Boston Beer

Topics: Beer, Initial public offering, Brewery Pages: 6 (2075 words) Published: January 31, 2013
Boston Beer Company

Boston Beer Company is the maker of Samuel Adams brand beer and the beer industry’s leading craft brewer. On the year of 1995, the Boston Beer filed a registration statement with the U.S. SEC for an initial public stock. Now let’s start from the strategy direction of Boston Beer for analyzing the company. Strategies of Boston Beer Company in its beginning stage of the business were 1) outsourcing beer production facilities instead of building new facilities which requires approximately 10 million capital investment 2) marketing customers by appealing customer’s sense of patriotism in order to attack the imported beers. Boston Beer Company’s competitive advantages can be signified by sources of beer industries and its competitors. The re-reemergence of the craft breweries segment in 1990s had affected the decline of mass-produced beer companies. An increase of health and safety consciousness of beer consumers caused the market for distinctive and flavorful beers. Because of the new trend and customer needs in beer industry, Boston Beer Company was able to grow rapidly. Exhibit 1 shows the tremendous growth of U.S. craft brewing industry barrels and Boston Beer Company is a beneficiary and one of the leading companies that take the lead of the craft brewing market growth. Furthermore, Boston Beer Company’s outsourcing facilities in its early stage of the production and marketing approach to its customers lead the company to have the strategic advantage over its rival entities within competitive beer industry. Boston Beer Company’s income statement and balance sheet (Exhibit 3, 4) show the company has been growing rapidly with a significant growth of revenue and income. Notable competitors’ public stock offering transaction also strengthen the idea that set range of the stock price (10 to 15 dollars) of the company’s bankers can be adjusted to the level of its competitors (17 to 16 dollars per share) because of the growth rate of the company and its healthy financial situation. Currently, Boston Beer using dual-class structure, Class A and Class B, for its equities part. The company’s Class A Common Stock is not entitled to any voting rights, except for the right as a class to approve certain mergers and charter and by-law amendments and to elect a minority of the directors of the company. The Class B Common Stock has full voting rights. As of today, C. James Koch was the sole holder of record of all the company’s issued and outstanding Class B Common Stock. Boston Beer chosen a dual-class structure for its IPO because it would like to ensure that the firm's founders and top executives maintained control. Thus, dual-class shares satisfy owners who don't want to give up control, but do want the public equity market to provide financing. In some cases, company performance may benefit from the existence of dual-class shares. Founders often have a longer term vision than investors focused on the most recent quarterly figures. Since stock that provides extra voting rights often cannot be traded, it ensures the company will have a set of loyal investors during rough patches. On the other hand, it can be seen as downright unfair. It creates an inferior class of shareholders and hand over power to a select few, who are then allowed to pass the financial risk onto others. Normally, the existence of dual class shares would be a problem if an investor believed the disproportionate voting rights were allowing inferior management to remain in place in spite of the best interests of shareholders. For outside investors, they should always research the details of a company's share classes if they are considering investing in a firm with more than one class. Due to the sole holder of company’s Class B common stock, it means that The Class B shareholder has significant influence over the company. Mr. Koch is able to exercise substantial influence over all matters requiring stockholder approval, including the...
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