It's Now or Never for Boston Beer Company & Jim Koch – Box Brew Kits

It's Now or Never for Boston Beer Company & Jim Koch


The Current State of Sam Adams

To put it lightly, things have not been going well for Boston Beer Company lately. Over the past few years, the craft beer goliath hasn't been cranking out as much beer as they once did (Boston Beer’s total production has been down for three consecutive years), has seen revenue slow, and even decrease, and today at their 2017 Q1 earnings report, founder and chairman Jim Koch reported that Boston Beer Company is down a precipitous 14%, which is a $26.1M loss year over year. Depletions (the amount of product sold to retailers and distributors, which is a good indicator of demand) was down 14% as well...a telltale sign that they're making beer, and people just aren't buying it.


CEO Martin Roper also added, "Most of our volume declines for the quarter resulted from the underperformance of our 2017 spring seasonals, Samuel Adams Hopscape and Samuel Adams Fresh as Helles, compared to Samuel Adams Cold Snap last year. The weakness in our two new spring seasonals seems to have resulted from a combination of drinker confusion at retail, acceptability of these seasonal beer styles and the timing of our seasonal transitions compared to last year." The #2 company in craft brewing sales (including their other non-beer brands) has a lot of issues on its hands. In this beer lover's opinion, the market they once owned has been taken over by the very foundation Koch helped lay more than 30 years ago. Small, local breweries are popping up left and right, and making better beer. If they want to keep growing...or at least buoyant, something has to change.


Many may recommend, 'To right your company, you need to either join the macros, or get hyper-local like many other successful craft breweries.' And while that might be easy to say (and does make sense), doing so is just not that simple, especially for an established brewery with almost too much pride. It is possible that they don’t want to change. But, their trend-following Rebel Series and Jim Koch's attempts to explain in an Op-Ed piece how the “horizon isn’t so bright” in the craft beer world sure makes it seem like they’re at least trying to figure out what’s going on with their once unstoppable company.

Jim Koch in 2013

Founder of Boston Beer Company Jim Koch in 2013.


Their Possible Options

To sell the business to a macro brewery or operate more like one (narrow it down to a few beers and mass produce them) would be bone crushing soul-suicide. After building the company around the untouchable pillar of making craft not crap, doing anything less would be a complete degradation to all Koch and Samuel Adams stand for. Jim Koch is a pioneer in the craft beer world. A guy who made it his mission to make good tasting beer while not bowing down to the big boys. Goose Island and Elysian Brewing have gone this route with some success, albeit with stinging criticism from many in the craft beer community. I really don’t want to see this path come to fruition for Boston Beer. I doubt you do either.

The other less-sinful option is to basically “split” Boston Beer Company in half. On one side they would have beer, and on the other, everything else sold in major quantities (Angry Orchard, Twisted Tea, Truly Spiked). They would then pare down their beer offerings, and go back to being hyperlocal and focused on innovation instead of merely following trends (such as the Rebel Series following the explosion of the IPA craze). Honing in on brewing one or two great beers in Boston that match what beer drinkers are looking for should provide for them a path to...well...sort of start over.

And while I think this option is the more likely of the two, it’s arguably much more difficult. There are tons of employees to worry about, fallout from stockholders and investors, not to mention the stark fact that they just won’t be pulling in as much revenue. But despite that, a leaner approach may be the direction they need to move in, and move quickly. Jim Koch began the brand in the 80’s by hustling from bar to bar, showing off his Boston Lager. They need that energy back. Brew a great beer, show it off with pride, and cultivate a new following. It could transform their image from a stuffy company that will do anything for a buck (Truly Spiked Hard Seltzer) back to a craft brewery that brews to inspire beer drinkers. In my eyes, it’s one of the only ways to stay relevant in today’s competitive craft beer market.


Is It Boston Beer's Own Fault?

Last year I interviewed Jeremy Kosmicki, Brewmaster at Founder’s Brewing who said something very astute: “If there is a bubble it’ll be on the storeshelves. I think it will get to a point where there is a lot of saturation in the market, but I think there will always be a market for the small, local brewpubs.” These words ring very true for Jim Koch, many of whom believe is feeling the wrath of his company’s own success.

Boston Beer Company is a victim of circumstance in a crime where there is no aggressor. They grew because they were good. If your goal is to grow, you don’t not grow. But the current market of incredible, hyperlocal beer, shows that you don’t need the big boys anymore to find something great. In a world where Samuel Adams and Boston Beer built the keys, the industry changed the locks. And not for the worse either. There are more incredible craft beers and breweries out there today than ever before.

But, I’m not absolving Koch and Boston Beer completely. As early as 2015 (and likely a year or two before when sales began to tumble), he had to know something was amiss. In January 2015, a fairly telling article appeared in Boston Magazine, illustrating that while Koch was aware of some of the image issues surrounding Sam Adams beer, there was a good amount of denial and hostility that accompanied it. It’s been 2½ years since then, and the ship is still ever listing towards the whitecaps.


Even a few months ago, the current CEO Martin Roper said, "We like our new Samuel Adams packaging and our media advertising message, 'Pursue Better,' and our plans for the summer." He also mentioned that they would grow Samuel Adams once again through, "continued packaging, innovation, promotion, and brand communication initiatives." To me, this does not seem like a CEO who understands what the true issues are. If he believes that packaging and a painfully misplaced 'Pursue Better' slogan are going to help turn the company around, it's a good thing they're hiring a new CEO in 2018.


If Boston Beer wants to keep itself successful in the market, it’s going to have to break itself apart and rebuild, or become one of the big boys. And with the earnings call yesterday showing a bleak future if something doesn’t change, we may not have to wait long to see how this plays out.

April 26, 2017 by Bobby Gaglini
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