Next Samuel Adams?

When the Boston Beer Company was launched, it found a unique niche as a new brewing company that was higher-end than the traditional massive beer companies, but still was sold on the national level all around the country with high revenue. Now a day, many new breweries want to expand their market to reach that national level. With the boom of craft breweries, the question remains about whether one of them can reach the level of national success that Boston Beer Company has had. At the end of the 2014 fiscal year Boston Beer Company found itself with over $903 million in revenue, and according to the Brewers Association top 50 breweries of 2014 it was ranked 5th.

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However, it might be tough for one of the many craft breweries to get to quite the level that Boston Beer Company has attained. Part of this comes from the strict regulation that is out there in order to limit entry into the national market. All but four states in the United States have a strict three-tiered structure, which separates the brewing company, distributors, and retailers. Thus, it makes it tough for one of the many new breweries to extend its market share to somewhere near the level of Boston Beer Company.

 

Consider the fact that Lagunitas Brewing Company, which is the 11th ranked U.S. brewing company and 6th ranked craft brewery, brought in revenue of $90 million last year, almost a 1/10th of Boston Beer Company. The craft brewery movement has definitely had an impact in the traditional big national beer companies, but regulations and the tons of different craft brewing companies will make it tough for one of them to reach the size of Boston Beer Company.

 

Sources:

https://www.brewersassociation.org/wp-content/uploads/2015/04/2015_Top_5011.pdf

http://www.rollcall.com/news/free_the_brews_commentary-231809-1.html#disqus_thread

11 thoughts on “Next Samuel Adams?

    • Professor I believe that Boston Brewing has reached the ideal niche in their marketplace. They appear to be a microbrewery from the outside, creating high class brews and unique products; however, they advertise and distribute on the national level similarly to the major brewers. I would love to grab some of their market share if I owned a brewery in a similar market because they are certainly raking in the profits.

    • Boston Brewing, with Sam Adams, makes itself look like a Boston-bred microbrewer. Yes, there’s a big, decked out brewery in Boston where they give tours. But the recipe came from St. Louis and the founder came from Cincinatti, and it’s right next to Yuengling as one of the largest U.S. brewers. It owns malt beverages and hard ciders, too. Marketed as a craft brew, Boston Brewing is uniquely taking slices of profit from the craft consumers and the mainstream consumers.

  1. Prof, per your question:

    While they have breweries in Ohio and PA, The Boston Brewing Company brews the majority of its beer at its original brewery in Boston, MA. Their website explains all beers are first created in Boston, where the brewers brew several test batches until they have found their perfect recipes, which portrays very similar characteristics to Microbreweries. The Boston Brewing company may have the production numbers to be a large scale brewer, but they have the production technique and marketing strategy very similar to microbreweries.

    • Unlike most of today’s microbrewers, in its early years BBC contracted out 100% of their brewing to failed/failing regional that had excess capacity. [The founder may have been from Ohio, but he was actually living in Boston.] My strong hunch is that BBC later purchased at least one of these breweries (their initial brewing was all in PA). As far as I know, very little of their brewing is done in Boston. You can glean that from their annual report, which notes their bottle contracts are for OH and PA. Their AR details hops and barley/malt contracts and many other details of their operations, including acquisitions of other microbrewers and pieces of their new product development process using a Vermont microbrewery and assorted brew pubs that don’t carry the BBC name.

  2. Legislatures all across the states are attempting to reduce these restrictions on microbreweries as their popularity increases. In most states, microbreweries are able to serve their beer on site up until they hit a certain production cap. As the microbrewery industry grows, lawmakers are starting to increase these production caps and reduce other regulations to accommodate demand.

    Source: https://www.bostonglobe.com/business/2015/04/01/states-rewrite-microbrew-laws-demand-for-craft-beer-grows/1RRaspPQ7vg3FXD9B7cJiO/story.html

  3. Microbreweries being able to reach a national market will probably become even more prevalent as the ease of advertisement through the Internet is more firmly established. When we discussed T.V. advertisements, only the largest breweries were able to benefit from the economies of scale of buying up national ad time and reaping that benefit. However, internet advertisement can reach an even wider audience with greater ease, particularly the young beer drinking demographic. A microbrewery can pay companies like YouTube a small fee, around 10 cents per view of the full 30 second ad. That means they only pay for exactly how much exposure they get, making it very cost effective for relatively smaller companies to reach a national audience.

  4. I see Blue Moon’s situation as being very similar to what Samuel Adams has done. Marketing themselves as a craft beer although they are owned and operated by MillerCoors, they have succeeded at being a large national brewery with a microbrew feel. Their advertising, similarly to Samuel Adams, stays away from the advertisement strategies of the large beer brands marketing themselves to a younger demographic and advertising their brewing process with a personal, microbrew feel. It’s been successful, but once again Blue Moon is reaping the benefits of their MillerCoors ownership through distribution, funding, and mass production capabilities. Overall, it’s a smart move on their part to tap into a niche group that their larger brands are not capturing by almost tricking the consumer.

    • Is there a limit to the number of high-volume “national” microbrews? Most of the market remains with Bud/MillerCoors, and if you subtract the Mexican brands and Boston Beer [=”Sam Adams”] and Yuengling stumble, there’s not much market share left.

      Yes, over time the specialty beer segment may grow, but won’t that lead to more competition for the 2nd tier firms such as BBC? What are their marketing costs? I suspect that they have inched up over time, and will continue to do so.

      A separate issue is the (possible) presence of industry “price points”. We’ve not looked at this in class (and Martin doesn’t address it) but isn’t Sam Adams consistently less expensive than (say) Devil’s Backbone but more expensive than Heinecken? And price points are finite – $12.99 at the top? others at $9.99 and $8.99? Of course that needs to be backed out to the price that a company gets from its state-specific wholesalers, who in turn add a margin to what Kroger pays.

      I have never seen a study that addresses this distribution chain pricing issue, and whether a brewer has pricing power [a lower price gets a distributor to push a product more] or whether it’s actually pretty competitive (a microbrewer faces a set price, if they won’t take it someone else will).

  5. Sierra Nevada seems like it would be the most likely firm to compete with the Boston Beer Company as a national small brewery. It is already a recognizable name throughout most parts of the country, at least amongst beer-drinkers. While Yeungleng is the largest of these three it does not have the same national presence and is not viewed as being as high quality as Sam Adams and Sierra Nevada. Although these two brands are nationally recognized, they are still more popular locally. Luckily being in opposite parts of the country these two brands would not be damaging to each other’s most important markets.

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