BEM106 Final Project
Brian Cleary Sarah Luxenberg Peter Seidel Bill Van de Water
May 28, 2004
Overview The Boston Beer Company has had amazing success in its transition from a small scale microbrewer to a large scale national brewery. Almost all of the company’s success is due to the Samuel Adams Lager product line, which has hardly changed from the founding of the company in 1984, to the IPO in 1995, to the present day. In fact, much of the appeal of Samuel Adams comes from its microbrew image and the founder, Jim Koch’s, commitment to the brewing process and a premium beer. In recent years, however, the company has implemented a new strategy for growth which has included introducing a light beer that will have more mainstream appeal. While this has increased profits for the company, it has also left the company vulnerable to entry by diluting its brand name. For this reason, the company’s strategy for the immediate future has to make a significant shift, from a strategy of growth to a strategy of protection. It must focus on maintaining its current profits by preventing entry both from small breweries looking to copy the BBC’s strategy and from large breweries looking to use their expansive resources to steal some of BBC’s market share.
History of Boston Beer The Boston Beer Company began as a microbrewery in Boston, Massachusetts in 1984. Its first cases of beer were only sold to Boston bars, but the company quickly branched out geographically. Fueled by awards and recognition from prestigious beer festivals, Samuel Adams Boston Lager was available on much of the East Coast by the late 1980’s and nationally by 1992. The company went public on the New York Stock Exchange in 1995. The Boston Beer Company’s strategy for growth was one of differentiation. The company created a higher quality beer than the majority of American beers by using more expensive ingredients and less water, and it used its packaging and its commercials to advertise this commitment to quality. In fact, because of its use of only barley, hops, yeast, and water as its ingredients, Samuel Adams won the honor of being the first American beer to be sold in Germany, a distinction that helped its image in America even more.
One business strategy that the company employed as it started to grow was using extra brewing space in other company’s breweries to brew their beer. Since the company was growing at a double digit rate, it didn’t have a lot of extra capital to build its own breweries, so this was a good strategy for them during their period of growth. And, since these breweries were distributed throughout the country, this strategy allowed the Boston Beer Company to maximize the freshness of the beer it sold. In fact, the now famous practice of printing a freshness label on bottled beer was started by the Boston Beer Company on its Samuel Adams Boston Lager. The company ensured quality production in these disperse breweries by hiring experienced brewmasters to oversee the contract brewing. The company also brewed some beer on its own property, both in Boston and later in a plant they purchased in Cincinnati, Ohio. In 2002, the company took a risk by introducing Sam Adams Light, a light beer version of their Samuel Adams Lager. They had never produced a light beer before, and it was Koch’s stance that the company couldn’t brew a light beer that would be up to their standards of flavor. The expanded customer base that the company would target with the sale of a light beer was too lucrative a market to ignore, however, and the light beer market was almost devoid of any Better Beers, so after three years of development Sam Adams Light was born. The advertising expenditures for 2002 increased by 25.7% or $20.6 million over 2001 due to the promotion of Sam Adams Light2, which magnified the financial risk of producing and selling it. The new beer had the short term effect of attracting new consumers to the Samuel...