world is such a Swiss thing to do. Your parents are traditional Tibetans. At which point did they decide to go back to Tibet and start the orphanage? Because the orphanage and the character of your parents are an integral part of the story.

SG: It started when my brother and I came into our teenage years. She was looking for her roots because she was an orphan herself. She had always this feeling that she had to give something back for all the opportunities that she had in Europe, but a lot of people don't have that in Tibet. She always wanted to give something back. I still remember that my parents talked a lot about this idea that my mom set up an orphanage because my parents had the chance to travel in Tibet and they saw a lot of orphans there. But at that time, in 1993, China was not the same as it is now. It was much, much harder. A lady from Switzerland with Tibetan roots, going back to Tibet and opening an orphanage, that was something which was unbelievable for society at that time. But my mom was a very strong person and my father supported her and they decided that she should do that. It was like an inner call. She moved to Tibet. She took the pension of my father and started this orphanage, the first orphanage in Tibet with a lot of help from the local people. They supported her and she had the chance to build the first house with seven kids. And from then, it’s still ongoing.

ED: And how big did the orphanage become, eventually?

SG: She thought it would be a very small house. She built it by herself in Tibet in 1993. It grew quite fast. In the end, we had over 300 kids. We built another orphanage in Shangri-La, which is the hometown of my father, in the east of Tibet. We normally have around 60 to 80 kids in these two orphanages. Later, my mom found a non-governmental organisation and other people in Switzerland. They helped her with this project. It was running very successfully. She made a big impact on a lot of lives of underprivileged kids in Tibet.

ED: The Tibetan people in China today are a very stable community. There are about 6.3 million Tibetans in China. In my own visit to Yunnan and to Tibet, I saw how progressive the rural areas in China are today. But take us back to the year when a 32-year-old young man, without a care in the world, turned up in Tibet at his mother's orphanage. What happened then?

SG: I was traveling around the world. I wished to visit my parents in Tibet, of course. I wanted to see Lhasa, Potala Palace, etc. We always heard a lot of things, but we didn't have chance to go there. My idea was to stay there for a month and then travel to India, and then later to Africa. 

I arrived in the orphanage and I still remember when I entered this door, 30 kids came running towards me and hugged me. I was so overwhelmed by everything because I didn’t know the kids, but I realised that they knew everything about me, and they were looking at me as their real big brother who was coming home. I was really overwhelmed by all that joy. In the next couple of weeks, I realised what kind of project my parents had, and how wonderful that project actually was. Because when you have an orphanage in mind, you have an idea of this orphanage as you see in the movies, it was really like a big family. I gained so many sisters and brothers in a short time. It was amazing especially when you hear the background story of each kid. You feel very blessed. First, that you had the life in Switzerland. Second you also had a chance to have an impact on their lives. So that was the reason why I skipped my whole plans to travel further. 

My mom was scolding me. She said I was a very selfish person because I'm just looking out for me. 

She said ‘Now you have a big family and they need your help. You should actually do something for them also. Don't be so selfish.’ That was the time when I made the decision to stay longer and try to support the orphanage.

ED: Your mother just passed away at the age of 69 last year because of COVID-19. We extend our deepest condolences to your family. This was an amazing woman, a woman who gave you the zest for life, which you then built into the Shangri-La Brewery. And I hope that the family is taking it well.

SG: The year 2020 was really a year of change. It was a shock, absolutely unexpected. But in the meantime, we had some time to think about it. As I said before, we think that my mom achieved everything that she wanted to do in her life, especially the orphanage was the most important project in her life. And she did that over the last decade and she did it very successfully. 

Five years ago, she gave the orphanage back to the government. The government is running it. The reason is that in 1993, they were in a different situation in China and the rural areas in Tibet. But nowadays, as you have seen also, it's different. She believed that the government can take care of the orphanage. It took some time to transition. But she was really happy in the end that she could give it to the government in the way that she wanted to. That was something which was really important to her. She was working on her book. She wrote this book and published it. Then suddenly COVID-19 came. I still remember, we were sitting in the living room here in Switzerland and we saw this news in China. I said to my mom this would be over soon. It would be something like the swine flu before. And my mom said to me ‘You’ll see, this will infect us far longer’. I was laughing at her. I never thought that it would impact our family in Switzerland. It really came like that. And she’s now gone. But I think she had a very fulfilled life. 

ED: Is your father still part of the orphanage? Is he there with you in Switzerland or in Tibet?

SG: My father is here with me right now in Switzerland. We are living together. But he is now 82 years old. He really wants to go back to Shangri-La. His family is there. All the kids are there. They are like his kids and now these kids have kids also. They became parents. In Switzerland, we are in the second lockdown now. His life is a little bit limited. I fully understand why he wants to go back to Shangri-La.

Helping the Shangri-La community

ED: Take us back to that conversation that you had with your mother when she called you selfish and the transition that it meant. There are several undercurrents, one of which is the Tibetan people. The second is the transition of China and the rural areas of China, the rural communities of which you've been a part of. And third is you're taking the orphanage anchor that your mother created. You have orphans working for you in the brewery. There's a sense of a continuity, a story that is unfolding here. Let's start with the selfish young man. At which point did you give that up and build your family?

SG: I grew up in Switzerland and had the chance to build my business. For a young person, it's like a dream. You have everything in Switzerland and I had the feeling sometimes that I’m living in a bubble. Everything is very comfortable. Then I started traveling. Then I came to Tibet. My mom asked what kind of plans I have for my life? I want to travel. And she said ‘This is very selfish because you're only looking out for yourself’. I didn’t agree at that time because I was sponsoring. She meant something totally different. She said ‘If you really don’t want to waste your time, with all the backpack you have, with the knowhow you have, you can use your time much more valuably’. 

I have many kids here, and it's all good. But my biggest problem, my biggest fear is when the kids are coming out of the orphanage, they are lost. The reason is that in Tibet’s culture, the parents, uncles and aunties, when their kids come out, they are hoping that their kids get jobs through their network. When our kids come out of the orphanage, they have absolutely no network. They don't get any jobs. And in my company in Switzerland, I have internships. We have this dual system in Switzerland so that you can learn what you want to have as a profession later on. She said if you could implement something like that, it would really have a big impact on the kids’ lives, especially for the kids who were not that good in school. Because the guys who will graduate from universities, they will find jobs. But for kids who are not so good in school, they will have problems in finding good jobs. 

It took me quite a while to change my whole thinking. I'm changing my life. I'm staying here and trying to build something for people which I actually didn’t know at that time. But as I said, I was overwhelmed by all the feelings which the kids were giving me at that time and I thought I had the chance, the ability and the time to do that. Maybe I should do that. And that was the starting point of my journey in Tibet, especially in Yunnan. 

The first thing that I asked my mother is, “What should I do?” She said tourism is a big thing in Tibet. So maybe you can do something related to tourism. Why don’t you open a restaurant? And teach the kids how to run a restaurant in a Swiss way. How to do bookkeeping, how to manage the kitchen, hygiene, etc. I said I have no idea about the restaurant business. And she said, you will do it, you can do it. I bought a flight ticket back to Switzerland and bought all the books on how to run a restaurant. I flew back and I started first with five kids. We took over a place right away and started running the business.  It was really a big success. And that was the time when I realised that I like to drink beer. But I didn't get good beer in Shangri-La. At that time, Chinese lager beers had a light taste. Maybe we can expand our businesses and try to make beer? In the meantime, I realised that the boys who were in the restaurant were not very motivated to work. The girls were more motivated. And when I came up with the idea to make beer, the boys were like, “Yeah, let's do beer!”

The reason why I wanted to make beer was that during my studies here in Switzerland, I had roommates who were making beer in our kitchen. I knew that it was not so hard to make a beer. If they can make beer in our kitchen, it's possible to make beer in a restaurant. And it started from there. We bought a little equipment with 200 litres per batch and started brewing beer. I read everything that I could find about brewing beer and tried to make beer there. But it didn’t work out. I couldn't make a good beer and I thought I needed more help. I found somebody, a former brew master in Switzerland. I asked him would you come and help me in Shangri-La to make beer? He has just retired and had a lot of time. He said, ‘This is an adventure. I will come’.  He came and he taught us how to make a proper real beer. 

But on the other side, you have to get investment inside so I flew back to Switzerland. I asked my two partners in the business: my brother and my best friend, shall we invest in a brewery? I told them, look, you have to be sure about this because it's not a low investment. But I see a real chance to combine two things. On one side, we have the chance to create real jobs, careers and a future for kids who are underprivileged. And on the other side, we have a market opportunity which, if the timing is right — and which we proved already — that we can produce a product which people want to buy. Combine that together and build something out of that. And it was a meeting of half an hour and they said let's do that. Then we started from there. We started to build our commercial brewery in Shangri-La. This was a process with thousands of stories and thousands of obstacles. I never thought it would be so hard. 

Now 80% of our staff are former kids from the orphanage. We are paying the highest salaries in Yunnan. And right now, the brewery is run by a former kid from the orphanage. She was four years old when she came to the orphanage. Now she's running a brewery and led that brewery through the pandemic in 2020 and we’re still in the black by the end of the year. 

Growing the brewery

ED: It is an amazing story. And when we visited the site, it looked like an industrial site that was set aside by the government for small industries. Was that made available to you in 2008? Or did it come about later? Did the government give it to you in a concession rate so that you could get this business off the ground? Were you growing the capital on the back of retained earnings?  Or did you have to keep investing in it for a while until it was financially self-sustaining?

SG: When we went to the government and said we would build a brewery, the leaders of Shangri-La supported us. It was a good idea. But the whole administration in the government didn’t believe us. “That’s a crazy idea. Why would you want to build a brewery in Shangri-La? Nobody has done that. Nobody will do that. You will fail.” That was the general information. We had to get all the licences for construction. But nobody was supporting us from the government. We had to go to the leaders and they ordered them to support us. But actually, until the first bottle of beer came out of the brewery, nobody believed in us. 

Another thing was when I was looking for a piece of land where we can build the brewery. But the government said that we can’t, we have to build it in their industrial zone. And I asked, 'Where is your industrial zone? I haven't seen an industrial zone.' They showed it to me, 'Here is the industrial zone.' But there was nothing. It was just a field. There is no street, no water, no electricity, nothing. They said, 'We will build later.’ I asked when, and they replied, ‘Later, but you can start building.' And I said, 'But I need a road.' And they said 'You just build your brewery, everything will come after.' So when we started in the industrial zone, there was absolutely nothing. 

I'm very thankful to my father because while with our family, I said to my father, 'Father, you can be proud of me. I built this building. I bought this land in Switzerland.' And he said, 'I'm not very impressed. If you really want to impress me, you have to build in Shangri-La where you're from.' At that time, when I had to build this brewery, there was no industry, there was nothing. Business-wise, I can't start. It made no sense to start. I had to wait. And one day, I had an argument with my father. He asked, “Why aren’t you starting?” I said, “Because of this, because of that.” I had a lot of reasons why I couldn’t start. The next morning, my father organised the tractor and started digging on our piece of land.  He started building the wall for the brewery. He said, “Now if you really want to do it, you do it now.” And then we just did it. With all the problems that we had: no water, we had to build our own water pipes, we had to get our own electricity, but we built our brewery. And then slowly, everything else around us started. It was really difficult. 

I was naive when it came to doing business in China, because I thought the whole banking system worked a little bit like in Switzerland, but I was completely wrong. When you say, “Look, I have this project, we have this business plan, we have this business case, we will do it like that, and this is our money,” and you think you can borrow money from the bank, there's absolutely no chance. That means I had to always invest more money than I expected. That's why I don't believe in business plans anymore. I only believe in business models. Until 2019 we didn't make any profit with the brewery. The first time that we made good profit was in 2019. At least we are growing our business now. We are always facing new challenges. This is the way you do it. 

ED: You're doing it for the community more than for the profit at first. How did you break that problem? 

SG: Let’s go back first to this problem between being philanthropic and doing something good for the community versus doing something profitable. When we started over, we had this idea to build a commercial brewery. I knew this is something which I had to look really close into. I believe that if you want to do a project like that, it's not an orphanage anymore. It’s a business. And the business has to be viable. If you can't establish a business, which is making money, then you can't do good. Also, you can't have an impact in society. 

Where is my space in the market? When you have the triangle and you look at a business case, at the bottom, it’s mass volume of beers with a low price. I can't compete against them in Shangri-La, it's not possible. We're in a rural area. When you look at the middle level, these are premium beers, sometimes international beers, which have a higher premium price. Can I compete against them? I said, no, it's really hard to compete against Budweiser, Heineken, and Carlsberg. Then at the top, there's a space. This is really the super-premium, the craft, the specialty beer. And this was like an open ocean, there was no bar.

Creating the brand DNA

ED: I was just thinking exactly of that word, that what you were actually looking for the blue ocean of your own industry. 

SG: This is the space where I have to be. That means that I can afford better-quality beers to make and produce because there is a market that I can sell it for higher price also. This is something in general for the Tibetan entrepreneurs in the whole area. I believe that we have a unique chance to build businesses in the Tibetan area. But they have to rely on our culture, on our raw materials which we have there, and are of high quality. We can create brands which are unique. 

What was really important in building the Shangri-La beer brand was that I needed a brand strategy and the brand DNA which is really unique and different from other beers. Because at the end of the day, the business of beer is about sales channels and the brand. And then you can sell beer. I was focusing on these two things. And that's why I think that we are on the right track to build our business. Maybe not that fast, but we are growing and we are building it, it’s stable. The opportunities are big and wide. It depends on what we are doing with that. And it now also depends a little bit on my team in Shangri-La. They want to shape their future. 

ED: Over time, you've had that international recognition.  Which ones of the recognition were very important to you?

SG: I'm very critical when it comes to my beer. When I drink my beer, I always see opportunities, I always see something which is not 100% good, which you can improve here and there. But in general, I hear other people say that our beer is great. But I always doubt that a little bit. I want to make it better. In 2015, we had a chance to attend a beer competition, the European Beer Star competition in Germany. The European Beer Star is something like the Champions League of beer. We won a silver medal with our Black Yak. That's almost like the Shangri-La football team is playing the Champions League and becoming second.  And then I realised, yes, we can brew beer. And yes, we can make a high-quality product. And from that time on we’ve won different international beer awards. But the European Beer Star was the point where I said yes, we can brew beer.

ED: China is a beer loving country.  You have Tsingtao, you've got Yanjing and so on. How are you dealing with the competition and the sophistication that's growing in China? 

SG: Of course, it's always hard because you have to compete with big conglomerates, or big companies. So the brand comes into play. We are a very authentic brand and we are making high-quality beer, That's also a part of our branding. We believe that green is the new platinum, green food, organic food, and water. That's why we are sticking to that. And we keep on focusing on quality, and we want to be authentic about our brand. And this is the way I think that we may have a chance to compete with the big breweries.

ED: In terms of funding, would you be going out to look for impact investors? You can almost configure your story as an impact investment story. The Chinese banks will look at you better now. You have an income and you are making a difference in a rural community.

SG: We’re in contact with investors who are interested to invest in our business. I think they see the potential of this business. But for me, it's really important that the investor understand the philanthropic nature of our project. If only profitability will be in focus, then we will have a culture clash. But if there is somebody who will say you know how it works because you have the experience and I understand where you're coming from, and understand your team, and what is important for you, then this would be probably a good match. We have to look at the bigger picture. But I think that the potential of this brewery is really big.

ED: What is the volume? 

SG: We have the capacity of 24,000 tons a year. That is what the machines can do. But what's interesting is that we have another project. We are building our first own special maltery. China can malt, but only with the barley from outside, and only one kind of barley malt. We have no specialty malting plants in China. For the specialty beer market, for the craft beer market, we need a lot of different kinds of malts, like chocolate malt, caramel malt, toffee malt, crystal malt. There are a lot. All these malts are imported from Germany or from Canada. It’s very expensive. So we built our own malting plant with an expert from Belgium. This year, we started to malt specialty malts. We add the specialty malts produced in China into our beers. Maybe we can also sell that to other specialty breweries.

ED: As a businessman, your specialty is finding the blue ocean in specific categories. You are not a small brewery. You're somewhere in the middle by adding specific skill sets. How much of your beer is sold in the rest of China and outside of China?

SG: I looked at my beer business as a local business. I made the mistake when we started brewing and selling beer. We got requests from all over China to send our beers to these places. I was not focusing too much on my local business. Offers came in and we started producing beer and sending it. I realised that this is because of lack of expertise. I realised that I can't control the markets in Shanghai, or in Beijing. I'm too far away. What happens is that you are not able to build a sustainable business model in these places, because China is too big. First of all, you have to focus on your home market that means Shangri-La, maybe the city Lijiang and Dali, maybe Yunnan Province. But Yunnan is already big. But this is the home market and we are selling most of our beers now in our home market. Of course, we are sending it to other places, but we are not trying to build a business there. We’re just selling the beer and sending it there. We also sell our beer in Switzerland. We have a corporation with Carlsberg. We send one to two container every year and selling it here. But the main focus is actually Yunnan.

Shaping the future of Tibet

ED: What are some of the lingering things you think, or opportunities for the Tibetan people where a social entrepreneur like yourself can make a huge difference today? What are the needs that are still there that need to be met? This may not mean anything to do with beer, but the Tibetan people in general?

SG: My mom always said and I also agree that, it's education. This is the basis. We have a lot of opportunities, in rural areas, and also in Tibetan areas. But we are lacking education. That's why she set up the orphanage. And that's why we have the brewery. This is the place where we have to start. You have to educate them, then they can develop, that they can bloom, they can really build up and set up sustainable businesses. This is where we are, and what our target is.

ED: The Chinese government did build the Qinghai University where a lot of the Tibetan people go to finish school. But you are also saying that there is still a scope for education amongst the Tibetan people?

SG: We were always happy when our kids had the chance to go to the universities. I ask “What are you studying?” I'm becoming a teacher. I'm becoming a nurse. I'm becoming a doctor. So where are the lawyers? Where are the businesspeople? Where are the IT people? No, there is no lawyers no businesspeople, no IT. There’s a general problem that so many Tibetans who have the chance to go to universities always go into something social related, which is very good. I really admire that. But I would love to see a little bit more into business, economics, in IT, and law. These are too few.

ED: But that may be a function of generation. And with wealth eventually, those choices will come. What is the next thing in your mind? 

SG: I'm very curious about the malting project. This is a big challenge. For the future, what we need for the brewery is somebody who can guide my young team. And a market specialist who understands the market in China. And on the philanthropic side, it is important. And of course the investment that he can grow or that we can grow together this business to the next level. 

ED: It’s really wonderful to be able to hear your story of a modern Tibetan, helping to build the society that you come from it, that you're a part of it. And you are also a Swiss. That’s where the precision technology thinking comes from that makes you able to succeed in cracking through the problems of brewing beer in a place like Shangri-La in Yunnan. It’s an amazing story already. Thank you very much. Thank you for this conversation.

 



Keywords: Craft Beer, European Beer Star, Shangri-la, Zhongdian, Ancient Tea-horse Road, Potala Palace, Brussels Beer Challenge, Orphanage, Budweiser, Heineken, Carlsberg, Tsingtao, Yanjing
Institution: Shangri-La Highland Craft Brewery, Children’s Charity Tendol Gyalzur, Qinghai University, Ganden Sumtseling Monastery, Rudolf Steiner
Country: China, Tibet, Switzerland, India, Mongolia, Lhasa, Germany, Belgium, India
Region: Yunnan Province
Guest: Sonny Gyalzur, Emmanuel Daniel, Freddy Stauffer
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