Identify important general environmental trends that has contributed to the growth of the craft beer industry.  Other sources are fine, but information must be taken from the attachments I provided.  In order to receive credit: 1. You need to answer all the questions thoroughly (~500 words) 2. You need to draw from theories and concepts rather than using common sense 3. Respond to others comments. ( I will provide their comments later) Attached:Boston Beer – This is the case studyPowerpoint – Notes describing general environmental factorsCASES
CASE
20
THE BOSTON BEER COMPANY *
The Boston Beer Company, known for its Samuel Adams
brand, is the largest craft brewery in the United States,
holding a 1 percent stake in the overall beer market.1 It
faces growing competitive threats from other breweries,
both large and small. In the past several years, the beer
industry as a whole has been on a decline, while sales of
wines and spirits have increased. The Boston Beer Company competes within the premium beer industry, which
includes craft beer and premium imported beers like
Heineken and Corona. Although the beer industry has been
on a decline, the premium beer industry has seen a small
amount of growth, and the craft beer industry has seen a
surge in popularity. Because of this success of the craft
breweries in particular the major breweries have taken
notice and many new craft breweries have sprung up.
Anheuser-Busch Inbev and MillerCoors, LLC, account
for over 80 percent of the beer market in the United
States.2 They have caught on to the current trend in the
beer industry toward higher quality beers and have started
releasing their own higher quality beers. For example,
Anheuser-Busch Inbev has released Bud Light Wheat and
Bud Light Platinum in an effort to provide quality beers to
their loyal customers. MillerCoors makes Blue Moon beer,
which is the most popular craft beer in the United States.
Anheuser-Busch Inbev released ShockTop to combat the
popularity of Blue Moon. These companies have also
begun to purchase smaller craft breweries, whose products
have been rising in popularity. Anheuser-Busch Inbev purchased Goose Island Brewing Company in March 2011.
MillerCoors has started a group within the company titled
Tenth and Blake Beer Company for the purpose of creating
and purchasing craft breweries. According to MillerCoors
CEO Tom Lang, the plan is to grow Tenth and Blake Beer
Company by 60 percent within the next three years.3 The
two major companies plan to use their massive marketing
budgets to tell people about their craft beers.
According to the Brewers Association, 1,940 craft
breweries and 1,989 total breweries operated in the
United States for some or all of 2011. While craft breweries account for over 97 percent of all the breweries in the
United States, they only produce approximately 25 percent
of all beer sold.4 However, with the rise in popularity of
premium beers, the craft breweries will continue to grab
*This case was developed by graduate students Peter J. Courtney and Eric S.
Engelson and Professor Alan B. Eisner, Pace University. Material has been
drawn from published sources to be used for class discussion. Copyright ©
2013 Alan B. Eisner.
C128 CASE 20 :: THE BOSTON BEER COMPANY
more of the market. As the country’s largest craft brewery, the Boston Beer Company had revenue of over $500
million in 2011 and sold over 2 million barrels of beer.
Other large craft breweries include New Belgium Brewing
Company and Sierra Nevada Brewing Company, which
sold over 580,000 and 720,000 barrels of beer in 2011,
respectively.5 In addition, some smaller breweries have
been merging to take advantage of economies of scale and
enhance their competitive position.
According to the Boston Beer Company, there are
approximately 770 craft breweries that ship their product domestically, up from 420 in 2006. There are also an
expected 800 craft breweries in the planning stage, expecting to be operational within the next 2–3 years. Boston
Beer Company assumes that 300 of those 800 will be
shipping breweries (i.e., breweries that sell their product beyond their local market). Thus, within the next few
years, Samuel Adams beer may be competing with over
1,000 other craft breweries around the country.
The Boston Beer Company competes not only with
domestic craft breweries but also with premium beer
imports, such as Heineken and Corona, which sell beer
in a similar price range. Like Anheuser-Busch Inbev and
MillerCoors, Heineken and Corona have large financial
resources and can influence the market. It is projected that
premium imported beers will grow by 6 percent over the
next five years.
The Brewers Association defines a craft brewery as
brewing less than six million barrels per year and being less
than 25 percent owned or controlled by another economic
interest. Maintaining status as a craft brewery can be important for image and, therefore, sales. Thus, MillerCoors
purchased less than a 25 percent stake in Terrapin Beer, still
allowing it to maintain its craft brewery status.6 The size of
the Boston Beer Company, however, is an issue. With continued growth, the brewery could potentially increase its
volume output to more than 6 million barrels per year, thus
losing its craft brewery status. Furthermore, with the size
of the company and their ability to market nationwide, the
company runs the risk of alienating itself from other craft
breweries who believe Samuel Adams no longer fits the
profile. Many craft breweries already believe the company,
which has been public since 1995, is more concerned with
making money than with providing quality beer and educating the public on craft beers.
Size does have advantages, of course, with more money
for marketing and, especially in the beer business, with
distribution. A heavy complaint for all craft breweries is
the difficulty they have distributing their product in the
current three-tier system (discussed in a later section). The
large breweries have power over the independent distributors because they account for most of their business. Thus,
they can influence the distributors and make it difficult for
craft breweries to sell their product. Because of its size,
the Boston Beer Company has fewer problems with distributors than its smaller competitors do. Consequently, the
company has less in common with other craft breweries
and more with the major breweries in regards to distribution. This is good for Boston Beer Company’s distribution,
but might be bad for its image. One brewer from The Defiant Brewing Company in Pearl River, New York, said that
The Boston Beer Company was becoming too large to be
considered a craft brewery and that their substantial connections with distributors contributed to this notion.7
As the above discussion makes clear, The Boston Beer
Company is facing a difficult competitive environment.
They are facing direct competition from both larger and
smaller breweries and from premium imported beers.
Some of the smaller craft breweries are growing quickly
and want to be larger than the Boston Beer Company.
Other craft breweries feel that the Boston Beer Company
is too large already. Thus, while further growth would be
beneficial in terms of revenue, growing too large could
negatively affect the company’s status as a craft brewery
and the perceptions of its customers. The company must
pay close attention to maintaining its image for the growing customer base of premium beer drinkers.
Company Background
Jim Koch started the Boston Beer Company in 1984 along
with fellow Harvard MBA graduates Harry Rubin and
Lorenzo Lamadrid. The company began with the sale of
the now popular Samuel Adams Boston Lager, named
after the famous American patriot who was known to have
been a brewer himself. The recipe for the lager was passed
down from generation to generation in Koch’s family, dating back to the 1860s. Koch began home brewing the beer
in his own kitchen and soliciting local establishments in
Boston to purchase and sell it. Just one year after its initial
sales, Samuel Adams Boston Lager was voted “Best Beer
in America” at the Great American Beer Festival in Denver, Colorado. In 1985 Samuel Adams grew immensely
and sold 500 barrels of beer in Massachusetts, Connecticut, and West Germany.8
To avoid the high up-front capital costs of starting a
brewery, Koch contracted with several existing breweries to make his beer. This allowed the production of the
Boston Lager to grow quickly from the relatively small
quantities Koch could brew himself. Growth continued
after that, and in 1988 the Boston Beer Company opened
a brewery in Boston. By 1989 the Boston Beer Company
produced 63,000 barrels of Samuel Adams beer annually.
The company went public in 1995, selling Class A
Common stock to potential investors. The stock was sold
at two different prices, $15 to loyal customers and $20
through an IPO run by Goldman-Sachs. Koch decided
to reward his loyal customers by advertising the stock
offering on the packages of his six-packs, estimating that
30,000 buyers would be interested. He believed that those
who enjoyed the beer and supported it should be the ones
who have a stake in the company. After 100,000 potential
investors sent checks in, Koch randomly chose 30,000.9
Managers from Goldman-Sachs were upset that they did
not receive the lowest-price offering. Koch owns 100 percent of Class B Common stock, of which all major decisions for the company are made. This is seen as a risk
to potential investors because Koch can make important
decisions on the strategy for the company without receiving approval.
Continued success for the business led to the purchase
of a large brewery in Cincinnati in 1997. Since 2000,
Samuel Adams has won more awards in international beer
tasting competitions than any other brewery in the world.
In 2008 the Boston Beer Company purchased a worldclass brewery in Lehigh, Pennsylvania, to support growth.
As of 2013, the Boston Beer Company was the largest craft brewery in the United States, brewing over two
million barrels of Samuel Adams beer, but still only made
up approximately 1 percent of the total U.S. beer market.
The company has expanded its selections to over 50 beer
flavors, including seasonal and other flavorful beers, such
as Samuel Adams Summer Ale, Samuel Adams Cherry
Wheat, and Samuel Adams Octoberfest, as well as the nonbeer brands Twisted Tea and HardCore Cider. The Boston
Beer Company planned to use the profits gained from its
non-beer brands to invest in Samuel Adams and build a
stronger portfolio. Revenue for the company grew from
$380 million in 2007 to over $500 million in 2011, while
operating costs grew from $150 million to $180 million.
Net income tripled from $22 million to $66 million in the
same period (see Exhibits 1 and 2). In July 2012, the company was selling at $113, nearly $100 over the initial public offering from 1995.
The goal of the Boston Beer Company was to become
the leading brewer in the premium beer market. As of
2013, it was the largest craft brewery, but it trailed Crown
Imports, LLC, and Heineken USA in the premium beer
market. The company planned to surpass the large importers by increasing brand availability and awareness through
advertising, drinker education, and the support of its over
300-member salesforce. The salespeople for the company
have a high level of product knowledge about beer and the
brewing process and use this to educate distributors and the
public on the benefits of Samuel Adams. In 2011 the Boston Beer Company formed a subsidiary called Alchemy
& Science to seize new opportunities in the craft brewing industry. The purpose of this group will be to identify better beer ingredients, methods for better brewing,
and purchasing opportunities for any breweries that would
help the business grow. One of these instances occurred in
CASE 20 :: THE BOSTON BEER COMPANY C129
EXHIBIT 1 Income Statements
A
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Case Financials.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
B
Income Statements
Period Ending
Total Revenue
Cost of Revenue
Gross Profit
Operating Expenses
Selling General and Administrative
Nonrecurring
Operating Income or Loss
Income from Continuing Operations
Total Other Income/Expenses Net
Earnings Before Interest And Taxes
Income Before Tax
Income Tax Expense
Net Income From Continuing Ops
Net Income
C
D
Dec 28, 2012
580,222
265,012
315,210
Dec 30, 2011
513,000
228,433
284,567
Dec 24, 2010
463,798
207,471
256,327
219,477
149
95,584
180,246
666
103,655
174,849
300
81,178
(98)
95,517
95,517
36,050
59,467
59,467
(209)
103,500
103,500
37,441
66,059
66,059
(149)
81,108
81,108
30,966
50,142
50,142
All numbers in $ thousands
Source: Boston Beer Company.
EXHIBIT 2 Balance Sheets
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Case Financials.
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2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
A
B
Balance Sheets
C
D
Period Ending
Assets
Current Assets
Cash And Cash Equivalents
Net Receivables
Inventory
Other Current Assets
Total Current Assets
Property Plant and Equipment
Goodwill
Other Assets
Total Assets
Liabilities
Current Liabilities
Accounts Payable
Short/Current Long Term Debt
Total Current Liabilities
Long Term Debt
Other Liabilities
Deferred Long Term Liability Charges
Total Liabilities
Stockholders’ Equity
Common Stock
Retained Earnings
Capital Surplus
Other Stockholder Equity
Total Stockholder Equity
Net Tangible Assets
Dec 28, 2012
Dec 30, 2011
Dec 24, 2010
74,463
36,890
44,361
6,628
162,342
189,948
2,538
4,656
359,484
49,450
27,596
34,072
14,605
125,723
143,586
1,377
1,802
272,488
48,969
23,665
26,614
12,756
112,004
142,889
1,377
2,260
258,530
88,832
62
88,894
566
4,470
20,463
114,393
67,049

67,049

3,345
17,349
87,743
72,199

72,199

3,656
17,087
92,942
128
88,541
157,305
(883)
245,091
242,553
128
47,119
138,336
(838)
184,745
183,368
134
43,876
122,016
(438)
165,588
164,211
All numbers in $ thousands
Source: Boston Beer Company.
C130 CASE 20 :: THE BOSTON BEER COMPANY
early 2012, when the group purchased Southern California
Brewing.
The company continues to invest in efficiency initiatives
to lower cost within its breweries and increase margins. One
large program that the company is employing is its Freshest Beer Program. Typically, bottled and canned beer sits
in a distributor’s warehouse for three to five weeks, while
kegs sit for three to four weeks. In an effort to reduce storage time in the distributor warehouses by approximately
two weeks and consequently increase freshness of the beer
in retailers, the company focused on better on-time service,
forecasting, production planning, and great coordination
and cooperation with distributors. In 2011 the company
had 50 percent of its beer on the Freshest Beer Program,
with the goal of expanding that number to 75 percent in
2012 by investing $50 million into the program.
While expansion and growth are more commonly
deemed positive attributes, Boston Beer Co. is aware
of the many possible risks in the growth of its business.
With the acquisition of the Lehigh brewery in 2008, the
Boston Beer Company now brews over 90 percent of its
beer from its own breweries. With capital tied up in large
investments, there was a potential for the business to falter
if an unexpected event affected one of the breweries and
halted production at that facility. The company had also
put forth a sizable investment to increase product offerings and another to keep its beer fresh during distribution.
However, with its reliance on independent distributors, a
mishap in its relationship with major distributors could
lead to complications within their supply chain. The Boston Beer Company also depended on foreign suppliers of
raw material ingredients for its beer. An unexpected shortage of a crop might lead to a drop in production volume.
In effect, the image of the company would diminish if its
products were not available to loyal fans whose enjoyment
of the brand relies on the wide accessibility of a craft beer.
With the surge of an enormous number of other craft beer
choices, customers had many options to choose from.
Industry
Although Samuel Adams was sold in other countries, the
United States was where the majority of the product was
sold and where they held the most prominence in the beer
market. Within the beer industry, Samuel Adams fell into
the craft beer category. In terms of volume of beer sold,
the Boston Beer Company was the largest craft brewery
in the country, but only the seventh largest brewery overall
in 2013. The beer market consists mainly of standard and
economy lagers, which account for nearly 75 percent of all
volume sold. Samuel Adams brand beers were more costly
than standard lagers, and were counted with the premium
beers, which together account for the other 25 percent of
all beer sold.
In 2011 there were over 200 million barrels of beer
sold in the United States. Anheuser-Busch Inbev dominated the beer industry, totaling over 48 percent of the
market. MillerCoors also had a large share of the market
at just over 30 percent. Together these two companies sold
approximately 8 out of every 10 beers purchased in the
United States. The third largest brewer in terms of volume
of beer sold was the Mexican-owned Crown Imports LLC,
which accounted for less than 6 percent of the market. As
the seventh largest brewery in the country, the Boston Beer
Company had a 1.1 percent share of the market.
Changes in Drinking Habits
The consumption habits of beer drinkers appear to have
changed in recent years. From 2006 to 2011, the beer industry as a whole declined by approximately 3 percent.10 This
was mostly due to the decline in the consumption of standard lager by 10 percent and economy lager by 3 percent.
Even though the volume of beer sold declined, the craft
brew market had in fact exploded. Within the same period,
dark ales grew by 67 percent and premium lagers grew by
27 percent. Wheat beers (a segment of dark ales) experienced an especially large growth of over 150 percent.
The Boston Beer Company brewed the Samuel Adams
Cherry Wheat beer in this category, which was one of the
company’s popular beers. According to Euromonitor International, projected beer volume sales would decline by
1 percent during 2013 to 2017, but craft beers were projected to grow by 3 percent. As shown in Exhibit 3, dark
beers, low-alcohol beers, and domestic premium lagers
were the only beer categories to grow from 2007–2011.
The Three-Tier System
In 2011, 75 percent of the volume of beer was sold at offtrade value in supermarkets, beer distributors, and such,
while the other 25 percent was sold in bars and restaurants. Despite the vast difference in volume sold, the value
of beer sold for both off-trade and on-trade were equal
because of the premium charged for purchasing beer at a
bar or a restaurant.
Breweries are not permitted to own either off-trade or
on-trade establishments, so their beer has to be distributed.
Before prohibition however, beer was sold in tavernlike
establishments called “tied houses,” which supplied and
sold their own beer. There were no regulations regarding
brewing companies owning all of the retail “tied houses”
and only selling their own beer. After prohibition, a system was put in place to discourage monopolies in the supply and sale of beer. This system was titled the Three-Tier
System and divided the beer industry into suppliers, distributors, and retailers, all independent of each other. Aside
from the brewpub, breweries cannot own retailers or distributors, thus ensuring a level of competition in the brewing industry.11
Although the three categories of the industry are separate, they each have a large influence on one another. For
instance, Anheuser-Busch Inbev and MillerCoors sell
80 percent of the beers in the country. That means that
80 percent of distributors’ volume, and consequently
CASE 20 :: THE BOSTON BEER COMPANY C131
EXHIBIT 3 Total Sales of Beer, 2007–2012 (Millions of Barrels)
A
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8
9
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Type of Beer
Amber Ale
Other Ale
Pale Ale
Wheat Beer
Other Dark Beer
Subtotal Dark Beers
Domestic Premium Lager
Imported Premium Lager
Standard Lager
Economy Lager
Subtotal Lagers
Low Alcohol Beer
Stout
Total
B
C
D
E
Total Sales of Beer, 2007–2012 (Millions of Barrels)
2007
2008
2009
2010
0.78
0.81
0.97
1.10
1.57
1.60
1.63
1.78
1.32
1.35
1.37
1.51
1.69
1.95
2.26
2.97
0.08
0.08
0.08
0.08
5.45
5.80
6.32
7.44
13.76
15.55
15.74
15.40
27.29
26.75
25.04
25.40
110.28
109.71
105.37
100.11
50.88
51.68
52.66
51.43
202.22
203.69
198.81
192.34
1.06
1.08
1.93
2.73
1.15
1.16
1.14
1.16
209.88
211.72
208.20
203.67
F
G
2011
1.11
1.94
1.73
3.30
0.08
8.17
15.58
25.71
98.07
48.85
188.21
2.57
1.27
200.21
2012*
1.12
2.09
1.86
3.70
0.08
8.85
15.76
26.03
95.60
44.40
181.79
2.41
1.35
194.40
*Author estimates.
Source: Global Market Information Database.
revenue, is from these two companies. Hence, the distributors value the business of Anheuser-Busch Inbev and
MillerCoors to a higher degree, in fear of losing their business. In an effort to maintain its dominant position in the
industry, Anheuser-Busch Inbev has contracted with several distributors on the condition that they cannot work
with any other breweries. Likewise, the other large breweries impose restrictions on their distributors on what other
breweries they can work with as well.
The distributors act as the intermediary in the beer
industry, providing the beer to retailers. The beer that is
available from retailers is a result of the products that their
distributors carry. The distributors are major decision makers for what beer taps will be available in bars, as well
as the location of beer selections in supermarkets. Small
breweries do not like the system because the distributors
are heavily influenced by the major breweries. This makes
it difficult for the small breweries to compete and achieve
growth if distributors have no incentive to treat them as an
equal business partner. Consequently, it is difficult for a
small brewery to gain widespread recognition in the industry. Despite the challenges, the Boston Beer Company had
made a name for itself and sold its beer to a network of
approximately 400 distributors.
professional breweries as well as home brewers. In 2012
more than 1,650 beers in 65 different categories were submitted. The top 10 brewers were named based on receiving
the highest overall grade in the most categories collectively. Exhibit 4 shows the top 10 brewers for 2012 according to the U.S. Open Beer Championship. The Boston Beer
Company received the second-place ribbon, an impressive
feat with so many breweries participating.12
Home brewing has become an extremely popular hobby
and in many instances has led home brewers to pursue their
passion in the form of an actual brewery. The Homebrewers Association was founded in 1978 and includes more
than 30,000 beer-enthusiastic members. Exhibit 5 shows a
EXHIBIT 4 Top 10 Brewers, U.S. Open Beer
Championship, 2012
Rank
Brewery
1
Sweetwater Brewing
Georgia
2
Boston Beer Company
Massachusetts
3
Deschutes Brewery
Oregon
4
Cigar City Brewing
Florida
Competition
5
Black Tooth Brewing
Wyoming
The Boston Beer Company mainly competes with other
beers sold in the United States. Samuel Adams belongs to
the craft beer category, which has been rapidly growing
over the last several years. The company faces competition
from other craft brewers, premium import brewers, and the
two major domestic breweries, Anheuser-Busch Inbev and
MillerCoors.
The U.S. Open Beer Championship is a highly recognized nationwide beer competition that includes
6
Niagara College
Ontario
7
Full Sail Brewing
Oregon
8
Sprecher Brewing
Wisconsin
9
Morgan Street Brewing
Missouri
Maui Brewing
Hawaii
C132 CASE 20 :: THE BOSTON BEER COMPANY
10
Source: U.S. Open Beer Championship.
Location
EXHIBIT 5 Top 10 Beer Categories in 2012
Best Beer
Best Brewery
Best Portfolio
Russian River Pliny the Elder
Sierra Nevada Brewing Company
Boston Beer Company (41 beers)
Bell’s Two Hearted Ale
Dogfish Head Craft Brewery
Dogfish Head Craft Brewery (34 beers)
Dogfish Head 90 Minute IPA
Stone Brewing Company
New Glarus Brewing Company (28 beers)
Sierra Nevada Pale Ale
Russian River Brewing Company
Rogue Ales (27 beers)
Stone Arrogant Bastard Ale
Bell’s Brewery
Bell’s Brewery (26 beers)
Bell’s Hopslam
New Belgium Brewing Company
New Belgium Brewing Company (26 beers)
Sierra Nevada Celebration
Firestone Walker Brewing Company
Sierra Nevada Brewing Company (25 beers)
Stone Ruination IPA
Deschutes Brewery
Three Floyds Brewing Company (25 beers)
Sierra Nevada Torpedo
Lagunitas Brewing Company
Goose Island Brewing Company (23 beers)
North Coast Old Rasputin
Founders Brewing Company
Great Divide Brewing Company (23 beers)
Samuel Adams Boston Lager (31st)
Boston Beer Company (11th)
Source: Homebrewers Association.
ranked list of the top 10 beers, top 10 breweries, and top 10
most diverse breweries.13
The Boston Beer Company also competes with the
noncraft breweries that sell premium imports and standard
and economy lagers. In regards to dollar sales, a list of the
top 20 beers in the United States is shown in Exhibit 6,
followed by a list of the top imports in Exhibit 7. Samuel
Adams did not crack the top 20 list.14
Sierra Nevada Brewing Company
Ken Grossman and Paul Camusi started the Sierra Nevada
Brewing Company in 1980. It is the second largest craft
brewery behind the Boston Beer Company and the 10th
largest brewery in the United States. It was also voted
the best craft brewery by the Homebrewers Association.
Sierra Nevada makes a pale ale that is the highest-selling
pale ale in the country. The company sold approximately
EXHIBIT 6 Top Dollar Sales of Beers in the United States
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Rank
1
2
3
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5
6
7
8
9
10
11
12
13
14
15
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17
18
19
20
B
C
D
Top Dollar Sales of Beers in the United States
Beer
Dollar Sales
Brewery
Bud Light
$5,327,145,000
Anheuser-Busch Inbev
Budweiser
$2,072,380,000
Anheuser-Busch Inbev
Coors Light
$1,946,762,000
MillerCoors
Miller Lite
$1,672,598,000
MillerCoors
Natural Light
$1,089,709,000
Anheuser-Busch Inbev
Corona Extra
$ 964,968,900
Crown Imports
Busch Light
$ 735,397,100
Anheuser-Busch Inbev
Busch
$ 684,463,700
Anheuser-Busch Inbev
Heineken
$ 577,453,300
Heineken USA
Michelob Ultra Light
$ 518,075,100
Anheuser-Busch Inbev
Miller High Life
$ 498,743,900
MillerCoors
Keystone Light
$ 484,396,900
MillerCoors
Natural Ice
$ 363,154,400
Anheuser-Busch Inbev
Modelo Especial
$ 331,697,700
Crown Imports
Bud Light Lime
$ 299,320,300
Anheuser-Busch Inbev
Icehouse
$ 239,119,900
MillerCoors
Bud Ice
$ 221,357,000
Anheuser-Busch Inbev
Pabst Blue Ribbon
$ 204,409,400
Pabst Brewing Company
Yuengling Lager
$ 185,332,400
Yuengling Brewery
Corona Light
$ 168,556,600
Crown Imports
Source: SymphonyIRI Group.
CASE 20 :: THE BOSTON BEER COMPANY C133
EXHIBIT 7 Top Dollar Sales of Imported Beers in the United
States (millions of dollars)
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B
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Top Dollar Sales of Imported Beers in the
United States (millions of dollars)
Beer
Sales
1
Corona Extra
$422.90
2
Heineken
$275.40
3
Corona Light
$129.10
4
Tecate
$ 95.90
5
Modelo Especial
$ 90.50
6
Stella Artois Lager
$ 67.80
7
Heineken Premium Light Lager
$ 58.30
8
Dos Equis XX Lager Especial
$ 56.40
9
Newcastle Brown Ale
$ 56.20
10
Guinness Draught
$ 47.20
11
Beck’s
$ 45.00
12
Pacifico
$ 42.70
13
Labatt Blue
$ 42.10
14
Labatt Blue Light
$ 33.40
15
Amstel Light
$ 30.20
16
Foster’s Lager
$ 27.30
17
Red Stripe
$ 24.80
18
Negra Modelo
$ 22.40
19
Dos Equis XX Ambar Lager
$ 20.40
20
St. Pauli Girl
$ 19.90
Source: Global Market Information Database, “Sales of the leading imported
beer brands of the United States in 2011,” www.statista.com.
865,000 barrels of beer in 2012 and distributes in all
50 states. Sierra Nevada was one of the earliest craft
breweries, and its founders are consequently referred to as
pioneers in the craft brewing industry. The company plans
to open another brewing facility within the next few years
to continue growth of the business. They create goodwill
by promoting the craft beer industry and by their efforts
to be environmentally friendly in their beer’s production.
One of Sierra Nevada Brewing’s goals is to overtake the
Boston Beer Company as the largest craft brewery in the
country.15
New Belgium Brewing Company
Jeff Lebesch founded New Belgium Brewing Company
in Fort Collins, Colorado, in 1991. New Belgium Brewing Company is the third largest craft brewery in the
United States behind the Boston Beer Company and Sierra
Nevada, and the 8th largest brewery in the country. The
company’s flagship beer is an amber ale called Fat Tire,
but it has over 25 different beers in production. In 2012 the
company sold over 700,000 barrels of beer and was distributed in 29 states. Over the last several years, the company has seen growth of approximately 15 percent. New
Belgium has plans to build a $100 million brewery in
North Carolina by 2015 to compete with the other major
breweries. Like Sierra Nevada, New Belgium focuses on
energy-efficient practices. New Belgium Brewing also
hopes to become the largest craft brewery in the country.16
C134 CASE 20 :: THE BOSTON BEER COMPANY
Crown Imports, LLC
Crown Imports, LLC, is a joint venture between Grupo
Modelo and Constellation Brands. Crown Imports has
a portfolio of beers that includes Corona Extra, Corona
Light, Modelo Especial, Pacifico, and others. Crown
Imports controls approximately 6 percent of the market
and has the number one import into the United States with
Corona Extra, which brought in almost $1 billion in revenue in 2012. It is the third largest brewing company in the
United States behind Anheuser-Busch Inbev and MillerCoors. The beer brands are owned by the public company Constellation Brands. Constellation owns over 200
brands of beer, wine, and spirits and had sales of almost
$3 billion in 2012. With such a large financial backing,
Crown Imports wants to remain the number one import in
the country and close the gap in market share from the top
two breweries. Due to its large amount of capital, Crown
Imports is able to advertise its brands nationally. Crown
also hosts several charitable events.17 Crown recently
started a campaign to make Corona Extra the most liked
beer in America.
Heineken
Heineken is the second largest import brewing company
and the fourth largest brewing company in the United
States. The company has had approximately 4 percent of
the market for the last several years. The company was
founded in 1873 and resides in 71 countries worldwide.
Heineken imports popular brands such as Heineken,
Amstel Light, Sol, Dos Equis, and Newcastle. The
Heineken beer alone collected more than $590 million in
sales in 2012. With Heineken’s large size and reputation,
it has the ability to advertise its products nationally. The
Dos Equis brand has grown by over 10 percent since the
popular “Most Interesting Man in the World” commercials
began airing. Most of the brands offered by Heineken are
in the price range of Samuel Adams, making them a close
competitor.18
Anheuser-Busch Inbev NV
Anheuser-Busch Inbev is one of the largest beer companies in the world, with roughly $40 billion in revenue in
2012. The brewing portion of the company remains the
largest brewery in the country and has an approximate
50 percent stake in the United States beer industry.19 They
have the two best-selling beers in the country with Bud
Light and Budweiser and the fifth best-selling beer with
Natural Light. However, they have seen the sale of their
products decline over the last several years. In an effort
to combat the lower volume of sales, they have raised the
prices of their beer.
Additionally, the company has also been witness to the
explosive growth of the craft beer industry. Although it
could never be considered a craft brewery because of its
size, Anheuser-Busch plans to make more craftlike beers,
as it has done with its brand Shock Top. They also plan
EXHIBIT 8 Map of Domestic Beer Brands*
Domestic Beers
Alcohol by volume (%)
Avg. Price for a 6 Package of Beer
Market Share
Bud Light
4.20
$4.99
0.198
Coors Light
4.20
$4.99
0.097
Budweiser
5.00
$4.99
0.074
Miller Light
4.20
$4.99
0.041
Corona Extra
4.60
$7.99
0.035
Natural Light
4.20
$3.49
0.035
Busch Light
4.10
$3.99
0.032
Busch
4.60
$4.49
0.029
Miller High Life
4.70
$3.99
0.024
Keystone Light
4.13
$3.49
0.022
Blue Moon Belgian White
5.36
$8.49
0.015
Heineken
5.00
$5.99
0.010
Samuel Adams Boston Lager
4.90
$8.49
0.009
Shock Top Belgian White
5.20
$8.49
0.008
Sierra Nevada Pale Ale
5.60
$8.49
0.008
New Belgium Fat Tire
5.20
$8.99
0.007
Yuengling Lager
4.40
$6.49
0.005
Dogfish Head Pale Ale
5.00
$8.99
0.004
Brooklyn Brewery Lager
5.20
$7.99
0.004
*Some shares are estimated due to undisclosed information.
Source: Global Market Information Database.
to invest in and purchase small craft breweries, like that
of Goose Island, which makes the popular beer 312. The
company is also not opposed to merging with other large
breweries. In June of 2012, the company was partaking in
talks with the maker of Corona to purchase the company.
The size and influence that Anheuser-Busch has pose a
threat to the Boston Beer Company because their substantial lead in available capital.
Belgian White. They have also started the group Tenth
and Blake to focus on the craft beer industry and premium
imports and plan to expand the group by 60 percent over
the next few years. Some of their other premium beers
include Leinenkugel’s Honey Weiss, George Killian’s Irish
Red, Batch 19, Henry Weinhard’s IPA, Colorado Native,
Pilsner Urquell, Peroni Nastro Azzurro, and Grolsch.20
Thinking about the Future for Beer
Millercoors, LLC
MillerCoors, LLC, is the second largest brewing company in the country, a joint venture between the Miller and
Coors brands, accounting for approximately 30 percent
of the market. They have two out of the top five most
popular beers with Miller Lite and Coors Light, and would
like to catch up with Anheuser-Busch Inbev. The company
trades publicly as Molson Coors Brewing Company and
SAB Miller, and were sold for over $40 and $2,600 respectively in July of 2012. MillerCoors would also like to push
its craft beers after witnessing the growth in the market.
They have the most popular craftlike beer with Blue Moon
The Boston Beer Company created high-quality craft
beers and sold them at a higher prices than standard and
economy lagers. It was the largest craft brewery in the
country and the seventh largest overall brewery. While
Boston Beer was delighted to be the largest craft brewery,
the goal was to become the third largest overall brewery
in the country. Brand recognition is key to any business,
and it is especially obvious in the beer industry. AnheuserBusch Inbev and MillerCoors spend enormous amounts of
capital each year to advertise their products. Due in large
part to Anheuser-Busch Inbev and MillerCoors, beer has
become synonymous with sports, and nowhere is this more
CASE 20 :: THE BOSTON BEER COMPANY C135
apparent than the Super Bowl. Anheuser-Busch Inbev was
one of the main sponsors of the Super Bowl in 2012, and
beer commercials were apparent throughout the game.
The challenge for craft brewers is to gain the attention
of potential customers while these large brewers spend a
great deal of money vying for these same consumers. One
might argue that the larger brewers’ beers do not encompass the same amount of flavor or high-quality taste as the
craft beers do, but it is hard to be heard in a crowded space.
Jim Koch and the Samuel Adams team emphasize the
amount of hops and flavor that their products have and
they want to get “better beer” to potential customers.
Boston Beer even tried to help the craft beer movement
as a whole, with the potential of hurting their own Samuel
Adams line of business. In 2008 the company sold excess
hops to small brewers who were struggling to pay for the
rising cost. Boston Beer also partnered with Accion to
provide microloans to small businesses trying to start up
breweries and to help small breweries in distress.21
Over the last several years, the craft brewing industry
has grown at the expense of standard and economy lagers.
The major breweries have taken notice and have started to
build up their craft-style beer portfolios. In the past, the
Boston Beer Company had an advantage as being one of
the only craft breweries that was nationally recognized.
With other craft breweries on a steady rise, the Boston
Beer Company has to position itself to remain in front.
Exhibit 8 shows the pricing and alcohol by volume for
popular U.S. beers.
The Boston Beer Company made an effort to move
away from contract brewing and toward brewing its own
beer with the purchase of the large brewery in Pennsylvania. They had also put a focus on growing the brand in
other countries outside the United States. In 2009 the company established a relationship with Moosehead Breweries
in Canada to expand the Samuel Adams brand presence
there. In addition, with the increase in popularity of other
C136 CASE 20 :: THE BOSTON BEER COMPANY
alcoholic beverages besides beer, Boston Beer has positioned their Twisted Teas and HardCore Cider products to
be recognized nationwide as well.
Boston Beer Company was in a tough position, as both
the smaller craft breweries and the larger breweries wanted
to compete with them. Only time will unfold whether
Boston Beer will continue to brew flavorful beers that people enjoy, in order to maintain a loyal customer base and
see continued growth in the future.
ENDNOTES
1. Global Market Information Database. 2012. The Boston Beer
Company, in alcoholic drinks (USA). February.
2. Global Market Information Database. 2012. Beer in the US. February.
3. Los Angeles Times. 2011. MillerCoors CEO Tom Long seeks growth
with craft beers. August.
4. www.brewersassociation.org.
5. Washington Times. 2012. Top Ten: Craft beers of 2011. January
6 Rotunno, Tom. October 31, 2011. MillerCoors Crafts Small Beer
Strategy. CNBC.com, http://www.cnbc.com/id/45079554
7. Personal Interview with Woody from Defiant Brewery in Pearl River,
New York, June 2012.
8. www.bostonbeer.com.
9. The New York Times. 2012. An IPO that is customer-friendly.
February.
10. Euromonitor International and author estimates
11. www.abdi.org.
12. www.usopenbeer.com.
13. The Homebrewers Association
14. Dayton Business Journal. 2012. Top 20 selling beers of 2011.
January.
15. www.sierranevada.com.
16. www.newbelgium.com.
17. www.crownimportsllc.com.
18. www.heineken.com.
19. www.ab-inbev.com.
20. www.millercoors.com.
21. Anonymous. 2008. Sharing beers: Largest craft brewer offers
scarce hops to rivals. Associated Press, April 06, 2008. In http://
www.pantagraph.com/business/article_3f06ff0a-44a8-53c2-bd1852b5e6e25977.html.
Analyzing the
External
Environment of
the Firm:
Creating
Competitive
Advantages
Chapter 2
Part 1
Copyright © 2014 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education
.
Creating the Environmentally Aware
Organization
2-2
Exhibit 2.1 Inputs to Forecasting
Environmental Scanning & Monitoring
2-3

Environmental scanning involves
surveillance of a firm’s external
environment
 Predicts
environmental changes to come
 Detects changes already under way
 Allows firm to be proactive

Environmental monitoring tracks evolution
of environmental trends
 Hard
trends – measurable facts/events
 Soft trends – estimated, probable events
Competitive Intelligence
2-4

Competitive intelligence
 Helps
firms define & understand their industry
 Identify rivals’ strengths & weaknesses
 Collect
data on competitors
 Interpret intelligence data
 Helps
firms avoid surprises
 Anticipate
competitors’ moves
 Decrease response time
 Beware
of the potential for unethical behavior
while gathering intelligence
Environmental Forecasting
2-5

Environmental forecasting predicts change
 Plausible
projections about
 Direction
of environmental change?
 Scope of environmental change?
 Speed of environmental change?
 Intensity of environmental change?

Scenario analysis involves detailed
assessments of the ways trends may affect
an issue & development of alternative
futures based on these assessments
SWOT Analysis
2-6

SWOT analysis is a basic technique for
analyzing firm and industry conditions
 Firm
or internal conditions = Strengths &
Weaknesses
 Where
the firm excels or where it may be lacking
 Environmental
or external conditions =
Opportunities & Threats
 Developments
that exist in the general
environment
 Activities among firms competing for the same
customers
The General Environment
2-7
The general environment is composed of
factors that are both hard to predict and
difficult to control:
Demographic
 Sociocultural
 Political/Legal

Technological
 Economic
 Global

1) Demographic Segment
8





Aging population (health
care industry)
Rising affluence (upscale
products)
Changes in ethnic
composition (new
marketing strategies)
Geographic distribution of
population
Greater disparities in
income levels
2) Socio-cultural Segment
9




More women in the workforce
(textile industry)
Greater concern for fitness
(exercise equipments, organic
foods)
Greater concern for
environment
Postponement of family
formation
3) Political/Legal Segment
10




Antitrust laws (i.e.
Microsoft)
Taxation laws
Deregulation philosophies
(i.e., telecommunication
industry)
Labor training laws
4) Technological Segment
11
Genetic engineering
 Emergence of Internet technology
 Computer-aided design/computer-aided
manufacturing systems (CAD/CAM)
 Research in synthetic and exotic materials
 Miniaturization of computing technologies
(smart phones)
 Wireless communication
 Nanotechnology
Downside:
 Pollution/global warming

http://money.cnn.com/video/technology/2012/09/23/t-mobile-payments.cnnmoney/
5) Economic Segment
12
Interest rates
 Unemployment
 Consumer Price index
 Trends in GDP
 Changes in stock
market valuations

6) Global Segment
13





Increasing global trade
Currency exchange rates
Emergence of the Indian and
Chinese economies
Trade agreements among
regional blocs (NAFTA, EU,
ASEAN)
Creation of WTO (decreasing
tariffs/free trade in services)

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