Boston Beer Company

BUSI 4609A
September 19, 2014

Zachary Brandt

Lauren Handforth
r!"t!na #!on
ap"tone $ro%ect
Introduct!on"
Zachary Brandt
Zachary Brandt is in his fourth year at Carleton
University enrolled in the Bachelor of Commerce
program with a concentration in Entrepreneurship. The
majority of his classes and interests are tailored
towards the supply chain management and project
management industry for future career opportunities.
His future goals and plans consist of owning and operating a project
management and consulting company that him and his father can pursue.
Zachary is a hard working student who ecels in every aspect of his education in
order to o!tain the highest return on investment and develop skills that will !e
applica!le to future opportunities. His strengths are etensive" consisting of#
hardworking" dedicated" organi$ed" punctual" professional" and goal%oriented. &n
terms of this capstone project" his strong a!ility to understand !usiness
development processes and overall strategic placements within the environment
will allow this team to develop to new levels of success. Through many of his
entrepreneurial courses" Zachary has !een responsi!le for assessing the primary
industry and developing a plan of action for future !usiness growth. The
weaknesses that Zachary portrays are his lack of financial and accounting
eperience and understanding. &n his spare time" he can !e found at the hockey
arena. He has a large interest and appreciation for hockey" as he is a referee for
the 'unior (" B" and C level as well as ((()((. He grew up playing minor hockey
developing and enhancing his teamwork and interpersonal skills that will also
contri!ute to the success of this project.
2
Lauren Handforth
*auren Handforth will !e entering her fifth year at Carleton
University in the +all as she wraps up her Bachelor of
Commerce degree with a dual concentration in &nformation
,ystems and -anagement. *auren has completed her Co%
op designation through work placements at .ttawa
Community Housing Corporation /.CH0 and the Carleton
University 1egistrar2s .ffice. (t .CH" *auren eperienced a
full cycle system implementation as the organi$ation underwent etensive
changes to its suite of !usiness management software" in addition to major
corporate restructuring. Currently" *auren holds a position with Carleton2s
Conference ,ervices department where she assists internal and eternal clients
with events planning and overnight accommodations. *auren2s greatest strengths
come in the form of communication" organi$ational" and leadership skills" which
she has demonstrated over the past four years of her degree. *auren2s passion
for people has helped her maintain a deep interest in understanding the inner
workings of a !usiness including the politics and !ehaviours that influence
successful /or lack thereof0 operations. *auren is particularly astute in
recogni$ing the strengths and weaknesses apparent in her colleagues and
school group mem!ers and shows confidence in delegating tasks accordingly. &n
terms of working in groups" *auren is working to develop more patience and to
ehi!it less concern over factors that are !eyond her control.
3
r!"t!na #!on
Cristina -ion is entering her fourth year of the Bachelor
of Commerce program at Carleton University. ,he is
currently majoring in management with a su!%
concentration in finance. &n pursuing these
concentrations Cristina has developed a considera!le
!ase of knowledge in !oth theoretical managerial
concepts and financial practices. Cristina2s strengths lie
in her presentation" writing" and group leadership skills. ,he is comforta!le
speaking in front of crowds and enjoys presenting her findings in a manner that is
!oth engaging and informative. Being in the management concentration" Cristina
has also had considera!le practice in writing and editing reports and has
developed the a!ility to effectively communicate concepts in a manner that is
succinct and understanda!le. Cristina currently holds the position of ,B,,
president" and appreciates the importance of working colla!oratively with others3
this is to prove useful in considering that the capstone project is to !e completed
in a group setting. Having taken numerous finance courses" Cristina is
comforta!le working with empirical data and analy$ing company financial reports.
The com!ination of management and finance has ena!led Cristina to develop a
well%rounded skill set that is hoped to prove useful over the course of the
semester. Cristina2s weaknesses lie primarily in her !usy schedule" which makes
it difficult for her to devote large amounts of time to work independently on the
project" as well as to meet up with group mem!ers throughout the week. (nother
weakness is her discomfort with computers" and her lack of familiarity with
4ower4oint and various research portals. &t is !elieved that in completing this
course Cristina will have the opportunity to further develop !oth her strengths
and weaknesses" while gaining an increased understanding of the role of
research and strategic planning in the corporate world.
4
&'ecut!(e Summary
The Boston Beer Company is an U,%!ased craft !rewing company that has !een
!rewing its premium lager since the 56772s. They are the country2s leading
producers of handcrafted" full%flavoured !eers" and one of few craft !rewers to
have an international presence. &n 8759" Boston Beer Co. generated sales of
:;9< million
5
.
Technology innovations provide !rewers with access to increasingly advanced
production e=uipment" ena!ling greater efficiency" and =uality control. These
continued advancements represent an opportunity for the !eer industry and the
firms that are proactive in responding to them. *ikewise" socio%cultural and
political%legal environments provide !oth an opportunity and threat for the !eer
industry. Consumer taste preferences are dependent upon geographical location
resulting in the need for !rewers to assess and understand the industry as a
whole. Eisting laws governing the alcoholic !everage industry" and the political
parties enforcing them" offer !oth opportunities and threats for Boston Beer Co..
>hile laws are necessary to ensure accepta!le standards of =uality" distri!ution
and retailing laws threaten !eer producer2s a!ility to capitali$e on consumer
demand. (merican corporate and ecise ta rates drive up costs and hinder
producers2 a!ility to compete within the market.
(n analysis of 4orter2s +ive +orces has indicated that the !rewing industry is
moderately unattractive. There are several major competitors that heighten the
level of rivalry in controlling market share. The significant amount of capital
investment re=uired to initiate operations in the industry results in a medium%level
threat of entry. &ncreasing consumer preference for wine" spirits and ready%to%
drink /1T?0 !everages heightens the threat of su!stitutes. ,uppliers of key
ingredients including !arley and hops farmers follow regulated standards for
pricing" which reduces !uyer power. The three%tier system of alcohol distri!ution
1 The Boston Beer Company" &@C. About Us. 875A. http#))www.!oston!eer.com)phoeni.$htmlB
cCD<A98EpCirol%homeprofile /accessed 7F 59" 875A0.
5
in place throughout the U, and Canada strictly governs the sale of !eer and thus
increases the power of suppliers.
&n conducting an E+E audit it !ecame evident that the !eer industry ranks a!ove
average /90 !y providing several opportunities for !rewers. (s consumer trends
change to adopt more sophisticated tastes and health awareness surrounding
the effects of alcohol consumption" players in the !rewing industry face important
decisions that impact their a!ility to remain competitive.
Boston Beer Co. manages a comple supply chain management /,C-0 function
with multiple intermediaries and distri!ution locations. ( minimal num!er of well%
esta!lished relationships with its suppliers" in addition to high transportation costs
weaken the company2s ,C-. +rom an operational standpoint" the company2s
greatest strength lies in its use of well%engineered control processes that allow
for high =uality !eer production. The company maintains an effective distri!ution
system !y keeping the majority of operating in%house" yet due to its limited
num!er of production plants" distri!ution costs are su!stantially higher than
competitors. By effectively marketing its product lines to reflect superior =uality"
Boston Beer Co. justifies its premium%pricing scheme and has helped the
company to land the leading position in the U, craft !eer market. Boston Beer
Co.2s minimal efforts to differentiate itself on any of its communication platforms
weaken the company2s customer service function.
Boston Beer Co.2s strongest secondary value chain function is its human
resources management /H1-0. By maintaining a strong corporate culture"
providing competitive compensation" and investing heavily into employee
training" Boston Beer Co.2s outstanding H1- strategy !enefits from earning the
highest revenues per employee in the industry. &nnovation and continuous 1E?
efforts in product and packaging development have assisted Boston Beer Co. to
reach competitive parity with its closest competitors. Corporate leadership at the
company has yielded a!ove average performance for Boston Beer Co. relative to
6
other players in the industry. The company2s superior understanding and
response to market signals suggests that Boston Beer Co.2s corporate leadership
function is immensely valua!le and will play a key role in furthering desired
growth of the company2s market share.
The internal environment at Boston Beer Co. presents more opportunities than it
does threats and ranks slightly a!ove the industry average with a weighted score
of 8.6;. The Boston Beer Company is relatively attractive when compared to
those competing only within the !etter !eer segment. However" when analy$ed
as a player in the entire !eer industry" the Boston Beer Company is moderately
unattractive due to its ina!ility to compete with the primary market shareholders.
Boston Beer Co. has translated its core competencies into three main product
segments. (ccording to 4orter2s generic strategies" the company2s !eer" cider"
and 1T? segments each ehi!it differentiation strategies3 the latter two !eing of
focused differentiation. By using a differentiation strategy to guide its !usiness
decisions" Boston Beer Co. has successfully reached the market leading position
for craft !eer. This is evidence that its !usiness%functional strategies are
ade=uately aligned to its corporate direction.
To implement the overarching recommendation that Boston Beer Co. must
epand" the company must ac=uire more assets" which is estimated to cost
:5.9F million per !rewing facility. ,teps must !e taken to improve the company2s
online communication channels to remain competitive on the element of
Customer ,ervice. +inally" the 1E? function should closely monitor consumer
and competitor !ehaviour and !e proactive in its developments" so that it too can
help epand the scope of the company2s operations. &f it continues to preserve an
atmosphere conducive to eperimentation and one that recogni$es its
employees" Boston Beer Co. will !e more successful in moving forward with the
proposed epansion strategy.
7
&'ecut!(e Summary )Zachary*
The Boston Beer Company is a glo!ally recogni$ed !rewing company
head=uartered in Boston" -assachusetts that has !een producing =uality craft !eer
since 5<6A. Through joint ventures" The Boston Beer Company now !rews in four
locations across the United ,tates" sells over 577 distinctive favours and is currently the
largest craft company and seventh largest !rewer in the U.,. Boston Beer Co. sold 9.A
million !arrels of !eer generating :;9< million in 8759.
&n order for The Boston Beer Company to remain competitive in the !eer industry"
it must carefully monitor its eternal environment. -any social issues such as legal
drinking ages and impaired driving laws play important roles in the a!ility for !rewers to
sell !eer. Companies within the industry must a!ide !y these rules and enforce
responsi!le drinking in order to have a good pu!lic image. Car!o (nalytics and
Biotechnology are two technologies that !rewers must take advantage of to minimi$e
spoiled !atches" as well as to alleviate the shortage of !arley and the !arley price
increases" respectively. G?4 per capita and disposa!le income also have a strong
connection with !eer consumption. The higher the G?4 and disposa!le income" the
higher the !eer consumption is in various regions across the world.
4orter2s +ive +orces are a good indicator of how attractive the industry is. >ithin
the !eer industry" rivalry is high with a score of 6)57 !ecause of many large !rewers
such as (nheuser%Busch &n!ev" ,(B-iller and Carls!erg. Threat of entry received a
mark of F)57 !ecause of the capital re=uired to !e a!le to compete with the already well%
esta!lished !rewers at the !etter !eer level and the ease of entrance at the craft !eer
level. 4ower of suppliers hold a lot of control over !rewers !ecause of the !arley
shortage and power of !uyers scored ;)57 !ecause of the low switching costs and ease
for consumers to switch !rands. ,u!stitutes received a score of ;)57 due to the variety
of su!stitutes and the pressure of consumers to switch to healthier !everages.
.verall" The Boston Beer Company is a!ove average in responding to the
eternal environment. .pportunities that are most significant are technological
advancements" the growing world population" and the increase in disposa!le income.
The threat" which has the most significance" is pressure for consumers to drink more
healthy !everages. (fter weighing the opportunities and threats" The Boston Beer
Company achieved a score of 9 on its E+E.
The Boston Beer Company2s internal environment is also comple in which it
must have a strong understanding of its strengths and weaknesses. Boston Beer Co.
has a competitive advantage in human resource management and corporate leadership
and has a competitive parity in all other value creating activities ecept for supply chain
management and operations showing competitive disadvantages. The Boston Beer
Company achieved a score of 8.6; in the internal factor evaluation" which shows it is
slightly a!ove the industry average.
&f Boston Beer Co. wishes to stay competitive in the !eer industry and remain
successful as a glo!al company it must continue its current strategy of developing
uni=ue flavours and reaching new target markets. ( recommendation for Boston Beer
Co. to increase revenues is !y ac=uiring more !rewing locations to reduce transportation
and increase inventory turnover. ?eveloping and maintaining relationships with suppliers
will ena!le The Boston Beer Co. to remain competitive. Then" to support the epansion
process" the corporate culture must correspond with the changing attitudes and promote
a strong mission and uphold the desired traditions. This process of epansion will cost
the Boston Beer Company :5.9F million per facility that is ac=uired and should !e done
immediately as the !eer industry is dynamic and forever changing.
8
&'ecut!(e Summary )Lauren*
The Boston Beer Company was esta!lished !y 'im Hoch in 5<6A and its
product portfolio has grown to include a vast selection of !eers" hard cider" and
malt%!ased 1T?s /1eady%to%?rink0 under the !rand names ,amuel (damsI"
(ngry .rchardI" and Twisted TeaI" respectively. By the end of 8759" Boston
Beer Co. sold 9.A million !arrels of !eer yielding :;9< million" and its workforce
increased !y 975 new hires to 5"588 employees.
Technology" socio%cultural" and political%legal factors hold the most weight
in the company2s eternal environment. There are opportunities to !e eploited in
technology%driven areas including supply chain management" research and
development" and manufacturing. ,ocio%cultural drivers including shifting
consumer tastes away from !eer" as well as increasing health awareness and
ethnic diversity are negatively related to alcohol consumption and threaten the
!eer industry as a result. ( strictly regulated political%legal environment centered
around the three%tier distri!ution system inhi!it industry players from engaging in
forward integration" thus limiting the a!ility to privati$e the sale of alcohol.
(n analysis of 4orter2s +ive +orces revealed that all of the forces with the
eception of the threat of entry pose a significant challenge /ranked ;)57 or
higher0 to small% to mid%si$e players and make the industry appear considera!ly
unattractive. The entrance of hundreds of new !rewers annually" in addition to a
fluctuating supply of key raw material inputs are two of the driving forces
influencing the success of the !rewing industry. Boston Beer Co. received an
E+E score of 9 indicating that its capa!ilities are slightly a!ove average in terms
of eploiting opportunities and mitigating threats. The company2s internal
environment is characteri$ed !y sustaina!le competitive advantages in 1E?" an
industry%leading differentiation strategy" and strong operational processes that
yield high returns on capital investments into manufacturing e=uipment and
=uality assurance processes. &ts weaknesses lie in high transportation and
logistics costs" in addition to limited distri!ution networks as a result of its few
and geographically dispersed manufacturing facilities. Boston Beer Co.2s &+E
score is slightly a!ove average at 8.6; indicating that its competitive strengths
outweigh its weaknesses assisting it to remain competitive in the !rewing
industry.
Currently" Boston Beer Co. ehi!its a differentiation strategy !y supplying
uni=ue" high%=uality products to select target markets. &n order to uphold its
position as the num!er one craft !rewer in the U," the company must epand its
product offerings and the num!er of !reweries it operates. To do this" it is
recommended that Boston Beer Co. ac=uire several new facilities and continue
tightening its network of suppliers and !uyers to overcome sustain its competitive
advantages in in%house operations and overcome its weaknesses in along the
supply chain. The recommended epansion strategy is estimated to cost over :5
million per ac=uisition and is epected to take five years to initiate and get
underway long enough to see lasting results.
9
&'ecut!(e Summary )r!"t!na*
10
+ab,e of ontent"
Introduct!on"2
Zachary Brandt...........................................................................2
Lauren Handforth.......................................................................3
Cristina Mion..............................................................................4
&'ecut!(e Summary...................................................................5
&'ecut!(e Summary )Zachary*......................................................8
&'ecut!(e Summary )Lauren*........................................................9
&'ecut!(e Summary )r!"t!na*.....................................................10
Introductory Summary..............................................................17
#acro &n(!ronment.................................................................20
ection !ntroduction..................................................................20
"echno#o$y %n&iron'ent "rend (na#ysis.....................................20
E=uipment................................................................................................. 22
1esearch and ?evelopment.........................................................................25
(lcohol detection and -onitoring Technologies...............................................27
*ogistics and ,upply Chain -anagement.......................................................28
Car!o (nalytics.......................................................................................... 28
Biotechnology............................................................................................ 29
?igital -arketing......................................................................................... 29
u''ary ) "echno#o$y..............................................................30
%cono'ic %n&iron'ent "rend (na#ysis........................................32
United ,tates of (merica.............................................................................32
G?4................................................................................................................ 32
Consumer Confidence........................................................................................ 35
4roductivity....................................................................................................... 35
Eport 4rices..................................................................................................... 36
Corporate Ta 1ate............................................................................................ 37
Canada..................................................................................................... 37
G?4................................................................................................................ 37
Europe...................................................................................................... 40
G?4................................................................................................................ 40
Consumer Confidence........................................................................................ 43
u''ary ) %cono'ic.................................................................43
ocio*Cu#tura# %n&iron'ent "rend (na#ysis.................................45
Consumer 4references E Taste....................................................................45
@orth (merica /U, E C(@0..................................................................................46
(sia................................................................................................................. 50
Europe............................................................................................................. 52
(lcohol and Consumer Health......................................................................54
@orth (merica /U, E C(@0..................................................................................54
(sia................................................................................................................. 56
Europe............................................................................................................. 59
@on%Governmental Bodies E *o!!y Groups...................................................61
?emographics............................................................................................ 64
4opulation Growth.............................................................................................64
4opulation ?ensity.............................................................................................65
11
-edium (ge...................................................................................................... 66
Ethnic ?iversity.................................................................................................. 67
u''ary ) ocio*Cu#tura#..........................................................+8
,o#itica#*Le$a# %n&iron'ent "rend (na#ysis.................................+9
United ,tates of (merica.............................................................................69
Governing Bodies..............................................................................................69
-arket Control -easures....................................................................................69
Ecise Ta........................................................................................................ 70
*egal ?rinking (ge.............................................................................................71
Canada..................................................................................................... 71
@orth (merican +ree Trade (greement.................................................................71
Governing Bodies..............................................................................................71
&mport Ta......................................................................................................... 72
Europe...................................................................................................... 72
European Union and @orth (merican Trade (greements..........................................72
u''ary ) ,o#itica#*Le$a#..........................................................73
#acro &n(!ronment Summary.....................................................74
Indu"try Ana,y"!"....................................................................7+
ection !ntroduction..................................................................7+
!ndustry -&er&ie......................................................................7+
Geographical *ocation................................................................................ 79
Europe............................................................................................................. 79
@orth (merica................................................................................................... 80
@orth (sia......................................................................................................... 80
.ther............................................................................................................... 80
trate$ic /rou0 Ma0.................................................................81
,orter1s 2i&e 2orces (na#ysis.....................................................85
1ivalry or direct competitors /6)570................................................................85
Heineken.......................................................................................................... 88
(nheuser%Busch &nBev.......................................................................................90
Carls!erg (),.................................................................................................... 92
,(B-iller......................................................................................................... 94
-olson Coors Brewing Company.........................................................................96
(sia................................................................................................................. 97
Canada............................................................................................................ 98
Europe............................................................................................................. 99
Threat of entry /F)570................................................................................ 100
*arge ,cale.................................................................................................... 100
Craft Beer....................................................................................................... 100
Threat of ,u!stitutes /;)570........................................................................101
4ower of ,uppliers /6)570.......................................................................... 103
4ower of Buyers /;)570.............................................................................. 106
u''ary of 5 2orces...............................................................110
3ri&in$ 2orces.........................................................................112
Entrance of @ew Brewers.......................................................................... 112
Consumer Taste 4references.....................................................................112
Consumer Behaviour................................................................................ 112
Changing ?emographics........................................................................... 112
,upply and ?emand of 1aw -aterials.........................................................113
Brand 4ositioning..................................................................................... 113
%4terna# 2actor %&a#uation 5%2%6 Matri4....................................114
12
Summary of Indu"try Ana,y"!"..................................................11+
-a,ue ha!n Ana,y"!"..............................................................119
$r!mary -a,ue.reat!n/ Act!(!t!e"...............................................122
u00#y Chain Mana$e'ent......................................................122
Hey ,elling &ndustries................................................................................123
1aw -aterials.......................................................................................... 124
*ogistics.................................................................................................. 127
Barge J >ater................................................................................................. 128
1ail Car J *and............................................................................................... 128
Truck E Trailer J 1oad...................................................................................... 128
.ther ,C- -etrics................................................................................... 131
&nventory Turnover........................................................................................... 131
?ays in &nventory.............................................................................................134
Gross 4rofit -argin.......................................................................................... 136
&nventory........................................................................................................ 138
Total (sset Turnover.........................................................................................140
Cash and E=uivalents.......................................................................................141
4roperty" 4lant" and E=uipment Turnover.............................................................142
1ecent @ews........................................................................................... 142
Conc#usion..............................................................................144
-0erations..............................................................................14+
4roduction (reas and *ocations..................................................................147
Heineken........................................................................................................ 150
(nheuser%Busch &nBev.....................................................................................152
,(B-iller....................................................................................................... 153
The Boston Beer Company...............................................................................154
1evenues................................................................................................ 154
.perating 1atio........................................................................................ 155
Energy Use.............................................................................................. 156
-anagement of Kuality.............................................................................160
-aterial >aste......................................................................................... 161
@um!er of Barrels ,old.............................................................................161
-argins................................................................................................... 165
Total .perating Epenses..........................................................................166
Conc#usion..............................................................................1++
3istri7ution............................................................................1+8
&n House or .utsourced............................................................................. 170
13
Heineken........................................................................................................ 171
(nheuser%Busch &nBev.....................................................................................172
Carls!erg........................................................................................................ 172
Conc#usion..............................................................................173
Mar8etin$ and a#es................................................................174
4roduct................................................................................................... 174
4lace...................................................................................................... 177
4romotion................................................................................................ 178
4rice....................................................................................................... 181
Conc#usion..............................................................................182
Custo'er er&ice....................................................................183
Corporate >e!site 4resence......................................................................183
Contact -ethods...................................................................................... 187
1eturn 4olicy........................................................................................... 190
Conc#usion..............................................................................191
Secondary -a,ue reat!n/ Act!(!t!e"...........................................195
Hu'an 9esources Mana$e'ent...............................................195
Employee Count....................................................................................... 195
1evenues per Employee............................................................................196
Compensation ,tructure............................................................................197
Education and Culture...............................................................................200
Conc#usion..............................................................................202
9esearch : 3e&e#o0'ent.........................................................203
@ew 4roduct &ntroductions......................................................................... 204
(lternatives# 1eady To ?rink......................................................................204
(lternatives# Cider.................................................................................... 207
4ackaging............................................................................................... 208
Conc#usion..............................................................................209
Cor0orate Leadershi0..............................................................212
14
Eecutive -em!ers.................................................................................. 213
C. 'ames Hoch /Chairman0...............................................................................213
-artin +. 1oper /4resident and Chief Eecutive .fficer0.........................................213
>illiam +. Urich /Chief +inancial .fficer and Treasurer0..........................................213
'ohn C. Geist /Lice 4resident of ,ales0...............................................................213
?avid *. Grinnell /Lice 4resident of Brewing0.......................................................214
Thomas >. *ance /Lice 4resident of .perations0................................................214
(i%*i *im /Lice 4resident of Human 1esources0....................................................214
1o!ert 4. 4agano /Lice 4resident of Brand ?evelopment0......................................215
Hathleen H. >ade /Lice 4resident J *egal and Corporate ,ecretary0.......................215
Competitors Eecutives.............................................................................215
Eecutive &nitiatives.................................................................................. 216
Company vs. &ndustry +inancial -etrics (nalysis...........................................217
-anagerial Effectiveness 1atio2s................................................................219
,tock 4rice (nalysis.................................................................................. 221
-arket Capitali$ation................................................................................. 223
Growth 1ate (nalysis................................................................................227
4erformance &ndicators.............................................................................229
@et 1evenue (nalysis............................................................................... 232
.ther &ndicators........................................................................................ 233
Conc#usion..............................................................................235
!nterna# 2actor %&a#uation 5!2%6................................................23+
Hey ,trengths.......................................................................................... 237
15
Hey >eaknesses...................................................................................... 238
;-" (na#ysis........................................................................239
Summary of -a,ue ha!n Act!(!t!e".............................................240
orporate Strate/y................................................................245
<ertica# Location.....................................................................24+
Hori=onta# Location.................................................................248
@(&C, 958587......................................................................................... 249
@(&C, AAF957......................................................................................... 250
Geographic ?iversification......................................................................... 251
!ssues .ith Cor0orate trate$y................................................253
Cor0orate trate$y 9eco''endation.......................................25+
-ission ,tatement.................................................................................... 256
Lision ,tatement...................................................................................... 257
-oving Upstream..................................................................................... 258
Bu"!ne"" . 0unct!ona, Strate/!e"...............................................2+2
!ntroduction............................................................................2+2
16
,orter1s 2our /eneric trate$ies..............................................2+2
Beer....................................................................................................... 262
Cider...................................................................................................... 263
1T?s...................................................................................................... 264
!ssues .ith Business trate$ies...............................................2++
Beer....................................................................................................... 266
Cider and 1T?s....................................................................................... 268
u''ary................................................................................2+9
2unctiona# trate$ies..............................................................270
,upply Chain........................................................................................... 270
1ecommendation............................................................................................. 272
17
&mplementation................................................................................................ 276
Cost%Benefit (nalysis........................................................................................280
.perations............................................................................................... 280
1ecommendation............................................................................................. 282
&mplementation................................................................................................ 283
-arketing and ,ales................................................................................. 284
1ecommendation............................................................................................. 288
&mplementation................................................................................................ 289
Cost Benefit (nalysis........................................................................................ 290
?istri!ution.............................................................................................. 291
1ecommendation............................................................................................. 292
&mplementation................................................................................................ 292
18
Customer ,ervice..................................................................................... 297
1ecommendations........................................................................................... 298
&mplementation................................................................................................ 299
Cost%Benefit (nalysis........................................................................................301
1esearch E ?evelopment..........................................................................302
1ecommendations........................................................................................... 303
Corporate *eadership................................................................................ 305
1ecommendation............................................................................................. 306
&mplementation................................................................................................ 307
Cost to Benefit (nalysis....................................................................................307
Summary............................................................................308
19
u00#y Chain Mana$e'ent......................................................308
-0erations..............................................................................308
Mar8etin$ and a#es................................................................309
3istri7ution............................................................................309
Custo'er er&ice....................................................................309
9esearch and 3e&e#o0'ent.....................................................309
Cor0orate Leadershi0..............................................................310
onc,u"!on..........................................................................310
B!b,!o/raphy........................................................................313
20
Append!'............................................................................324
"he Boston Beer Co'0any.......................................................324
Car#s7er$................................................................................327
(BMi##er................................................................................329
(nheuser*Busch !nBe&.............................................................331
Heine8en................................................................................334
21
Introductory Summary
The Boston Beer Company &nc." is recogni$ed as one of (merica2s prominent
!rewers of handcrafted and full flavoured !eers. 'im Hoch inaugurated the
company in 5<6A
8
. The Boston Beer Company is the largest and most illustrious
craft !rewer in the U,
9
. The !rewery has accomplished a status that only a
handful of U, craft !rewers have o!tained" national presence. The Boston Beer
Company primarily supplies the U, !eer market" !ut also provides on a limited
!asis to Canada" Eastern (sia" and Europe
A
. The !rewery !ecame pu!licly
traded under the ticker sym!ol ,(- on the @ew Mork ,tock Echange in 5<<F at
the peak of the 5<<72s craft !rewing movement
F
. The firm continues to create
new styles and flavours of !eer to entice new customers and geographical
constituencies. The Boston Beer Company owns four !reweries located in
Boston" -assachusetts" Cincinnati" .hio" ,an +rancisco" California" and
Breinigsville" 4ennsylvania
D
. Each location contri!utes to different components of
the overall production of its !eer. The Boston location serves as the company2s
test !rewery facility and supplier of the Boston market with draught !eer.
The Boston Beer Company is the largest craft !eer company and seventh largest
!rewer in the U,
;
. The !usiness held a 5N share of total !eer volumes in the U,
in 8758
6
. Unlike other craft !rewers" which only speciali$e in dark !eers" the
Boston Beer Company has esta!lished a strong presence in !oth dark !eer and
lager. The company2s sales in 8758 increased !y 57N" primarily due to increases
for (ngry .rchard" ,amuel (dams dark !eer" the .kto!erfest range" and Twisted
3The Boston Beer Company. 2013 Annual Report. (nnual" The Boston Beer Company" 8759.
4 &!id.
6 Euromonitor &nternational. Passport: Boston Beer Co INC, The In Alcoholic rin!s. 4assport"
8759.
7 &!id.
8 &!id.
22
Tea" all of which totalled more than :F67 million /U,0 in sales
<
. The Boston Beer
Company2s flagship !rand" ,amuel (dams Boston *ager" along with its light
version have ena!led the company to prosper and grow to dominate the U, craft
!rewing industry. ?uring 8759" the company sold over fifty !rands under the
,amuel (dams and ,am (dams trademarks
57
. The craft sector is eperiencing
two new !reweries opening every !usiness day which results in F77 !reweries
per year" and another 5"D77 are in the planning stage
55
. ?espite stringent
competition" the Boston Beer Company yielded :;9< million in sales for 8759
creating 975 new jo!s throughout the !rewery
58
. The Boston Beer Company is
re=uired to continuously develop new !rands and flavours in order to maintain
market share within the increasingly competitive !eer industry.
The Boston Beer company operates under the @(&C, code# 958587 J Beverage
and To!acco -anufacturing. This industry is segmented into two specific groups
with different magnitudes and capa!ilities. The first industry group includes the
large national !reweries like (nheuser%Busch &nBev and -illerCoors. The second
industry group is classified as the O!etter !eerP segment" which consists of craft"
premium and micro!reweries like the Boston Beer Company" Heineken"
Carls!erg" and Craft Brew (lliance.
9 The Boston Beer Company. 2013 Annual Report. (nnual" The Boston Beer Company" 8759.
11 &B&, >orld. IBI"#orl$ In$ustr% Report C11211&'( 'lobal Beer )anu*acturin+. &B&, >orld"
875A.
12 Euromonitor &nternational. Passport: Boston Beer Co INC, The In Alcoholic rin!s. 4assport"
8759.
23
,(9" !
%4terna# (na#ysis
24
#acro &n(!ronment
Sect!on Introduct!on
The !eer industry is dynamic and comple in that it contains many uncontrolla!le
eternal factors that influence !rewer decision%making. Brewers are faced with
changing technological" economical" socio%cultural" political%legal" and natural
environments. (nheuser%Busch &nBev and -illerCoors" which comprise the
industry leading market segment" enjoy AA.5N and 98.8N market share"
respectively
59
. The !etter !eer segment includes numerous smaller firms taking
up a smaller share of the market. This segment is seen to offer higher priced
premium !rews with uni=ue characteristics. Under the !etter !eer segment" eist
two su!%classifications3 !randed import and craft !eer. Craft !rewers and import
!rewers have similar target markets and are still a!le to o!tain si$ea!le revenues
despite selling significantly less volume than major !rewers
5A
.
The major competitors in the !etter !eer industry include Heineken" The Boston
Beer Company" Carls!erg" and Craft Brewers (lliance
5F
. (ll of these firms face
similar opportunities and threats with the eternal environment. (n environmental
scan to determine future innovations" threats" and opportunities is re=uired to
o!tain a full understanding of the !rewing industry.
+echno,o/y &n(!ronment +rend Ana,y"!"
The a!ility for manufacturers and suppliers to adapt to the changing
technological environment is critical to the future success and dura!ility of the
organi$ation. Beer distri!utors and !reweries are recogni$ing the key role that
13 Giraldo" Lanessa. "tron+ Bre,: Cra*t beers an$ -icrobre,s ,ill $ra, $rin!ers, as ,ill hi+h
.ualit% i-ports. &B&, >orld &ndustry" 875A.
14 Euromonitor &nternational. Q4assport# Beer in the U,.Q 4assport" 8759.
15 Brewers (ssociation. Bre,ers Association Releases Top /0 Bre,eries o* 2012. 7A 57" 8759.
https#))www.!rewersassociation.org)pages)media)press%releases)showBtitleC!rewers%association%
releases%top%F7%!reweries%of%8758 /accessed 7F 5A" 875A0.
25
technology plays in the future of the !eer industry and the competitive advantage
that it can !ring to operations.
-ost major advances in the industry occurred in the early 56772s when
refrigeration and pasteuri$ation were introduced" !ut today2s technological
advances deal with the !rewery e=uipment" =uality control" and the production of
raw materials. Technological change has not had a drastic impact on the industry
operations in the past five years !ut it has still contri!uted to the overall strategic
placement and differentiation of the various !rewers.
-ost !reweries are constructed with stainless steel and have advanced heating
and cooling systems to ensure =uality gates have !een achieved. (s e=uipment
!ecomes more speciali$ed to industry standards" it also !ecomes more
epensive. Constant upgrades are necessary in order to remain competitive !ut
yield decreasing returns
5D
. 4roducers must continue to invest in research and
development in order to adapt to changing consumer tastes and preferences with
respect to packaging design. The can vs. !ottle de!ate has sparked innovative
and creative designs that have !een o!tained through an increased ependiture
in research and development
5;
. Breweries are re=uired to maintain a level of
corporate social responsi!ility that involves the use of alcohol detection and
monitoring technologies to ensure =uality control and pu!lic safety. (
manufacturer that has integrated an innovative supply chain management
system will outperform competitors !y offering products at a cheaper price and
faster turnaround time. These producers have the a!ilities to improve their
!usiness practices through the elimination or reduction of inefficiencies within
their organi$ation.
16 4ontinen" 'ennifer. Q&ndustry .verview# The !eer !rewing industry.Q 8755.
17 ?ean" ,am. A$0ances in Beer Can an$ Bottle Technolo+%. 7F 5D" 8759.
http#))www.!onappetit.com)drinks)!eer)article)advances%in%!eer%can%and%!ottle%technology
/accessed 7F 59" 875A0.
26
&1u!pment . 2pportun!ty
Technology has played a considera!le role in ensuring =uality control measures
and reducing a company2s car!on footprint !y utili$ing lower energy levels. *ike
all large%scale manufacturing industries" !reweries re=uire su!stantial amounts of
capital investment. ,tills" filtration systems" !ottling lines and other machinery are
!ought when a plant is first esta!lished !ut re=uire continuous maintenance and
repair. Breweries must spend an average :AF7"777 /U,0 annually for e=uipment
upgrades in addition to the initial start%up costs" which can !e in the multimillions
for some facilities
56
.
Breweries spend :.A8 /U,0 in e=uipment upgrades for every dollar spent on
la!our
5<
. The amount of capital spending varies each year and !y the si$e of the
plant. Technological developments have influenced the production process with
AFN of !rewers now employing fewer than 87 employees
87
.
(s seen in the graph !elow" the capital intensity of the !rewing industry is much
larger than manufacturing or the entire economy. (n industry that invests .9 units
per la!our is found to !e high and the !eer industry re=uires over .A units per
la!our investment.
18 Coffey" Brenan. "a- A$a-s Creator Beco-es Billionair as Cra*t Beer Rises. 7< 7<" 8759.
http#))www.!loom!erg.com)news)8759%7<%7<)sam%adams%creator%!ecomes%!illionaire%as%craft%
!eer%rises.html /accessed 7F 59" 875A0.
27
Economy Manufacturing Breweries Row 4
0
0.1
0.2
0.3
0.4
0.5
Ca0ita# !ntensity
Ca0ita# units 0er #a7our unit
,ource# &B&, >orld
85
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,ource# Mahoo +inance
88
21 &B&, >orld. 'lobal Beer )anu*acturin+. &B&, >orld" 875A.
22 Mahoo finance. Capital 12pen$iture. 7F 57" 875A. http#))finance.yahoo.com)=)cfB
sC,(-Eannual /accessed 7F 59" 875A0.
28
(s shown from the graph a!ove" the !rewers who invest the most into capital
ependitures to o!tain new technologies and operating processes have a
compara!le market share growth.
&n addition to capital ependitures on e=uipment" technology has reduced energy
consumption. -anaging energy costs leads to improved efficiency that will allow
for long term cost savings" lower GHG emissions and improved competitive
position
89
. 1efrigeration generally creates the largest electrical load" while
!rewing consumes the largest amount of natural gas" for heat. The energy can
!e regulated throughout a !rewery in two primary units# thermal energy and
electrical energy. Energy profiles are also heavily regulated and violators are
taed and scrutini$ed heavily.
(s shown !elow" there is a strong correlation !etween electrical cost and !arrels
produced. This outlines the importance for !rewers to develop cost efficient and
energy efficient e=uipment to increase return on investment. The introduction of
e=uipment provides !oth an opportunity and threat for the !eer industry.
&mproved e=uipment is an opportunity !y !eing a!le to reduce energy levels"
improve =uality control inspections and the overall efficiency and effectiveness of
the !oiling e=uipment. The threats that eist with new e=uipment is the a!ility for
the government to normali$e and monitor production. &n addition" there is a
su!stantial increase in costs to ensure the specific !rewer is following industry
standards and maintaining market share !y constantly improving production
methods.
23 Brewers (ssociation. 1ner+% Usa+e, '3' Re$uction, 1**icienc% an$ loa$ -ana+e-ent
-anual. 875A.
http#))www.!rewersassociation.org)attachments)7775)5F97),ustaina!ilityREnergyR-anual.pdf
29
'
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y
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)
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0
1000
2000
3000
4000
5000
6000
%ner$y Cost &s. Barre#s ,roduced "rend
E%ectrica% #ost
+ue% #ost
Barre%s ,ro-uce-
Cost 5>6
,ource# Brewers (ssociation
8A
3e"earch and 4e(e,opment . 2pportun!ty
Companies are continuously finding new ways to attract consumers and meet
demand for long%lasting cold !eer. -illerCoors has led the industry in satisfying
this demand with the introduction of the Coors *ight cold certified can that has
won the interest of consumers. .ther !reweries are not far !ehind !y researching
and developing newer technologies to maintain the fresh and cold taste that the
!eer consumers prefer.
&n addition to the cold certified technology improvements" !rewers have ena!led
the use of !etter vents that esta!lish a widened mouth and faster consumption.
The Boston Beer Company is rolling out with its Boston *ager in the ,am Can
that has a wider lid for more airflow into your mouth" which will increase the
olfactory eperience for consumers
8F
. +urther development has !een introduced
24 Brewers (ssociation. 1ner+% Usa+e, '3' Re$uction, 1**icienc% an$ loa$ -ana+e-ent
-anual. 875A.
25 ?ean" ,am. A$0ances in Beer Can an$ Bottle Technolo+%. 7F 5D" 8759.
http#))www.!onappetit.com)drinks)!eer)article)advances%in%!eer%can%and%!ottle%technology
30
!y the 4ennsylvania2s ,ly +o !rewery of
their 9D7 lid that ena!les the consumer to
take the entire lid off the can rather than
dealing with varia!le vents and wide
mouths. 1esearch is also !eing done to
improve aesthetic appeal and packaging
as they work to generate greater !rand awareness. Budweiser is updating their
cans to !e pinched in the middle" so that it can resem!le the company2s !owtie
logo. -iller *ite and Coors *ight are now availa!le in a F.; litre draft !eer unit
called OHome ?raftP that allows consumers to keep !eer on tap in their
refrigerator. .nce opened" it stays fresh for 97 days" which is a drastic
improvement from the 9%day turnaround period for standard kegs. (lso" some
!rewers have also !egun to use cans made with aluminum that are in the shape
of a !eer !ottle. Craft !rewers" with fewer financial resources" struggle to
implement innovations of this magnitude !ut reali$e spinoff !enefits from the
investments of larger companies.
,ource# Kuart$
8D
26 ,tephenson" 4hilip (. Beer cans are *inall% +ettin+ the creati0e $esi+ns the% $eser0e.
@oveme!er 85" 8759. http#))=$.com)5A6;;A)!eer%can%design%is%officially%a%thing) /accessed 7F
59" 875A0.
31
1esearch and development has contri!uted to new innovations and opportunities
for the entire industry. @ew designs and features will allow !rewers to market
their product more effectively and continue to gain market share.
A,coho, detect!on and #on!tor!n/ +echno,o/!e" 5 2pportun!ty and +hreat
&n addition" the consumption of alcohol has !een regulated due to the increase
use of &? technology that either permits or refrains a consumer from entering a
!ar or purchasing alcohol. (ccording to the 8758 @ational ,urvey on ?rug Use
and Health" a!out <.9 million (mericans !etween the ages 58%87 report current
alcohol consumption3 this represents 8AN of this age group for whom alcohol
consumption is illegal
8;
. ,ince the 8778 @ational ,urvey on ?rug Use and
Health" consumption of alcohol has dropped almost <N
86
.
27 +oundation for advancing alcohol responsi!ility. Un$era+e rin!in+ Research. 8758.
http#))responsi!ility.org)underage%drinking)underage%drinking%research /accessed 7F 59" 875A0.
28 &!id.
32
,ource# +oundation for (dvancing (lcohol 1esponsi!ility
8<
Lo/!"t!c" and Supp,y ha!n #ana/ement . 2pportun!ty
The supply chain is etensive and dynamic in the !eer industry and re=uires
constant focus and attention to detail. Technology has supported the
improvement of enterprise resource planning systems and just in time delivery
29 &!id.
33
methods. ?ash!oards have !een designed to allow workers to visuali$e the
entire process and identify !ottlenecks hindering success. Technology in the
supply chain system has enhanced time and inventory management.
arbo Ana,yt!c" 5 2pportun!ty
&n recent years" a num!er of innovations have come to the !rewing industry. .ne
of these emerging trends is Car!o (nalytics" which is the utili$ation of la!%on%chip
technology used during the !rewing process
97
. The technology is used to analy$e
and separate the sugars involved during the fermentation process and allows
!rewers to actively monitor the !atch. This allows !rewers to detect poorly
!rewed !atches of !eer prior to completion" ena!ling them to fi the pro!lem
during the !rewing process as opposed to having to dispose of the entire !atch
once it is completed
95
. This innovation aids in cost reductions for !rewers
!ecause it allows them to carefully monitor their production and reduce waste. &t
also supports consistency in customer !rand perception.
B!otechno,o/y 5 2pportun!ty
Using !iotechnology to maimi$e the !reakdown of !arley into sugars and starch
using en$ymes has offset the shortage in !arley. Genetically modified foods are a
common form of !iotechnology which allows manufacturers to make up for
shortages" however not all regions of the world are accepting of these types of
foods /i.e. Europe0. Biotechnology can !e used to create en$ymes that can last
longer in the heating process decreasing the amount of wasted !arley
98
. This
allows !rewers to purchase less !arley and optimi$e their !arley consumption"
reducing overall production costs. Biotechnology can alleviate the worry on grain
and !arley production !y creating a constant supply to compensate for the
growing demand of !eer.
4!/!ta, #ar6et!n/ 5 2pportun!ty and +hreat
30 Hughes" &vy. QCar!o (nalytics.Q 8758. /1etrieved 7F.59.5A0
31 &!id.
32 &!id.
34
?igital marketing and media has created a world of !usiness that is no longer in
the hands of the owners !ut rather" the consumers. By sharing eperiences"
consumers can either ruin or elevate the firm2s reputation. &n this way" digital
marketing presents !oth an opportunity and threat. The opportunity eists when a
firm uses social media to promote products" which !ecomes increasingly
effective as the num!er of social media users continues to increase /see !elow0.
( threat eists when a firm offers a product that does not meet consumer needs
or demands and is ridiculed online for the lack of customer service or product
usefulness.
,ource# Tech Crunch
99
Summary 5 +echno,o/y
.verall" the introduction of new and innovative technology provides several
opportunities and threats for the !eer industry. (fter fully analy$ing the new
technologies that are !eing introduced" it is evident that technology provides a
!right future for the !eer industry. Brewers are currently developing new and
innovative containers and product packaging that meet consumer demand for
colder" !etter tasting !eer. &n addition" technology provides a promising outlook
for the =uality control measures that !rewers are constantly re=uired to monitor
to ensure consumer safety and regulation. Technology has also made the
33 Constine" 'osh. 4aceboo!5s 62: )ontl% Users up 217 898 to 1.1/B, ailies up 2:7 to
;<<), )obile -onthlies up /17 to =1<). 'uly 8A" 8759.
35
efficiency of owning and operating a !usiness easier !y implementing supply
chain technologies that analy$e and organi$e every detail of the logistics
re=uired. ,ocial media and digital marketing has presented an opportunity for the
firm that meets consumer needs and overall market satisfaction. Biotechnology
has allowed the stress of raw material shortages to !e mitigated and the firms
that take advantage of this opportunity will eperience economies of scale in
terms of price and constant production. 4rovided !elow is an overall assessment
of the threats and opportunities provided !y technology developments.
2pportun!t!e" +hreat"
Better Can ?esigns &ncreased Costs
Better Bottle ?esigns &ncreased consumer demands
-ore features -ore regulation
Trendier cosmetics Higher epectations
&mproved supply chain system @egative (dvertising
&mproved =uality control measures *ower drinking rates
-ore efficient e=uipment
?ifferentiation
@ew leader in production
&ncreased word of mouth
(!ility to manufacture demand
Better storage and tracking
36
&conom!c &n(!ronment +rend Ana,y"!"
Un!ted State" of Amer!ca
GDP Opportunity
Gross ?omestic 4roduct represents the total dollar value of goods and services
produced over a specific time period" and offers an accurate representation of
their overall performance in a given year. Countries that eperience higher levels
of G?4" and real G?4 growth" are seen to have healthy" prospering economies.
Higher levels of G?4" and G?4 growth" are positively correlated with greater
consumer well!eing and discretionary income. &n considering the elastic nature
of the demand for alcoholic !everages" specifically craft !rews" the level of
discretionary income is highly indicative of !rewers2 success within a market" as
disposa!le income must !e relatively high in order to reali$e potentially strong
profits within a nation
9A
.
The U, has !een the world2s largest economy since 56;5" with an end of year
G?4 of :5;D.; !illion in 8759. (s seen in the graphs !elow" the U, has
eperienced increasing real G?4 per capita rates over the past five years and is
forecasted to have continued positive real G?4 growth over the net five years
into 875<
9F
.This growth has !een associated with advances in technology"
innovation" and la!our productivity
9D
. (merican !rew companies can capitali$e on
these advancements" while the growing levels of discretionary income offer the
opportunity for increased revenues as consumers are more willing to spend on
non%essential craft !eer products.
34 &nvestopedia. /875A0. In0estope$ia. 1etrieved 7F 7F" 875A" from
http#))www.investopedia.com)terms)r)realgdp.asp
35 Ta!orda" '. /875A0. Tra$in+ 1cono-ics . 1etrieved 7F 7D" 875A" from
http#))www.tradingeconomics.com)united%kingdom)gdp%growth
36 &nvestopedia. /875A0. In0estope$ia. 1etrieved 7F 7F" 875A" from
http#))www.investopedia.com)terms)r)realgdp.asp
37
1eal G?4 in the U,
,ource# Trading Economics
9;

38
2013.0 2014.0 2015.0 2016.0 2017.0 2018.0
0
1
2
3
4
> 9ea# /3, /ro.th 2orecast
?ear
/ro.th ,ercenta$e
,o
urce# The Economist &ntelligence Unit
96
9<

(lso associated with G?4 is the unemployment rate. (s G?4 increases" the
unemployment is seen to drop. The U, unemployment rate has continued to
38 &ntelligence Unit" T. E. /875A0. The 1cono-ist Intelli+ence Unit. 1etrieved 7F 7;" 875A" from
http#))country.eiu.com.proy.li!rary.carleton.ca)article.aspB
articleidC598565595DECountryCUHEtopicCEconomyEsu!topicC+orecastEsu!su!topicC+orecastS
summary
39
drop !y an increasingly large percentage since 8776. This decline indicates
growing strength in the economy and further supports growing discretionary
income forecasts
A7
.
A5
Consumer Confidence - Opportunity
&n conjunction with the growing G?4" consumer confidence has also
demonstrated continued growth over the past five years. This confidence refers
to the way in which consumers view their personal finances" the present
economy" and its epected long%term strength. Consumer confidence in the U, is
currently residing just !elow the five year high of 6F.5 &nde 4oints" at 65.7 &nde
4oints
A8
. This represents an opportunity for craft" and premium !rewers" whose
higher price points re=uire a positive consumer outlook on discretionary
spending.
40 &!id.
41 &!id
42 &!id.
40
A9

Productivity - Opportunity
The United ,tates2 level of productivity" the real value output produced !y a unit
of la!our during a certain time" has !een steadily increasing over the past five
years. The country2s level of productivity currently sits just !elow the five year
high of 57;.D &nde 4oints" at 57D.F; &nde 4oints
AA
. +or manufacturing firms
located in the U," higher levels of productivity indicate greater value returns per
dollar spent and allow for an increased competitive edge within the glo!al
market.
,o
urce# Trading Economics
AF
43 &!id.
44 &!id.
45 &!id.
41
Export Prices Threat
Eport prices refer to the rate of change in the prices of goods and services sold
!y residents of that country to foreign !uyers. U, eport prices reached an all%
time high in 875A at 59F.9 &nde 4oints
AD
. Boston Beer Company2s manufacturing
plants are all located in the United ,tates and its products are eported to
multiple continents. (s eport prices rise" the a!ility to maintain a competitive
price point in the glo!al market !ecomes increasingly difficult and further
threatens the a!ility of !rewers to compete against the market leaders" most of
whom possess international manufacturing plants.
A;

Corporate Tax Rate Threat
The United ,tates2 corporate ta rate has remained consistent over the past five
years. The country possesses the second highest corporate ta rate in the world
at A7N" nearly ;N higher than that the net highest rate
A6
. ( high corporate ta
rate means fewer funds availa!le for !usinesses to reinvest in their firm. This
makes it increasingly difficult for (merican !rewers to compete glo!ally
46 &!id.
47 &!id.
48 H4-G. /875A0. >P)'. 1etrieved 7F 7;" 875A" from
http#))www.kpmg.com)glo!al)en)services)ta)ta%tools%and%resources)pages)corporate%ta%rates%
ta!le.asp
42
considering the capital%intensive nature of the industry" and the increasing
demand for innovation
A<
.
anada
GDP Opportunity
Canada2s G?4 has demonstrated a positive growth trend over the past five
years" with sta!le growth since 8758. This growth is epected to continue to
8756" and indicates favoura!le economic conditions for the country
F7
.
(ccompanying this trend is a continued rise in disposa!le income" and a
decreasing unemployment rate as seen in the graphs !elow
F5
. The com!ination
of these factors makes Canada an opportunistic market for the non%essential
products of !rewers.
1eal G?4 in Canada
49 Euromonitor. /875A0. 1uro-onitor International . 1etrieved 7F 7;" 875A" from
http#))www.euromonitor.com)!eer%in%spain)report
50 Hnoema. /875A0. >noe-a #orl$ Atlas ata . 1etrieved 7F 7;" 875A" from
http#))knoema.com)atlas)United%Hingdom%of%Great%Britain%and%@orthern%&reland)G?4
43
,ource# Hnoema >orld ?ata (tlas
F8
2013.0 2014.0 2015.0 2016.0 2017.0 2018.0
0
0.5
1
1.5
2
2.5
3
3.5
4
Canada 9ea# /3, /ro.th 2orecast
?ear
/ro.th ,ercenta$e
,ource# The Economist &ntelligence Unit
F9
52 Hnoema. /875A0. >noe-a #orl$ Atlas ata . 1etrieved 7F 7;" 875A" from
http#))knoema.com)atlas)United%Hingdom%of%Great%Britain%and%@orthern%&reland)G?4
summary
44
FA

FF

There have also !een continuous monthly increases in consumer spending over
the last five years. This trend demonstrates greater willingness of consumers to
purchases non%essential goods" potentially translating to increased demand" and
revenue" for the craft !rewers industry.
54 &!id.
55 &!id.
45
FD

&urope
(s the world2s seventh largest economy" the UH is used in the proceeding
analysis as a proy for Europe and its economy.
GDP Opportunity
The G?4 for Europe has demonstrated greater volatility than @orth (merican
markets over the past five years. >hile growth has !een positive" no visi!le trend
was evident until 8759. &n 875A" the growth rate demonstrated more sta!le
growth" plateauing at a historically moderate growth rate of 7.6N. &t is epected
that the G?4 growth rate will remain positive" increasing !y approimately 7.9N
over the net five years
F;
. This positive G?4 growth" and its corresponding
market implications" indicates favoura!le economic conditions and the
opportunity for epansion of craft !rewers in Europe.
56 &!id.
57 &!id.
46
F6

2013.0 2014.0 2015.0 2016.0 2017.0 2018.0
0
0.5
1
1.5
2
2.5
3
3.5
4
>@ 9ea# /3, /ro.th 2orecast

?ear
/ro.th 5A6
,ource# The Economist &ntelligence Unit
F<
58 &!id.
summary
47
D7

The unemployment rate for the UH has seen steady decline since 8758"
indicating an opportunistic jo! market and increased circulation of money
D5
. This
is an opportunity for The Boston Beer Company in that as the availa!ility of jo!s
and consumer income increases" so does its potential market !ase.
D8

61 &!id.
62 &!id.
48
Consumer Confidence Threat
?espite positive G?4 growth" decreasing unemployment rates and relatively high
levels of discretionary income" consumer confidence throughout most of Europe
remains relatively low. Consumer confidence levels in the UH have !een
negative over the past five years. 1eaching an all%time low in 877< at %9< &nde
4oints" consumer confidence has since increased to %9" !ut still remains well
!elow @orth (merican levels
D9
. This indicates a pessimistic outlook on personal
finances and the economy" and threatens the success of non%essential craft !eer
products throughout Europe.
Summary 5 &conom!c
(s indicated a!ove" the current markets offer a variety of economic opportunities.
(ll markets currently demonstrate favoura!le G?4 growth" a declining
unemployment rate" and improved discretionary income levels. (s such" the !eer
industry has the opportunity to eploit consumers2 a!ility and willingness to spend
on higher priced" non%essential alcohol products. (n increase in productivity was
also o!served in the United ,tates and offers the opportunity for greater value
63 &!id.
49
production" allowing !eer producers to generate greater revenues or eercise
more competitive pricing.
Economic threats to !rewers are increases in eport taes" and high corporate
ta rates inherent to the U,. These rates drive up manufacturing prices and
diminish potential reinvestment funds" making it increasingly difficult to play
against major industry players throughout the glo!al market. &t also threatens
their a!ility to maintain premium production facilities" and remain adapta!le to
changing market trends.
2pportun!ty +hreat
G?4 /?iscretionary &ncome"
Unemployment 1ate" Consumer
,pending Ha!its0
Eport Taes
4roductivity Corporate Ta 1ates
Consumer ,pending
50
Soc!o.u,tura, &n(!ronment +rend Ana,y"!"
Beer made its emergence some 58"777 years ago alongside the development of
cereal agriculture
DA
. Ever since" !eer has infiltrated society as one of the most
popular alcoholic !everages. (t various points in history" !eer has played
important roles in different capacities. &t has served as a source of nutrition and
as a thirst =uencher" as a religious item of worship" a medicinal therapy" and has
!een proven to enhance =uality of life when consumed in moderation
DF
.
@onetheless" social and cultural trends continue to change on a glo!al scale and
impact attitudes towards !eer and alcohol consumption. The !rewing industry is
most affected !y socio%cultural trends including changes in consumer
preferences and taste" increasing health awareness" and the emergence of large
!ody @G.s and lo!!yist groups.
on"umer $reference" 7 +a"te
+rom 8758 to 875;" glo!al alcoholic drinks consumption is epected to rise !y
5FN to 8F.A !illion liters of pure alcohol
DD
. 4reference for !eer over wine and
spirits varies considera!ly !etween regions" depending on the culture and
traditions. The percentage of recorded alcohol consumption per capita is
illustrated in the graph !elow.
64 History Channel. #ho In0ente$ Beer? 'anuary 6" 875A. http#))www.history.com)news)ask%
history)who%invented%!eer /accessed -ay 59" 875A0.
65 &!is.
66 Cunnington" 'eremy. 'lobal Alcoholic rin!s Consu-ption Beco-es )ore 1clectic. .pinion "
Euromonitor &nternational" 8759.
51
,ource# >orld Health .rgani$ation
D;
Here it is evident that !eer and spirits dominate consumer preferences in the
market for alcohol across the glo!e. (s alcohol consumption continues to rise"
trends in consumer taste are also moving. Tastes are shifting away from !eer"
making spirits and Cider)4erry the two main !eneficiaries
D6
. Consumers also
perceive !eer as less eotic than su!stitutes like wine and spirits" which is
slowing industry sales" even as consumers show a significant interest in premium
and craft !eer
D<
. ?espite the rise in consumer preference for alternatives to !eer"
in 875; it is predicted that !eer will still !e the world2s most popular alcoholic
drink
;7
.
North America !" # CAN$ Opportunity and Threat
Changes in consumer taste !uds are a trend affecting the distri!ution and sale of
different alcohol types across the @orth (merican continent. &n 8757" F5N of
67 >orld Health .rgani$ation. 'lobal "tatus Report on Alcohol an$ 3ealth 201@. Geneva# >orld
Health .rgani$ation" 875A.
69 &B&, >orld. IBI"#orl$ In$ustr% Report 31212 Bre,eries in the U". &B&, >orld" 875A.
52
recorded alcohol consumption in Canada took the form of !eer" while spirits and
wine were split relatively evenly among the rest. &n the United ,tates" eactly
F7N of recorded alcohol consumed was !eer" while just over 97N was in spirits"
and the remainder in wine
;5
. ,ee the graphs !elow for a depiction of alcohol
consumption !y type in !oth of the two @orth (merican countries.

;8
4ostmodern consumerism characteristic of the @orth (merican population has
lessened the value of the one%si$e%fits%all alcoholic drinks category and
heightened consumer interest in more nostalgic alcohol products. U, consumers
are ehi!iting new consumption ha!its with preference for certain value%added
products. These products are associated with certain stories or folklore" premium
positioning" and sophistication that today2s consumer finds appealing
;9
.
-icro!rews" craft !eers" limited edition drinks" and !onus gift packs are
eamples of some products that fall into this value%added category.
72 &!id.
73 Euromonitor &nternational. Alcoholic rin!s in the U". &ndustry .verview" Euromonitor
&nternational" 8759.
United ,tates Canada
53
(side from product differentiation" consumer demand is !eing shaped !y
innovations in flavoring. The alcoholic drink industry is more capa!le than ever in
catering to the specific tastes of certain demographics such as women and
millennia2s" whose respective preferences include more approacha!le flavor
profiles /e.g. sweeter0" or newer" wilder flavors
;A
. The !rewing industry has
caught on and is adapting to this trend as the craft !eer category has !egun to
satisfy consumer demand for innovative flavor
;F
. &n Canada" the stereotype of
!eer !eing predominantly a man2s !everage remains unchallenged
;D
. However"
!eer marketers have engaged in product development initiatives that are focused
on lighter and flavored !eers to epand product reach to the female
demographic.
4remiumi$ation is also a key theme in consumer taste across all major alcoholic
drink categories in @orth (merica. (s the market !egan to recover following the
Great 1ecession of 8776" increases in disposa!le income prompted consumer
indulgence in higher%priced" premium alcohol
;;
. This hike in per capita spending
in the U, is illustrated in the graph !elow.
74 Euromonitor &nternational. Alcoholic rin!s in the U". &ndustry .verview" Euromonitor
75 &!id.
76 Euromonitor &nternational. Beer in Cana$a. Euromonitor &nternational" 8759.
54
,ource# &B&, >orld
;6
?espite forecasted increases in the sale of premium alcohol products" the !eer
industry will continue to struggle in this regard as consumers trade up and save
for premium !rews. This implies that revenues in the U, !eer industry will no
longer !e driven !y sales of traditional" light (merican !eers" !ut from consumers
em!racing dark /usually craft0 !eers and premium lagers
;<
. The same is true in
Canada" where the trend towards launching more light !eers !y major !rewers
has failed to reverse the overall drop in !eer consumption. &n fact" primarily craft
!reweries" most of which do not emphasi$e light !eer development" drive sales
of !eer in Canada
67
. This is an indication that Canadian consumers are
prioriti$ing uni=ue taste and !ody =ualities characteristic of darker" craft !rews
while making !eer purchases.
Therefore" consumer taste in Canada and the United ,tates present !oth a threat
and opportunity for the !rewing industry. +irms that can meet the desired tastes
78 &B&, >orld. IBI"#orl$ Business 1n0iron-ent Report Per Capita 12pen$iture on Alcohol. &B&,
>orld" 8759.
79 &!id.
55
and flavors of Canadians and (merican will differentiate and lead the market. The
firms that do not tailor their flavors towards consumer demands will !e left
!ehind.
Asia Opportunity and Threat
(sia 4acific is the largest alcohol%consuming region" which is driving the
epected increase in glo!al alcohol consumption
65
. The shift away from !eer
towards alternate forms of alcohol is felt less in (sia than in the @orth (mericas.
&n fact" !eer in emerging (sian nations is epected to fare well against cider"
wine" and spirits" which are generally sold at a higher price
68
. (n illustration of
recorded alcohol consumption in China /to serve as a proy for (sia0 is depicted
!elow.
69
The pie chart a!ove is a key indicator that spirits still remain as the most
commonly consumed alcoholic !everage type in China. The resilient Chinese
market characteri$ed !y rising incomes and an increasingly westerni$ed diet will
875A.
h!na
56
!e a major driver of growth in the !eer industry
6A
. Changes in dietary ha!its"
lifestyle" and for fashion reasons mean that demand for !eer is epected to grow
strong" with young Chinese drinkers opting for !eer in place of traditional" spirit%
!ased drinks
6F
. &mproving living standards also ena!le new consumers to join in
the !eer intake" such as those who are influenced !y >esterni$ed culture and
prefer to have a drink in !ars or pu!s after work or on their leisure time
6D
.
1egardless of alcohol type" (sia follows much the same consumer taste trends
outlined for the @orth (merican region.
Consumer preferences for innovative products have pro!ed the growing trend of
fruit%flavored !eer in China. (n increasing num!er of Chinese consumers attach
importance to the flavor of !eers and as a result" they are willing to try new things
over traditional products
6;
. 1ecent flavor launches including lychee" apple"
pineapple" mango" and grape" as well as the addition of !lack fragrant rice as a
raw material input are proving to !e popular innovations in the !eer industry in
China
66
.
The growing disposa!le income of the Chinese population has consumers in
pursuit of !etter%=uality alcohol products
6<
. However in (sia" premium =uality
alcohol is typically associated with the spirits and wine categories versus the craft
and premium !eers category that @orth (mericans see as !eing of e=ual higher
=uality. Eastern China enjoys more sales in wine /grape and non%grape0 than any
other alcoholic !everage
<7
. To positively impact attitudes towards !eer in China"
companies have put forth noticea!le efforts to enhance their !rand image and
market the higher social status associated with drinking particular !eers. &n (pril
875A.
85 &!id.
86 Euromonitor &nternational. Beer in China. Category Briefing" Euromonitor &nternational" 8759.
87 Euromonitor &nternational. Alcoholic rin!s in China. Euromonitor &nternational" 'uly 97"
8759.
88 &!id.
89 &!id.
90 &!id.
57
8758" Tu!org launched its high%end Tu!org !rand in China" and 'apan2s (sahi
Group is attempting to esta!lish the !rand of its ,uper ?ry !eer !y re=uesting
that local !ars serve it draft%style" a rarity in China
<5
.
.verall" the (sian consumer2s taste towards !eer provides more of a threat to the
industry !ut with proper placement and segmentation to consumer demands" an
opportunity is esta!lished for !rewers who can develop products geared toward
the (sian population.
Europe Opportunity and Threat
The populations of Europe are among the highest !eer consumers in the world
per capita
<8
. (lcohol consumption is heaviest in Central%Eastern and Eastern
Europe and lightest in the @ordic countries" consuming 5A.F and 57.A liters of
pure alcohol per adult per year" respectively
<9
. However" tastes for alcohol differ
greatly !etween each country. +or instance" Germany has a per capita !eer
consumption rate more than three times greater than +rance" where wine is more
popular
<A
. Using the UH as a proy /see graph !elow0" the !leak economic
outlook of the European region has reinforced the Tentertaining at home2 trend
<F
.
Consumers are saving money !y refraining from going out and instead are willing
to spend more on alcohol to enjoy at home. This spending is typically directed
towards wine purchases which is easy to share and more economical than !ar
purchases in terms of cost per glass
<D
.
91 Bloom!erg @ews. Q+oreign Beermakers 1aise a Glass to China.Q Bloo-ber+ Business,ee!
Co-panies A In$ustries. (pril 5<" 8758. http#))www.!usinessweek.com)articles)8758%7A%
5<)foreign%!eermakers%raise%a%glass%to%china /accessed -ay 5A" 875A0.
875A.
93 The Huffington 4ost. 1urope5s Alcohol Consu-ption (ar+est in the #orl$, sa%s #39 Report.
-arch 86" 8758. http#))www.huffingtonpost.com)8758)79)86)europe%alcohol%consumption%who%
reportRnR5969A7A.html /accessed -ay 5A" 875A0.
94 &!id.
95 Euromonitor &nternational. Beer in the Unite$ >in+$o-. ,eptem!er A" 8759.
96 &!id.
58
<;
&n addition to wine" consumers opting to save money !y refraining from the
nightlife scene are more interested in diversifying their tastes and indulging in
more epensive take%home !eer purchases. This comprises a consumer%
conscious shift to purchase premium ales" premium lagers" and >eiss!ier /white
!eer0" which is compounded !y fre=uent price promotions that the premium !eer
segment offers to UH consumers
<6
. Consumer interest in craft !eer and specialty
!rands with distinct product offerings is also increasing across Europe" with
premium ale gaining share against standard ale. ,ales in smaller regional
companies and micro!reweries are also yielding nota!le sales increases.
,imilarly" low%alcohol !eer sales have increased in the UH in the wake of the
European recession !ecause of its low price" which makes it more appealing to
consumers looking to minimi$e their spending
<<
. Trends surrounding the flavor%
enhanced !eers prevalent in the (sian and @orth (merican regions are not as
visi!le in the European market.
The European market provides a promising future in terms of opportunities !eing
created !ut !rewers need to continue to develop various tastes and
accommodate their culture. -aking the !eer taste more like a fruit !everage will
59
certainly provide future growth. (lthough" relaing and not developing the
European market will esta!lish a threat for small !rewers as other competitors
may enter" offering different products.
A,coho, and on"umer Hea,th
-oderate alcohol consumption appears to !e associated with !etter health than
does a!stinence or heavy drinking
577
. &n fact" medical studies released during the
past decade showed that moderate consumption of wine and spirits could lead to
health !enefits
575
. However" due to increases in consumer awareness of health
and well%!eing" !eer is increasingly perceived as !eing less healthy
578
. Growing
concerns over !inge%drinking in youth and young adults" in addition to the
num!er of fatalities linked to disease and injury has prompted understanda!le
concerns a!out the consumption of alcohol in today2s society for !oth health and
safety reasons.
North America !" # CAN$ - Threat
The recent trend of low%car!ohydrate diets in @orth (merica has discouraged the
consumption of !eer" which is generally high in car!s
579
. -oreover" the way that
!eer is consumed in the United ,tates Uoften to ecess while watching pro
sporting eventsU can reverse any health !enefits tied to it
57A
. To negate claims
against !eer as a dietary ha$ard" !rewing companies in the U, and Canada
have launched light !eers" which have a low calorie profile yet maintain a high
alcohol content. +or instance" (%B &nBev2s nota!le 8758 launch of Bud *ight
4latinum targets consumers who want to get intoicated =uicker yet take in fewer
100 @ewsom" 'ason T. " Bentson H. -c+arland" -ark ,. Haplan" @athalie Huguet" and Brigid
Zani. QThe Health Consciousness -yth# &mplications of the @ear &ndependence of -ajor Health
Behaviors in the @orth (merican 4opulation.Q "ocial "cience A )e$icine" 'anuary 877F# A99%A9;.
101 &B&, >orld. IBI"#orl$ Business 1n0iron-ent Report Per Capita 12pen$iture on Alcohol.
&B&, >orld" 8759.
&B&, >orld" 8759.
104 >eisman" 1o!ert. QThe Benefits and Health 1isks of Beer and >ine.Q The Boston 'lobe.
@ovem!er 5;" 8759. http#))www.!ostonglo!e.com)!usiness)8759)55)5;)!eer%and%wine%!enefits%
health%risks)MT!$&a-7fs;8Ge<GdUE17*)story.html /accessed -ay 5A" 875A0.
60
calories
57F
. +urther development and promotional activity aimed to capitali$e on
health and wellness trends" should see total volume sales of low alcohol !eer in
Canada increase at an average annual rate of F percent
57D
. &t should !e noted
that low%sugar sodas" like Gu, /Grown%Up ,oda0" relaation drinks" and eotic
juices are selling alongside these low%calorie !eers and provide the health%
conscious @orth (merican consumer with an appealing alternative
57;
.
Health conse=uences as a result of alcohol consumption include liver cirrhosis"
road traffic accidents" alcohol use disorders and alcohol dependence. &n 8758"
57.D men and F.5 women per 577"777%person population died from liver cirrhosis
in Canada. .f these mortalities" over D7N in !oth men and women were
attri!uta!le to alcohol consumption
576
. The same statistic is true of the United
,tates" although the death rates from liver cirrhosis are slightly higher in women
and nearly FN higher in men. .f the 5F.5 total age%standardi$ed death rate
/(,?10 that occurred in Canada in the same year for road traffic accidents"
59.6N and A.6N were alcohol%attri!uta!le fractions /((+0 involving men and
women" respectively
57<
. The num!er of ((+s surrounding the (,?1 in road
traffic accidents in the United ,tates was almost identical. &n 8757" the
prevalence of alcohol use disorders and alcohol dependence was under 57N for
!oth men and women in Canada and the United ,tates
557
. The percentage of
heavy episodic drinking /HE?0 of the general population aged 5F and older was
5D.<N in the U, and 5;.6N in Canada" averaging to approimately 5;.AN
overall during 8757
555
. -ore statistics concerning alcohol and health
conse=uences in Canada and the U, can !e found in the ta!les !elow.
105 Euromonitor &nternational. Beer in the U". Category Briefing" Euromonitor &nternational"
8759.
108 >orld Health .rgani$ation. 'lobal "tatus Report on Alcohol an$ 3ealth 201@. Geneva#
>orld Health .rgani$ation" 875A.
110 &!id.
111 &!id.
61
Canada
United ,tates of (merica
558
,ociety is conscientious to what their !ody consumes" providing the !eer industry
throughout @orth (merica a severe threat. Consumers are shifting their drinking
ha!its to products that are cleaner and safer for the individual. >eight and
personal health are a major concern and the !eer industry provides a negative
response to losing weight. +irms within the !eer industry who are a!le to develop
future products that are healthy and weight friendly will dominate the industry !ut
in order to maintain alcohol content" predictions of this occurring are miniscule.
Asia Opportunity and Threat
(lcohol consumption across (sian 4acific populations is highest among more
developed countries. &n 8776" nations including the 1epu!lic of Horea" (ustralia"
112 &!id.
62
@ew Zealand" and 'apan were consuming over ; liters of alcohol per capita"
while the populations of Thailand" -acao" China" the *ao 4?1" and the
4hilippines consumed !etween A and ; liters
559
. Empirical data collected over a
86 year period ending in 8776 suggests that trends in alcohol consumption will
continue to increase in China" while consumption levels in other (sian 4acific
regions including &ndia and (ustralia will remain relatively flat /see graph !elow0.
( more westerni$ed diet in China has altered drinking patterns and is leading to
more potential for harm through !inging and heavy drinking" especially among
young people
55A
. .ther health concerns involving alcohol consumption in the
(sian region include an en$yme deficiency common in those of East (sian
decent that causes the skin to redden" or OflushP" when alcohol is a!sor!ed into
the !ody. The @ational &nstitute on (lcohol (!use and (lcoholism /@&(((0 and
'apan2s Hurihama (lcohol Center have released that 6Nof the world2s population
113 .EC? i*i!rary. 3ealth at a 'lance: AsiaBPaci*ic 2012. 8758. http#))www.oecd%
ili!rary.org)sites)<;6<8DA569<78%en)78)76)inde.html3jsessionidC9!ufuh6i8wr6u.%oecd%live%78B
contentTypeCEitem&dCN8+contentN8+chapterN8+<;6<8DA569<78%89%enEmimeTypeCtet
N8+htmlEcontainer&tem&dCN8+contentN8+serialN8+897FA<DAEaccess&tem&dsCN /accessed
-ay 5F" 875A0.
114 &!id.
63
suffers from the Oalcohol flushP and are at an increased risk for esophageal
cancer /cancer of the esophagus0
55F
.
?espite growing concerns over the ill effects from the consumption of alcohol"
China scored a 8 on the 8757 4atterns of ?rinking ,cale" where 5 demonstrates
the least risk and F demonstrates the most risk
55D
. The percentage of China2s
general population engaging in HE? is ;.DN" which is low when compared to the
@orth (merican and European regions
55;
. +urthermore" the prevalence of alcohol
use disorders and alcohol dependence !etween !oth sees in China in 8757
remained !elow FN. The ta!le !elow offers more insight into the health
conse=uences of alcohol consumption in China.
China
556
(s living standards and disposa!le income levels rise in China" consumers will
!e paying greater attention to health and high%=uality lifestyles. Health trends in
China sparked ro!ust volume growth of non)low alcohol !eer in 8758
55<
. .rganic
red wine products noted for their antioidant properties" in addition to other high%
end alcoholic drinks with healthy ingredients are also epected to see major
115 U.,. ?epartment of Health and Human ,ervices. Q(lcohol +lush ,ignals &ncreased Cancer
1isk among East (sians.Q National Institutes o* 3ealth Ne,s. -arch 89" 877<.
http#))www.nih.gov)news)health)mar877<)niaaa%89.htm /accessed -ay 5F" 875A0.
117 &!id.
118 &!id.
8759.
64
growth momentum in line with the increasingly health%conscious Chinese
consumer
587
.
The (sian market once again provides an opportunity and a threat for the !eer
industry. Here consumers enjoy !eer !ut are also health conscientious and
moderate their intake of the !everage.
Europe Opportunity and Threat
&n Europe" the philosophy surrounding alcohol consumption is considera!ly
different than in @orth (merican culture. (lcohol is a less alluring vice in Europe
!ecause it is not mystified nor eiled into a corner of society
585
. (s a result" !inge
drinking appears to !e somewhat less of a concern. &n Germany" for eample"
people engaging in HE? comprised only 58.FN of the general population" which
is considera!ly less than what was reported for the @orth (merican
demographic
588
. ?ata collected in the most recent E,4(? /European ,chool
,urvey 4roject on (lcohol and .ther ?rugs0 report also indicates that HE? has
seen either no change or has decreased in all !ut A of the 9D European countries
surveyed /see chart !elow for more details0
589
.
8759.
121 +rant$" 'eff. 1uropeans (earns Responsible rin!in+. 8759.
http#))www8.potsdam.edu)alcohol)Mouth&ssues)57;;FD9698.htmlV.U9KCUFHsi,o /accessed -ay
5A" 875A0.
123 The European ,chool ,urvey 4roject on (lcohol and .ther ?rugs. QThe 8755 E,4(?
1eport.Q 1"PA Reports. -ay 95" 8758.
http#))www.espad.org)Uploads)E,4(?Rreports)8755)TheR8755RE,4(?R1eportR,U--(1M.pdf
/accessed -ay 5A" 875A0.
65
,ource# The European ,chool 4roject on (lcohol and .ther ?rugs
58A
The eceptions to decreasing trends in HE? in Europe include the heavily
stereotyped OalcoholicP nations" which form the UH" and +rance" famous for
124 The European ,chool ,urvey 4roject on (lcohol and .ther ?rugs. QThe 8755 E,4(?
1eport.Q 1"PA Reports. -ay 95" 8758.
http#))www.espad.org)Uploads)E,4(?Rreports)8755)TheR8755RE,4(?R1eportR,U--(1M.pdf
66
producing some of the world2s finest wines. However" alcohol a!use in the form
of disorders and dependence in +rance is nearly half of what it is in the UH. The
prevalence of alcohol use disorders in !oth men and women of the UH was over
55N" while alcohol dependence levels reached almost DN
58F
. &n the UH" an
astounding 56N volume growth rate in low alcohol !eer has !een attri!uted to
increasing health awareness
58D
. ,erving as a proy" this is a key indicator that the
European demographic is recogni$ing the impacts of long%term alcohol
consumption and is taking steps to reduce health risks in this regard.
(gain" consumers health concern in Europe provides !oth an opportunity and
threat for the !eer industry. Brewers must focus on reducing the amount of health
effects on consumers while maintaining and further developing flavors and
products.
8on.9o(ernmenta, Bod!e" 7 Lobby 9roup" . +hreat
,trategic plans to cur! alcohol misuse and a!use have !een esta!lished at
varying geographic levels across @orth (merica. (s a result of the influences
eerted !y lo!!yists from !oth sides /e.g. -others (gainst ?runk ?riving vs.
alcohol industries0" it is unlikely that alcohol laws will change in the net A
years
58;
.
-others (gainst ?runk ?riving /-(??0 is a charita!le organi$ation dedicated to
the anti%impaired driving movement. -(??2s volunteers work to offers victim
support services" heighten awareness a!out the dangers of alcohol and drug%
impaired driving" and to prevent deaths and injuries from road traffic accidents
586
.
-(?? has a chapter in each province and territory in Canada and in the U," it is
nation2s largest non%profit organi$ation lo!!ying against drunk driving and
&B&, >orld" 8759.
128 -(?? Canada. #hat #e o. 875A.
http#))www.madd.ca)madd8)en)a!out)a!outRwhatRweRdo.html /accessed -ay 5F" 875A0.
67
underage drinking
58<
. &n +e!ruary 8758" -(?? launched its line of -(?? Lirgin
?rinks" distri!uting the products across the ,o!eys grocery chain in Canada
597
.
By tapping into the !illion%dollar non%alcoholic drink industry with its sleek%looking
line of wines and 1T?s /1eady to ?rink0" -(?? is providing consumers with a
relevant alternative to alcohol" water" and soft drink products. The primary
!eneficiaries of -(??2s recent product launch include !a!y !oomers who want
to reduce their alcohol intake" pregnant women" people taking prescription
medication" and ethnic groups who do not drink for religious or cultural reasons"
all of whom constitute a growing demographic
595
. Ba!y !oomers are the largest
demographic of non%alcoholic !everage consumers at 9;.<N" followed !y people
aged F7%DA years at 8;.;N
598
. Consumer data gathered on product usage
/shown !elow0 indicates that 7.<5N of Canadian !eer consumers are drinking
non%alcoholic !eer
599
.
Beer Consumption !y Type in Canada
129 -(??.org. About Us. 875A. http#))www.madd.org)a!out%us) /accessed -ay 5F" 875A0.
130 Haynes" -egan. Q-(?? Taps into Billion%?ollar @on%(lcoholic ?rink &ndustry.Q "trate+%.ca.
+e!ruary 59" 8758. http#))strategyonline.ca)8758)78)59)madd%taps%into%!illion%dollar%non%
alcoholic%drink%industry) /accessed -ay 5F" 875A0.
131 &!id.
132 4rint -easurement Bureau. QBeer Types 4ersonally ?rank.Q P)B e-o+raphics "ur0e%.
4rint -easurement Bureau" ,pring 875A.
133 &!id.
68
Considering the demand eists at the consumer level" -(??2s strategic move
into the non%alcoholic drinks category poses a threat to its rivals in the !rewing
and alcoholic drink manufacturing industries.
.n a glo!al level" the >orld Health .rgani$ation />H.0 represents a continuing
effort to support -em!er ,tates in collecting information to assist in effort to
reduce the harmful effects on health from alcohol consumption
59A
. The >H.
released a comprehensive report this -ay on the glo!al status on alcohol and
health as a part of its international strategy to reduce the harmful use of alcohol.
This strategy has garnered the mutual commitment of all 5<9 >H. -em!er
,tates at the >orld Health (ssem!ly in 8757" and many -em!er ,tates have
demonstrated increased leadership in this regard
59F
. The >H.2s worldwide
efforts to gain a !acking on the ill effects of alcohol pose a threat to the !rewing
and alcoholic drinks industries which may !e more harshly targeted !y these
awareness groups in upcoming years.
134 >orld Health .rgani$ation. )ana+e-ent o* "ubstance Abuse: Alcohol. 875A.
http#))www.who.int)su!stanceRa!use)facts)alcohol)en) /accessed -ay 5F" 875A0.
135 >orld Health .rgani$ation. Alcohol. 875A.
69
Therefore" non%governmental !odies and lo!!y groups provide a profligate threat
for !rewers as they are !eing scrutini$ed for their production. &n addition" social
ostracism !y these specific groups makes the advertising efforts more difficult.
(dvertising !eer is now against marketing laws !ut marketing !rands is permitted
making the overall !rand awareness and industry accepta!ility difficult.
4emo/raph!c" 5 2pportun!ty
Popu%ation Gro&th
Canada2s population of 9A.66 million /87580 and the United ,tates of (merica2s
population of 959.< million /87580 provide a promising future for the !eer industry
as population growth is epected at around 55N !etween 8775 and 8755
59D
.
China population is hovering around the 5.9F5 !illion /87580 and the United
Hingdom has reached D9 million /87580
59;
.
136 Google. Cana$a Population. 875A. https#))www.google.ca)searchB
=CpopulationSinScanadaEo=CpopulationSinScanadaEa=sCchrome..D<iF;j7lF.9F8Dj7jAEsourceidC
chromeEesRsmC<5EieCUT+%6 /accessed 7F 59" 875A0.
137 &!id.
70

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0.2
0.4
0.6
0.8
1
,o0u#ation /ro.th 9ate
Country
,ercenta$e
,ource# Google 4opulation
596
The population growth in the main industry2s targeted !y !rewers provides a
promising future. 4opulation growth maintains opportunities for the industry" as
they are a!le to target the growing and developing populations.
Popu%ation Density
Understanding population density for !rewers is an opportunity as they can easily
determine where the most feasi!le locations are for production in order to reduce
transportation costs. 4rovided !elow is a population density graph outlining the
important countries to the !eer industry. ,eeing Canada has a population density
of A shows !rewers that this geographical region may !e more epensive due to
increase transportation costs where a !rewer in Belgium can eperience a large
population density re=uiring less !rewers and smaller transportation costs
59<
.
138 Google. Cana$a Population. 875A. https#))www.google.ca)searchB
=CpopulationSinScanadaEo=CpopulationSinScanadaEa=sCchrome..D<iF;j7lF.9F8Dj7jAEsourceidC
chromeEesRsmC<5EieCUT+%6 /accessed 7F 59" 875A0.
139 The world Bank. Population ensit%. 8759.
http#))data.world!ank.org)indicator)E@.4.4.?@,T /accessed 7F 59" 875A0.
71

#
a
n
a
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a

.
$
a
i
n
+
r
a
n
c
e
B
e
%
g
i
u
m
0
50
100
150
200
250
300
350
400
,o0u#ation 3ensity
Country
,eo0#e 0er sB. 8'
,ource# The >orld Bank
5A7
'edium A(e
Lisi!le !elow" a graph that shows the medium ages !etween various countries
outlines the lifespan and ages that represent the majority of the population. (n
opportunity eists for !rewers in Belgium !y !eing a!le to target consumers for
much longer where !rewers in the United ,tates and China" have a shorter time
frame in which their consumers live. This is !oth an opportunity and threat !ut
the opportunity outweighs the threat as the population growth outlined a!ove
continues to increase. &n addition" the legal drinking age in most Canadian
regions is 5< years old" which means the industry has a large demographic. The
population aged !etween 5F and DFS is around 6A.AN
5A5
. (lthough some of this
portion descri!es a population that is una!le to legally purchase and consume
alcohol" it can !e concluded that there2s a vast majority of the population residing
within the legal age parameters for the !eer industry.
140 The world Bank. Population ensit%. 8759.
141 &!id.
72

#
a
n
a
-
a

.
$
a
i
n
+
r
a
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c
e
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%
g
i
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m
20
30
40
50
Mediu' ($e
Ma%e
+ema%e
/ota%
Country
($e 5years6
,ource# Central &ntelligence (gency
5A8
Ethnic Diversity
Canadians are an etremely culturally diverse people. The ethnic group
distri!ution in Canada is mainly dominated from people originally from the British
&sles /86N0" +rench /89N0 and other Europeans /5FN0" with the remainder
coming from other (frican" (ra! and (sian nations
5A9
. This presents the industry
with a chance to appeal to a wide range of people from a num!er of different
nations. +or eample" if one firm is originally from somewhere in the European
Union" the chance at eporting !eer to Canada and having an unyielding
consumer !ase is relatively sta!le and presents a fairly low level of risk.
Consumers who are a!le to o!tain the !everages from their home nation will
provide !rand loyalty and overall increase the market share for specific !rewers.
Larious religions such as -uslims avoid alcohol consumption thus demonstrating
the importance of recogni$ing ethnic diversity and developing alternatives.
142 Central &ntelligence (gency. The ,orl$ 4actboo!. 875A.
https#))www.cia.gov)li!rary)pu!lications)the%world%fact!ook)fields)85;;.html /accessed 7F 5A"
875A0.
143 &!id.
73
Summary 5 Soc!o.u,tura,
(s presented a!ove" there are several opportunities that eist for the !eer
industry. &n the !rewery industry" opportunities eist in personal tastes and
consumer demands as well as promising demographics that suggest population
growth" increased disposa!le income" and ethnic diversity within Canada.
(lthough the opportunities are strong" there are threats that eist within the
socio%cultural environment. ,hifting consumer preferences to alternative alcoholic
!everages pose a threat to the !eer market. Brewers must tailor their product to
meet the increasingly sophisticated palate of consumers. &n addition" growing
concern over the ill effects of alcohol consumption is hurting the !eer industry.
,ocial ostracism and lo!!y groups are also heightening the num!er of negative
views towards alcohol intolerance. &n summary" there are opportunities and
threats of e=ual magnitude present in the socio%cultural environment of the
!rewing industry.
2pportun!t!e" +hreat"
4ersonal Tastes
4opulation Growth
4opulation ?ensity
4opulation (ge
Ethnicity Consumer Health (wareness
?isposa!le &ncome *o!!y Groups
$o,!t!ca,.Le/a, &n(!ronment +rend Ana,y"!"
Un!ted State" of Amer!ca
Governin( )odies Opportunity
74
The regulation of alcoholic !everages in the United ,tates is classified as a three
tiered system with manufacturers and distri!utors su!ject to federal" state" and
local law enforcement. These regulating !odies impact distri!ution" la!eling"
advertising" container characteristics" alcohol content" and ta rates within the
!rewing industry. The overarching federal regulator for alcoholic !everages in the
U, is the Treasury ?epartment Bureau of (lcohol" To!acco" and +irearms
/B(T+0
5AA
. Beneath this are state agencies that are primarily responsi!le for
issuing" regulating" and enforcing the licenses re=uired to sell alcohol. ,tate
regulators also have the a!ility to control their ecise ta rates" offering the
manufacturers and distri!utors the opportunity to eploit lower rates. Boston
Beer Company2s eisting manufacturing plants are all located within the !ottom
fifteen states for lowest ecise ta rates
5AF
.
'ar*et Contro% 'easures Threat
There are currently very few market controls in place within the alcoholic
!everage industry. (nheuser%Busch &nBev /(%B &nBev0" the leading !eer
manufacturer within the U," currently accounts for A6N of the total sales volume
in 8758" indicating monopolistic market state
5AD
. &n the a!sence of market control"
major producers have taken steps towards !ecoming more vertically integrated"
allowing them to eert greater control over distri!ution networks and retailers"
and making it increasingly difficult for smaller firms to compete within the industry.
Excise Tax Threat
The eistence of an ecise ta in the" in the form of fied dollar charges per
!arrel of !eer produced" eists within the glo!al !eer market. &n the U, the
(lcohol and Ta!aco Ta and Trade Bureau collects this ta. Taes represent the
highest cost for !eer manufacturers and account for A7N of the !everages retail
144 'ustice" U. ,. /875A0. AT4 . 1etrieved 7F 7;" 875A" from https#))www.atf.gov)
145 +oundation" T. T. /875A0. Beer 12cise Ta2 Rates b% "tate. 1etrieved 7F 7;" 875A" from
http#))tafoundation.org)!log)map%!eer%ecise%ta%rates%state%875A
146 &B&, >orld. /875A0. IBI"#orl$ In$ustr% Report 31212 Bre,eries in the U". &B&, >orld.
1etrieved -ay 5A" 875A
75
price
5A;
. >hile rates vary across the country" they are applied e=ually to large and
medium si$ed manufactures within each state" threatening the a!ility of smaller
manufacturers to compete with industries larger producers
5A6
.
,ource# Ta +oundation
5A<
+e(a% Drin*in( A(e Threat
The legal drinking age in the United ,tates is the highest of all legal drinking
ages around the world
5F7
. Having a higher legal drinking age translates into a
smaller availa!le market for alcoholic !everage producers distri!uting their
products within the U," and ultimately threatens their a!ility to compete in the
147 H4-G. /875A0. >P)'. 1etrieved 7F 7;" 875A" from
http#))www.kpmg.com)glo!al)en)services)ta)ta%tools%and%resources)pages)corporate%ta%rates%
ta!le.asp
148 Brewers (ssociation. /8759" 7A 570. Bre,ers Association Releases Top /0 Bre,eries o*
2012. 1etrieved 7F 5A" 875A" from https#))www.!rewersassociation.org)pages)media)press%
releases)showBtitleC!rewers%association%releases%top%F7%!reweries%of%8758
149 +oundation" T. T. /875A0. Beer 12cise Ta2 Rates b% "tate. 1etrieved 7F 7;" 875A" from
http#))tafoundation.org)!log)map%!eer%ecise%ta%rates%state%875A
150 ,olutions" (. 4. /n.d.0. (e+al rin!in+ A+e Aroun$ The #orl$ . 1etrieved from
http#))www8.potsdam.edu)alcohol)*egal?rinking(ge.htmlV.U9o>;s58lnc
76
glo!al market place. The younger millennial generation represents the greatest
potential market for manufacturers of alcoholic !everages" with each producer
looking to make their product the drink of choice for these upcoming consumers.
(dvertising to under aged individuals is strictly prohi!ited" and thus a higher legal
drinking age further threatens the a!ility of up%and%coming !reweries to compete
against well%known !rands
5F5
.
anada
North American ,ree Trade A(reement Opportunity
The eistence of the @orth (merican +ree Trade (greement allows for the
echange of goods at relatively low cost
5F8
. This ena!les manufacturers to sell
their products at a lower cost within @orth (merica than other foreign producers
who are su!ject to taation. This agreement ena!les Boston Beer Company and
other @orth (merican producers to lower prices and increase revenue" allowing
them the opportunity to !etter compete across a larger market !ase.
Governin( )odies Threat
1egulation in the alcoholic !everage market in Canada is similar to that of the U,
in that it is a multi%tiered system with !oth federal and provincial regulating
!odies. +ederal governance is eercised through the +ood and ?rug (ct" which
controls the production" import" eport" provincial transportation" and sale of
alcoholic !everages. 4rovincial li=uor !oards" such as the (lcohol and Gaming
Commission of .ntario" are responsi!le for distri!uting alcoholic !everages and
have a monopoly on selling them. The crown involvement in the sale of alcohol
threatens the industry in that it impedes their market reach and su!jects them to
higher taation
5F9
.
151 U.,. ?epartment of Health and Human ,ervices. /877<" -arch 890. Alcohol 4lush "i+nals
Increase$ Cancer Ris! a-on+ 1ast Asians. 1etrieved -ay 5F" 875A" from @ational &nstitutes of
Health @ews# http#))www.nih.gov)news)health)mar877<)niaaa%89.htm
152 Canada" G. o. /875A0. 4orei+n A**airs, Tra$e, an$ e0elop-ent Cana$a. 1etrieved 7F 7;"
875A" from http#))www.international.gc.ca)trade%agreements%accords%commerciau)agr%acc)nafta%
alena)inde.aspBlangCeng
153 Canada" H. /875A0. 3ealth Cana$a. 1etrieved 7F 7;" 875A" from http#))www.hc%sc.gc.ca)fn%
an)legislation)acts%lois)act%loiRreg%eng.php
77
-mport Tax Threat
(n import ta is applied to alcoholic !everages containing as little as 5N of
imported content /i.e. :.57 per !ottle of !eer0
5FA
. This taation further threatens
the a!ility of smaller scale !reweries to compete against the industries major
players" as they have to further increase their prices to compensate. The major
market players are less affected !y these laws as they eperience greater
economies of scale and thus have lower initial price points" as well as possessing
large capital re=uirements to set up manufacturing plants in foreign countries
should the ta rate continue to increase.
&urope
European !nion and North American Trade A(reements Opportunity
Trade and investment !etween the European Union and @orth (merica represent
considera!le growth and jo! opportunities for !oth parties. 1ecently there has
!een work to further develop the relations !etween these two parties" and in
doing so" further stimulate the economy and eports levels of !oth countries. (s
previously mentioned" stronger economies correlate with greater productivity"
consumer confidence" and spending. This is an opportunity for all !usinesses to
increase their revenues and epand.
Summary 5 $o,!t!ca,.Le/a,
The current political%legal environment of Boston Beer Company2s markets offers
!oth opportunities and threats to the firm. The most prominent opportunities are
seen in the eisting" and pending" trade agreements !etween @orth (merican
countries" and the United ,tates and the European Union. These agreements
encourage trade and offer glo!al market opportunities for (merican
manufacturers. The (merican Brewer2s association and various corporate
lo!!ying groups are addressing the eisting market threats" specifically the
78
ecise" import" and corporate ta rates. (s the largest craft !rewer in the U,"
Boston Beer Company has managed to successfully respond to the lack of
market controls and any !arriers associated with the governing !odies. These
threats are seen as less prevalent and have !een given less attention in later
analysis such as the Eternal +actor Environment -atri.
2pportun!ty +hreat
Governing Bodies /U,0 -arket Control -easures
@orth (merican +ree Trade (greement Ecise Ta
EU and @orth (merica Trade Efforts *egal ?rinking (ge /U,0
Governing Bodies /Canada0
&mport Ta
Corporate Ta 1ate
#acro &n(!ronment Summary
(n analysis of the eternal environment allowed for the reali$ation that there are
a num!er of etremely important factors that will affect the industry and its
players. .ne of the most prominent factors influencing a firm2s success in the
!rewing industry is its grasp of technological advances to further its competitive
positioning in the market. +urthermore" the varying consumer preferences
apparent in the socio%cultural environment are influencing the level of demand for
79
premium and craft !eer. The firm that can reduce costs while improving product
=uality will prove to !e the most successful in the years to come.
(s in any industry" the economic and political environments present a threat"
which re=uires the firm to constantly monitor and ensure they are operating
within the law and meeting the regulation standards. Ecise ta represents the
greatest threat in the political macro environment" as all producers of over two
million !arrels are su!ject to the same rate. This makes it more difficult for
moderate si$ed producers such as The Boston Beer Company to compete with
the major industry players" as they do not reali$e the same economies of scale.
The current" and forecasted" economic states of Boston Beer Company2s
domestic and foreign markets offer opportunities for continued growth. The
positive G?4 growth rates" and increases in consumer2 discretionary income
indicates an increase in demand for premium craft !eers and other non%essential
products.
1egulation and monitoring of the production and sale of alcohol in the legal
environment limits the revenue that can !e generated !y one specific firm. The
high regulations governing the industry induces high capital investment into
resources that ensure production e=uipment and procedures are up to date and
=uality assured. This reality threatens smaller craft !reweries" with limited funds"
that are seeking out opportunities for growth.
80
,(9" !!
!ndustry (na#ysis
81
Indu"try Ana,y"!"
Sect!on Introduct!on
&n this section of the report" an analysis of the industry environment will !e
conducted. ( strategic group map that identifies all major competitors will !e
constructed to ensure an overall understanding of the industry. &n addition"
4orter2s five forces will !e used to assess the overall attractiveness of the
industry. The !eer industry is a very comple industry with a num!er of
competitors. These competitors range from etremely large pu!licly traded
companies to small" in%house !rewers who create and sell their own private
products. +or the interest of this report" the findings will !e !ased on the pu!lic
companies that operate worldwide and compete on a glo!al level who distri!ute
ales" lager and stout !eers.
Indu"try 2(er(!e:
The !rewery industry primarily produces alcoholic !everages using malted !arley
and hops. This industry ecludes wine" !randy" cider" and distilled !everages
such as vodka and rum
5FF
. The primary activities of the !rewery industry include#
Canned Beer 4roduction
Bottled Beer 4roduction
?raft Beer 4roduction
@on%alcoholic Beer 4roduction
(le 4roduction
(ccording to the @orth (merican &ndustry Classification ,ystem" the !eer
industry is found in ,ection 958# Beverage and To!acco -anufacturing
5FD
. The
@(&C, states that" O&ndustries in the Beverage and To!acco 4roduct
-anufacturing su!sector manufacture !everages and to!acco products. The
industry group" Beverage -anufacturing" includes three types of esta!lishments#
156 +ind the Best. Be0era+e an$ Tobacco Pro$uct )anu*acturin+. 875A. http#))naics%code%
lookup.findthe!est.com)l)9A)Beverage%and%To!acco%4roduct%-anufacturing /accessed 7F 59"
875A0.
82
/50 those that manufacture non%alcoholic !everages3 /80 those that manufacture
alcoholic !everages through the fermentation process3 and /90 those that
produce distilled alcoholic !everagesWP
5F;
. (lthough !eer is within the same
section as wine and distilled spirits" they do not consider them the same. >ithin
section 958" !eer can !e found under section 958587. >ithin this definition of the
section" Breweries consist of" Oesta!lishments primarily engaged in !rewing !eer"
ale" malt li=uors" and non%alcoholic !eersP
5F6
. &n addition" the !rewery industry
can also !e analy$ed under the ,&C code 8768.
The !rewery industry operates out of primarily eight regions as seen !elow. Each
contri!utes to the total revenue incurred !y the !rewery industry. The !rew
industry generates :5A; !illion at an annuali$ed rate of A.5N
5F<
. Europe" @orth
(merica and @orth (sia dominate the Glo!al Beer -anufacturing industry. These
three regions account for an estimated 68N of glo!al !eer production value
5D7
.
The !rewery industry across the U, generates approimately :8;.6 Billion with a
profit of :9.5 Billion
5D5
. The annual growth of the industry from 877< to 875A is
8.5N
5D8
. &t is epected that the annual growth from 875A%875< will lower to only
5.AN due to changing consumer ha!its
5D9
. (cross the U," there are 8"F8<
!usinesses eporting a total of :9.5 Billion annually
5DA
.
157 &!id.
158 &!id.
161 &!id.
162 &!id.
163 &!id.
164 Euromonitor &nternational. Q4assport# Beer in the U,.Q 4assport" 8759.
83
390
200
220
100
20
30 10 20
9e&enue 2009
Euro$e (ort! sia (ort! merica
.out! merica frica 1 Mi--%e East .out East sia
2n-ia 1 #entra% sia 3ceania
,ource# &B&, >orld
5DF
(s we can see from the ta!le provided !elow" the industry is eperiencing a
decrease in yearly revenues" and the industry value added continues to fluctuate.
The num!er of esta!lishments and enterprises are increasing" which contri!utes
to an overall sta!le employment.
;ea
r
3e(enue
)<m*
Indu"try -a,ue
Added )<m*
&"tab,!"hme
nt"
&nterpr!"
e"
&mp,oyme
nt
=a/e"
)<m*
201
0
86777.D ADD9.7 8595 876< 866F9 5;D7.A
201
1
865;D.5 A66;.D 897< 85DD 86F56 5;5D.9
201
2
86AD6.D F8<;.6 8966 89FF 8<FDA 5D67.8
201
>
86<DD.D FD<F.9 8F9A 8F77 8<<99 5DFD.A
201
4
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84
201
?
8;D7;.7 FA99.D 8D88 8F6A 8658D 5A65.<
,ource# &B&, >orld
5DD
The !eer industry in the United ,tates is at the mature life cycle stage attempting
to avoid the decline. Capital intensity" the concentration level" and the !arriers to
entry are all high with the regulation level classified as high. The !eer industry is
found to have a medium classification in competition level" industry glo!ali$ation"
and revenue volatility.
0actor 3at!n/ 0actor 3at!n/
1evenue Lolatility -edium ap!ta, Inten"!ty High
&ndustry
Glo!ali$ation
-edium oncentrat!on
Le(e,
High
Competition *evel -edium 3e/u,at!on Le(e, Heavy
*ife Cycle ,tage -ature +echno,o/y
han/e
*ow
&ndustry
(ssistance
*ow Barr!er" to &ntry High
9eo/raph!ca, Locat!on
,ales and revenue are different across various geographical locations. Breweries
attract different consumers !ased on taste and !rand design resulting in a
necessary understanding of the various locations.
Europe
Europe is the largest region of the Glo!al Beer -anufacturing industry" with
respect to !oth revenue and volume" accounting for 9<.AN and 99.9N of revenue
and production volume
5D;
. Europe is recogni$ed as the historical origin of !eer
!rewing and is home to the head=uarters of half of the top ten !rewers in the
166 &!id.
167 Euromonitor &nternational. Alcoholic rin!s in the Unite$ >in+$o-. ,eptem!er A" 8759.
85
world. The populations of Europe are also amongst the highest !eer consumers
in the world per capita.
North America
@orth (merica is the second largest region in the industry !y production value"
accounting for 88.8N of revenue and 87.AN of production volume. @orth (merica
is segmented !etween the United ,tates" which produces ;5N of the region2s
!eer !y volume" followed !y -eico /88N0 and Canada /;N0
5D6
.
North Asia
@orth (sia is the third%largest !eer%producing region !y revenue at 87.AN of the
value of glo!al output. By volume" @orth (sia is the second largest producer"
accounting for 8A.8N of production volume. OChina produces ;<.5N of the
regions volume making China the largest market for !eer in the world. -ajor
players have invested in !reweries in China in an effort to !enefit from the
epected long%term growth in consumptionP
5D<
.
Other
The remainder of the world accounts for 88N of !eer production !y volume.
>ithin each region" the nature of the national !eer industry varies considera!ly.
Beer industries can !e classified as emerging or developed. The !eer industry in
@orth (merica tend to !e !ased on higher priced !eers for !oth local and eport
markets where emerging !eer nations such as *atin (merica" the !eer industry
tends to !e focused on high volume production of low%priced !eers for local
markets
5;7
.
169 &!id.
170 &!id.
86
Strate/!c 9roup #ap
Company revenue was first reviewed as a possi!le measure of the position of a
company in a strategic group. The economic impact of the industry is measured
in total sales. Brewers with a high level of sales generally have higher profits and
access to resources that !rewers with a lower level of sales do not have. Higher
sales allow companies to invest in tools that can aid in the development of
efficiencies. >hile the industry is analy$ed in terms of revenue generated" the
num!er of !arrels produced also classifies !rewers. +ederal law states that the
craft !rewer classification is reserved for !rewers producing less than two million
!arrels per year. Considering the industry standard in measuring the si$e of
!rewers !y the num!er of !arrels produced annually" this measure was used in
the strategic group map. -arket share is another primary measure of the !eer
industry. (ll market share data was taken from the Beer &ndustry .verview and
the Beer &ndustry Update. -arket share measures the prevalence of the
company2s product in the market. +inally" sale price of the product can !e used to
classify !rewers in the appropriate strategic group. Terms such as premium" su!%
premium" import" and craft !eer are used to descri!e the !eer produced !y
companies in the industry.
87
16 18 20 22 24 26 28 30 32 34
0
5000
10000
15000
20000
25000
trate$ic /rou0 Ma0 * 9e&enues &s. ,rice
,rice 512*,ac86
9e&enue 5Mi##ion6
Boston Beer Company
(nheuser%Busch &nBev
-iller Coors
Heineken
Craft Brewers (lliance
Crown &mports
4a!st
,ierra @evada
88
16 18 20 22 24 26 28 30 32 34
0
50000
100000
150000
200000
250000
300000
350000
400000
trate$ic /rou0 Ma0 * Barre#s &s. ,rice
,rice 512*,ac86
Barre#s ,roduced 5"housands6
Boston Beer Company
-iller Coors
Heineken
Crown &mports
4a!st
,ierra @evada
89
0 10 20 30 40 50 60
0
5
10
15
20
25
30
35
40
45
50
trate$ic /rou0 Ma0 * <ariety &s. Cua#ity
Cua#ity
<ariety
Boston Beer Company
-iller Coors
Heineken
Crown &mports
4a!st
,ierra @evada
This strategic group map was constructed in order to compare The Boston Beer
Company against its four largest competitors. (nheuser%Busch has the largest
glo!al market share" yet they offer minimal variety in its product selection.
-illerCoors also is amongst the leading !rewers with market share just !ehind
(nheuser%Busch. -illerCoors offers a larger array of product types and has a
=uality over price ratio for the consumer. Heineken is a craft !rewer that
competes directly with The Boston Beer Company. This graph outlines the
competitive resem!lance of !oth firms" with each offering the same degree of
variety in its product lines3 however Heineken offers higher price points. Craft
90
Brew (lliance falls !ehind all four other competitors !ut they are amongst the top
in the !rand variety for !eer.
$orter@" 0!(e 0orce" Ana,y"!"
(n analysis of the industry shows that it can !e an attractive industry to enter if
planned and eecuted properly. Considering two major !rewers control nearly
67N of the U.,. market share" their influence on all strategic groups is critical.
4orter2s five forces will assess five components of the industry that will complete
an overall assessment of the attractiveness of the industry.
3!(a,ry or d!rect compet!tor" )AB10*
The etent of competition varies across different geographical segments. The
!eer industry is fragmented across several regions" and producers work to satisfy
the demands of consumers within each respective area. Beer interest and
consumption rates are highly dependent on geographical region" which eplains
producers2 desire to diversify their market distri!ution portfolios and mitigate risk.
&n countries where the domestic !eer market has already reached a mature
stage of its life cycle" the market is dominated !y a small num!er of large
players. &n this instance" competition takes place through direct marketing
channels and !rand promotion strategies in an effort to gain greater consumer
awareness. &n emerging markets" competition is greater as there are fewer
!arriers to entry" and more firms are competing for market share
5;5
.
>ith increased demand from consumers for differentiation" it is common for
!rewers to import and distri!ute !rands of foreign !rewers under their own !rand
identity. This allows the !rand owner to gain leverage from the distri!ution
strength of the importer or distri!utor
5;8
. Greater competition !ased on taste has
!ecome apparent with the rise of craft !rewing in mature markets. Consumers
are !ecoming loyal to !rands !ased on taste as opposed to price.
875A.
172 &!id.
91
The !rewing industry has a high level of concentration" with the four largest
corporations generating a!out ;<.<N of revenue
5;9
. -illerCoors and (nheuser%
Busch &nBev dominate the industry and are responsi!le for the majority of all
!eer !rewed within the United ,tates. However" over the past five years" the
industry has changed as an increasing num!er of smaller players have entered
the market" including The Boston Beer Company" Carls!erg" and Heineken.
>hile they represent a small portion of the industry" the craft !rew segment has
eperienced rapid growth over the past couple of years" and it is epected to
continue
5;A
.
Co'0any hares of Beer 5>6
n!euser"Busc! 2nBe)
.BMi%%er
Mo%son#oors
4eine5en
Boston Beer
#om$any
#raft Brewers %%iance
173 &!id.
174 &!id.
92
280
160
120
110
90
80
70
60
40
MaDor Co'0anies /#o7a#
n!euser Busc! 2nBe) 4eine5en
.BMi%%er #om$an!ia 6e Be*i-as 6as merica
sa!ia 7rou$ 4o%-ings #ar%s*erg
Mi%%er#oors 8irin 4o%-ings #om$any
3t!er
The following information details the previous three years information regarding
the industries top F competitors. The top five competitors are listed in terms of
cash flow from operations" 1.(N" 1.EN and 1.&N
5;F
.
175 -ergent .nline. Comparison 1eports. 1etrieved -ay 5D" 875A.
93
.eine*en
Heineken is !ased in the @etherlands" esta!lished in 56DA. The company
employs approimately DA"977 staff with more than 55F !reweries across the
world
5;D
. The !rewery sells more than 877 international premium" regional" local"
176 &!id.
94
and specialty !eers and ciders. Beer accounts for a!out 6F.7N of the company2s
production.
The company2s !eer production segment is epected to grow at D.FN
annuali$ed. 1evenue is epected to total :89.; Billion in 875A growing 9.<N
during the year
5;;
.
Anheuser-)usch -n)ev
177 &!id.
95
(nheuser%Busch &nBev is head=uartered in *euven" Belgium and operates with
an etensive portfolio of over 877 well%recogni$ed !rands
5;6
. The company is the
result of a takeover of (nheuser%Busch !y &nBev in 8776. (ccording to &B&,
>orld" OThe rationale !ehind the ac=uisition included (nheuser%Busch2s strength
in the U, &ndustry. The operations of &nBev and (nheuser%Busch were
875A.
96
complementary# (nheuser%Busch had little presence in Europe while &nBev2s
presence in the U, market was only through !rands distri!uted !y (nheuser%
BuschP
5;<
. The firm currently employs 5F7"777 people across the glo!e
567
.
The !eer production segment of (nheuser%Busch &nBev generates a!out <7.7N
of total company revenue
565
. &t is epected that revenue will grow F.8N in five
years totalling :A5.; !illion
568
.
179 &!id.
180 &!id.
181 &!id.
182 &!id.
97
Car%s/er( A0"
The Carls!erg Brewing Group is a ?anish !rewing company that was founded in
56A; and employs approimately AF"777 people
569
. &t has an etensive collection
of international and regional !eers. Carls!erg2s !usiness is focused around three
geographical regions# >estern Europe" Eastern Europe and (sia.
183 &!id.
98
Carls!erg2s !eer production segment is estimated to grow at an average annual
rate of 9.7N" including a 9.6N increase in revenue totalling :55 Billion
56A
.
However" the company2s major market is in Europe" which eperienced a
depression in 8758 reflecting the financial statement.
"A)'i%%er
184 &!id.
99
,(B-iller and -olson Coors formed a joint venture in the United ,tates in 877;"
to !etter compete with (B%&nBev in this key market. The venture has esta!lished
a strategic distri!ution and !randing !etween the companies depending on
regional local market trends
56F
. ,(B-iller controls F;.7N of the venture while
-olson Coors has a A9N stake in the entity.
185 &!id.
100
1evenue is epected to grow A.AN to :<.F Billion as consumers shift spending to
craft !eer or alternative !everages
56D
. The recession significantly hindered
consumer spending on this company2s products.
'o%son Coors )re&in( Company
186 &!id.
101
Asia
102
&n China" there are many !rewers who can !e considered competitors" !ut this
report will focus on the three largest competitors# (nheuser%Busch &nBev"
,(B-iller" and Tsingtao Brewery Company
56;
. The graph !elow outlines the
competitors market share within China.
These three companies pose the !iggest threat to The Boston Beer Company
within the Chinese market. ,(B-iller is the largest competitor holding 5D.8N of
market share" closely followed !y Tsingtao Brewery at 59.DN and (nheuser%
Busch at 55.8N
566
. This makes a com!ined market share of A5N in China. The
following ta!les give a short summary snap shot of the competitors.
187 Euromonitor &nternational. Beer in China. Category Briefing" Euromonitor &nternational"
8759.
188 Beer &ndustry 4rofile# China. /87570. Business ,ource Complete. 1etrieved on -ay 5A"
875A
103
,ource# -ergent .nline
56<
Canada
Two firms dominate the Canadian !eer industry# (nheuser%Busch and -olson
Coors Brewing Company. (nheuser%Busch controls A9.5N market share followed
!y -olson Coors with 96N
5<7
.
&ndicated !elow are the financials for the two main competitors within the
Canadian industry. The ta!les provide a snap shot of the cash flow from
operations" total assets" EB&T?( N" 1.( and 1.&.
190 Euromonitor &nternational. Beer in Cana$a. Euromonitor &nternational" 8759
104
5<5
Europe
(s analy$ing all of Europe is not entirely feasi!le" the UH is used as a proy. The
three largest competitors are -olson Coors Brewing Co." Heineken" and
(nheuser%Busch &nBev. The company summaries for the respective competitors
can !e seen !elow. -olson Coors Brewing and (nheuser%Busch hold 85.<N and
5<.6N of the market share" respectively
5<8
. Heineken holds 97.7N market share
as shown !elow.
192 Beer &ndustry 4rofile# United Hingdom. /87570. Business ,ource Complete. 1etrieved on
-ay 5A" 875A
105
+hreat of entry )?B10*
The !arriers to entry into the domestic !rewing industry depend on whether a
new operator is attempting to enter the small craft%!rewing market or large%scale
production. The investment in the e=uipment" !uildings" ingredients" recipes" and
human resources re=uired to produce over 8 million !arrels of !eer per year" and
!e classified as a medium%large si$ed !rewer is significant" !ut not a !arrier on
its own.
+ar(e "ca%e
The major market producers control approimately 67N of the U, market share.
?ue to this" they have su!stantial financial resources that are availa!le to invest
in marketing" ac=uisitions" or other methods to discourage new entrants. ( firm2s
financial sta!ility allows domination and power over the entire industry
5<9
. +or a
!rewery to enter the industry and start competing on a large platform with the
likes of (nheuser%Busch &nBev and -illerCoors" the chances of survival are slim.
The major !rewers can enter or leave the craft !eer industry at any time due to
their unlimited resources and economies of scale. The economies of scale
achieved as a result of larger production capacity gives the major !rewers higher
profit margins than smaller !rewers. >ith additional profits" these companies can
reinvest in new facilities and e=uipment" do additional marketing" and ac=uire
smaller !reweries. 1ecently" large !rewers such as -illerCoors have ac=uired
smaller !reweries to increase their market shares. &n the case of the large
!rewers" high !arriers to entry have esta!lished a low threat of entry !ecause it is
challenging for outsiders to enter the competitive and epensive industry.
Craft )eer
The eistence of over 5D77 companies supports the notion of low !arriers to
entry into the craft !eer segment. Entry into the craft%!rewing market is facilitated
!y the option to purchase turnkey facilities and face lesser taes" !ut starting a
large%scale production re=uires significant cash flow and continuous investment.
875A.
106
Customers have responded well to craft !eer and the industry has seen rapid
growth
5<A
. Craft !reweries that do not differentiate themselves will !e forced to
sell ownership or !e faced with loss of market share as the major players
continue to dominate the market. Barriers to entry in the craft !eer segment
mimic those in the large%scale !rewing group and include the sunk costs of
manufacturing facilities and !randing. ,ince the !etter !eer industry has medium
!arriers to entry" a threat still eists for new competitors to enter the market" as
the !arriers don2t fully deter a company from entering.
+hreat of Sub"t!tute" )CB10*
(s the launch of wine" spirits" and innovative malt%!ased OmalternativesP continue
on an upward trend" the market for !eer has reached maturity and the threat of
su!stitutes is eerting pressure on the industry. Beer consumption has either
remained relatively consistent or has decreased slightly over the years" while
wine and spirits consumption increases. ,hipments in the wine industry
encountered a 8FN rise from 5<<; to 877D and flavoured alcoholic malt
!everages yielded approimately :AAF million !y the mid%8777s
5<F
. ?espite
these trends" there are 67 million !eer drinkers in the U.,." making it the most
popular !everage of choice !ehind water and tea
5<D
. &n Canada" the growing
num!er of older consumers has reinforced consumer preferences for wine and
has increased demand in various spirit areas" while demand for !eer in 8758
remained low
5<;
. &n @orth (merica" (ustralasia" and >estern Europe the shift
away from !eer was prompted most nota!ly !y spirits !ut also increasingly cider
and 1T?s" while increases in worldwide wine consumption occurred in all
regions !ut >estern Europe" (frica" and the -iddle East
5<6
.
194 &!id.
195 High!eam Business. Q-alt Beverages ,&C 8768.Q &ndustry 1eport" 875A.
196 &!id.
198 Cunnington" 'eremy. 'lobal Alcoholic rin!s Consu-ption Beco-es )ore 1clectic. .pinion
" Euromonitor &nternational" 8759.
107
,hare of Throat /N0 for (lcoholic ?rinks Glo!ally and !y 1egion 8758)875;
>orld 8758 875;
Beer AA.A A9.<
Cider)4erry 7.A 7.F
1T?s)High%,trength 4remies 5.7 5.7
,pirits 96.7 96.;
>ine 5D.8 5F.<
A"!a $ac!f!c 2012 201C
Beer 9<.5 96.8
Cider)4erry 7.7 7.7
1T?s)High%,trength 4remies 7.F 7.A
,pirits F8.7 F8.7
>ine 6.F <.A
Au"tra,a"!a 2012 201C
Beer A8.7 9;.<
Cider)4erry 5.6 A.9
1T?s)High%,trength 4remies ;.A D.<
,pirits 58.< 59.A
>ine 9F.6 9;.A
&a"tern &urope 2012 201C
Beer A9.8 AA.7
Cider)4erry 7.5 7.8
1T?s)High%,trength 4remies 5.8 5.D
,pirits A5.7 96.8
>ine 5A.F 5D.7
Lat!n Amer!ca 2012 201C
Beer F6.; D7.D
Cider)4erry 7.9 7.9
1T?s)High%,trength 4remies 7.D 7.;
,pirits 95.9 8<.8
>ine <.5 <.8
#!dd,e &a"t and Afr!ca 2012 201C
Beer ;7.; ;7.D
Cider)4erry 5.A 5.6
1T?s)High%,trength 4remies 5.; 5.;
108
,pirits 59.F 59.D
>ine 58.F 58.9
8orth Amer!ca 2012 201C
Beer F5.7 A6.5
Cider)4erry 7.8 7.D
1T?s)High%,trength 4remies 5.9 5.9
,pirits 97.8 95.9
>ine 5;.9 56.;
=e"tern &urope 2012 201C
Beer 9D.8 9F.6
Cider)4erry 5.; 5.<
1T?s)High%,trength 4remies 5.D 5.D
,pirits 87.A 87.;
>ine A7.8 9<.<
,ource# Euromonitor &nternational
5<<
The chart a!ove compares the share of throat in alcoholic !everage segments in
8758 to predictions in 875;. (lthough the changes across each region may
appear insignficant" it should !e noted that !eer2s share of throat is decreasing
across all geographical areas with the eception of Eastern Europe and *atin
(merica. (ccording to the data a!ove" share of throat in cider" 1T?s" and spirits
is also epected to increase or remain the same in each continental region
ecept for Eastern Europe and *atin (merica which may eperience a fall in the
consumption of spirits" and (ustralasia and (sia 4acific where 1T?s intake will
drop slightly.
$o:er of Supp,!er" )AB10*
(n entire ancillary industry now provides everything from organic hops to
fermentation tanks to specially tailored financial consultation to the :57 !illion
craft !eer industry
877
. The !etter !eer segment is also !enefiting from the major
players in the !rewing industry who have lessened the power of suppliers. ?ue to
its much larger production volumes /in !arrels per year0" it is easier for the larger
!reweries to control prices with suppliers. ,mall !rewers also have some
199 &!id.
200 &!id.
109
influence over prices when choosing to !uy from local farms. 4urchasing from
local suppliers reduces transportation and spoilage costs" making !uying local a
!enefit to any !rewery capa!le of doing so. ,upplier power is reduced even
further in these instances when a !rewery2s high volume purchases make it the
farmer2s primary customer.
The major suppliers to the !eer industry include hops and !arley farmers" and
aluminum can and glass !ottle manufacturers. Hops and !arley constitute raw
agricultural products in the same category as other commodities like rice and
wheat. This makes hops and !arley suppliers price setters" where!y the price is
determined !y a fied%weight inde !ased on spot or future prices.
Barley is the largest glo!al crop in A years and is epected to lift stocks !y 85N
!y the end of 875A
875
. .utput is projected to drop !y ;N and world consumption
is also likely to decline in 875A)5F
878
. Consumption is projected to !e outpaced !y
production in the medium term" !ut the modest annual stock increases will
remain well !elow the highs seen at the turn of the decade
879
. The projected drop
in the glo!al average yield in 875A)5F comes after !eing unusually high due to
favoura!le conditions for !arley in Canada" the EU" (rgentina" and (ustralia
87A
.
Barley production is largely concentrated in the EU" which is the world2s largest
supplier. ,upply and demand projections on a glo!al scale are depicted in the
graph !elow.
201 &nternational Grains Council. Barle%. (pril 8F" 875A.
http#))www.igc.int)en)grainsupdate)sd.aspBcropCBarley /accessed -ay 5<" 875A0.
202 &!id.
203 &nternational Grains Council. Q+ive%Mear Glo!al ,upply and ?emand 4rojections.Q I'C
'rains an$ 9ilsee$s In$e2 C'9ID. ?ecem!er 57" 8759.
http#))www.igc.int)en)downloads)grainsupdate)igcRFyrprojections.pdf /accessed -ay 5<" 875A0.
204 &!id.
110
,ource# &nternational Grains Council
87F
Epanding !eer consumption has and will continue to !e a key driver of demand
especially for malting !arley in developing !eer markets in 4acific (sia and ,outh
(merica
87D
. ?emand for malt !arley from the !rewing industry dominates
processing consumption and world industrial use of !arley is projected to rise !y
5.<N per annum to 99 million tonnes !y 8756)5<
87;
.
Hops are the other main ingredient essential to the flavouring of !eer.
>ashington" .regon" and &daho are the only 9 states in the U.,. that share in the
hops farming industry
876
. This is evidence of an etremely concentrated supplier
!ase in the hops farming industry. >ashington ,tate grows approimately ;;N of
hops" however" increasing demand !y the craft !eer segment for fragrant aroma
varieties is making it more difficult for suppliers to keep up
87<
. Therefore" without
immediate partnerships with 5 of the 9 U.,. hops growers" !reweries are likely to
face a trade%off in higher priced raw material inputs or lesser =uality /less
205 &!id.
206 &!id.
207 &!id.
208 >e!er" 4eter. Q&4( +ans" Beware# Hops ,upply &snXt -eeting Craft%Brewer ?emand.Q The
#ee!. +e!ruary 8;" 875A. http#))theweek.com)speedreads)inde)8F;7F8)speedreads%ipa%fans%
!eware%hops%supply%isnt%meeting%craft%!rewer%demand /accessed -ay 5<" 875A0.
209 &!id.
111
OhoppyP0 ales. The graph !elow depicts the trend of an overall increase in
demand for hops over ten years !etween 8778 and 8758" while production has
started to decline since the recession in 8776.
,ource# Hop Growers of (merica.
857
Hops stocks are up FN from 8759 to 585 million pounds of inventory held !y
growers" dealers" and !reweries on -arch 5" 875A
855
. ,tocks held !y growers
and dealers have increased !y 5DN over the past year" while hops stocks held
!y !reweries are down 6N
858
.
$o:er of Buyer" )CB10*
Buyers in the !rewing and alcoholic drinks industries are made up of wholesalers
and distri!utors who" in turn" sell the products to licensed retailers and end%
consumers. >ith more than 8777 distri!utors in operation" !uyers are etremely
fragmented3 the top A players account for less than 57N of revenue and none
210 QU,( Hops 8759 ,tatistical 1eport.Q U"A 3ops. 'anuary 8759.
http#))www.usahops.org)userfiles)image)59<88DAF5DR8759N87,tatN874ack.pdf /accessed -ay
5<" 875A0.
211 U, ?epartment of (griculture. QHop ,tocks.Q U"A 3ops. -arch 87" 875A.
http#))www.usahops.org)userfiles)image)59<DFA7AFAR875AN87-archN87Hop,tocks.pdf
/accessed -ay 5<" 875A0.
212 &!id.
112
control more than FN of the total (merican market share
859
. This !uyer
fragmentation is captured in the chart !elow !y comparing the si$e of distri!ution
enterprises !ased on the num!er of employees. Here" it is evidenced that nearly
AFN of firms employ less than 87 people and only 8.8N have more than F77
employees
85A
.
,ource# &B&, >orld
85F
,trict regulation at the respective state and provincial levels in the U.,. and
Canada further guarantees the industry2s overall fragmentation. (ll of Canada
and 56 of the U.,. states are alcohol !everage controlled which means that
private wholesaling is prohi!ited and the government monitors the marketing and
sale of alcohol products
85D
. (s a result" there are a large num!er of state%!ased
distri!utors serving the needs of local cities and regional communities.
The num!er of !eer wholesalers in the U.,. is declining at a 57%year annuali$ed
rate of 7.9N per year
85;
. +ollowing the centrali$ation of major !rewers in the
years leading to now" wholesalers are also epected to reduce the num!er of
distri!ution centers and in 875<" it is estimated that there will !e 5"<AF
213 &B&, >orld. Q&B&,>orld &ndustry 1eport A8A65# Beer >holesaling in the U,.Q &ndustry
1eport" 875A.
214 &!id.
215 &!id.
216 &!id.
217 &!id.
113
warehouses
856
. (lthough still high" these predictions of the downward trend in the
num!er of distri!ution facilities are an indication that the !uyer !ase may
eventually !ecome more concentrated.
.nce the product makes it from the !reweries to the distri!utor or wholesaler" it is
finally sold to the retailer or merchant who will resell it to the !eer drinker. The
majority of !eer is sold to restaurants and !ars" which account for 9<N of the
market
85<
. The remaining product is sold to li=uor and grocery stores as well as
hotels and motels. The third largest segment consists of other esta!lishments
including casinos" gas stations" and convenience stores
887
.
,ource# &B&, >orld
885
?ue to heavy start%up costs and the fied costs associated with manufacturing"
scale is critical to cost leadership in the !rewing industry. ?espite the loyalty that
may eist to certain !eer !rands" consumers usually have a choice of lager in
!oth on% and off%premise channels" so switching costs are low
888
.
218 &!id.
219 &!id.
220 &!id.
221 &!id.
222 -arket*ine. QThe Boston Beer Company" &nc.Q Company 4rofile" 875A.
114
Technically !eer in itself is not a commodity" which gives !uyers no etra power
in this regard. However" raw ingredients like water" hops" and !arley that go into
making !eer are commodities. &ndustry eperts argue that although prices for
these raw materials will continue to increase" people will continue to drink !eer
even under the poorest economic conditions
889
. Hence the opportunity waits for
!reweries seeking competitive advantage to o!tain the cheapest raw material
inputs to keep production costs to a minimum. This opportunity could !e
multiplied if the !rewery chose to !ackwards integrate and invest in its own hops
and !arley farms. The !rewery cannot" however" engage in forward integration as
strict regulations governing the sale of alcohol prohi!it firms from !uying out any
distri!utorship.
+ederal laws in Canada and the U.,. state that !reweries cannot perform sales
transactions of their products directly with the end consumer. 1ather" the
presence of a wholesaler or distri!utor must eist in !etween so that products
can make it from the !rewery into the hands of the !eer drinker. This rule is
known as the three%tier system of alcohol distri!ution3 the effects of which have
!een closely analy$ed !y industry eperts
88A
. The three%tier system commands
that the !uyers have considera!le power over the !reweries if products are
epected to make it to market. +urthermore" distri!utors generally have an
eclusivity agreement with the !rewery and franchise laws ensure that the
!reweries cannot easily end these contracts
88F
. Hence" it is important that a
!rewery esta!lish friendly relationships with its !uyers in order to have access to
the consumer. The positive impact of the three%tier system is that it esta!lishes
competition !y preventing the major !reweries from !uying out all the
distri!utorships that would otherwise only sell their own products and instead"
allows for smaller" craft !rands to grow
88D
.
875A.
224 &!id.
225 &!id.
226 &!id.
115
>hen it comes to the !etter !eer segment" !uyers have additional power.
(lthough prices are higher" the vast selection of craft and import !eers amounts
to key decision%making processes !y wholesalers and distri!utors. The !uyers
hold the ultimate authority in deciding which !eers will make it to market. (s craft
!rand distri!ution remains limited" it !ecomes difficult for consumers to
consistently find certain products" making the distri!utors and wholesalers even
more powerful in the craft !eer segment. -oreover" as consumer tastes develop
and the demand for multiple types of craft and import !eer increases" !uyer
power rises in tandem.
Summary of ? 0orce"
Based on the findings within this report" the determining factors for areas with the
highest impact on the industry overall have !een weighted accordingly. The main
areas where pro!lems might occur for those in the industry are the rivalry and
threat of su!stitutes" which has the highest rating /6)570. ?ue to the nature of the
!eer industry" there are a select few firms that operate glo!ally and dominate the
market share. &t is difficult for a craft !rewer to penetrate the international industry
and compete against firms such as (nheuser%Busch &nBev and -illerCoors. (s a
result" the competition within the !eer industry remains =uite etensive.
Considering there are only a few glo!al leaders" firms must !e cautious of their
operations in order to create higher 1.EN and profita!ility.
The net important factors consist of power of suppliers and !uyers. The demand
for !arley and other raw material greatly impacts how the industry operates. &f the
!arley production falls !elow the overall demand for the industry" prices will rise
and customers will see increases in prices paid for the products according to the
law of supply and demand. The power of !uyers is important as consumers have
several su!stitutes availa!le and choices availa!le. Buyers have the a!ility to
tailor their consumption ha!its to their desired price of purchase or =uality for a
product.
116
The threat of new entrants plays a large role depending on which industry is
!eing considered. ( large !rewer has a low threat of entry from competitors" as
the financial investment to get started is too large to profit. >hereas a small craft
!rewer has a high threat of entrance as competitors can enter with smaller
capital investment. Both ends of the spectrums allowed us to identify a score of F
for threat of entry.
0!(e 0orce" Summary )B10*
1ivalry 6.7
Threat of Entry F.7
4ower of ,uppliers ;.7
4ower of ,u!stitutes 6.7
4ower of Buyers ;.7
A(era/e Score CD0
(n average score of ;.7" the market is moderately unattractive to outsiders who
wish to compete. Entering this industry provides an individual with an unlimited
amount of uncertainties in terms of the industry as a whole. &t is clear that there is
a large portion of craft !rewers and micro!reweries within the market3 however
there are large glo!al leaders who make the industry competitive and difficult to
navigate freely.
117
4r!(!n/ 0orce"
&ntrance of 8e: Bre:er"
The compleity of the !eer industry and amount of competition clim!ed =uickly
throughout the 5<<72s. ( large portion of market share is controlled !y a select
num!er of major players" leaving room for only a small portion of !etter !eer
!rewers. >ith such fierce competition in the industry" firms must look to innovate
their products and capitali$e on emerging markets.
on"umer +a"te $reference"
Brewers are re=uired to develop uni=ue !rands in order to maintain a customer
!ase and attract interest. ,ome of the first !rewers to do this were craft !rewers"
!ut as their popularity grew" large !rewers introduced various options as well
88;
.
(s premiumi$ation continues to trend across the glo!al marketplace" !reweries
must look to adapt their product lines accordingly.
on"umer Beha(!our
( crack down on drinking and driving led to a decrease in alcohol related
accidents and fatalities. Underage drinking has also declined and will continue to
decline with an increased focus on consumer health. This awareness increases
the threat of non%alcoholic su!stitutes.
han/!n/ 4emo/raph!c"
Beer consumption fre=uency and preference will change due to the growing
diversity in ethnicity in the U, population
886
. Ethnic groups prefer different tastes
and !rewers must recogni$e this difference. The !eer industry has eperienced
positive growth as the Generation M demographic has reached 85 in the U,
88<
.
Generation Z will provide a !right future as well once they !egin to reach legal
227 4ontinen" 'ennifer. Q&ndustry .verview# The !eer !rewing industry.Q 8755.
228 &!id.
229 &!id.
118
drinking age. &n addition" the aging population will impact the amount of !eer
consumed as the over F7 age !rackets purchases 97N of !eer sold
897
.
Supp,y and 4emand of 3a: #ater!a,"
The industry is regulated and controlled !y the supply of Barley and Hops. >hen
a shortage eists" the !rewers are faced with a higher price to o!tain the re=uired
materials. (s discussed a!ove" the supply of Barley has !een on the decline over
the past few years and the demand has only !een increasing resulting in a
shortage. This trend has caused industry players to seek technological
innovations in maimi$ing output and increasing efficiency.
Brand $o"!t!on!n/
( key determinant of success is the !rewery2s a!ility to take control over its
distri!ution system and access the necessary networks. ,everal smaller
!reweries starting to penetrate the market are !uilding their reputation on strong"
craft !rands with loyal customer !ases. By increasing !rand presence and" with
it" customer demand3 these companies are a!le to maintain strong !argaining
positions with distri!utors. This leads to a second key success factor for
!reweries which is the esta!lishment of !rand names.
230 &!id.
119
&'terna, 0actor &(a,uat!on )&0&* #atr!'
+actor 9eig!t Res$onse 9eig!te-.core
-00ortunities
2ncreaseing%o*a% a%co!o% consum$tion 0.1 2 0.2
/ec!no%ogica% a-)ancesena*%ingmoreefficient manufacturing&
-isri*utionan-:ua%itycontro%
0.15 3 0.45
2ncreasing-iscretionaryincomein-icategreater s$en-ing%e)e%son
non"essentia% goo-ssuc!craft *eer
0.1 3 0.3
,remiumi;ationtren-in-icatingt!eo$$ortunityfor greater sa%es
)o%umeof $remium$rice-craft *eer $ro-ucts
0.15 4 0.6
"hreats
E<tensi)eca$ita% in)estmentsre:uire-inor-er toremain
com$etiti)ewit!int!e*eer=craft *eer in-ustryt!reatenst!ea*i%ity
of sma%%er firmstocom$eteagainst t!ema>or mar5et $%ayers.
0.15 3 0.45
.!ift inconsumer $referencesfrom*eer toa%ternati)ea%co!o%ic
*e)eragessuc!asci-er& $erry& wine
0.1 3 0.3
2ncrease-awarenessof a%co!o% re%ate-!ea%t!an-safetyconcerns
t!reatensconsumer $erce$tionof& an-wi%%ingnessto*uy& suc!
$ro-ucts
0.05 2 0.1
2ncrease-a)ai%a*%ityof su*stitutestoa%co!o%ic*e)eragesinc%u-ing
wine& s$irits& an-R/6?s.
0.1 2 0.2
@owentry*arriersof craft *rewin-ustryt!reatens*rewerswit!
increase-mar5et com$eititon
0.1 4 0.4
"ota# 1 3
&n receiving a score of 9 on the E+E matri indicates that Boston Beer Company
is a!ove average in responding to opportunities and threats within the eternal
120
environment. The most prevalent opportunities identified in the market are the
introduction of technological advancements" and the premiumi$ation trend
spreading throughout many of Boston Beer Company2s markets. The recent" and
continuing" technological advancements in !rewing e=uipment have presented
Boston Beer Company" and other !rewers" with the opportunity to engage in
more efficient production and distri!ution" as well as greater =uality management.
&n considering the highly competitive" and monopolistic" nature of the !eer
industry" efficiency is essential to Boston Beer Company2s a!ility to maintain
competitive price points relative to other craft !rews and to continue growing
revenues necessary to epand within !oth domestic and foreign markets. The
premiumi$ation trend refers to consumers growing preference for higher =uality"
higher priced" !eers. (s a craft !rewing company that prides themselves on their
a!ility to deliver the highest =uality craft !eers" this trend represents a growing
market !ase and potential growth in revenues. (s the largest and most famous
craft !rewer in the United ,tates" and one of the few craft !rewers with a national
presence" Boston Beer Company has demonstrated considera!le understanding
of eternal market opportunities and how to eploit them.
The largest current threat identified is the etensive capital investment re=uired
to remain competitive within the craft !eer industry. (s the craft !eer market
continues to grow" competition from major industry players such as -illerCoors
and (%B &nBev" and new and eisting micro!reweries" will continue to grow as
well. &n order to further their current success within the craft !rew market it is
necessary that Boston Beer Company continue to reinvest in themselves and
adopt strategies that support efficient" high =uality production. Boston Beer
Company has demonstrated considera!le strength in responding to these threats
through their recent investments in new manufacturing plants" allowing for larger
production volumes and economies of scale. They have also undertaken various
su!contracting arrangements that have ena!led them to epand their market
reach and minimal cost.
121
&n looking at Boston Beer Company2s current market position" and its responses
to eisting threats and opportunities it is !elieved that the firm is operating at an
a!ove average level and" if successfully maintained" are likely to eperience
continued prosperity.
Summary of Indu"try Ana,y"!"
&n applying 4orter2s five forces to assess the eisting industry conditions" it is
found that the !eer industry is moderately unattractive as the threat of
competition3 num!er of su!stitutes" and !uyer and supplier power are high.
.ffsetting eisting threats are moderately attractive EB&T?(2s" 1.(2s" and 1.&2s
that could !e improved upon. &n looking at the top three !rewers" the 8758
EB&T?( ranges from 57.7AN /Tsingtao0 to 95.D;N /(nheuser%Busch &nBev0"
1.( ranged from D.5FN /(nheuser%Busch &nBev0 to 6.66N /,(B-iller0" and 1.&
ranging from 8.8DN /Tsingtao0 to 5A.DDN /(nheuser%Busch0
895
. &n addition" the
industry growth rate has grown at an average of 8N over the past five years" of
which !eer makes up AD.;N
898
.
High competition from few major market players makes it eceedingly difficult for
new%entry firms to survive. The growth in craft !eer consumption has prompted
an influ of craft !eer entrants" threatening eisting !rewer2s market share" and
making for an increasingly competitive environment.
The threat of entry is low within the !eer industry as !arriers are relatively high.
These !arriers pertain to high capital investment re=uirements" strict government
regulations regarding the production and distri!ution of alcohol" and the
eistence of major market players with possessing high levels of customer
loyalty.
122
>ith respect to su!stitutes" a shift in consumer preferences towards wine" spirits"
and 1T?2s has !een o!served and poses a threat to !rewers. &n order to
overcome this threat" !rewers must work to innovate their product line and offer a
more diversified selection. This translates into a competitive advantage for craft
!rewers who are capa!le of supplying more value added products.
&n considering that the raw materials re=uired for !eer production are
commodities" suppliers eercise considera!le power within the industry. +armer2s
=uotas dictate the market prices and production levels of agricultural outputs
used in the production of !eer. +urthermore" the limited num!er of states
producing these raw materials makes for a highly concentrated supplier !ase.
The stringent distri!ution regulations which heighten !uyer power pose a threat
to companies within the !rewing industry. The three%tier distri!ution system"
eclusivity agreements" and franchise laws make it challenging for craft !eers to
consistently make it to the shelf and limit the a!ility to epand distri!ution
networks.
The forces driving the !eer industry include the entrance of new !rewers"
changing consumer taste preferences" !ehaviour" and demographics" as well as
the availa!ility of raw materials and strong !rand positioning of eisting market
players. These driving forces add compleity to the mature dynamics of the
industry and present a challenge for most !reweries seeking to conduct
!usiness.
123
,(9" !!!
<a#ue Chain (na#ysis
124
-a,ue ha!n Ana,y"!"
The Boston Brew Company is the leading !rewer of full%flavoured" craft !eers in
the U,. The company has !uilt its reputation on over 97 distinctive" award%
winning styles of !eer marketed under its well%renowned ,amuel (damsI
!rand
899
. ,amuel (dams is an independent !rewery with a sole focus on !rewing
high =uality !eers. ?espite only holding 5N of the U, !eer market" the ,amuel
(dams !rand is the country2s largest%selling craft !eer
89A
. The company2s flagship
product ,amuel (dams Boston *agerI has !een !rewed using the same recipe
passed down through family tradition since the mid%5677s
89F
.
&n the early 5<672s" C. 'ames /'im0 Hoch revisited an old family recipe for *ouis
Hoch *ager that had !een !rewed continuously over the course of five
generations
89D
. ,eeking out a niche position in the highly competitive U, craft
!eer market" Hoch used his great%great grandfather2s recipe to !rew his first
!atch of ,amuel (dams Boston *ager in 5<6A
89;
. Hoch2s endeavour first took him
to 4ennsylvania where he started producing !eer in a century old !rewery while
renovating the a!andoned Haffenreffer Brewery in Boston" which opened as the
Boston Brewery in 5<66
896
. Hoch also purchased a !rewery in his hometown of
Cincinnati in the mid%5<<7s and later" in 'une of 8776" The Boston Beer
Company took ownership of a 4ennsylvania%!ased !rewery
89<
. Hoch currently
serves as Boston Beer Co.2s Chairman after stepping down as Chief Eecutive
.fficer in 'anuary 8775 and as the company2s ,ecretary)Clerk in -ay 8757
8A7
.
233 The Boston Beer Company" &nc. In0estor Relations Center: 3o-e pa+e. 875A.
http#))www.!oston!eer.com)phoeni.$htmlBcCD<A98EpCirol%overview /accessed -ay 88" 875A0.
234 &!id.
235 &!id.
236 The Boston Beer Company" &nc. In0estor Relations Center: About Us pa+e. 875A.
237 &!id.
238 &!id.
239 &!id.
240 The Boston Beer Company" &nc. In0estor Relations Center: irectors pa+e. 875A.
125
The !rand inherited its name after the Boston patriot and father of the (merican
1evolution who had also inherited a !rewing tradition from his father
8A5
. ,amuel
(dams was launched in Boston on 4atriot2s ?ay in (pril 5<6F and !y the end of
that year" sales reached F77 !arrels. The product unveiling prompted swift
distri!ution of ,amuel (dams !eer and The Boston Beer Co. started to epand
across -assachusetts" into Connecticut and later" into >est Germany
8A8
.
The Boston Beer Co. continues to engage in the alcoholic !everage !usiness
throughout the U, and in selected international markets. The company primarily
supplies the U, !ut also on a limited !asis Canada" Europe" and East (sia
8A9
. &ts
,amuel (dams and ,am (dams *ightI !eers are produced and sold under the
trade name The Boston Beer Company. The company has epanded its product
portfolio to include ciders and malt%!ased !everages under the trade names
(ngry .rchard Cider Company and Twisted Tea Brewing Company"
respectively
8AA
. Continued outsi$ed volume growth in the (ngry .rchard and
Twisted Tea !rands contri!uted to a 8AN rise in net revenue in 8759" to
approimately :D6D million" ecluding ecise ta
8AF
. Estimates for 875A predict
company sales growth of over 5;N as (ngry .rchard and Twisted Tea volumes
grow at a slower rate and the core ,amuel (dams !rand sustains good growth
8AD
.
The Boston Beer Company currently employs 5"588 people stimulating :;5.6
million in net income.
241 The Boston Beer Company" &nc. In0estor Relations Center: About Us pa+e. 875A.
242 &!id.
243 Euromonitor &nternational. QBoston Beer Co. &nc" The &n (lcoholic ?rinks /U,(0.Q 8759.
/accessed -ay 88" 875A0.
244 +ord E=uity 1esearch. Boston Beer Co. Inc. ( -ergent Company" -ay <" 875A. /accessed
-ay 88" 875A0.
245,E4 Capital &K. Boston Beer Co. Inc. CTheD. -cGraw Hill +inancial" -ay 57" 875A.
246 &!id.
126
,(9" !!!(
,ri'ary <a#ue*Creatin$ (cti&ities
127
$r!mary -a,ue.reat!n/ Act!(!t!e"
This section of the report will assess the strengths and weakness of each value
creating activity" and metrics will !e provided to support the claims made a!out
the competitive positioning of each function. ,upply Chain -anagement"
?istri!ution" .perations" -arketing and ,ales" and Customer ,ervice are
elements of the primary value creating activities that kindle opportunities and
threats for the industry and The Boston Beer Company. (t the end of each
section" a L1&. framework is constructed for each value chain function to
determine if the strategic /in0capa!ilities lead to strong or weak competitive
positioning.
Supp,y ha!n #ana/ement
,upply chain management refers to procuring the right input" producing value"
and then distri!uting the finished product to wholesalers or retailers
8A;
. ,upply
chain management is a particularly important performance metric in retail and
production industries where inventory and holding costs account for a significant
share of a company2s annual operating epenses. The larger the product line or
geographical dispersion" the more time and resources re=uired in developing an
efficient and effective supply chain system
8A6
.
The Boston Beer Company has a vast network supplying over 577 distinctive"
award%winning styles of !eer through selected international markets
8A<
. The
company2s supply chain system is not as etensive as other !rewers2" !ut !y
offering seasonal !everages" The Boston Beer Company is still re=uired to
anticipate change and maintain flei!ility. The Boston Beer Company is uni=ue in
that it keeps <FN of its supply chain activities in house
8F7
. ,ome !everages"
247 #hat is suppl% chain )ana+e-ent. /8755" 'an 550. 1etrieved 7D 78" 875A" from @C ,tate
University# http#))scm.ncsu.edu)scm%articles)article)what%is%supply%chain%management
248 &!id.
249 The Boston Beer Company" &@C. About Us. 875A.
http#))www.!oston!eer.com)phoeni.$htmlBcCD<A98EpCirol%homeprofile /accessed 7F 59" 875A0.
250 >ikinvest. Boston Beer Co-pan%. -ay 89" 875A.
http#))www.wikinvest.com)stock)BostonRBeerRCompanyR/,(-0 /accessed -ay 89" 875A0.
128
which are not produced !y the company2s own !reweries" are contracted
elsewhere to !rewers whom are a!le to maintain =uality and taste standards
8F5
.
The essential ingredients and materials re=uired in the production and packaging
of Boston Beer Co.2s products are o!tained through sound and efficient supply
chain management. This system is essential to the success of the organi$ation
!ecause if one part of supply chain disappoints" the remaining operations are
negatively impacted. Below" The Boston Beer Company2s performance on key
supply chain metrics used to measure efficiency and responsiveness are outlined
in detail.
Eey Se,,!n/ Indu"tr!e"
The !eer industry relies on sellers and manufacturers for raw materials"
packaging" and la!elling in order to produce a finished product. The Boston Beer
Company has !een successful to date in o!taining sufficient =uantities of the
ingredients used in the production of its !eers and hard cider. These ingredients
include# malt" hops" yeast" apples" and packaging materials. The key sellers and
industry classification num!ers are provided !elow
8F8
.
Indu"tr 8ame 4e"cr!pt!on
251 The Boston Beer Company. /87590. 2013 Annual Report. The Boston Beer Company.
252 &B&, >orld. /875A0. 'lobal Beer )anu*acturin+. &B&, >orld.
129
y
1111C >heat" Barley E
,orghum +arming
in the U,
-alt" a key ingredient in !eer production" is made from
grains like !arley and hops.
>1121 +lour -illing in
the U,
Brewers purchase malt from this industry. -alt comes
from !arley or other grains that have !een germinated !y
soaking them in water and then kiln%drying them.
>11>1 ,ugar 4rocessing
in the U,
,ugar is a key component in making !eer.
>2192 >ood 4allets and
,kids 4roduction
in U,
>ooden pallets are used to transport the final product to
end users" such as retailers" !ars and clu!s.
>2221 Card!oard Bo
and Container
4aper!oard containers are used to package !ottles and
cans of !eer for the purpose of transportation.
>2>11 4rinting in U, Brewers re=uire printed la!els on their products" a key
success factor in marketing.
>2C21 Glass 4roduct
-anufacturing
Glass is re=uired for packaging !ottled !eer.
424?1 Corn" >heat E
,oy!ean
>holesaling
Barley and hops are purchased from grain wholesalers
for making malt !everages.
,ource# &B&,>orld
8F9
3a: #ater!a,"
The Boston Beer Company takes pride in the =uality ingredients that its !eer is
made with. The majority of the hops and !arley is handpicked to ensure the
freshest =uality. The Boston Beer Company uses a Otwo%rowP variety of !arley
that is grown in the United ,tates and Canada
8FA
. The 8758 !arley crop in
Canada was consistent with the ten%year average in terms of !oth =uality and
=uantity
8FF
. The 8759 !arley crop in Canada had record setting yields and a!ove%
average =uality which resulted in a price increase. -uch of the malt used in
production was purchased from one major supplier during 8759
8FD
. The
company2s !arley selection is handpicked from the U, and Canadian markets"
versus the hops which is imported from various regions in Germany" the C$ech
253 &!id.
/(ccessed 875A0
255 &!id.
256 &!id.
130
1epu!lic" and the U.H
8F;
. The company predominantly uses @o!le hops for its
,amuel (dam lagers
8F6
. @o!le hops is availa!le in different varieties recogni$ed
for superior taste and aroma properties. ,ome of these include Halertau%
Hallertauer" Tettnang%Tettnanger" Hers!ruck%Hers!rucker and ,palt%,palter which
all originate in Germany3 and ,aa$%,aa$er from the C$ech 1epu!lic
8F<
. The
company maintains proprietary strands of yeast that are used in its !eers and are
nearly impossi!le to duplicate. These strands are so !eneficial to the !eer2s
=uality" that Boston Beer Co. has stored them in several different" secure
locations" including an unaffiliated la!oratory
8D7
. The company has entered into
limited%term supply agreements with certain vendors in order to receive
preferential pricing. &n 8759" glass" cans" and la!els were each supplied !y a
single source
8D5
.
Boston Beer Co. has entered into purchase commitments with seven hops
dealers !ased on consumption and production projections
8D8
. The dealers have
either have the raw materials availa!le or contract work to farmers in order to
meet any etra demand re=uirements. ,toring inventory in case of material
shortages is a strategic plan !y The Boston Beer Company" which maintains
approimately two years of supply to limit the risk of unepected shortages
8D9
.
The company stores its hops in multiple cold storage warehouses to minimi$e the
impact of a catastrophe at a single site. 4rovided !elow is a list of The Boston
Beer Company2s primary suppliers of raw materials.
257 &B&, >orld. /875A0. 'lobal Beer )anu*acturin+. &B&, >orld.
/(ccessed 875A0
259 &!id.
260 &!id.
261 &!id.
262 &!id.
263 &!id.
131
Supp,!er 8ame 3e,at!on"h!p +ype $r!mary Indu"try
Arda/h 9,a"" IncD ,upplier -etal and Glass
Containers
Arda/h $ac6a/!n/
Ho,d!n/" L!m!ted
,upplier -etal and Glass
Containers
Bo"ton 4e"!/n enter *andlord 1eal Estate .perating
Companies
!ty Bre:!n/ ompany ,upplier Brewers
$,ea"ant -a,,ey =!ne
ompany
,upplier @(
Shma,tF Bre:!n/
ompany
,upplier Brewers
,ource# Boston Beer Company (nnual 1eport
8DA
(t The Boston Beer Company it is apparent that production levels are increasing
as the demand for raw material has !een increasing since 8757 /shown !elow0.
&n addition" The Boston Beer Company is the fourth highest spender on raw
materials when compared to competitors showing similar production growth
8DF
.
,ource# >ikinvest
8DD
/(ccessed 875A0
265 >ikinvest. Boston Beer Co-pan%. -ay 89" 875A.
http#))www.wikinvest.com)stock)BostonRBeerRCompanyR/,(-0 /accessed -ay 89" 875A0.
266 &!id.
132
,ource# >ikinvest
8D;
4urchasing more raw materials does not necessarily mean that The Boston Beer
Company is selling more products" !ut it does impact the price. +urthermore"
growth in raw materials is attractive to investors" and shows that production
levels are increasing in relation to demand. &f the amount of raw materials where
decreasing" The Boston Beer Company would !e eperiencing a decline in
production" which would !e opposite to industry averages.
Lo/!"t!c"
Breweries are attempting to reduce their car!on footprint within production plants
and are now starting to do the same in logistics and transportation departments.
The cost of shipping and transportation of raw materials and !eer products are
su!stantially increasing
8D6
. These items are dense and increase the weight of
shipment and ultimately3 cost. The raw materials o!tained overseas for The
Boston Beer Company are shipped via !oat and then loaded onto a tractor%trailer
or railcar to travel across land
8D<
. Each land transportation method has its
267 >ikinvest. http#))www.wikinvest.com)stock)BostonRBeerRCompanyR/,(-0 /accessed -ay
89" 875A0.
/(ccessed 875A0
269 &!id.
133
advantages and disadvantages. Tractor%trailers cost several thousands of dollars
more" !ut can arrive in half of the time it takes a train. .n the contrary" railways
provide a cheaper and more environmentally friendly mode of transportation" !ut
they also re=uire that the !rewery !e located close to the track.
)ar(e 1ater
( !arge has its advantages and disadvantages for the !eer industry. &t has the
a!ility to carry 5"F77 tons of cargo or F8"F77 !ushels of corn" grain" or wheat"
etc.
8;7
. &n addition" if eporting or importing !eer" it can ship AF9"D77 gallons. The
water transportation industry has the lowest injury rate and death rate compared
to all modes of transportation. +ocusing on car!on footprints" the water industry
can travel F5A miles per gallon of fuel
8;5
.
Rai% Car +and
The train industry has the advantage of carrying 57"777 tons resulting in 9F7"777
!ushels or e=ually 9"78A"777 gallons of !eer
8;8
. The load difference !etween rail
and !arge are drastically reducing the overall cost and =uantity of shipments.
Unfortunately" train transportation has the lowest safety record associated with it.
There are 5.5F deaths per !illion ton%miles and 85.;; injuries per !illion ton%
miles. The train industry offers a compara!le energy efficiency of 878 miles per
gallon of fuel
8;9
.
Truc* # Trai%er Road
Unlike the other modes of transportation" transport trucks have the a!ility to carry
a maimum freight weight of 8D tons" which e=uals <57 !ushels" or ;"6DF gallons
of !eer
8;A
. >ith the lowest freight weight a!ility" the !eer industry typically
re=uires approimately 96A trucks to e=ual the transportation volume of one rail
270 Tennessee%Tom!ig!ee >aterway. /n.d.0. Car+o Capacit% o* $i**erent transportation )o$es.
1etrieved 7D 78" 875A" from +or Business E &ndustry# http#))!usiness.tenntom.org)why%use%the%
waterway)shipping%comparisons)
271 &!id.
272 &!id.
273 &!id.
274 &!id.
134
car shipment. The trucking industry has a relatively high death rate compared to
the water and !arge industry. The death rate is .6A deaths per !illion ton%miles.
(lso" with small load si$es and additional trucks re=uired" the fuel economy is still
low at F< miles per gallon resulting in an increased cost of transportation
8;F
.
#ode arry!n/
apac!ty
)+on"*
Beer
apac!ty
)9a,,on"*
3ate of
In%ury
arbon
0ootpr!nt
)m!,e"B/a,,on
*
2(era,,
Bar/e 5"F77 AF9"D77 *ow F5A 2
n$
Choice
3a!, 57"777 9"78A"777 High 878 1
st
Choice
+ruc6 8D ;"6DF High F< A0oi$
Ultimately" long haul trucks are most common in the !eer industry for several
reasons. The !reweries tend to !e located in rural areas and the use of ships or
trains !ecomes challenging. (lso" the shipment time through use of trucks is
reduced drastically as it offers direct" door%to%door service. Trucks also offer a
form of advertising in addition to the reduced delivery time. Branded delivery
trucks can attract consumer attention and !uild !rand awareness. (s seen !elow"
there are several !reweries located on coastal regions that are more apt to utili$e
!arges to receive shipments of raw materials from overseas. There are several
locations inland that have no other choice !ut to utili$e train or transport trailer.
(s shown !elow" railways have !een developed to serve most primary locations"
!ut the prolonged delivery time has resulted in ecess inventory making it a less
feasi!le choice for most !rewers.
275 &!id.
135
,ource# Google maps
8;D
,ource# U,( 1ail -ap
8;;
276 Google Earth. /875A0. 'oo+le 1arth. 1etrieved 7D 78" 875A" from
https#))maps.google.ca)mapsB=CmapsEieCUT+%
6EeiCRsu-U;HYGMi5y(,flAH(CKEvedC7C(MKR(Uo(K
277 -aps of >orld. /875A0. U"A Rail )ap. 1etrieved 7D 78" 875A" from -aps of >orld#
http#))www.mapsofworld.com)usa)usa%rail%map.html
136
,ource# @ational Highway ,ystem
8;6
The transportation options provide an opportunity for the !eer industry and
competitive advantages are to !e gained !y !reweries that can effectively utili$e
the availa!le resources. >hether !y !arge" rail or truck and trailer" The Boston
Beer Company and its competitors are faced with increasing transportation costs
due to the price of fuel and industry%!ound transportation metrics such as weight
limits. Therefore" value%to%weight is a key logistics concern for the !eer industry.
2ther S# #etr!c"
&n addition to the metrics surrounding raw materials and transportation as
descri!ed a!ove" metrics including inventory turnover and gross profit margin
must !e analy$ed to fully understand Boston Beer Co.2s competitive positioning.
-nventory Turnover
278 @ational Highway ,ystem. /875A0. 1etrieved 7D 78" 875A" from
http#))www.fhwa.dot.gov)planning)images)nhs.pdf
137
&nventory turnover is a measure of the num!er of times in a fiscal year a
company has sold its entire inventory
8;<
. High inventory turnover is a strong
indicator of the effectiveness of a supply chain" particularly when compared to
competitors in the industry
867
. >hen inventory turnover is high3 holding" storage"
and other supply chain related costs are decreased.
2
0
0
9
.
0
2
0
1
0
.
0
2
0
1
1
.
0
2
0
1
2
.
0
2
0
1
3
.
0
2
0
1
4
.
0
0
2
4
6
8
10
12
14
16
!n&entory "urno&er
/!e Boston Beer
#om$any
n!euser"Busc! 2nBe)
.BMi%%er
4eine5en
"i'es E
,ource# Capital &K
865
279 In0entor% Turno0er. /875A0. 1etrieved 7D 78" 875A" from &nvestopedia#
http#))www.investopedia.com)terms)i)inventoryturnover.asp
280 &!id.
281 ,E4 Capital &K. Boston Beer Co. Inc. CTheD. -cGraw Hill +inancial" -ay 57" 875A.
138
2009 2010 2011 2012 201> 2014
+he
Bo"ton
Beer
ompany
6.9 6 ;.F D.D ; D.;
Anheu"er
.Bu"ch
InBe(
D.F D.6 D.6 D.D D.F
SAB#!,,er A.8 9.D 9.6 A.9 A.F 5F.5
He!ne6en < 6.A <.5 6.A ;.< ;.;
,ource# Capital &K
868
&t is apparent that The Boston Beer Company has !een eperiencing a decrease
in inventory turnover during the last four years" however" the company is still
hovering near the industry average of seven times per year
869
. ,urprisingly" the
Boston Beer Company has had a higher inventory turnover rate than industry
leaders (nheuser%Busch &nBev and ,(B-iller. Having a higher inventory
turnover rate reduces holding and storage costs" !ut it can ultimately increase
supply chain and shipping costs in order to deliver the product where re=uired.
(s Boston Beer Company continues to offer seasonal and limited release
products" its inventory turnover should !e much increased in an effort to sell as
much product as possi!le. &f the company2s product offerings remained
consistent and yielded similar demand" its inventory turnover rate would !e
lowered as inventory levels could remain higher. &f The Boston Beer Company
produces more seasonal !eer than it can sell" an inventory surplus will arise.
4roduction levels and inventory turnover must !e recorded and tracked
meticulously to ensure an efficient inventory turnover level. &n addition"
considering The Boston Beer Company offers a lesser num!er of !rands than
/(ccessed 875A0
139
most of its competitors" the num!er of physical production lines is reduced. (s a
result of smaller production runs and lower volume inventory" Boston Beer Co.
appears to !e competitively positioned on the inventory turnover metric.
Days in -nventory
?ays in inventory is a similar metric to inventory turnover" yet it measures the
time in days during which inventory remains in the company2s supply chain
86A
.
The days in inventory should !e the reciprocal of inventory turnover" as shown
!elow.
284 &nvestopedia. /875A0. a%s "ales o* In0entor%. 1etrieved 7D 78" 875A" from &nvestopedia#
http#))www.investopedia.com)terms)d)dsi.asp
140
2009.0 2010.0 2011.0 2012.0 2013.0 2014.0
0
20
40
60
80
100
120
3ays in !n&entory
3ays F
,ource# Capital &K
86F
(s illustrated a!ove" ,(B-iller has eperienced a drastic increase in inventory
turnover resulting in a major decrease in days in inventory. .ther !rewers once
again fall around the industry average of F; days in inventory
86D
. +inding the
financial !alance !etween inventory turnover and days in inventory contri!ute to
the overall effectiveness of supply chain management. The Boston Beer
Company strives to o!tain a lower num!er of days in inventory as a result of its
286 &!id.
141
seasonal and limited%time craft !eer sales. >hen the days in inventory increases"
this is an indication that season products are !eing introduced too late and are
!ehind schedule in making it to market. (s the leading craft !rewer in the U, with
the desire to grow its market share" Boston Beer Co. must strive to lead the
inventory turnover and days in inventory rates to reduce costs associated with
holding and storing ecess product.
Gross Profit 'ar(in
Gross profit is the amount !y which net revenue eceeds cost of goods sold.
Companies with efficient supply chains should !e a!le to earn higher gross profit
margins !y reducing the cost of transportation" raw materials" and production.
However" this value is not as strong of a representation of the supply chain2s
effectiveness" as cost of goods sold can !e inflated !y having a higher sales
price while still selling inventory of similar value to that of competitors.
142
2009.0 2010.0 2011.0 2012.0 2013.0 2014.0
"0.2
"0.15
"0.1
"0.05
0
0.05
0.1
0.15
0.2
0.25
0.3
/ross ,roGt Mar$in
,ercenta$e A
,ource# Capital &K
86;
(s illustrated a!ove" The Boston Beer Company has maintained a gross profit
margin a!ove the industry average for the past year and has ranked at the top
when compared to competitors. The gross profit margin outlines the Boston Beer
Company2s health !y showing the proportion of money left over from revenues
after accounting for the cost of goods sold. (lthough this metric is not as effective
as inventory turnover" we can see that The Boston Beer Company has a
moderately strong supply chain system.
287 &!id.
143
-nventory
&nventory growth over the year is another important supply chain metric to
consider. &f inventory is increasing" storage costs and handling costs will increase
accordingly. (lso" new distri!ution centers or warehouses will !e re=uired" thus
allocating more revenue to costs of production and the supply chain.
2
0
0
9
.
0
2
0
1
1
.
0
2
0
1
3
.
0
"0.3
"0.2
"0.1
0
0.1
0.2
0.3
0.4
0.5
!n&entory * /ro.th -&er ?ear
/!e Boston Beer
#om$any
n!euser"Busc! 2nBe)
.BMi%%er
4eine5en
,ercenta$e A
,ource# Capital &K
866
288 &!id.
144
2
0
0
9
.
0
2
0
1
0
.
0
2
0
1
1
.
0
2
0
1
2
.
0
2
0
1
3
.
0
0
500
1000
1500
2000
2500
3000
3500
!n&entory
/!e Boston Beer #om$any
n!euser"Busc! 2nBe)
4eine5en
.BMi%%er
#ar%s*erg
Mi##ions 5>6
,ource# -erchant .nline
86<
4redicting future inventory growth is difficult" !ut it can !e seen that (nheuser%
Busch &nBev is eperiencing the most inventory growth of all the industry leaders.
This value must also reflect the inventory turnover. (s inventory is increasing" the
turnover rate may decrease if effective supply chain practices are not followed.
The Boston Beer Company2s inventory level is much less than it competitors
which helps to reduce storage costs. .n the other hand" this also represents the
lack of demand in the market for the company2s offerings. &n any case" it appears
that most !rewers have !een increasing inventory levels as future demand is
predicted to increase.
Tota% Asset Turnover
289 -ergent .nline. /875A0. "A). 1etrieved 7D 78" 875A" from
http#))www.mergentonline.com.proy.li!rary.carleton.ca)!asicsearch.php
145
2010.0 2011.0 2012.0 2013.0
0
0.5
1
1.5
2
"ota# (sset "urno&er
#ar%s*erg
/!e Boston Beer
#om$any
n!euser"Busc! 2nBe)
.BM2%%er
4eine5en
<a#ue
8<7
The total asset turnover represents the annuali$ed revenues divided !y the
average total assets. The Boston Beer Company has the highest percentage of
asset turnover over four years. &ts high score on this metric shows that Boston
Beer Company is generating more revenue per dollar of assets and are thus
doing well.
Cash and E2uiva%ents
290 &!id.
146
2010.0 2011.0 2012.0 2013.0
0
5
10
15
20
25
30
35
Cash : %Bui&a#ents
#ar%s*erg
/!e Boston Beer
#om$any
n!euser"Busc! 2nBe)
.BM2%%er
4eine5en
<a#ue
8<5
The Cash E E=uivalents are investment securities that are short term" have high
credit =uality and are highly li=uid
8<8
. The Boston Beer Company has eperienced
an increase on this particular metric over the past year" while its competitors are
all eperiencing losses.
Property3 P%ant3 and E2uipment Turnover
291 &!id.
292 &!id.
147
2
0
1
0
.
0
2
0
1
2
.
0
0
0.5
1
1.5
2
2.5
3
3.5
4
,ro0erty ,#ant : %Bui0'ent "urno&er
#ar%s*erg
/!e Boston Beer
#om$any
n!euser"Busc! 2nBe)
.BM2%%er
4eine5en
Hu'7er of "i'es
8<9
(s discussed a!ove" the !rewers that invest more into their production and
manufacturing will reap greater rewards. These ratios indicate that The Boston
Beer Company is receiving a !etter return on each dollar invested in property"
plant" and e=uipment than its competitors. The Boston Beer Company is more
efficient with its capital investments than competitors as well. However" recent
purchases are not providing the same !enefit for The Boston Beer Company as
is discussed further !elow.
3ecent 8e:"
The Boston Beer Company2s chairman" 'im Hoch" has recogni$ed that U, !eer
distri!utors could cut :8.F !illion in costs if they !ecame more efficient in supply
chain distri!ution
8<A
. Hoch discussed how distri!utors should redesign their
!usinesses to slash 87N from eisting cost structures and eliminate Odeli!erate
inefficienciesP. The cost of distri!ution is !urdening !rewers with a significant
financial investment. There has !een recent discussion !y industry
representatives analy$ing the overall effectiveness of sharing supply chain costs
with other local !rewers that ship products along the same geographical
293 &!id.
294 1amin" -. /8758" -ay 580. >in+ o* Cra*t Beers. 1etrieved 7D 78" 875A" from The >all ,treet
'ournal#
http#))online.wsj.com)news)articles),B57775A8A7F8;7897AAF557AF;;9<75<5F6656A6D7
148
locations
8<F
. 4rovided !elow is a general outline of the supply chain process for
!rewers. Each category presents more challenging and costly steps within.
,ource# +activa Company 1eport
8<D
The economic footprint of !eer" !y industry is provided a!ove. The supply chain
within the !eer industry is comple and epensive as is evident !y the financial
values termed in !illions of dollars. The shipping and transportation of products
account for almost one =uarter of total costs /depicted as the 9ther category0
8<;
.
295 Hesmodel" ?. /877<" ,ept 8D0. Beer Chie* Pushes *or In$ustr% Chan+es. 1etrieved 7D 78"
875A" from The >all ,treet 'ournal# http#))online.wsj.com)news)articles),B58F96AF9A8D8<9<<9<
296 +activa. /875A0. Boston Beer Co., Inc.
297 &!id.
149
The increasing num!er of product lines in the !eer industry has generated recent
discussion related to the compleity of stock keeping units /,HU0. Breweries can
no longer effectively manage 877 ,HUs !y hand and re=uire plant automation
8<6
.
By automating the supply chain system" companies can effectively track and
manage their diverse product lines. The use of dash!oards to monitor production
and inventory levels has also proven to improve overall efficiency and reduce
costs.
onc,u"!on
The Boston Beer Company and other players within the !eer industry must
manage a comple supply chain system with several intermediaries and
distri!ution locations. Effectively managing the system to esta!lish efficiency
re=uires the coordination of all departments within the company. The Boston
Beer Company has performed well on most metrics analy$ed when compared to
its competitors.
The Boston Beer Company2s supply chain has allowed the offering of seasonal
!everages and ensures such products arrive on time and that stores are stocked
accordingly to meet sales =uotas. This re=uires the !alance of inventory turnover
and days in inventory" which the Boston Beer Company has achieved. The
company has invested resources into capital that it has !enefited from when
compared to competitors.
Unfortunately" however" the weaknesses in The Boston Beer Company2s supply
chain far outweigh its strengths. The company has only esta!lished a relationship
with seven main providers of raw materials" which implicates a large risk
associated with crop failure. (lthough it has enough inventory to last two years" a
crop that can !e destroyed for an even longer period will result in surplus
298 ,chuhmacher" H. /8759" ,ept. 750. Potential Pit*alls o* the cra*t beer re0olution. 1etrieved
7D 78" 875A" from (ll a!out Beer -aga$ine# http#))alla!out!eer.com)article)potential%pitfalls%of%the%
craft%!eer%revolution)
150
epenses paid to alternate suppliers. (dditionally" the cost of shipping from
Boston Beer Company2s four main !reweries is high due to the associated
transportation costs. &f the company had more !reweries" shipping costs would
likely decrease as the distance !etween !reweries and the consumer would
shrink. The increasing compleity of tracking and shipping has resulted in an
ecess num!er of ,HUs that !reweries must coordinate.
.verall" The Boston Beer Company2s supply chain system is seen as a
competitive disadvantage. Below" a L1&. framework has !een included to
summari$e the reasons why Boston Beer Company does not shows signs of a
particularly successful supply chain system. The most important point to note is
that The Boston Beer Company has done a relatively well in terms of supply
chain management when compared to industry leaders. However" its small si$e
and limited resources in terms of supply chain management have disa!led the
company from successfully growing its share of the !eer market. 1elying on
seven primary suppliers in a competitive environment can lead to destruction as
the market is constantly changing. 1elationships need to !e esta!lished and
long%term partnerships with all of the parties involved need to !e arranged across
all affected geographic areas in order to ensure economies of scale and mitigate
risks.
Criteria Mes @o Eplanation
&s the 1esource or
Capa!ility
Lalua!leB
G ,trengths in this area promote higher gross
profita!ility" minimi$e risks and costs surrounding
supply chain management
151
&s the 1esource or
Capa!ility 1areB
G The Boston Beer Company has several competitors in
the Craft !eer industry and the !eer industry as a
whole. They all offer relatively the same product.
&s the 1esource or
Capa!ility costly
to &mitateB
G Esta!lishing a !rewer and implementing an effective
supply chain system has a costly financial investment.
&ndividuals can start a small !rewery !ut in order to
grow and !ecome a large player" large financial
resources are re=uired.
&s the 1esource or
Capa!ility @on%
,u!stituta!leB
G Beer can !e su!stituted with water" pop" wine" or other
!everages. Larious cultures do not accept the
consumption of alcoholic !everages.
.rgani$ed to !e
Eploited
G The Boston Beer Company is the leader in Craft
!rewing. &t has still not a significant impact on the
overall !eer industry.
4erformance &mplication (verage 1eturns
Competitive Conse=uence Competitive ?isadvantage
2perat!on"
The metrics outlined !elow will provide insight into the underlying strengths and
weaknesses associated with The Boston Beer Company2s internal operations.
This analysis will indicate where The Boston Beer Company outperforms its
competitors and conclusions surrounding the competitive advantages that the
company holds within the operations function of the value chain will !e made
evident.
$roduct!on Area" and Locat!on"
152
,ource# &B&, >orld
8<<
(s illustrated a!ove" Europe contains the highest production levels while @orth
(merica is third with 87.AN of production
977
. This outlines the severity of
competition in the main markets that The Boston Beer Company operates within.
The geographic spread of this industry is characteri$ed !y the volume of
production and the num!er of !reweries in a particular region. &n turn" the larger
the population" the greater the consumer demand and the more production
re=uired. Brewers are also locating production facilities closer to more densely
populated areas to reduce transportation costs. (nother influence on the
production and location of !reweries is climate. Temperature plays a large role in
the feasi!ility of !eer production and consumption. >armer climates are
conducive to !eer consumption and thus implicate higher production
re=uirements.
,outh%eastern regions at the glo!al scale account for the highest level of !eer
production at 8F.5N" which is mainly due to the high population
975
. The Great
*akes region in @orth (merica accounts for the net highest proportion of
299 Giraldo" L. /875A0. "tron+ Bre,: Cra*t beers an$ -icrobre,s ,ill $ra, $rin!ers, as ,ill hi+h
.ualit% i-ports. &B&, >orld &ndustry.
300 &!id.
301 &!id.
153
production at 5D.DN
978
. California has the highest num!er of !reweries in the U,
totalling 97A
979
.

,ource# &B&, >orld
97A
302 &!id.
303 &!id.
304 &!id.
154
$opu,at!on by 3e/!on
ompany !tyBLocat!on $opu,at!on
+he Bo"ton Beer
ompany
Boston" -assachusetts D9D"A;<
Cincinnati" .hio 8<D"FF7
Breinigsville"
4ennsylvania
A"596
He!ne6en (frica E -E AA Breweries
(sia 4acific 8F Breweries
Europe ;6 Breweries
The (mericas 87 Breweries
Anheu"er.Bu"ch InBe( ,t. *ouis" -issori 95<"8<A
@ewark" @'. 8;;"5A7
*os (ngelas" California 9";<8"D85
Houston" Teas 8"5D7"685
Colum!us" .hio 688"FF9
'acksonville" +lorida 69D"F7;
-errimack" @ew
Hampshire
8F"A<A
>illiams!urg" Lirginia 5A"7D6
+airfield" California 576"985
Baldwinsville" @ew Mork ;"9;6
+ort Collins" Colorado 5A6"D58
Cartersville" Georgia 5<";95
Chicago" &llinois 8";5A"6FD
,ource# Google
97F
(lthough The Boston Beer Company competes against major industry giants like
(nheuser%Busch &nBev and Heineken" the company2s scale of operations rank on
a considera!ly different level. >here these !reweries serve a population of
several million" The Boston Beer Company reaches just shy of a million people in
the total population surrounding its !reweries. The Boston Beer Company2s four
primary !reweries appear insignificant when compared to (nheuser%Busch
&nBev" which has thirteen !reweries in @orth (merica alone
97D
. Heineken" which is
a direct competitor of The Boston Beer Company" has over 5DF !reweries in
total
97;
. 4opulation plays a large role in the location of a !rewery. The Boston
305 Google.com
307 &!id.
155
Beer Company serves a small population compared to (nheuser%Busch &nBev
who has placed its !reweries in strategic locations. +ewer !rewing facilities
reduce overall production costs for Boston Beer Co." !ut it also significantly
increases transportation and shipping costs showing that location is a strategic
determinant.
The visual representation provided !elow outline Heineken" (nheuser%Busch"
,(B-iller" and The Boston Beer Company2s consolidated !eer volume !y region.
These charts where taken from each company2s 8759 57%H filings.
.eine*en
The (merica2s consume 8<N of Heineken2s !eer production with Central and
Eastern Europe consuming 8FN. Europe in total accounts for almost F7N of
consumption volume
976
.
,ource# Heineken (nnual 1eport
97<
308 Heineken. /87590. 4or- 10&> Annual Report. /(ccessed 875A0
309 &!id.
156
This diagram also shows that Heineken does not rely on one geographical
location for revenue. The (merica2s provide 8AN of operating profit" while
>estern Europe generates 8<N
957
.
310&!id.
157
,ource# (nheuser%Busch &nBev (nnual 1eport
955
(nheuser%Busch &nBev generates and operates primarily in si large
geographical locations. @orth (merica contri!utes to 8;.AN of volume and
Europe provides 57.FN of volume
958
. >hen comparing (nheuser%Busch &nBev
!etween 8758 and 8759" the company decreased volume production in @orth
(merica and !egan to focus on the European and (sian markets. The volume
contri!ution in 8758 in @orth (merica was 95.5N" compared to 8759 when it
dropped to 8;.AN. Elsewhere" volume grew from 5A.9N in 8758 to 5A.6N in (sia
4acific in one year
959
.
311 (nheuser%Busch &nBev. /87590. 4or- 10&> Annual Report.
312 &!id.
313 &!id.
158
"A)'i%%er
,ource# ,(B-iller 8759 (nnual 1eport
95A
(t ,(B-iller production is highest in (sia 4acific with D;.9m hectoliters and a
contri!ution of 59N to EB&T(. This is followed !y Europe" *atin (merica" @orth
(merica" ,outh (frica" and (frica in respective order. This indicates that similar to
Heineken" the !iggest EB&T( is found in developing markets" and although
similar =uantities are produced in developed nations" the margins are not as
profita!le with less opportunity for growth. &t can !e concluded that ,(B-iller is
fairly diverse across the (mericas" Europe" (sia 4acific and (frica.
The )oston )eer Company
The Boston Beer Company has increased its production and sales in !arrels
from 8";AD in 8758 to 9"A5D in 8759
95F
. .ver four years" the net revenue per
!arrel has increased :8<
95D
.
314 ,(B-iller. /87590. 4or- 10&> Annual Report.
315 The Boston Beer Company. /87590. 4or- 10&> Annual Report.
316 &!id.
159
;ear Barre," So,d 8et 3e(enue $er Barre,
201> 9"A5D :85D
2012 8";AD :855
2011 8"A6A :87;
2010 8"8;8 :87A
2009 8"888 :56;
,ource# Boston Beer Company (nnual 1eport
95;
3e(enue"
2009.0 2010.0 2011.0 2012.0 2013.0
0
5000000000
10000000000
15000000000
20000000000
25000000000
30000000000
35000000000
40000000000
45000000000
50000000000
9e&enue
4eine5en
n!euser"Busc! 2nBe)
.BMi%%er
#ar%s*erg
> 3o##ar
956
317 &!id.
160
2
0
0
9
.
0
2
0
1
0
.
0
2
0
1
1
.
0
2
0
1
2
.
0
2
0
1
3
.
0
0
100000000
200000000
300000000
400000000
500000000
600000000
700000000
800000000
900000000
9e&enue
> 3o##ars
95<
The four main competitors of The Boston Beer Company were allocated their
own plot on the first line graph a!ove to represent a more precise description of
revenue changes. &ndustry leader" (nheuser%Busch &nBev" generated almost :A7
!illion in 8758 and :AA !illion in 8759 while direct competitor" Heineken"
generated :8A !illion in 8758 and :8D !illion in 8759
987
. This is important to note
and must !e taken into account as industry leaders often !enefit from higher
economies of scale and are more e=uipped to enter emerging markets more
rapidly.
2perat!n/ 3at!o
The operating ratio is an important metric for the !eer industry. &t measures
management2s performance3 where lower is !etter and calculates operating
epenses as a percentage of sales. &t is particularly effective in predicting a firm2s
a!ility to generate profits going forward" if total revenues were to decrease. The
following graph outlines how the industry leader" (nheuser%Busch &nBev has
319 &!id.
320 &!id.
161
!een a!le to maintain a sta!le operating ratio. The Boston Beer Company has a
smaller operating ratio than Heineken yet the company looks to !e profita!le
moving forward.
2
0
0
9
.
0
2
0
1
0
.
0
2
0
1
1
.
0
2
0
1
2
.
0
2
0
1
3
.
0
0
0.02
0.04
0.06
0.08
0.1
0.12
0.14
0.16
0.18
-0eratin$ 9atio 7y ?ear
n!euser"Busc! 2nBe)
4eine5en
,ercenta$e 5A6
,ource# Capital &K
985
&ner/y U"e
Craft !rewers are an innovative segment of the greater !rewing industry. Beer
companies are developing innovative solutions to conserve energy and reduce
greenhouse gas emissions at facilities. Today2s rising energy costs makes the
reduction of energy usage a high priority for all !reweries. The !rewers that are
considering energy costs" as an epense they cannot control will miss out on
cost saving opportunities and additional revenue. (s outlined !elow" the
production levels are increasing while total energy use is decreasing. Brewers
are developing cost efficient technologies and e=uipment" which support energy%
saving production processes.
162
988
&n general" smaller !reweries have higher k>h)BB* num!ers !ecause smaller
volumes do not offset the !ase energy re=uired to !rew a !arrel of !eer. The
average !rewer uses 58 to 88 k>h)!!l of electrical usage and 5.9 to 5.F
Therms)!!l of thermal /natural gas0" which com!ines to !e on average F7 to DD
k>h)!!l
989
. Ecess energy use can contri!ute to more than :5"8<D"F77 in
epenses as calculated for the average energy consumption rates of industry
players.
322 Brewers (ssociation. /875A0. 1ner+% Usa+e, '3' Re$uction, 1**icienc% an$ loa$
-ana+e-ent -anual. 1etrieved 7F 58" 875A" from
323&!id.
163
98A
The Boston Beer Company has !een eperiencing significant variation in direct
and indirect energy costs over the last five years
98F
. &ncreased energy costs
would result in higher transportation" freight" and other operating costs" including
increases in the cost of ingredients and supplies. The Boston Beer Company2s
future operating epenses and margins could !e dependent on its a!ility to
manage the impact of such cost increases.
325 &!id.
164
.f all its competitors including Heineken" (nheuser%Busch" Carls!erg" and
,(B-iller" there were only two companies that appeared presently concerned
with recogni$ing and sharing its glo!al environmental impact. ,(B-iller
presented its decrease in C.
8
emissions" indicating that fuel emissions were
down 57N3 while (nheuser%Busch &nBev2s energy consumption is reportedly
down 89N in three years
98D
.
The average small !rewer uses !etween F7 to DD k>h)!!l
98;
of energy. (s the
num!er of !arrels sold increases" the energy consumption also increases
significantly. The Boston Beer Company must integrate ways to reduce energy
consumption into its operational procedures in order to !ecome an industry
leader.
2
0
0
9
.
0
2
0
1
0
.
0
2
0
1
1
.
0
2
0
1
2
.
0
2
0
1
3
.
0
0
50000
100000
150000
200000
250000
%ner$y >sed <s. Barre#s o#d
*arre%s
energy
?ear
<a#ue and @.HIB7#
,ource# The Boston Beer Company (nnual 1eport
986
326 (nheuser%Busch &nBev. /87590. 4or- 10&> Annual Report.
165
#ana/ement of Hua,!ty
(s of ?ecem!er 86
th
" 8759" The Boston Beer Company employed over fifteen
!rew masters to monitor the company2s !rewing operations and control the
production of its !eers and ciders
98<
. Etensive =uality tests" tastings and
evaluations are typically re=uired to ensure that each !atch of ,amuel (dams
!eer" Twisted Tea malt !everages" and (ngry .rchard Hard Ciders conform to
the company2s standards. The Boston Beer Company has on%site =uality control
technicians and la!s at each !rewery
997
. The manufacturing process includes a
clearly legi!le OfreshnessP code on every !ottle" can" and keg. The Boston Beer
Company was the first (merican !rewer to implement this practice
995
.
#ater!a, =a"te
The !rewing industry has prompted considera!le potential risks due to the high
volumes of waste material that are discharged during each !rew process. The
range of !rewing%specific waste materials !eyond standard manufacturing
gar!age such as packaging" are listed !elow
998
#
329 &!id.
330 &!id.
331 &!id.
332 Thomas" H." E 1ahman" 4. /877D0. Bre,er% #astes. "trate+ies *or "ustainabilit%.
166
,ource# Brewery >astes. ,trategies for ,ustaina!ility
999
(s seen a!ove" water and spent malt pose the most etensive pro!lems. (
typical small !rewery producing 5F77 litres of !eer three times a week will
produce around two tons of spent grain in a week. *arge !reweries producing
5777 H* !eer per day will have A7 tons per day to remove
99A
.
8umber of Barre," So,d
The num!er of !arrels sold per competitor was listed in each respective annual
report. These figures were compared across the industry for the year 877< as
more recent data does not provide the same metric in relevant units.
333 &!id.
334 &!id.
167
"ota# Barre#s o#d 2009
/!e Boston Beer #om$any n!euser"Busc! 2nBe) Mi%%er #oors
4eine5en #raft Brew %%iance
+he Bo"ton Beer
ompany
8"877"777
Anheu"er.Bu"ch
InBe(
9A6"5<6"9
DA
#!,,er oor" 885"A;6"A
A7
He!ne6en 85"777"77
7
raft Bre:
A,,!ance
F68"F77
,ource# Company (nnual 1eports" 877<
The Boston Beer Company only produced 8.8 million !arrels of !eer in 877<.
&ndustry leader (nheuser%Busch &nBev produced close to 9F7 million !arrels
99F
.
Considering the geographical locations each of these competitors occupy and
the num!er of !reweries each has" The Boston Beer Company appears to enjoy
high production levels.
168
Bo"ton Beer ompany
2
0
0
7
.
0
2
0
1
0
.
0
0
500
1000
1500
2000
2500
3000
Barre#s o#d <s. 9e&enue 0er Barre#
Barre%s .o%-
(et Re)enue ,er
Barre%
Hu'7er and 3o##ars 5J6
,ource# The Boston Beer Company (nnual 1eport
&nformation pertaining to the !arrels produced and revenue over a four%year
period could only !e o!tained for the Boston Beer Company. There appears to !e
a positive relation !etween the !arrels sold and net revenue per !arrel.
169
4
e
i
n
e
5
e
n
.
B
M
i
%
%
e
r
0
50000000
100000000
150000000
200000000
250000000
300000000
350000000
9e&enue <s. Barre#s ,roduced
Re)enue
Barre%s ,ro-uce-
Co'0any
Cuantity and 3o##ars 5"housands6
,ource# Capital &K
99D
(ccording to the graph a!ove" it appears as though the num!er of !arrels
produced is higher than the amount of revenue earned !y each competitor" !ut in
actual terms the net revenue is significantly more than the num!er of !arrels
produced. The scale has !een reduced !y 5 million in order to see a !etter
relationship !etween revenue and !arrels produced. (nheuser%Busch &nBev and
,(B-iller are the industry leaders in !eer production and their revenue levels
correlate accordingly. Heineken and The Boston Beer Company produce
su!stantially less !arrels of !eer each year" !ut !oth companies still do relatively
well in terms of revenue considering the level of production.
336 &!id.
170
#ar/!n"
,ource# +activa
99;
The Boston Beer Company2s gross margin came under pressure in 8758 as the
company2s cost of feedstock like !arley" hops" and other ingredients rose.
+ota, 2perat!n/ &'pen"e"
337 +activa. /875A0. Boston Beer Co., Inc
171
2
0
0
9
.
0
2
0
1
0
.
0
2
0
1
1
.
0
2
0
1
2
.
0
2
0
1
3
.
0
0
100
200
300
"ota# -0eratin$ %40enses
/!e Boston Beer
#om$any
?ear
Mi##ions >
,ource# Capital &K
996
(s illustrated a!ove" total operating epenses are increasing drastically for The
Boston Beer Company. This is due to fluctuating market prices for raw materials
and the cost of maintaining high =uality standards. The industry as a whole is
eperiencing increasing operating margins of 56.D<N on a five year average
compared to The Boston Beer Company2s 5F.6FN operating margin
99<
.
onc,u"!on
The Boston Beer Company is leading the craft !eer industry in @orth (merica !ut
it aims to perform on the glo!al level. The Boston Beer Company competes on a
large platform with competitors that are generating !illions of dollars more than
the company itself. (fter analy$ing the company on certain metrics against its
closest competitors" it has !een determined that The Boston Beer Company2s
operations rank as average overall. &ts locations of operation are resulting in lost
revenue and increasing costs. The company2s shipping and transportation costs
are higher in comparison to other competitors when looking at the num!er of
!arrels produced.
( major weakness in the operations of The Boston Beer Company is its lack of
recognition and factual evidence for reducing its environmental impact. The
339 +activa. /875A0. Boston Beer Co., Inc
172
company2s lack of concern for the environment may lead to risks such as
shareholder disloyalty in the future. (dditional revenue channels and new
markets will !enefit !rewers that can demonstrate reductions to their car!on
footprints.
,trengths pertaining to the operational value creating activities include the fact
that The Boston Beer Company has integrated the use of =uality control
technicians. &t is important for the craft !eer industry to advertise the use of top%
grade ingredients" well%engineered processes" and focus only on producing the
highest =uality !eers. Consumers pay higher prices for craft !eer so that
companies may continue to produce it at the desired level of =uality and
distinction.
&s the 1esource or
Capa!ility
Lalua!leB
G The operations are typical and meet industry
standards !ut in no way stand out.
173
&s the 1esource or
Capa!ility 1areB
G Competitors are offering the same or !etter production
levels and cost reduction methods to generate higher
levels of revenue.
&s the 1esource or
Capa!ility costly
to &mitateB
G 1educing car!on footprint is costly and must !e
developed in order to gain acceptance and grow
market share.
&s the 1esource or
Capa!ility @on%
,u!stituta!leB
G ?ifferent operations can perform the same task at a
higher =uality or efficiency rate.
.rgani$ed to !e
Eploited
G The Boston Beer Company is the leader in craft
!rewing. &t has still not a significant impact on the
overall !eer industry.
4erformance &mplication Below (verage 1eturns
Competitive Conse=uence Competitive ?isadvantage
4!"tr!but!on
?istri!ution in the !eer industry relates to out!ound logistics competencies. This
section focuses on how !reweries must distri!ute products post%manufacturing in
order to reach the end consumer.
The Boston Beer Company sells its products to a network of approimately 9F7
wholesalers in the United ,tates and to a network of wholesalers" importers" and
other distri!utors in other areas serving its foreign markets
9A7
. These distri!utors
in turn" sell the products to retailers" such as pu!s" restaurants" grocery stores"
sporting arenas" and state%managed resellers. This creates a three%tier system of
alcohol distri!ution as outlined !elow
9A5
. The three%tier distri!ution system
provides advantages in terms of regulation !ut makes the competition fiercer as
The Boston Beer Company must compete with other !rewers for a share of the
distri!utor2s attention" time" and selling efforts. ,elling product directly to
restaurants and franchise owners is prohi!ited !y law3 creating more competition
in the industry.
341 &!id.
174
Brewer
A /!e Boston Beer
#om$any
A n!euser"Busc! 2nBe)
A 4eine5en
A #ar%s*erg
Brewer
A /!e Boston Beer
#om$any
A n!euser"Busc! 2nBe)
A 4eine5en
A #ar%s*erg
6istri*utor=9!o%esa
%ers
6istri*utor=9!o%esa
%ers
Retai%ers
A @#B3
A Beer .tores
A Restaurants
A .$orting renas
Retai%ers
A @#B3
A Beer .tores
A Restaurants
A .$orting renas
The Boston Beer Company has !een named the industry2s !est supplier in its
annual polling of wholesalers five years in a row
9A8
. &n some states" the Boston
Beer Company2s contracts with its distri!utors are affected !y laws that restrict
the enforcement of some contract terms" including the company2s right to
terminate the service of distri!utors
9A9
. Generally" the Boston Beer Company
receives its orders from domestic distri!utors in the first week of each month.
These products are later shipped the following month" re=uiring distri!utors to
carry three to five weeks of packaged inventory
9AA
. Craft !eer !rewers are
eperiencing a shipment volume growth of 58N as outlined !elow. ?ue to
sociocultural trends" consumers are demanding more craft !eer resulting in a
higher shipment volume to distri!utors than to the final retailer or consumer.
342 &!id.
343 &!id.
344 &!id.
175
,ource# -arket 1ealist
9AF
In Hou"e or 2ut"ourced
The Boston Beer Company !rews a!out <FN of its core !rand products in
house
9AD
. 4roduction in house allows The Boston Beer Company to eert more
control and flei!ility over how the !usiness operates. &n house production allows
management to make prompt product changes according to customer
preferences and market demand. Each !rew location has its own purpose. The
4ennsylvania and .hio !reweries produce a full range of the company2s core
!rands and produce most of the company2s shipment volume. The 4ennsylvania
location is the largest !rewery" while the .hio !rewery is primarily used for
production of specialty and lower%volume products
9A;
. The Boston !rewery is
focused on developing new types of innovative and traditional !eers and !rewing
and packaging !eers in the ,amuel (dams Barrel 1oom Collection. .utsourcing
345 Chen" Y. M. /8759" ?ec 950. #h% in house bre,in+ +i0es Boston Beer Co-pan% -ore
control. 1etrieved 7D 78" 875A" from -arket 1ealist# http#))marketrealist.com)8759)58)house%
!rewing%gives%!oston%!eer%company%control)
347 &!id.
176
can help a !rewer scale up rapidly without creating fied assets that cannot !e
afforded. The !rewing industry is mainly done in%house or contracted to
independent !rewers to produce the remaining demand. The cost of
transportation and =uality assurance in the outsourced company would !e too
etensive and costly to !e rewarding.
.eine*en
&n 8758" Heineken spent :5"96A million on transportation amounting to F.;AN of
total revenue
9A6
. (s seen from the figure provided !elow" Heineken is spending
more every year on supply chain related epenses.
2
0
0
9
.
0
2
0
1
0
.
0
2
0
1
1
.
0
2
0
1
2
.
0
2
0
1
3
.
0
0
5000
10000
15000
20000
9a. Materia#sK Consu'a7#es : er&ices
4eine5en
?ear
Mi##ions 5>6
9A<
349 &!id.
177
2
0
0
9
2
0
1
1
2
0
1
3
0
1000
2000
3000
4000
5000
3istri7ution %40enses
n!euser"Busc! 2nBe)
?ear
Mi##ions 5>6
9F7
>ith revenues of :A9"5<F million and a distri!ution epense in 8759 of :A"7D5
million" <.A7N of (nheuser%Busch &nBev2s total revenue is attri!uta!le to
distri!ution costs
9F5
. This percentage is significantly higher than that of Heineken.
Car%s/er(
350 &!id.
351 &!id.
178
2009.0 2010.0 2011.0 2012.0 2013.0
2800
2900
3000
3100
3200
3300
3400
3500
3600
a#es : 3istri7ution %40enses
#ar%s*erg
?ear
Mi##ions 5>6
9F8
1evenues for Carls!erg in 8759 were :5;"8<< million" and sales and distri!ution
epenses accounted for :9"AFA million
9F9
. This means that approimately 87N of
revenues were spent on distri!ution and sales. Carls!erg did not report a
financial value for primarily distri!ution. >ith just distri!ution cost" this percentage
would appear to !e higher than Heineken" !ut lower than (nheuser%Busch &nBev
for two primary reasons# Heineken has larger economies of scale and outsources
its distri!ution services" whereas (nheuser%Busch &nBev has a dynamic
distri!ution network with several intermediaries.
onc,u"!on
The Boston Beer Company uses three%tiered distri!ution channels to provide
consumers with an end product. The company maintains an effective distri!ution
system !y keeping operating in%house rather than outsourcing like most
352 &!id.
353 &!id.
179
industries. This strategy allows for the reduction of transportation costs. .n the
contrary" since The Boston Beer Company only has four !reweries" the
distri!ution costs are su!stantially higher. The analysis !elow demonstrates that
The Boston Beer Company2s distri!ution competencies are at competitive parity
and the company can epect average returns as a result of its distri!ution
competencies.
Boston Beer Co.2s distri!ution network is similar to industry leaders" minus its
a!ility to take advantage of shorter distri!ution channels. The Boston Beer
Company is re=uired to ship its final product a longer distance to distri!utors. The
distri!utors within the !eer industry are very similar due to regulation and
mandates that have already !een esta!lished.
&s the 1esource or
Capa!ility
Lalua!leB
G *aw to utili$e distri!utors to sell products to retailers or
consumers mandates the !eer industry.
&s the 1esource or
Capa!ility 1areB
G The Boston Beer Company has esta!lished strong
relationships with its distri!utors !ut any !rewer is a!le
to o!tain this status.
&s the 1esource or
Capa!ility costly
to &mitateB
G ?istri!ution costs are found to !e approimately DN of
total revenue. This is costly and re=uires efficiency in
order to effectively manage revenue.
&s the 1esource or
Capa!ility @on%
,u!stituta!leB
G There is no way around distri!ution due to laws and
regulation.
.rgani$ed to !e
Eploited
G The Boston Beer Company is not prepared to take
advantage of any potential new infrastructure projects
that will allow it to access new markets until costs are
controlled
4erformance &mplication (verage 1eturns
Competitive Conse=uence Competitive 4arity
#ar6et!n/ and Sa,e"
180
$roduct
Boston Beer Company2s product line consists of five different !rand names3
,amuel (dams" ,amuel (dams Utopias" Twisted Tea" (ngry .rchard" and
(lchemy and ,cience" each of which caters to diverse consumer demands within
the !etter !eer market. This large and diversified !rand portfolio" relative to other
!reweries in @orth (merica" has ena!led Boston Beer Co. to remain leaders
within the !etter !eer industry and reali$e continued growth in their operations.
9FA

,amuel (dams was the first of the Boston Beer Company2s !rands and
continues to !e the !est%selling craft !eer in (merica. The !rand line consists of
over sity%four premium !eer varieties with sales !eing led !y the seasonal" and
variety pack offerings. ,amuel (dam2s has several seasonal !eers" which it
!rews for a limited amount of time each year. The limited supply and increasing
demand" of these seasonal !eers allows ,amuel (dams to charge a higher price
and reali$e greater revenues
9FF
. (lso driving ,amuel (dams sales is the !rand2s
commitment to innovation. ,amuel (dams recently introduced a custom
designed can !elieved to improve drinkers2 eperience as compared to traditional
cans. These cans have opened up a large market for ,amuel (dams as it allows
them to sell their !eers in venues where glass !ottles are prohi!ited
9FD
.
Boston Beer Company2s success within the !rewer2s and !etter !eer market is
largely attri!uted to their ,amuel (dams Boston *ager line" which has !rought
the company international recognition. This !rand has won over A77 medals from
a variety of competitions including the European Beer ,tar Competition" one of
the most significant !eer competitions in the world
9F;
. (chievements such as
these support the company2s dedication to =uality and solidify its position as a
market leader.
355 &!id.
356 &!id.
357 .regon" University of. Boston Beer Co. . 875A. http#))uoinvestmentgroup.org)wp%
content)uploads)8759)7F),(-%report%+inal.pdf /accessed -ay 88" 875A0.
181
,amuel (dams Utopia2s is Boston Beer Company2s Oetreme !eerP line" in which
!eers contain a variety of comple and potent flavors. This !rand was originally
introduced as an anniversary line" where new !eers were released only every
two years
9F6
. (fter eperiencing significant demand for their 8758 Tenth
(nniversary etreme !eer however" the company has decided to introduce a new
!eer every year in an attempt to further capitali$e on demand.
The company2s Twisted Tea !rand caters to the malt !everage market. This line"
consisting of ten flavoured malts" coincides with recent market trends indicating a
continued shift toward non%!eer alternatives
9F<
. (lso catering to this trend is the
company2s (ngry .rchard line" which consists of eight different hard cider
!everages. Boston Beer Co. commitment to =uality remains consistent through
these non%!eer !rands with the company importing apples from +rance and &taly
to ensure premium flavour
9D7
.
(lchemy and ,cience is an independently operated su!sidiary of the Boston
Beer Company that was introduced with the purpose of finding" creating" and
managing craft !eer opportunities. This su!sidiary operates as a virtual research
and development center in that it is seeks to eplore the increasingly !road range
of opportunities presented within the growing !rewers market. This includes
leveraging the company2s eisting epertise and production capa!ilities to create
and incu!ate new !reweries
9D5
. Thus far" (lchemy and ,cience !rands are only
availa!le in limited markets and sales have !een classified as insignificant to the
company2s operations accounting for less than 5N of total revenues
9D8
.
359 Bank" The ?emeter Group &nvestment. "tate o* the Cra*t Beer In$ustr% 2013. (nnual
1eport" The ?emeter Group &nvestment Bank" 8759.
361 @ewman" (lan. Alche-% an$ "cience . 875A. http#))www.alchemyandscience.com)
182
The underlying element through all of the company2s products is a dedication to
=uality and innovation. Boston Beer Co. prides itself on !eing leaders within the
!etter !eer market" and the commitment to superior =uality" !rand image" and
taste that is re=uired to hold this position
9D9
. The company invests in etensive
testing" tasting" and evaluation of their products to ensure they conform to the
desired standards.
Craft Brewing -arket ,hare /Glo!al0
,ource# &B&, >orld
$,ace
363 &!id.
183
Boston Beer Co. currently sells its craft !eer in nearly 97 countries around the
world" with United ,tates !eing its predominant market. The company produces
the vast majority of its products at company owned !reweries located in Boston"
Cincinnati" and Breinigsville" with only a small portion /primarily the (lchemy and
,cience la!els0 !eing contracted out to other !reweries
9DA
. &n 8759" the
company2s largest foreign customer accounted for approimately DN of its net
sales" with its top three foreign customers accounting for approimately 58N
collectively
9DF
.
&n considering the oligopolistic nature of the !eer market" with four companies
making up approimately ;6N of the !eer market" Boston Beer Co.2s a!ility to
esta!lish relationships with distri!utors is essential to its success
9DD
. (s a
manufacturing company" Boston Beer Co. sells directly to wholesalers who in
turn sell to grocery stores" restaurants" and other retailers. >ith few eceptions"
Boston Beer Co. is not the primary !rand in any of its distri!utors2 portfolios"
meaning it has to fight for distri!utor attention and invest in strengthening those
relationships
9D;
.
&n its efforts to strengthen distri!utor relations and ensure optimum consumer
satisfaction" Boston Beer Co. introduced a +reshest Beer 4rogram in 8757"
which aims to provide !etter on%time service" forecasting production planning"
and cooperation with distri!utors" while reducing inventory levels at distri!utor
locations
9D6
. &n reducing inventory levels" and thus the amount of time products
are spent sitting stagnant in inventory" the company is a!le to achieve greater
freshness in their !everages and reali$e greater inventory turnover.
364 &!id.
366 Bank" The ?emeter Group &nvestment. "tate o* the Cra*t Beer In$ustr% 2013. (nnual
1eport" The ?emeter Group &nvestment Bank" 8759.
184
?ue to the fact that the vast majority of the company2s sales are derived from its
(merican market" no segmentation of the firm2s international market sales has
!een conducted.
$romot!on
Boston Beer Company invests considera!le resources into promoting its !rands
and maintaining eisting !rand images" of which the overarching theme is a
dedication to =uality. The !eer industry is characteri$ed !y high !rand loyalty
and" as such" companies invest a considera!le portion of revenues in promoting
their !rands in an attempt to gain long%term consumer commitment and growth
9D<
.
(s noted in the charts !elow" advertising" promotion" and sales epenses for
Boston Beer Co. have continued to grow over the past three years. The greatest
increase was seen in 8759 with ependitures up 88.65N from the previous year.
This increase coincided with a higher volume of sales. Boston Beer Co. engages
in media campaigns consisting of television" radio" !ill!oards" and print. These
efforts are supported !y the company2s involvement in various sponsorship
initiatives including community events" local !eer festivals" and industry related
trade shows at local esta!lishments
9;7
.
Boston Beer Co. 8759 &ncome ,tatement ,napshot
369 &!id.
370 &!id.
185
,ource# The Boston Beer Company" &nc.
9;5
The company has increased its customer service and incentive programs" with
an investment of :59.A million up nearly 558N from the previous year
9;8
. These
figures coincide with the increasing core%product shipping volume" and
demonstrate a commitment to further epanding their position within the craft
!eer market.
The company has a sales force of approimately 967 individuals possessing
etensive knowledge on the firm2s products and operations. This is !elieved to !e
one of the largest in the domestic industry
9;9
. The purpose of the sales force is to
deliver a level of service on par with the company2s premium !rand positioning"
and is designed to support relations with distri!utors" retailers" and drinkers
alike
9;A
. The focus of the sales team is education" as it is !elieved that in
educating potential and eisting customers on what differentiates its products"
they will gain a greater appreciation for the care Boston Beer Co. takes in each
!everage it produces.
371 &!id.
372 &!id.
374 &!id.
186
?emonstrated !y its flagship !rand" the company takes great pride in its long
(merican history" and (merican%!ased !reweries
9;F
. This sense of patriotism has
worked well for the company and is !elieved to have contri!uted significantly to
the firm2s success within the (merican craft market.
4ercentage Growth of Consolidated +inancial ?ata
8759 8758 8755
1evenue 8F.7;N 58.F<N 57.9DN
@et &ncome 56.9;N %<.<;N 95.;A
(dvertising" promotional" and
selling epenses
88.65N ;.DDN 5F.6DN
C.G, 99.D9N 5D.75N 57.5N
9;D

@ote# @& in 8759 is up D.FDN from previous @& high in 8755
Consolidated +inancial ?ata
8759 8758 8755
1evenue ;<9";7F"777 D86"F67"777 FF6"868"777
@et &ncome ;7"9<8"777 F<"AD;"777 DD"7F<"777
(dvertising" promotional" and
selling epenses
87;"<97"777 5D<"97D"777 5F;"8D5"777
C.G, 9FA"595"777 8DF"758"777 886"A99"777
9;;
$r!ce
4roducts within the !etter !eer market have higher price points than the average
!everage price within !eer industry. The Boston Beer Co.2s primary focus lies in
its dedication to =uality at the potential epense of a more competitive price
point. &n 8759" the company strived to improve efficiency !y :;.F million dollars
375 &!id.
377 &!id.
187
and eceeded this goal !y :8.5 million
9;6
. >ith this improvement" Boston Beer
Co. was a!le to reali$e greater gross margins" attri!uting to a A7.7<N increase in
retained earnings
9;<
. The company did not lower its price point upon reali$ing
improved efficiency in its operations and remains approimately 58N higher than
the average price of competing craft lagers
967
. Boston Beer Co. !elieves that this
price point is appropriately aligned with the value of its product.
onc,u"!on
r!ter!a ;e" 8o &'p,a!n
I" the 3e"ource
or apab!,!ty
-a,uab,eI
G &n considering that Boston Beer Co. is not
the primary producer for any of its
distri!utors it must work to esta!lish and
foster these relationships in an attempt to
increase distri!utor attention and potential
share. +or this reason" Boston Beer Co.2s
advertising" sales" and promotional
378 &!id.
379 &!id.
380 ,tore" The Beer. The Beer "tore. 875A.
http#))www.the!eerstore.ca)!eers)search)!randRtype%%Craft /accessed -ay 85" 875A0.
188
ependitures" including investments in
customer service and incentive programs" is
a valua!le resource.
I" the 3e"ource
or apab!,!ty
3areI
G Lirtually all firms" specifically those with
whom Boston Beer Co. is directly
competing with in the !eer industry" invest
in marketing and sales. The industry2s major
shareholders are !etter a!le to invest in
marketing and sales" and possess greater
!rand loyalty" indicating that this is not a
rare resource.
I" the 3e"ource
or apab!,!ty
co"t,y to !m!tateI
G &n considering that the company is classified
as a mid%cap firm" and yields considera!ly
lower revenues than the industry2s major
competitors" Boston Beer Co.2s marketing
strategies and investments would not !e
difficult for them to imitate.
I" the 3e"ource
or apab!,!ty
8on.
Sub"t!tutab,eI
G The company2s consists of various forms of
virtually interchangea!le media
advertisement all of which are !eing
employed !y competitors within the market.
+or this reason it cannot !e classified as
non%su!stituta!le.
2r/an!Fed to be
&'p,o!ted
G The company understands the importance
of fostering and maintaining relationships
with distri!utors and has since increased its
portion of revenues allocated to customer
service and incentive programs in an
attempt to !etter capitali$e on their recent
successes and !rand image.
$erformance Imp,!cat!on (verage to Below (verage 1eturns
ompet!t!(e
on"e1uence
Competitive 4arity) Competitive ?isadvantage
(ccording to the L1&. framework a!ove" -arketing and ,ales has a competitive
parity due to the ease of which other firms in the industry can imitate the
company2s marketing mi" or depending on the si$e of the competitor" surpass its
current marketing initiatives. &n order to improve this component of the value
chain" Boston Beer Co. must work to !etter leverage its uni=ue !rand perception
and develop a marketing strategy as uni=ue as its !everages.
189
u"tomer Ser(!ce
Customer service encompasses a range of value%creating activities designed to
enhance or maintain a product2s value
965
. (lthough dependent on the industry" a
firm2s customer service function most often deals directly with the end consumer.
(s stated previously" the !rewing industry must initially deal with an interim !uyer
U a wholesaler or distri!utor U prior to reaching its final consumers. Therefore"
!rewing companies are responsi!le for maintaining high level customer service
not only with the !eer drinkers themselves" !ut also with the firms that comprise
its distri!ution networks. Consider the !rewing industry and the activities
conducted within. Customer service in this case will !e less geared towards the
installation and repair of products" or the replacement of parts. 1ather" the focus
rests on a visi!le and marketa!le customer service presence within the food and
!everage community !y creating an enhanced eperience. To maintain a high
level customer service eperience for !oth distri!utors and end consumers"
!rewing companies compete on a num!er of !ases including we!site presence"
communication methods" and return policies.
orporate =eb"!te $re"ence
The Boston Beer Co. maintains its own corporate we!site at the U1*
www.!oston!eer.com" in addition to three other we!sites used eplicitly in
marketing its ,amuel (dams /www.samueladams.com0" Twisted Tea
/www.twistedtea.com0" and (ngry .rchard /angryorchard.com0 !rands. The
Boston Beer Co.2s corporate we! presence" du!!ed the T&nvestor 1elations
Center2" is dedicated to meeting the needs of invested shareholders and industry
analysts seeking up%to%date information a!out the firm. The overview page found
at !oston!eer.com has !een formatted to include links to the company2s latest
press releases" stock =uote information" featured documents /i.e. annual
reports0" audio recordings" and the site2s most viewed pages
968
. The Boston Beer
381 Lolesky" Cheryl. O*ecture 9" Chapter 9# &nternal (nalysis" Lalue Chain E L1&. +ramework.P
-ay 85" 875A
382 The Boston Beer Company" &nc. . In0estor Relations Center. -ay 86" 875A.
http#))www.!oston!eer.com)phoeni.$htmlBcCD<A98EpCirol%overview /accessed -ay 875A" 875A0.
190
Co.2s corporate we! presence is updated to the minute" given that the stock
information on the site must remain current at all times. +urthermore" no
information or documents found on the we!site are dated older than 8759 which
is a good indicator that the company is meticulous in the upkeep of valid and
relia!le corporate data to its online viewers.
(s mentioned a!ove" Boston Beer Co. also maintains three other we!sites
pertaining to the different !rands of alcoholic !everages it produces. These three
pages re=uire the user to enter their date of !irth in order view anything" as U,
laws that prohi!it the sale of alcohol to minors also deter vendors from engaging
in underage advertising.
,ource# www.samueladams.com
The Boston Beer Co.2s corporate site" however" does not restrict access and
makes information accessi!le to all online viewers" regardless of age. *inks to
the ,amuel (dams we!page can !e found directly on the Boston Beer Co.2s
corporate site. (ll of Boston Beer Co.2s competitors ehi!it the same logic in
designing their own online presence. ,(B-iller /www.sa!miller.com0" for
eample" allows any user to view the corporate we!site for investor relations
data" as well as career and company information. However" as soon as the
191
viewer clicks through the link to ,(B-iller2s TBrands2 page" /s0he is prompted to
enter his or her date of !irth. &n essence" most !reweries have esta!lished two
we! presences3 one investor%!ased and openly accessi!le to all" and the other
!rand%!ased and limited to those of legal drinking age. &t appears that when one
conducts an online search !y !rand3 /s0he will almost always !e directed to a
site that prompts them for a !irthdate. &f the viewer2s intent is to find corporate or
investment information and !ypass this restriction each time" /s0he must !e a!le
to differentiate !etween the !rand name and the actual firm name in order to
identify the correct we!site that will offer the desired information. The !irthdate
restriction puts some strain on the online viewer whose intent may !e to =uickly
access information a!out career opportunities" store hours and locations" product
ingredients" or even contests rules. &t also may deter investors whose
epectation it is that corporate information like annual reports !e clearly visi!le
and easily accessi!le in a timely manner. +urthermore" U, companies with a
!rand presence spanning international !orders may =uestion the validity of the
age restriction if online viewership ever starts to decline. Having these viewers
consistently enter their !irthdate each time they visit a site is redundant and
slows down the online eperience. (lthough seemingly mindless and easy to
!ypass /!y entering a false !irthdate0" this added inconvenience may limit the
customer eperience for the online viewer.
*ooking first at its corporate we!site" Boston Beer Co.2s online presence can !e
gauged !y the num!er of visitors that are viewing the &nvestor 1elations Center
pages. Boston!eer.com is the 5<9";66
th
most%viewed we!site in the U,3 falling
significantly !ehind (nheuser Busch &nBEL and -illerCoors" !oth of which rank
within the top F7"777 most%viewed
969
. (lthough no U, data was availa!le on
Carls!erg for this particular metric" as the 58F"5A7
th
most%viewed we!site in
&ndia" Carls!erg is also outperforming Boston Beer Co.2s in terms of we!site
reach. .n a glo!al scale" Boston Beer Co. lags even farther !ehind3 ranking as
383 >oorank. Q1eview of !oston!eer.com.Q #ooran!. -ay 875A.
http#))www.woorank.com)en)review)!oston!eer.com /accessed -ay 86" 875A0.
192
the D;5"<89
rd
most%visited we!site in the world !ehind (%B &nBEL which yielded
the highest world traffic rank amongst Boston Beer Co.2s closest competitors.
Corporate >e!site
Traffic 1ank
/most visited site in the
world0
Traffic 1ank
/U,0
Anheu"er Bu"ch InBe( 5;<"6<D AF" <7;
#!,,eroor" 5<6"9;< A6"656
+he He!ne6en oD 5<6"FDD @)(
+he ar,"ber/ 9roup 87<"F85 @)(
Bo"ton Beer oD D;5"<89 5<9";66
raft Bre: A,,!ance @)( @)(
,ource# (dapted from >oorank reports
Each of Boston Beer Co.2s major competitors has optimi$ed its corporate we!site
for mo!ile with the eception of Craft Brew (lliance
96A
. .ptimi$ing for mo!ile
improves the customer eperience !y allowing for faster download speeds"
enhanced engagement and contet" and improved search performance" all while
presenting a positive !rand identity
96F
. By optimi$ing for mo!ile" this is a good
indication that !eer companies are willingly adapting to the increasingly powerful
trend towards mo!ile computing and the use of mo!ile devices among
consumers. Boston Beer Co.2s we!site caters to the high%profile investor and
tech%savvy consumer who desire viewing information on the go. (s optimi$ation
of its we!site has allowed for faster mo!ile load times" Boston Brew Co. is
surpassing some of the major industry players in providing its customers with
information in a mo!ile%friendly manner.
Corporate >e!site -o!ile 1endering ,peed
384 &!id.
385 Human ,ervice ,olutions" **C. A$0anta+es o* )obile #eb 9pti-iEation. 875A.
http#))hswsolutions.com)services)mo!ile%we!%development)advantages) /accessed -ay 86"
875A0.
193
Anheu"er Bu"ch InBe( Lery ,low
#!,,eroor" Lery +ast
+he He!ne6en oD Lery ,low
+he ar,"ber/ 9roup ,low
Bo"ton Beer oD +ast
raft Bre: A,,!ance Lery ,low
,ource# (dapted from >oorank reports
.verall" Boston Brew Co.2s we!site presence is not overtly impressive when
compared against other major players in the !eer industry. ?espite having !right
and flashy we!sites for each of its three major product lines" these sites re=uire
proof of age upon entry" which slows down time to access for the viewer.
+urthermore" Boston Beer Co.2s corporate we!site" although very much up to
date and well%organi$ed in terms of actual content3 is esthetically unappealing in
contrast to other !eer industry giants. .utdated fonts and images contri!ute to
the we!sites overall lack of style. Boston Beer Co.2s we!site ranks far !ehind its
competitors in terms of visitor traffic !oth in the U, and on the world stage. .n
the other hand" Boston Beer Co. has taken steps to offer a mo!ile%friendly
we!site" thus enhancing the customer eperience.
ontact #ethod"
Boston Beer Co. makes availa!le an &nvestor 1elations phone num!er on the
TContact Us2 page of its corporate we!site" in addition to a 5%666 num!er for
consumer in=uiries)complaints and the num!er for the firm2s Compliance .fficer.
The legal department2s General Counsel contact information is also posted on
the site" alongside a BBC email address and 5%666 hotline which can !e used to
report fraudulent activities concerning the company. Boston Beer Co. offers the
option to sign up for email alerts which notify !rowsers whenever new company
information is posted to the corporate we!site. Engaging in this type of
communication strategy !enefits Boston Beer Co. !y ena!ling the company to
=uickly share new content" target a focused list of recipients" and provide direct
194
links to important documents such as its annual reports
96D
. &t also is
advantageous to the customer who then has the a!ility to search through and)or
print past emails to easily find desired content
96;
. Boston Beer Co. also has an
archive of audio recordings availa!le on its corporate we! site. The most recent
post to date is a recording of Boston Beer Co.2s K5 875A company earnings
conference call which provides listeners with valua!le information from an
investor relations perspective
966
.
Boston Beer Co.2s competitors provide customers with similar contact methods
as descri!ed a!ove" although some have additional features that are likely to
enhance the level of communication. ,imilar to the Boston Beer Company" all of
its major competitors including (B%&nBev" The Carls!erg Group" -illerCoors" The
Heineken Company" and Craft Brew (lliance have a TContact2 page accessi!le
from its corporate we!site. (B%&nBev2s contact page is the least detailed"
providing only physical addresses and telephone num!ers for the company2s
corporate office head=uarters. To pursue location%specific in=uiries" we! users
must select their country from a drop%down list or find it on an interactive map in
order to o!tain the appropriate contact information
96<
. Carls!erg2s contact page is
more comprehensive and provides users with a headshot image for each of the
staff contacts listed" in addition to their individual emails" phone" and fa
num!ers
9<7
. &n a physically dispersed online world" giving a face to a name has
an impact on the customer or potential investor who may !e looking to get a
sense of the company2s authenticity and personality
9<5
.
386 odysen.com. /875A0. Top 10 Bene*its 4ro- Usin+ 1-ail Noti*ications. 1etrieved -ay 8<"
875A" from http#))!log.odysen.com)8758)76)5F)top%57%!enefits%from%using%email%notifications)
387 &!id.
388 The Boston Beer Company" &nc. . /875A0. Contact Us. 1etrieved -ay 8<" 875A" from
http#))www.!oston!eer.com)phoeni.$htmlBcCD<A98EpCirol%audioarchives
389 (nheuser%Busch &nBev. /875A0. Contact. 1etrieved -ay 8<" 875A" from http#))www.a!%
in!ev.com)contact.cfm
390 Carls!erg Group. /875A0. Contact. 1etrieved -ay 8<" 875A" from
http#))www.carls!erggroup.com)contact)4ages)contact.aspVir
391 -c-illan" H. /875A0. Usin+ Photo 3ea$shots on 8our #ebsite, an$ "ocial )e$ia Pro*iles...
1etrieved -ay 8<" 875A" from Hate -c-illan .ut!o .nline ?esign ,tudio#
http#))www.out!oonline.com)social%media)photo%headshots%we!site%social%media%profiles)
195
-illerCoors" Heineken" and Craft Brew (lliance include a feed!ack form template
on each of their respective contact pages" where users must classify their in=uiry
!y su!ject from a drop%down selection" and can provide further details within the
comments !o. This feed!ack form serves to standardi$e the emails directed
from the customer to the firm and assists to ensure clear and concise
communication !etween !oth parties. The feed!ack form) email template is
uni=ue to the three aforementioned competitors which sets it apart from Boston
Brew Co.2s communication methods. Competitors are also assisting to inform
customers !y including comprehensive directions to their physical locations
through the use of !uilt%in geographical interfaces. Heineken has !uilt in a
Google -ap app into its Contact page" while (B%&nBev provides a link to a
downloada!le 4?+ of a detailed roadmap of the area surrounding its
head=uarters. These small yet important details are something that Boston Brew
Co. has so far failed to include on its corporate we!site.
.verall" Boston Brew Co.2s positioning in terms of customer service
communication methods is weak in comparison to some of the industry2s major
players. The metrics in the chart a!ove indicate that the company2s we!site could
!e improved to include a feed!ack form template for email in=uiries" and updates
to the staff directory to include =uality headshots of eecutive mem!ers would
could have a more lasting impact on online users. Boston Brew Co.2s audio
archive is uni=ue to the company2s we!site" however" competitors offer
customers the same appeal through high%=uality images and video in their online
media galleries. +urthermore" the eistence of 5%YYY consumer in=uiry hotlines
196
present on Boston Brew Co.2s we!site do not act as a differentiator in any way as
this form of communication is also present on the we!sites of all its competitors.
3eturn $o,!cy
Boston Beer Co.2s product lines for ,amuel (dams !eer" (ngry .rchard cider"
and the malt%!ased Twisted Tea 1T? each have their own !rand%!ased we!site.
The return policy for the company2s !eer products is clearly outlined on the -y
(ccount +(K page of the ,amuel (dams we!site. The company includes a form
in all of its original packaging that customers can fill out should !e dissatisfied
with the product and seek a return or echange. Customers can then ship all
returns)echanges to the address provided within 97 days of the order !eing
received. Boston Beer Co. will do an echange for the desired merchandise or
will credit only the value of the item" void any shipping costs incurred
9<8
. There
are no references to a specific return policy on the company2s (ngry .rchard or
Twisted Tea we!sites. However" there is a feed!ack form email template on each
we!site that allows the user to select a topic !ased on their in=uiry. Here"
customers can address O4ro!lems with your TeaBP or O4roduct ComplaintsP via
the Twisted Tea and (ngry .rchard we!sites" respectively.
+inding information regarding the return policies of Boston Brew Co.2s
competitors2 products is not nearly as simple. There is no information regarding
the return of any of the major players2 products on the corporate we!sites" so the
customer must turn to the !randed we!pages to try and locate such. (B%&nBev2s
Budweiser and Bud *ight we!sites yielded no results after !rowsing for return
policies using the search tool provided" and there was no indication of a
customer support presence /such as an +(K page0 on these sites. *ikewise"
-illerCoors2 Coors *ight% and -iller Genuine ?raft /-G?0% !randed we!sites
provided no information on any policies governing the echange or return of
products" with the eception of -G?2s !eer OgearP online storefront which !riefly
392 The Boston Beer Company" Boston" -(. /875A0. )% Account 4A6. 1etrieved -ay 8<" 875A"
from ,amuel (dams# http#))estore.samueladams.com)fre=uentlyRaskedR=uestions.asp
197
outlines the return policy on non%!everage merchandise
9<9
. ( simple search
conducted on Heineken2s" Carls!erg2s" and all four of the we!sites for the !rands
produced !y Craft Brew (lliance offered no further insight into whether any return
policies eist for these !reweries" much less what the specifics of each are.
Given these o!servations" it is apparent that few of the industry2s major players
take interest in the well!eing of their customers as far as product returns and
echanges are concerned. Boston Beer Co.2s clearly prescri!ed return)echange
agreement listed on the ,amuel (dams we!site" in addition to the feed!ack it
encourages on !oth of its other !rand%!ased sites shows superiority on this
element of customer service in comparison to the competition.
onc,u"!on
Customer service seeks improvement at the Boston Beer Co. in two of the three
areas analy$ed a!ove. (fter reviewing the we!site presence" communication
methods" and return policies put in place !y the company and its competitors"
Boston Brew Co. can most nota!ly make improvements to the first two. The look
and feel of the company we!site is outdated" despite good efforts to keep content
current and users informed. The company2s efforts to optimi$e its we!site for
mo!ile use does" however" show that it is aware of modern%day consumer trends
toward on%the%go information re=uirements.
(lthough Boston Brew Co. is still gaining momentum as one of the major craft
!eer !rewers in the U," its we!site traffic still ranks far !ehind the industry%
leading giants3 an indication that online viewership has yet to correspond the
company2s overall growth. (s communication is an essential part of the customer
service value creation activity" it was important to analy$e the effectiveness of the
communication methods utili$ed !y Boston Beer Co. The presence of a
telephone hotline and email address for general customer in=uiries on Boston
Beer Co.2s we!site does not help it stand out in any way from its competitors.
*ikewise" e%alerts which provide important information to su!scri!ers were an
393 -illerCoors **C" Golden" C.. /875A0. 4A6". 1etrieved -ay 86" 875A" from -iller The
.fficial Beer Gear >e! ,tore# https#))www.shopmiller!rewing.com)fa=s.aspVF
198
option set forth !y all major competitors" making Boston Brew Co.2s attempt in
this regard just as ordinary.
The only communication channel eercised !y Boston Beer Co. that truly acted
as a differentiator was the archive of audio recordings availa!le through its
corporate we!site. Used to inform shareholders in a more uni=ue manner than
just plain tet" the recorded we!casts and announcements were something that
competitor2s communication schemas lacked.
+inally" a look into return and echange policies revealed that Boston Brew Co. is
the only firm of those analy$ed that is taking visi!le interest in this common
customer in=uiry. ,peculation that Boston Beer Co.2s desire to stay reputa!le in
the tightly%knit craft !rewing industry re=uires that the company maintain good
relations with its !uyers and end%consumers. &n providing customers with a fair
and concise return)echange agreement" Boston Beer Co. shows superiority in
this particular element of customer service /C,0. .utlined !y the criteria in the
chart !elow" it has !een determined that Boston Beer Co.2s C, activities"
although valua!le" are neither rare" costly to imitate" non%su!stituta!le" nor
organi$ed to !e eploited.
I" the 3e"ource
or apab!,!ty
-a,uab,eI
G
,trengths in this area promote greater customer
retention" increased !rand loyalty" and consumer
trust E appreciation
I" the 3e"ource
or apab!,!ty
3areI G
Boston Beer Co. engages in all of the same customer
service tactics as its competitors with the eception of
audio recordings and a concise return)echange
policy3 !oth of which are availa!le through its we!
presence/s0.
I" the 3e"ource G Boston Beer Co.2s we! presence and communication
199
or apab!,!ty
co"t,y to
Im!tateI
methods are underwhelming in comparison to
competitors. These major players likely have more
funds to invest in the upkeep of their we!sites and
more human resources to maintain their
communication channels with customers. Therefore"
if anything" it is more costly for Boston Brew Co. to
imitate its competitors than it is for them to mirror
Boston Brew Co.
I" the 3e"ource
or apab!,!ty
8on.
Sub"t!tutab,eI
G
5%YYY consumer hotlines and general in=uiry email
addresses can !e su!stituted with &- chat features
other forms of online support. +urther" the use of
social media to assist with customer in=uiries could
!e implemented)eplored as an alternative.
2r/an!Fed to be
&'p,o!ted
G
(lthough it has taken small steps to enhance the
after%sales service eperience for its customer !ase
/mo!ile optimi$ation" encouraging feed!ack" open
return policy" etc.0" Boston Beer Co. has not
organi$ed this activity to reap the rewards of a fully
eploita!le customer service operation.
$erformance Imp,!cat!on (verage 1eturns
ompet!t!(e on"e1uence Competitive 4arity
200
,(9" !!!B
econdary <a#ue*Creatin$ (cti&ities
201
Secondary -a,ue reat!n/ Act!(!t!e"
Human 3e"ource" #ana/ement
&mp,oyee ount
.riginally founded as the Boston Beer Company *imited 4artnership in 5<<F" the
firm was incorporated in -assachusetts on ?ecem!er 95" 8777 and has !een
growing ever since
9<A
. The company has ac=uired multiple !reweries" the latest
one from ?iageo @orth (merica" &nc." in 4ennsylvania" for :FF million in 'une"
8776
9<F
. (s Boston Beer Co. continues to epand its operations" the num!er of
people it employs rises concurrently. The graphs !elow depict how rapidly
increasing sales growth corresponds with a similar increase in the num!er of
employees at Boston Beer Co..
Sa,e" 9ro:th (" Staff 8umber
,ource# +act,et 1esearch ,ystems &nc. as cited in +activa
9<D
Based on employee volume" Boston Beer Co. is ranked A8
nd
out of the 577
largest !rewing companies in the industry worldwide
9<;
. Boston Beer Co. had 975
new employees enter its doors in 8759" increasing its workforce num!ers !y 56N
to 5"588 employees3 remaining well !elow the industry average as depicted
394 -ergent .nline. /875A0. Boston Beer Co., Inc CN8": "A)D. 1etrieved -ay 8<" 875A
395 &!id.
396 +activa" &nc. /875A0. Boston Beer Co., Inc. ?ow 'ones. 1etrieved -ay 8<" 875A
397 +activa" &nc. /875A0. Peer Co-parison: Top 100 b% 1-plo%ees base$ on o, Fones
In$ustr% Classi*ication: Bre,in+. ?ow 'ones. 1etrieved -ay 8<" 875A
202
!elow
9<6
. &n the years prior" employee growth increased !y 59N from 6A7
employees in 8755 to <F7 in 8758.
9<<
3e(enue" per &mp,oyee
1evenues per employee are a key metric used to gauge the efficiency of a
company2s human resources management strategy. &deally" a company wants
the highest revenue per employee possi!le" as it denotes higher productivity
A77
.
&n 8759" industry%average revenues were :<D;"777 per employee and in 875A" it
is estimated that num!er will drop 7.FN to :<D8"777 per employee
A75
. (t Boston
Beer Co." revenues per employee /TT-0 currently sit at :;78"DA6 which is 95N
!elow the industry average
A78
.
,ource# ?ata o!tained from &B&,>orld
A79
However" an analysis of the revenues per employee revealed that Boston Beer
Co. is more capa!le of converting its human resources into valua!le income than
some of its closest competitors. &n fact" in 8758" the company2s revenues per
398 The Boston Beer Company" &nc. /87590. 2013 Annual Report. Boston. 1etrieved -ay 8<"
875A
399 &!id.
400 &nvestopedia U,. /875A0. Re0enue Per 1-plo%ee. 1etrieved -ay 95" 875A" from
http#))www.investopedia.com)terms)r)revenueperemployee.asp
401 &B&, >orld. /875A0. Bre,eries in the U". &B&,>orld iEpert &ndustry 1eport 95858.
1etrieved -ay 8<" 875A
402 &!id.
403 &!id.
203
employee were higher than ,(B-iller2s" -olson Coors2" and Carls!erg2s3 and
Heineken and Craft Brew (lliance2s com!ined /see chart !elow for comparison0.
,ource# ?ata o!tained from -ergent .nline
A7A
ompen"at!on Structure
,maller companies using lower%paid hires contri!ute to overall employment in the
!eer industry" however" major companies have cut !ack on employee num!ers.
'oint ventures !etween industry giants like ,(B-iller and -olson Coors have
seen hundreds of workers laid off
A7F
. ,uch cut!acks have resulted in a five%year
annuali$ed 5.5N reduction in !eer industry wages to :5.F !illion in 875A
A7D
.
Employee wages are the second largest cost to the !rewing industry !ehind the
purchase of raw materials. &n 875A" it is projected that the cost of wages will
404 -ergent .nline. /875A0. Boston Beer Co., Inc CN8": "A)D. 1etrieved -ay 8<" 875A
406 &!id.
204
consume a F.FN portion /see graph !elow0 of revenues in the !rewing
industry
A7;
.
,ource# &B&,>orld
A76
,ince 8757" the average employee wage in the U, !rewing industry has
continued to decline. +rom 8755 to 8758" the average wage fell approimately
DN from :D7"569 to :FD"698" and !etween 8758 and 8759" it decreased slightly
again to :FF"99D
A7<
. 4roduction workers" who comprise 8;.95N of the !eer
manufacturing industry" earn a mean annual salary of :99"687" while
transportation and material moving occupations that account for 8D.98N of the
industry2s workforce" earn a mean hourly wage of :5F.7D
A57
. The Boston Beer Co.
appears to !e challenging this trend of downward sloping wages" as its team of
Eecutive mem!ers have seen increases to their total annual cash compensation
since 8755. CE. and 4resident" -artin +. 1oper has enjoyed a continual three%
407 &!id.
408 &!id.
410 High!eam Business. /875A0. )alt Be0era+es "IC 20=2 In$ustr% Report. 1etrieved -ay 95"
875A" from http#))!usiness.high!eam.com)industry%reports)food)malt%!everages
205
year increase of ;.;FN from :D6D";F7 in total compensation in 8757" to
:;A7"777 in 8759
A55
. @o mem!er of Boston Beer Co.2s eecutive team has
earned less than :95F"777 in the last four years since 8757
A58
. &n addition to
salaries" Boston Beer Co. has em!edded monetary !onuses into its
compensation structure. The company recogni$es its employees !y awarding
discretionary !onuses !ased on annual performance. &n 8759" L4 of ,ales" 'ohn
C. Geist" and L4 of .perations" Thomas >. *ance" were awarded discretionary
!onuses of :8F"777 and :57"777 respectively for their achievements throughout
the year
A59
. The company2s epenses incurred as a result of the incentivi$ed
compensation structure continue to increase. The amount of spending on
employee wages" !enefits" and reim!ursements has jumped over F9N from 8755
to :5A.6 million in 8759. This is an indication that as Boston Beer Co. grows and
its employee !ase continues to epand" it incurs more wage costs. Met" rather
than cutting salaries and eliminating !onuses" Boston Beer Co. continues to
generously reward its employees as descri!ed a!ove.
A5A
By developing a pay structure that strikes the right !alance !etween guaranteed
versus incentive compensation" and !y evidently sustaining these initiatives"
companies like Boston Beer Co. can enjoy a competitive advantage in the
marketplace
A5F
.
411 ,E4 Capital &K. /n.d.0. Boston Beer Co. Inc. CN8"1:"A)D. /-cGraw Hill +inancial"
4roducer0 1etrieved -ay 97" 875A" from
https#))www.capitali=.com)C&K?ot@et)Company)Compensation)Compensation,ummary.aspB
Company&dC99<<AD
412 &!id.
413 +activa" &nc. Boston Beer Co., Inc. +activa Company 1eport" ?ow 'ones" 875A. 1etrieved
-ay 95" 875A
414 -ergent .nline. QBoston Beer Co." &nc /@M,# ,(-0.Q 875A.
206
&ducat!on and u,ture
(lthough !rewing operations have !ecome increasingly automated with the
amount of technology availa!le" the manufacturing and logistics surrounding
manufacturing remain the most la!our%intense. Thus" the majority of Boston Beer
Co.2s employees can !e found working directly on factory floors where critical
decisions are made on a daily !asis. (s a result" it is important to consider the
!readth and depth of their skills and a!ilities" to determine what impact they can
have on the !usiness. Boston Beer Co.2s primary production facilities are located
in -assachusetts" .hio" and 4ennsylvania
A5D
. >hen the company initially started
out on its home soil in Boston" -( over 87 years ago" around 67N of the
surrounding population aged 8F and older that had received at least a high
school graduate diploma" 8;.8N had a Bachelor2s degree" and ;.8N had
advanced degrees
A5;
. By 877<" the -assachusetts2 populace !oasted a 59.AN
and 9;.AN increase in the num!er of high school and Bachelor degree
graduates" respectively. The .hio and 4ennsylvania regions saw very similar
jumps in the level of educational attainment over this period of two decades as
well.
,ource# U.,. Census Bureau
A56
415 The Lision*ink (dvisory Group. Co-pensation an$ Business 'ro,th. n.d.
http#))www.vladvisors.com)compensation%knowledge%center)articles)a%A9%how%do%i%create%a%
competitive%advantage%with%my%compensation%programs.asp /accessed -ay 95" 875A0.
416 Euromonitor &nternational. /-ay 87590. Boston Beer Co Inc, The In Alcoholic rin!s CU"AD.
1etrieved -ay 95" 875A
417 U.,. Census Bureau. QEducational (ttainment !y ,tate.Q The 2012 "tatistical Abstract. -ay
86" 875A. https#))www.census.gov)compendia)stata!)cats)education)educationalRattainment.html
418 &!id.
207
The chart a!ove indicates that the geographic areas that Boston Beer Co.
occupies U which are also home to the company2s most immediate workforce
U are !ecoming richer with intelligent potential employees. This is especially the
case in -assachusetts" where educational attainment has consistently risen
a!ove the U, average at all three levels. This puts the Boston Beer Co. at an
advantage where!y the company can actively recruit well%educated and high%
performing individuals to contri!ute accordingly in its decision%making processes.
The company also !enefits from having its head=uarters !ased in
-assachusetts" where 5D.AN of people have advanced educational !ackgrounds
and are likely to !e highly suited for corporate level positions
A5<
.
The Boston Beer Co. has esta!lished a strong culture fostered !y a communal
love of great !eer and a heavy investment into employee training. Each year the
company hosts a home!rew competition" as well as a heavily attended !eer trivia
contest
A87
. (s passionate !eer enthusiasts who are given the freedom to
eperiment" Boston Beer Co. employees continue to develop innovative" limited
release !rews and 1T?s such as its OTwisted TeaP product line which is highly
favoured !y the company2s target market. The Boston Beer Company has won
more awards than any other in history and has !een cited as !eing one of the
!est companies to work for !y Boston -aga$ine and one of the Best Entry%*evel
'o!s !y The 4rinceton 1eview
A85
. Boston Beer Co.2s success as an employer can
also !e attri!uted to its leadership at the eecutive level. Chairman and former
CE. 'im Hoch is known for taking a deep interest in training and orienting his
employees towards the company2s mission and was named an OEntrepreneur of
the MearP !y &nc. -aga$ine
A88
.
419 &!id.
420 The Boston Beer Company. QCulture.Q "a-uel A$a-s. 875A.
http#))www.samueladams.com)culture /accessed 'une 5" 875A0.
421 &!id.
422 &!id.
208
onc,u"!on
Boston Beer Co. ecels in managing its human resources and conse=uently
!enefits from marketa!le product !reakthroughs and the reputation as !eing a
highly regarded place to work. (lthough other major industry players have started
to shrink the si$e of their workforces as certain factors have reduced the need for
workers on the ground" Boston Beer Co. continues to create jo!s. -oreover" the
company2s productivity levels trump others in the industry" as revenues per
employee at Boston Beer Co. remain well a!ove its closest competitors.
Boston Beer Co.2s compensation structure offers employees competitive wages
and its discretionary !onus system provides them with the incentive to ecel at
their jo!s. This" in turn" sees employees performing at a higher rate and with
more positivity and enthusiasm" thus creating a strong corporate culture. Hoch2s
entrepreneurial mindset and genuine interest in employee training and
development further contri!utes to the culture and strength of the company2s
employee !ase.
Boston Beer Co. is geographically situated in regions that lend themselves to
well%educated populations that fit the working class demographic. (s a result" the
company has the opportunity to select candidates from an a!ove%average pool of
potential employees that are likely to positively impact operations !oth at the
factory and corporate levels.
Boston Beer Co.2s H1- function has !een highly successful so far" providing
!oth the company and its employees with certain advantages. The company
!enefits as a first%rate employer with the a!ility and resources to attract and
retain a =uality workforce. Growing ependitures on wages" !enefits and !onus
compensation in addition to heavy training investments" mean that employees at
Boston Beer Co. also !enefit from the company2s strong H1- function. .verall"
Boston Beer Co. appears to rank a!ove parity on this value chain activity.
209
I" the 3e"ource
or apab!,!ty
-a,uab,eI
G
&t is clear that Boston Beer Co. is generating more
revenues per employee than any of its closest
competitors. By leading on this metric" Boston Beer
Co. is creating the most value for itself and for the
industry. &ncreasing employee num!ers also
correspond to a similar rate of increase in sales"
which is hard evidence that the co.2s H1- function is
generating positive worth.
I" the 3e"ource
or apab!,!ty
3areI G
(lthough its revenues per employee are uni=ue to the
industry" Boston Beer Co.2s high salaries and
!onuses are not as unfamiliar to the multi%!illion
dollar industry. (s a result it is difficult to argue that
Boston Beer Co.2s H1- activities are completely rare
I" the 3e"ource
or apab!,!ty
co"t,y to
Im!tateI
G
The company2s significantly higher revenues per
employee demonstrate considera!le value and would
!e challenging and costly to imitate !y competitors.
2r/an!Fed to be
&'p,o!ted
G
Given that Boston Beer Co.2s H1- shows
characteristics of developing into a core competency"
it stands to reason the company will !e in a position
in the near future to eploit it and reap the full
!enefits.
$erformance Imp,!cat!on (!ove (verage 1eturns
ompet!t!(e on"e1uence Competitive (dvantage
3e"earch 7 4e(e,opment
1esearch and product development is a value chain activity critical to the
success of companies within the !rewing industry. 1apidly evolving consumer
tastes and preferences" as well as enhanced health awareness and dietary
concerns have prompted alcoholic !everage manufacturers to develop new and
improved products. Through the release of various styles of !eer" cider and
1T?," Boston Beer Co. is evidently adapting to this seismic shift in the !eer
!usiness. (mong the most mentiona!le new !rews are ,amuel (dams UtopiasI"
&nfinium" and the Barrel 1oom Collection
A89
.
423 The Boston Beer Company. QCulture.Q "a-uel A$a-s. 875A.
http#))www.samueladams.com)culture /accessed 'une 5" 875A0.
210
8e: $roduct Introduct!on"
&n 8759" The Boston Beer Company sold 9.A%million !arrels of !eer in all F7 U,
states and a!out 97 countries
A8A
. &n the same year" DA uni=ue styles of !eer were
!rewed and sold as part of the ,amuel (dams !rand line
A8F
. The craft !rewing
leader sold si other !rands of !eer and a hard cider in addition to its flagship
,amuel (dams" !ringing the num!er of !everages customers can choose from to
nearly 577 different styles
A8D
.
The outstanding product development function at Boston Beer Co. has not gone
unnoticed. &ts !eers have won AA8 awards and honors" and the company
received a gold medal at the European Beer ,tart Competition U one of the
most prestigious !eer competitions in the world U for its ,amuel (dams Boston
*ager
A8;
. Boston Beer Co.2s growth in 8759 was attri!uted primarily to sales led
!y Boston *ager" seasonal !rews such as (lpine ,pring and .cto!erfest" and the
variety packs
A86
.
A,ternat!(e"J 3eady +o 4r!n6
1eal growth for some of the industry2s largest players such as (nheuser%Busch
&nBev" is attri!uted to categories outside of !eer such as cider)perry and malt%
!ased 1T?s
A8<
. Conse=uently" a diversification strategy for companies like The
Boston Beer Company is likely to show greater returns versus staying put in the
!eer segment. ( consistent increase in market share for non%!eer alcoholic
!everages indicates that consumer preferences for alternatives have !egun to
dictate the direction of the industry.
$ercenta/e #ar6et Share )e"tD* by -o,ume !n anad!an A,coho, #ar6et
424 The Boston Beer Company" &nc. Q8759 (nnual 1eport.Q Boston" 8759.
425 &!id.
426 &!id.
427 &!id.
428 &!id.
429 Euromonitor &nternational. QBeer in the U,.Q -ay 8759.
211
,ource# -olson Coors Brewing Company
A97
To demonstrate its flei!ility in generating alternatives" Boston Beer Co. released
Twisted Tea in 8775 which =uickly caught on and generated an immense amount
of !rand loyalty among 1T? fans across the U, and Canada
A95
. ?espite
increasing competition in this segment" Twisted Tea remains the market leader of
hard iced tea as a result of strong sales eecution" the release of !old" new
flavours" and continuous customer support
A98
. To appeal to an even !roader
demographic of alcoholic !everage consumers" The Twisted Tea Brewing
Company has recently launched Twisted *emonade in the U, as a further 1T?
alternative for the summer of 875A
A99
.

,ource# twistedtea.com
A9A
430 -olson Coors Brewing Company. Q8759 (nnual 1eport on +orm 57%H.Q 4inancial Reportin+.
+e!ruary 5A" 875A. http#))ph.corporate%ir.net)phoeni.$htmlBcC575<8<EpCirol%financialreporting
/accessed 'une 5" 875A0.
431 Twisted Tea Brewing Company. About T,iste$ Tea. 875A. http#))www.twistedtea.com)a!out%
us /accessed 'une 5" 875A0.
433 &!id.
434 Twisted Tea Brewing Company. About T,iste$ Tea. 875A. http#))www.twistedtea.com)a!out%
us /accessed 'une 5" 875A0.
212
,imilar to Boston Beer Co.2s two most recent alternative product launches" (B%
&nBev released the Bud *ight *ime (i-e&A&Rita in 87583 it too designed to appeal
to an epanded range of consumers
A9F
. The closest attempt to compete directly
with Boston Beer Co.2s Twisted Tea !rand has !een -olson Coors2 (pril 8758
launch of Coors *ight &ced T
A9D
. .ther major competitors" including parent
companies ,(B-iller and -olson Coors of -illerCoors **C do not appear to
have taken the same advances into the alcoholic 1T? market territory. &n fact"
-olson Coors appears to have only tried selling 1T? alternatives in the UH
under the !rand names 1eef" ,creamers" and 'ava3 the latter two were !oth
discontinued
A9;
. ,(B-iller has placed the most emphasis on innovation in
epanding the eisting !eer category itself. &t has introduced a num!er of
products including a range of specialty !eers in 4oland" wheat !eer in the C$ech
1epu!lic and (frican cassava%!ased !eer in Ghana
A96
. +rom these o!servations
speculations can !e made a!out Boston Beer Co. and its keen a!ility to !e first
to market with consumer%approved" !eer alternatives. The company has already
created a solid fan !ase atop its Twisted !rands that puts it ahead of other !eer
companies with minimal or ineistent presences 1T? segment. This appears to
yield a competitive advantage for Boston Beer Co.
A,ternat!(e"J !der
The segment in which Boston Beer Co. and other companies within the !rewing
industry appear to overlap the most is cider. 1ecently on (pril ;" 875A" (B%&nBev
released 'ohnny (ppleseed Hard (pple Cider
A9<
. 'ohnny (ppleseed is the first
435 (nheuser%Busch &nBev. Q&nspired !y &nnovation .Q ABInBe0. 875A. http#))www.a!%
in!ev.com)pdf)(159)(BR&nBevR(1Rinnovation.pdf /accessed 'une 5" 875A0.
436 -unarri$" 1ick (ristotle. Tast% 9r Absur$i&Tea? )olson Coors to Bre, Tea&4la0ore$ Beer.
-arch ;" 8758. http#))www.dailyfinance.com)8758)79)7;)tasty%or%a!surdi%tea%molson%coors%to%
!rew%tea%flavored%!eer) /accessed 'une 8" 875A0.
437 -olson Coors Brewing Company. Q8759 (nnual 1eport on +orm 57%H.Q 4inancial Reportin+.
+e!ruary 5A" 875A. http#))ph.corporate%ir.net)phoeni.$htmlBcC575<8<EpCirol%financialreporting
438 ,(B-iller plc. Q(nnual 1eport 8759.Q In0estors Reports. 8759.
http#))www.sa!miller.com)files)reports)ar8759)8759RannualRreport.pdf /accessed 'une 5" 875A0.
439 (nheuser%Busch Companies" **C. Fohnn% Applesee 3ar$ Apple Ci$er "et to Ta!e a Bite
9ut o* the Ci$er Cate+or%. -arch 87" 875A. http#))newsroom.anheuser%!usch.com)johnny%
213
wholly new product from (B%&nBev in eight years as the industry giant attempts to
sei$e advantage of the fast%growing cider category
AA7
. Boston Beer Co.2s other
competitors" including Carls!erg and *a!att /a su!sidiary of (B%&nBev0" have
launched hard cider !everages with great success. Carls!erg2s ,omers!y Cider
has !een singled out for its performance3 with the !rewer la!eling it the Ofastest
growing glo!al cider !randP
AA5
. *a!att also added cider to (leander Heith2s
product line3 producing (leander Heith2s .riginal Cider in the U, and selling it in
si%packs and single cans in Canada
AA8
. 4roduct innovation in the cider category
at Boston Beer Co. continues to rise" and !rewers have crafted a new seasonal
cider that is the company2s first to !e made with (merican culinary apples.
Boston Beer Co. offers Cinnful (pple in variety 58%packs with three other (ngry
.rchard styles" including Crisp (pple" Traditional ?ry" and (pple Ginger
AA9
.
$ac6a/!n/
*aunched in 8759" the O,am CanP has led to opportunities for The Boston Beer
Company in venues and retailers where glass !ottles are prohi!ited
AAA
. The craft
can preserves the !eer2s flavour and enhances the drinking eperience"
providing consumers with innovative and eye%catching packaging. ,amuel
(dams !eer in custom designed cans is now !eing served at !eaches" golf
clu!s" sporting events and concerts3 and has even more recently made its de!ut
on airlines including 'etBlue" (merican (irlines" and Lirgin (merica
AAF
. &n addition
to using the can to package its multitude of !eer offerings" Boston Beer Co. has
offered to license use of the specially engineered can to other craft !rewers on a
royalty%free !asis
AAD
. @ot only has Boston Beer Co. generated competitive
appleseed%hard%apple%cider%set%to%take%a%!ite%out%of%the%cider%category) /accessed 'une 8" 875A0.
440 &!id.
441 'oseph" ,e!astian. QCarls!ergXs 4remiumisation 4ush *ifts 1evenue.Q )ar!etin+#ee!. -ay
;" 875A. http#))www.marketingweek.co.uk)sectors)food%and%drink)news)carls!ergs%
premiumisation%push%lifts%revenue)A757A59.article /accessed 'une 8" 875A0.
442 &!id.
443 Business>orld.com. QCiderXs ,picy ,ide.Q Be0era+e #orl$. Business ,ource Complete"
,eptem!er 8759. 58. /accessed 'une 8" 875A0.
444 The Boston Beer Company" &nc. /87590. 2013 Annual Report. Boston. 1etrieved -ay 8<"
875A
445 &!id.
446 &!id.
214
intelligence as a result of its 1E? efforts into packaging" !ut it shows openness
and authenticity in sharing this knowledge with its closest competitors.
.ther industry players have also recogni$ed the value in developing packaging
options that provide an alternative to traditional glass !ottles. (B &n%Bev has put
new" aluminum !ottles on store shelves which have provided the company with a
distinctive look and satisfied consumers !y keeping !eer colder longer
AA;
. The
industry giant2s Bud *ight 4latinum is leading the way in this innovative
packaging trend towards aluminum !ottles" which also offer a recycling
advantage over glass. &n 875A" (B%&nBev plans to offer Bud *ight in what it has
termed the Ocool twistP 5D o$. aluminum !ottle which features a special cap that
will make opening and reclosing easy
AA6
. Here" it appears that Boston Beer Co.2s
competitors have recogni$ed and acknowledge consumer trends toward
OgreenerP and more distinctive packaging alternatives. ?espite the company
holding a competitive advantage over its competitors in the market for particular
alcoholic !everages like hard iced tea and cider" its recent developments in
packaging only mirror and do not eceed those made !y other !reweries in the
industry.
onc,u"!on
The Boston Beer Co. has esta!lished strong !rand presence with its multitude of
!eers and distinctive product offerings in the cider and OmalternativesP segments.
(lthough the company has esta!lished itself as the market leader in hard iced
tea under its Twisted Tea la!el" competitors continue to develop and launch
similar products that fit the !ill for a new and eciting alternative. Boston Beer Co.
currently is eperiencing the most pressure from competitors in the hard cider
segment" as consumer preferences have seemed to shift in favor of this crisp
and refreshing !everage. The ta!le !elow summari$es the most recent 1E?
developments for Boston Beer Co. in comparison to its competitors and
447 (nheuser%Busch &nBev. Q(nnual 1eport 8759.Q" 96. /accessed 'une 8" 875A0.
448 &!id.
215
demonstrates that the company faces immense competition in the market for
!eer and alcoholic alternatives.
,ource# Business >orld
AA<
Boston Beer Co. is on par with -illerCoors which has released similar products
and packaging. The weakest competitor comparisons on the 1E? element
include Carls!erg and Heineken" !oth of whose ecellent upcoming packaging
innovations are still overshadowed !y their lack of alternate category options.
449 Business>orld.com. QCiderXs ,picy ,ide.Q Be0era+e #orl$. Business ,ource Complete"
,eptem!er 8759. 58. /accessed 'une 8" 875A0.
216
Boston Beer Co. has also taken steps to further develop its packaging and has
re%engineered the aluminum !eer can into the O,am canP which provides !eer
drinkers with a more enhanced used eperience. (nheuser%Busch &nBev has
pushed the very compara!le aluminum !ottle to market as well" while each of
Boston Beer Co.2s closest competitors also have made recent strides in
packaging development.
.verall" the far reaching num!er of styles of !eer" in addition to its well%
esta!lished presence in the hard iced tea and hard cider segments shows that
Boston Beer Co.is striving to compete for a larger share of the alcoholic drinks
market. ?espite its !rands drawing in a loyal fan !ase" however" Boston Beer
Co.2s competitors have ehi!ited compara!le efforts in their own respective 1E?
value chain function. (s a result" it is appropriate to say that Boston Beer Co. has
reached competitive parity with its closest competitors and that its 1E? efforts
are organi$ed to !e eploited in the near future.
217
I" the 3e"ource
or apab!,!ty
-a,uab,eI
G
1E? efforts set forth !y Boston Beer Co. have
separated the company from others in the industry
given its distinguished !rand portfolio. The company
has received several gold medal awards and over
A77 other awards and honours that indicate the high
net worth of the flagship !rand names including ,am
(dams" Twisted Tea" and (ngry .rchard Cider
I" the 3e"ource
or apab!,!ty
3areI G
(lthough Boston Beer Co. has !ecome very
reputa!le in the craft !rewing industry" its efforts
cannot !e deemed rare per se" as the company2s
closest competitors have launched some very
compara!le products and innovative technologies.
I" the 3e"ource
or apab!,!ty
co"t,y to
Im!tateI
G
Companies wishing to pursue similar 1E? projects to
Boston Beer Co. will re=uire significant capital
investment" in addition to the time" human resources"
and the appropriate work culture /i.e. freedom)
encouragement to eperiment0 that will help to foster
the right level of creativity
I" the 3e"ource
or apab!,!ty
8on.
Sub"t!tutab,eI
G
There are products and services yet to !e discovered
in the !rewing industry that may one day phase out
what appear to !e !reak%through innovations in
Boston Beer Co.2s present operations.
2r/an!Fed to be
&'p,o!ted
G
Boston Beer has invested a lot into training its
employees and providing them with a supportive
atmosphere that fosters innovation. This is a key
factor that will play a large part in the company2s
a!ility to further eploit its 1E? value%creating
activities further down the line.
$erformance Imp,!cat!on ,lightly (!ove (verage 1eturns
ompet!t!(e on"e1uence Competitive 4arity /temporarily0
orporate Leader"h!p
( Board of ?irectors /B.?0" who is responsi!le for representing stockholders"
and esta!lishing and enforcing corporate management and financial policy
AF7
"
450 &nvestopedia. Boar$ o* irecotrs . 875A.
http#))www.investopedia.com)terms)!)!oardofdirectors.asp /accessed -ay 8D 875A" 875A0.
218
governs Boston Beer Co. The company2s eecutives are elected annually !y the
B.?2s and remain in office until a =ualified successor is elected or until their
removal or resignation
AF5
.
&'ecut!(e #ember"
C4 5ames 6och Chairman$
C. 'ames Hoch" currently serves as Chairman of the Company. -r. Hoch
founded the Company in 5<6A and was the Chief Eecutive .fficer from that time
until 'anuary 8775
AF8
.
'artin ,4 Roper President and Chief Executive Officer$
-artin +. 1oper" was appointed Chief Eecutive .fficer of the Company in
'anuary 8775" and has !een 4resident of the Company since ?ecem!er 5<<<"
after having served as its Chief .perating .fficer since (pril 5<<;. He joined the
Company as Lice 4resident of .perations in ,eptem!er 5<<A. -r. 1oper holds a
masterXs degree in manufacturing" as well as an -B( from Harvard Business
,chool. 4rior to joining Boston Beer" he worked as a strategy consultant and led
small manufacturing companies in turn%around situations
AF9
.
1i%%iam ,4 !rich Chief ,inancia% Officer and Treasurer$
>illiam +. Urich" was appointed Chief +inancial .fficer and Treasurer of the
Company in ,eptem!er 8779. 4rior to joining the Company" -r. Urich had !een
the Chief +inancial .fficer of (circa" &nc." a producer of organic foods and
!everages" from 8775 to 8779. +rom 5<<6 to 8777" -r. Urich served as Lice
4resident +inance and Business ?evelopment for United ?istillers E Lintners" a
su!sidiary of ?iageo" 4*C" and from 5<<F to 5<<6 as its Lice 4resident +inance
and Treasurer
AFA
.
451 The Boston Beer Company" &nc. 2013 Annual Reports . 875A.
http#))www.!oston!eer.com)phoeni.$htmlBcCD<A98EpCirol%news(rticleE&?C56;7AD5EhighlightC
/accessed -ay 8D" 875A0.
452 &!id.
453 &!id.
454 &!id.
219
5ohn C4 Geist 7ice President of "a%es$
'ohn C. Geist was appointed Lice 4resident of ,ales in +e!ruary 877;" after
having served as @ational ,ales -anager of the Company since 5<<6. -r. Geist
came to the Company in 5<<; from a large alcohol !everage distri!utor where he
had !een a sales manager
AFF
.
David +4 Grinne%% 7ice President of )re&in($
?avid *. Grinnell" joined The Boston Beer Company in 5<66 as the -anager of
Brewing .perations until he was promoted to ?irector of Brewing and Kuality in
'anuary 8775. -r. Grinnell held this position until he was promoted to the
position of Lice 4resident of Brewing in 'anuary 8776. 4rior to coming to Boston
Beer" -r. Grinnell was one of the original !rewers of the @ew (msterdam
Brewing Company
AFD
.
Thomas 14 +ance 7ice President of Operations$
Thomas >. *ance joined the Company in 'anuary 877; after having served as
Eecutive Lice 4resident" .perations" of HenXs +oods of -arl!orough"
-assachusetts for more than five years. 4rior to that" -r. *ance held a num!er of
positions in operations at Bausch E *om! of 1ochester" @ew Mork" following
many years in operations at consumer food companies" namely" >elchXs"
General -ills and Kuaker .ats
AF;
.
Ai-+i +im 7ice President of .uman Resources$
-s. *im is the Company2s Lice 4resident of Human 1esources. 4rior to joining
the Company in +e!ruary 8758" -s. *im had served as ,enior ?irector of Human
1esources at Listaprint U,(" &nc." an online provider of marketing products and
services located in *eington" -(" for over three years. ,he served as ?irector of
-anagement Effectiveness at +idelity Human 1esources ,ervice at +-1 **C"
part of the +idelity group of companies" located in -arl!orough" -( from 877; to
8776. Before that" -s. *im worked for -onitor Group" an international consulting
firm located in Cam!ridge" -assachusetts" for 59 years" first as a consultant and
455 &!id.
456 &!id.
457 &!id.
220
then in the human assets department" serving during the last three years there
as Glo!al Human (sset -anager
AF6
.
Ro/ert P4 Pa(ano 7ice President of )rand Deve%opment$
-r. 4agano joined the Company in 8755 as Lice 4resident of Brand
?evelopment. -r. 4agano had previously served for five years as -anaging
?irector of the !rand strategy firm" 1ed ,ky &nsights" **C" located in ,ud!ury"
-assachusetts and @ew Mork" @M. +rom 8777%877D he served as a partner of
-onitor Group" a consulting company located in Cam!ridge" -assachusetts. &n
5<6D" -r. 4agano co%founded the advertising firm" 4agano ,chenck E Hay" &nc."
located in Boston" -assachusetts. &n 5<<;" he sold his interest in the agency to
!ecome ,enior Lice 4resident and Group (ccount ?irector at -ullen (dvertising"
which is currently located in Boston" -assachusetts" where he served until
8777
AF<
.
6ath%een .4 1ade 7ice President +e(a% and Corporate "ecretary$
-s. >ade joined Boston Beer Co. in 5<<< as Corporate *egal ?irector and
Corporate ,ecretary. ,he later !ecame ,ecretary of the company in 8757 and
was later appointed Lice 4resident%*egal and Corporate ,ecretary in -arch
8758
AD7
.
&n looking at Boston Beer Co.2s current eecutive mem!ers it is evident that each
possesses a uni=ue and enriching history of work eperiences !oth inside and
outside of their time at Boston Beer Co. These eperiences have well e=uipped
them for their respective positions and have contri!uted the success of Boston
Beer Co. within the !etter !eer market.
ompet!tor" &'ecut!(e"
The CE. of Heineken" 'ean%+rancois van Bomeer" has a -aster2s ?egree in
Economics" and has !een with the company since 5<6A" working his way up to
the CE. position in 8775. The C+. of Heineken has a degree in Business
458 &!id.
459 &!id.
460 &!id.
221
(dministration and a post%graduate certification in Chartered (ccounting. He
!egan working at Heineken in 5<65 and !ecame a mem!er of the eecutive
!oard in 877F
AD5
.
The CE. of (B%&nBev" Carlos Brito" possesses !oth a degree in -echanical
Engineering and an -B(. He joined (m!ev in 5<6< and various roles until !eing
appointed CE. in 'anuary of 877A. He !ecame the Zone 4resident @orth
(merica at &nBev in 'anuary of 877F" and CE. in ?ecem!er
AD8
. The company2s
C+." +elipe ?utra" holds a degree in Economics and an -B( in Controlling. He
joined (m!ev in 5<<7 and also held various positions !efore !eing appointed
C+. of (m!ev in 877F and later Chief +inancial and Technology .fficer in
875A
AD9
.
&n comparing Boston Beer Co.2s eecutives to those of its major competitors
within the market" namely Heineken and (B%&nBev" it is o!vious they possess
similar levels of formal education and work eperience. +or the purpose of this
analysis" only the positions of CE. and C+. were considered as they are felt to
!e of the greatest strategic importance. &t is noted than in comparing the
eecutive mem!ers of Heineken and (B%&nBev to those of Boston Beer Co." !oth
competitors2 eecutives have spent more time within their respective company2s
!efore !eing appointed an eecutive mem!er. ?espite the !enefits associated
with greater in%company eperience" this is seen as an inconse=uential element
of the analysis as Boston Beer Co. was founded nearly 577 years later.
&'ecut!(e In!t!at!(e"
*ead !y its eecutive team" 8759 represented a highly successful year for the
Boston Beer Company. Eecutives aimed to grow the company !y 59N" a goal
461 @.L." Heineken. 3eine!en&Chair-an 12ecuti0e Boar$. 875A.
http#))www.theheinekencompany.com)a!out%us)management)eecutive%!oard)jean%francois%van%
!omeer /accessed -ay 8D" 875A0.
462 (B&nBev. 9r+aniEation Chart. 875A. http#))www.a!%
in!ev.com)go)corporateRgovernance)organi$ationRchart /accessed -ay 8D" 875A0
463 &!id.
222
they far surpassed" achieving a 89N growth in depletions within the highly
competitive and dynamic craft !eer market
ADA
. &n addition to this" the company
worked to introduce a variety of new !everages including !eers" malts" and
ciders" allowing them to epand their product !ase and capitali$e on recent
trends within the alcoholic !everage market
ADF
. The eecutives attri!ute the year2s
success to the continued dedication and diligence of their employees"
demonstrating a sense of teamwork throughout all levels of the organi$ation" and
a sense of collectively in pursuing company goals.
ompany ("D Indu"try 0!nanc!a, #etr!c" Ana,y"!"
Boston Beer)&ndustry),ector -etrics
F Mear (verage
Gross -argin
F Mear (verage
EB&T?
F Mear (verage
@et 4rofit -argin
HE&@M.(, D6.A; 89.7F 57.AF
BU?.@ FD.<A 96.58 89.97
,(B.* @)( 88.69 5F.F8
,(-.@ F9.DD 5<.FA 57.88
&ndustry A8.66 5F.6A D.;8
,ource# 1euters
ADD
Boston Beer Co. has generated a greater average gross margin over the past
five years than !oth the !everages%!rewers industry and the consumer non%
dura!le goods sector as a whole. The company generated 57.;;N more than the
industry gross margin" and 5D.96N more than the sector margin
AD;
. This is
attri!uted to the higher price point associated with the company2s premium !etter
!eers and a continuous investment in improved operations efficiency. &n 8759
alone the company achieved a :<.D million improvement in resource efficiency
465 &!id.
466 1euters. Boston Beer Co-pan% . 875A.
http#))www.reuters.com)finance)stocks)financialHighlightsBsym!olC,(-.@ /accessed -ay 8D"
875A0.
467 &!id.
223
and gross margins" far surpassing their initial goal of :;.F million
AD6
. 1elative to
the !eer markets most significant players" The Boston Beer Company reali$ed
the lowers five year average gross margin. This is attri!uted in part to the larger
si$e" and market reach of these firms" and the a!ility to attain economies of
scale.
The company2s five%year average net profit margin" measuring profita!ility after
consideration of all epenses and taes" was 9.FN greater than the industry
average" further demonstrating its a!ility to yield superior profits a!ove the
industry as a whole
AD<
. &n comparing Boston Beer Co.2s EB&T? to those of the
major market players" it is seen that the company has the lowest EB&T? and
must work to further increase revenues and cut costs in order to compete.
&n looking at the company2s EB&T? it is seen that Boston Beer Co. reali$ed an
average of 57.;;N greater earnings !efore interest" ta" and depreciation than
the five%year industry average
A;7
. &gnoring the effects of financing and accounting
decisions" this indicates greater average profita!ility than other !rewers within
the market
A;5
. Boston Beer Co. fell !elow the five%year sector average !y only
5.A9N
A;8
. Considering the vast variety of goods classified within this sector" this is
not seen as a significant indication of poor" or !elow average performance" for
the company.
875A0.
470 &!id.
875A0.
224
#ana/er!a, &ffect!(ene"" 3at!o@"
-anagerial Effectiveness 1atio2s
,o
urce# 1euteurs
A;9
Boston Beer Co. has demonstrated a high average return on assets relative to
other firms in the !everage%!rewers industry over the past five years. &n referring
to the data a!ove" the company has yielded an average 1.( of 56.DDN" 5A.FN
greater than the industry average
A;A
. This demonstrates efficient management of
resources" and a superior a!ility to generate income from assets. &n considering
the proportionately large degree of fied assets re=uired to operate a mid to large
si$ed !rewery" with property" plant" and e=uipment making up D7N of total
assets
A;F
" the a!ility to generate a superior return on these investments yields a
significant competitive advantage for the firm.
&n evaluating Boston Beer Co.2s a!ility to generate ecess returns on investments
/1.&0" it is seen that it far surpasses the average of other !rewers in the industry.
.ver the past five years" Boston Beer Co. has generated an average 8F.8FN
473 &!id.
474 &!id.
225
return on its investments" 5<.5FN more than the industry average
A;D
. Boston Beer
Co. has reported numerous investment initiatives over the past few years"
including the introduction of a new can design" several new !eers" ciders and
malts" and investments in operations. The !everage%!rewers industry" and the
!etter !eer" malt" and cider markets within that" are characteri$ed !y rapid growth
and changing consumer tastes
A;;
. &n considering this" the a!ility to identify and
capitali$e on investments that yield significantly greater returns than others within
the market yields a significant competitive advantage. Boston Beer Co.2s 1.&
indicates successful financial management from its eecutives and is largely
credited with the company2s continued growth as market leaders.
.ver the past five years" Boston Beer Co. has generated an average return on
e=uity /1.E0 of 86.75N" 5<.9;N greater than the industry average
A;6
. This
indicates a superior return per dollar invested from stakeholders. This ratio is
highly important for pu!licly traded companies as it demonstrates how effectively
it is a!le to utili$e investors2 money. 1ational investors will prefer those
companies that yield greater returns on the dollar
A;<
. Boston Beer Co.2s a!ility to
generate a greater 1.E coincides with its considera!le market share relative to
other craft !rewers.
875A0.
477 Group" University of .regon &nvestment. Boston Beer Co-pan% . 8759.
http#))uoinvestmentgroup.org)wp%content)uploads)8759)7F),(-%report%+inal.pdf /accessed -ay
8D" 875A0.
875A0.
226
Stoc6 $r!ce Ana,y"!"
Boston Beer Co. +ive%Mear ,tock 4rices
,ource# MCharts
A67
1eferring to the graph a!ove" the Boston Beer Company2s stock price has
demonstrated a positive growth trend over the past five years. The stock price
currently sits at :85<.F;" :A5.<< !elow its five year high in .cto!er of 8759
A65
. &n
the months leading up to the five%year stock price high" Boston Beer Co.
repurchased approimately 5<D"777 shares of Class ( Common ,tock for an
aggregate purchase price of :8<.D million
A68
. This indicates that management felt
the shares were undervalued" and corresponds with the resulting price increases.
480 MCharts. 8Charts& "A) . 875A. http#))ycharts.com)companies),(- /accessed -ay 8D"
875A0.
481 &!id.
227
Heineken +ive%Mear ,tock 4rices
A69
(B&nBev +ive%Mear ,tock 4rices
A6A
(s indicated in the graphs a!ove" Boston Beer Co.2s stock price eceeds those
of Heineken and (B%&nBev. Heineken2s stock price currently sits at :F5.;5" down
:;.D; from its five year high in -arch of 8759
A6F
. >hile Heineken2s stock price
has demonstrated an overall increasing trend over the past five years" it has
demonstrated the greatest volatility out of the three companies !eing considered.
(B%&nBev2s stock price currently sits at :57<.<8" down only :5.56 from its five
483 +inance" Mahoo. 8ahoo 4inance . 875A. https#))ca.finance.yahoo.com)=)coBsCHE&@M
484 &!id.
485 &!id.
228
year high
A6D
. (B%&nBev2s stock price growth patterns are more consistent with
those of Boston Beer Co.
High stock prices and positive growth indicate greater returns for investors and
demonstrate investor confidence in the continued prosperity of a company
A6;
.
Boston Beer Co.2s high stock prices relative to competitors indicates that eisting
management has !een performing effectively and that investors epect them to
continue doing so into the foreseea!le future.
#ar6et ap!ta,!Fat!on
The graph !elow indicates the Boston Beer Company2s market capitali$ation
value over the past five years. ( company2s market capitali$ation" derived from its
share price and volume of shares outstanding" demonstrates its total value within
the market
A66
. Corresponding to the previous section" Boston Beer Co.2s market
capital has demonstrated a positive growth trend" peaking in .cto!er of 8759.
The company2s current market capitali$ation is valued at :8.;<F !illion" which
indicates growth of approimately :8.9;F !illion" or FDDN" over the past five
years" and classifies them as a mid%cap firm
A6<
. >hile the overall trend indicates
positive growth" Boston Beer Co.2s current market capitali$ation has fallen
58.7FN since its 8759 high of :9.5;6 !illion
A<7
. This is attri!uted to the reduced
volume in shares outstanding of approimately 99N /a result of increased 8759
stock repurchasing0" and the 5<.89N reduction in stock price
A<5
. &n considering
that the reduction in volume of shares outstanding eceeds the reduction in
market capitali$ation" and that stock prices continue to demonstrate positive
growth" this is not viewed as an indication of poor performance.
486 &!id.
487 &nvestopedia. #h% o Co-panies Care About "toc! Prices. 875A.
http#))www.investopedia.com)articles)!asics)79)787;79.asp /accessed -ay 8D" 875A0.
488 /&nvestopedia" -arket Capitali$ation" 875A0
489 /MCharts" 875A0
490 &!id.
491 /The Boston Beer Company" 875A0
229
&n comparing The Boston Beer Company2s market capitali$ation to those of
Heineken" (nheuser%Busch &nBev" Carls!erg" and ,(B-iller" it is evident that the
company continues to occupy a relatively small portion of the market despite its
recent growth. &n referring to the graphs !elow its seen that in 8759 (B&nBev2s
market capitali$ation is currently valued at :5;5.5; !illion making it the largest of
the five companies !eing considered
A<8
. +ollowing (nheuser%Busch is ,(B-iller"
Heineken" and Carls!erg" with market capitali$ation values of :68.95 !illion"
:96.6< !illion" and :5D.6D !illion respectively. (ll four companies are classified as
large%cap firms" possessing market capitali$ation !etween :57 !illion and :877
!illion. This indicates that they are well known firms and are a considered sta!le
investment
A<9
" which makes sense in considering their com!ined market share is
over ;5N of the !eer market
A<A
. ?espite these companies2 dominance in market
capitali$ation" Boston Beer Co. has demonstrated more rapid growth over the
past five years. Boston Beer Co. reali$ed a growth in its market capitali$ation of
over 67N" approimately F6N !igger than the net highest market cap growth
rate for that year reali$ed !y (B&nBev. The Boston Beer Co.2s high market cap
growth rate" relative to some the !eer industry2s largest competitors" corresponds
with recent growth in the craft !eer and premium !everage markets" and the
7.9N compounded annual decrease in the !eer industry since 877;
A<F
. &t can !e
said that Boston Beer Co.2s corporate strategy more effectively capitali$es on
recent shifts in consumer demand within the !eer and alcoholic !everage
industry.
492 /MCharts" 875A0
493 /&nvestopedia" -arket Capitali$ation" 875A0
494 /Tierney" 875A0
495 /-ike ,nider" 875A0
230
Boston Beer +ive%Mear -arket Capitali$ation
,ource# MCharts
A<D
The Boston Beer Co.
/Billion U, ?ollars0
-arket Cap. Growth 1ate 1evenue 1atio
8759 9.578 67.5AN .;9< A.8
8758 5.;88 89N .F67 8.<;
8755 5.A ;.D<N .F59 8.;9
8757 5.9 <5.;AN .AD9 8.65
877< .D;6 .A5F 5.D9
Heineken +ive%Mear -arket ,hare
,ource# MCharts
A<;
Heineken -arket Capitali$ation and 1evenue
/Billion U,?0
8759 96.6< .F;N 8D.A9; 5.A;
8758 96.D; AA.DFN 8A.897 5.D7
8755 8D.;A %F.AFN 88.5A6 5.85
8757 86.86 87.8<N 85.F<8 5.95
877< 89.F5 85.5;6 5.55
496 /MCharts" 875A0
497 /MCharts" 875A0
231
(nheuser%Busch &nBev +ive%Mear -arket ,hare
,ource# MCharts
A<6
(nheuser%Busch &nBev -arket Capitali$ation and 1evenue
8759 5;5.5; 85.6;N A9.5<F 9.<D
8758 5A7.AF A8.6DN 9<.;F6 9.F9
8755 <6.95 ;.A<N 9<.7AD 8.F8
8757 <5.AD <.FN 9D.8<; 8.F8
877< 69.F8 9D.;F6 8.8;
Carls!erg +ive%Mear -arket ,hare
,ource# MCharts
Carls!erg -arket Capitali$ation to ,ales 1atio
8759 5D.6D 58.56N 5;.8<< .<6
8758 5F.79 A7.9AN 5D.AA6 .<5
8755 57.;5 %97.D6N 5F.7F< .;5
8757 5F.AF 9F.7FN 5A.F<; 5.7D
877< 55.AA 5A.DA< .;6
,(B-iller +ive%Mear -arket ,hare
498 &!id.
232
,ource# MCharts
,(B-iller
8759 68.95 57.87N 89.859 9.FF
8758 ;A.D< 99.A;N 85.;D7 9.A9
8755 FF.<D %5.7DN 5<.A76 8.66
8757 FD.FD 88.7FN 56.787 9.5A
877< AD.9A 56.;79 8.A6
9ro:th 3ate Ana,y"!"
&n referring to the data listed in the chart !elow" it is seen that Boston Beer Co.2s
five%year average sales growth is greater than that of the industry. The company
is reported to have achieved average sales growth of 59.5FN" which is ;.6FN
greater than the !everage%!rewers industry average
A<<
. &n considering that the
industry encompasses !eer and malt li=uor production" including craft !eers" and
non%!eer alcoholic !everages
F77
" this sales growth indicates a superior a!ility to
capitali$e on the dou!le%digit growth of the craft !eer market and shifts in
consumer demands towards malts and ciders
F75
" compared to other major !eer
manufacturers who are less integrated in these market segments.
875A0.
500 Times" The @ew Mork. Be0era+es&Bre,ers. 875A.
http#))markets.on.nytimes.com)research)markets)usmarkets)industry.aspBindustryCFA555
/accessed -ay 8;" 875A0.
501 )i!e "ni$er. +e!ruary 875A.
http#))www.usatoday.com)story)money)!usiness)875A)78)7<)!eer%down%craft%!eer%continues%
growth)F9A55<<) /accessed -ay 85" 875A0.
233
Earnings per share /E4,0 serve as an indication of a company2s profita!ility" and
demonstrate the portion of profits to !e allocated to each outstanding share of
common stock
F78
. Boston Beer Co.2s five%year average E4, growth rate of
FF.67N eceeds that of the industry !y A5.88N
F79
. Earnings per share is
considered to !e one of the single greatest indicators of stock price" and thus
coincides with Boston Beer Co.2s relatively high stock price. Boston Beer Co.2s
capital ependiture growth rate also eceeds that of the industry" contri!uting to
the company2s earnings growth
F7A
. &t is important to note however that the E4,
growth rate eceeds that of capital ependitures and thus demonstrates an
efficient use of capital.
Growth 1ates
,ource# 1euters
F7F
$erformance Ind!cator"
875A0.
875A0.
234
&n referring to the five%year high price to earnings ratio2s /4)E0 it is seen that
Boston Beer Co.2s is !elow that of the industry. Boston Beer Co. currently
possesses a 4)E ratio of AD.;D" indicating that consumers are willing to pay
:AD.;D on average per :5 of earnings. This is !elow the industry 4)E ratio of
F9.9A" indicating that investors are less willing to invest in ,(- than they are in
the average competitor within the !everage%!rewers industry
F7D
. This can !e
attri!uted in part to the oligopolistic nature of the !eer market" with four
companies making up approimately ;6N of the market" and the fact that each of
the primary competitors is considered to !e a large%cap company with relatively
sta!le growth
F7;
. &n comparison" Boston Beer Co. is a relatively new pu!lic
competitor" whose !etter !eer and non%!eer markets are characteri$ed !y recent
growth" resulting in greater average E4, and reducing the average 4)E ratio
F76
.
Laluation 1atio2s
,ource# 1euters
F7<

4rice vs. Earnings
506 &!id.
508 Tierney" 'ohn. The "tate o* A-erican Beer. 875A.
http#))www.theatlantic.com)!usiness)archive)875A)7A)the%state%of%american%!eer)9D7F69)
875A0.
235
,ource# MCharts
F57
&nvestors aim to achieve the greatest possi!le returns and thus it is !eneficial to
compare the returns of Boston Beer Co. to those of its competitors and the
market as a whole. +or the purpose of this analysis only the returns of (B&nBev
and the ,E4 F77 will !e considered. (s indicated in the data !elow" Boston Beer
Co. has yielded greater returns than !oth (B&nBev and the ,E4 F77 over the
past year. Boston Beer Co.2s three%year returns are recorded at 5F;.8N"
outperforming the market inde !y 578.66N" and the !eer industry leader !y
F;.68N
F55
. The company2s relatively high returns can !e attri!uted to its success
within the !etter !eer market" and its continued epected growth of operations
and market capitali$ation
F58
. &t is also an indication of effective strategic and
financial policy management with decisions yielding optimal returns for the
company and its investors.
Total 1eturns Comparison
875A0.
511 &!id.
236
,ource# MCharts
F59
Boston Beer Co.2s current de!t to e=uity ratio of 7.5; is well !elow that of the
industry average at A6.AD
F5A
. &n considering that the !rewing industry is highly
capital%intensive" it is epected to have a de!t)e=uity ratio a!ove two. Companies
with high de!t)e=uity ratios are using de!t financing to pursue growth with the
hope that it will generate greater earnings that it otherwise would have without
the additional financing
F5F
. Boston Beer Co.2s low de!t to e=uity ratio" in
conjunction with its high earnings per share relative to the industry average"
indicates superior corporate governance and financial policy. The company has
successfully generated superior returns" and earnings per share" relative to the
market while mitigating financial vulnera!ility and earnings volatility in using
primarily e=uity financing.
+inancial ,trength &ndicators
875A0.
875A0.
237
,ource# 1euters
F5D
8et 3e(enue Ana,y"!"
Boston Beer Co. @et 1evenue 4ercentages 875A
F5;

&n 8759" Boston Beer Co. reali$ed a 8;.AN increase in net revenue /revenue less
ecise taes0" or a 8.8N increase in revenue per !arrel of its core !rand
products. The ta!le a!ove is a percentage !reakdown of Boston Beer Co.2s net
revenues. &n looking at the ta!le it is seen that net income as a percentage of net
875A0.
238
revenue has decreased 9.AN" directly corresponding with a 9.AN increase in
C.G,. This reduces the percentage of gross profit per dollar of net revenue and
thus the percentage of net income. &n looking at the percentage of advertising"
promotional" and selling epenses it is important to note that while the company
reduced this epense !y 5N per dollar of revenue" this reduction was offset !y
an increase in customer service and promotional ependitures which are
deducted from total revenues to derive net revenue.
F56

2ther Ind!cator"
>ith growth in the craft !eer market up 56N in volume" and 87N in retail dollars"
Boston Beer Co. is an attractive option for investors. (s one of few pu!licly
traded firms within the craft !eer market" Boston Beer Co. is poised to take
advantage of continued market growth projections" and the high demand for craft
!rewer stock that is likely to follow. The company2s continuous epansion and
diversification of product lines" which includes craft !eer" malts" and ciders"
coincides with recent shifts in consumer tastes and indicates effective forecasting
and market awareness from the company2s eecutives.
The Boston Beer Company has received considera!le recognition in its relatively
short life in the pu!lic sector. The company was ranked 68
nd
on +or!es2 list of
T>orld2s -ost &nnovative Growth Companies of 875A2" and 59
th
on +or!es2
T(merica2s Best ,mall Companies2 list. The Brewer2s (ssociation" who works to
promote and protect (merican craft !rewers" places Boston Beer Co. as its top
craft !rewer" and fifth in the overall U.,. !rewing market
F5<
.
Boston Beer Co. operates in a highly competitive market containing a high threat
of entry from small !rewers" and continuous pressure from the industry2s leaders.
(ll things in consideration" Boston Beer Co.2s position as (merica2s leading craft
518 &!id.
519 (lley" &nvestors. The )ar!et Cap . 875A. http#))www.investorsalley.com)mc5A)7F%
86)!eer.html /accessed -ay 85" 875A0.
239
!rewer" and its favoura!le reviews from !rewers and financial analysts alike"
indicates highly effective corporate leadership.
onc,u"!on
240
r!ter!a ;e" 8o &'p,a!n
I" the 3e"ource
or apab!,!ty
-a,uab,eI
G
Given that the company has outperformed
the industry average across various market
indicators it can !e said that the eecutive
team has a superior understanding of
market implications and how to respond to
them. The numerous mentions !y finical
and industry eperts demonstrates effective
management and further supports the
notion that the corporate leadership team
has !een a!le to provide value.
I" the 3e"ource
or apab!,!ty
3areI
G
&n looking at competitor2s eecutive teams it
is seen that the a!ility to gain eperienced
and formally =ualified individuals for various
eecutive positions is not a rare capa!ility.
-ajor market players possess a competitive
advantage in their a!ility to offer greater
financial compensation and their eposure
to a greater pool of talent across
eponentially larger international
operations.
I" the 3e"ource
or apab!,!ty
co"t,y to !m!tateI
G
This capa!ility is not costly to imitate" as
each corporation possesses an eecutive
team of their own. &t is important to note
however that the current CE. and several
other eecutive mem!ers possess
considera!le eperience within Boston Beer
Co. itself and likely possess a degree of
understanding of the company and its
values that would difficult to replace in the
short term.
I" the 3e"ource
or apab!,!ty
8on.
Sub"t!tutab,eI
G
&t is possi!le to create an eecutive team
consisting of individuals with similar formal
education !ackgrounds and years of
eperience and so is in fact su!stituta!le
2r/an!Fed to be
&'p,o!ted
G
The eperiences and formal epertise of the
eecutive team offer a rich pool of
resources for the firm. The company2s
success over the past five years indicates
effective eploitation of this.
$erformance Imp,!cat!on (!ove (verage to (verage 1eturns
ompet!t!(e
on"e1uence
Competitive (dvantage
241
Based on the competitive analysis a!ove" per the L1&. framework the corporate
leadership team represents a competitive advantage for the firm. The corporate
leadership team has demonstrated a!ove average performance relative to other
craft !rewers and industry averages and" as such" can epect a!ove average
returns.
Interna, 0actor &(a,uat!on )I0&*
Stren/th" =e!/ht 3at!n/ =e!/hted Score
#a!nta!n!n/ t:o
year" of
!n(entory to
reduce r!"6 of
crop fa!,ure
.75 9 .79
9ro"" $rof!t
#ar/!n
.7A A .5D
In(entory 9ro:th .7< A .9D
$urcha"!n/
cap!ta, that
pro(!de" h!/he"t
return
.5 A .A
In"ourced .7; A .86
Internat!ona,
"e,,!n/ and
product
reco/n!t!on
.79 9 .7<
=eb"!te" .7A 9 .58
#ana/!n/ human
re"ource
department
.7F 9 .5F
reat!n/ %ob" .79 8 .7D
H!/h product!(!ty .76 A .98
Sam an and
other
!nno(at!on"
.76 A .98
242
=ea6ne""e" =e!/ht 3at!n/ =e!/hted Score
3e,!ab!,!ty on
"e(en dea,er"
not ut!,!F!n/
economy@" of
"ca,e
.7F 8 .5
2(era,, co"t of
,o/!"t!c" and
tran"portat!on
cau"ed by on,y
four bre:er!e"
.5 5 .5
In(entory
+urno(er
.7; 8 .5A
2perat!on" .76 5 .76
u"tomer
Ser(!ce
.7A 8 .76
H!/h "a,ar!e" .75 8 .78
A,ternat!(e" to
beer . c!der
.79 8 .7D
+ota, 1 ?0 2DAC
The chart a!ove summari$es the strengths and weaknesses of The Boston Beer
Company and its internal environment. (fter weighing all of our o!servations
a!out the !reweries internal operations" we have given it a weighted score of
8.6;" slightly a!ove the industry average. 4rior to the end of 8759" this score
would have !een much lower as The Boston Beer Company hadn2t distinguished
itself as the leader in revolutionary craft !rewing. The company is challenged with
several eternal threats and competitors that compel The Boston Beer Company
to outperform and improve its2 internal operations to !e as efficient and
responsive as possi!le. The most impacting weaknesses and strengths are
discussed !elow.
Eey Stren/th"
The Boston Beer Company has several strengths that will allow it to !ecome the
leading craft !rewer and grow to international and glo!al markets. The company
effectively manages its raw materials !y storing its main ingredients in secure
locations to mitigate any risks. &nventory levels for raw materials are stocked for
two full years in case industry shortages occur. (n important element of the
243
!rewing industry is upgrading e=uipment and manufacturing processes to meet
industry standards in terms of environmental impact and efficiency levels. The
Boston Beer Company has the highest return on capital investment when
compared to competitors. This outlines one of the company2s many strengths.
&nsourcing provides strength for the Boston Beer Company as operations and
manufacturing processes can !e customi$ed and monitored at all times. +ull
=uality inspection and control can !e emphasi$ed during the entire process as
well as creating jo!s and income for the greater United ,tates. ?ifferentiation
within the !eer industry allows for a !rand to !e recogni$ed. The Boston Beer
Company has developed technology to promote and offer the ,am Can that
meets consumer meets in terms of freshness and tailoring consumption
!ehaviour.
Eey =ea6ne""e"
&nternal weaknesses can ultimately !ankrupt a company if not dealt with and
managed correctly. The Boston Beer Company2s major internal weakness lies in
the cost of transportation and logistics. ,ince the company only has four
!reweries" they are re=uired to ship and distri!ute products over a diverse array
of transportation networks. The company has !een a!le to reduce operating
costs in the short term !ut has increased the cost of logistics" transportation" and
handling. This has ultimately led to a weakness in its overall operations. >ith
only four !reweries" the inventory turnover should !e much higher than industry
competitors.
244
.trengt!s
A .trong +inancia%
,erformance
A 6i)ersiBe- *usiness
o$erations
A 2nsource-
.trengt!s
A .trong +inancia%
,erformance
A 6i)ersiBe- *usiness
o$erations
A 2nsource-
9ea5nesses
A @ac5 of sca%e
A #ost of %ogistics
9ea5nesses
A @ac5 of sca%e
A #ost of %ogistics
3$$ortunities
A Brewing strategy
aime- at re-ucing
-e$en-ence on
ot!er *reweries
A 7rowing 4is$anic
$o$u%ation in t!e C.
A 7rowing *eer
consum$tion in sia
,aciBc mar5et
3$$ortunities
A Brewing strategy
aime- at re-ucing
-e$en-ence on
ot!er *reweries
A 7rowing 4is$anic
$o$u%ation in t!e C.
A 7rowing *eer
consum$tion in sia
,aciBc mar5et
/!reats
A Booming tra-e of
counterfeit a%co!o%
A s%ow growt! of
Euro$ean *eer
mare5t
A #!anging consumer
$references in
*e)erages
/!reats
A Booming tra-e of
counterfeit a%co!o%
A s%ow growt! of
Euro$ean *eer
mare5t
A #!anging consumer
$references in
*e)erages
S=2+ Ana,y"!"
245
Summary of -a,ue ha!n Act!(!t!e"
The Boston Beer Company operates within a highly competitive and fragmented
industry. ,uccess in the !eer industry re=uires firms to develop competitive
advantages through lower prices or possess the a!ility to offer greater value
through product differentiation. (fter an in%depth analysis of The Boston Beer
Company and its major competitors" it is evident that its greatest competitive
advantages are !uilt on its Human 1esources -anagement and 1esearch and
?evelopment value chain functions.
The Boston Beer Company2s supply chain management system has ena!led it to
supply seasonal and limited release product offerings in an effective manner.
&nventory turnover and days in inventory are key metrics that The Boston Beer
Company scores competitively on3 with the a!ility to turn product over to
distri!utors faster than competitors. However" forming relationships with only
seven raw material suppliers reduces the company2s a!ility to reach economies
of scale and increases the costs associated with o!taining these products. The
Boston Beer Company produces its product in four !reweries which limits
operational costs !ut significantly increases transportation and logistics costs. (s
a result" Boston Beer Co.2s ,C- poses a competitive disadvantage yielding
average returns.
+rom an operational point of view" The Boston Beer Company ranks weaker than
its competitors. The primary area of improvement for the company is in reducing
its car!on footprint to comply with regulations that reflect increasing concern for
the natural environment. The Boston Beer Company2s operational strengths lay
in the use of =uality control technicians to ensure high =uality !rewing. &n
addition" the company has kept <FN of its supply chain and production activities
in house. The company2s performance implication of !elow average returns has
yielded a competitive disadvantage for the Boston Beer Company.
246
>hile ,upply Chain -anagement and .perations have weakened The Boston
Beer Company as competitive disadvantages" ?istri!ution provides the company
with competitive parity and average returns. The Boston Beer Company has
!een voted the !est supplier !y distri!utors and wholesalers for five years in a
row. 4roduction in house has allowed for more control and flei!ility over how the
!usiness operates. However" the distri!ution costs are significantly higher than
the industry average which limits its competitive positioning to a parity ranking.
The !eer industry is highly competitive due to the ease of entrants and high
product su!stituta!ility and re=uires immense investments into advertising in
order to keep product on the shelves. The -arketing and ,ales function at the
Boston Beer Company has less financial resources to invest in this capacity than
most of its major competitors. Boston Beer Company is at a disadvantage
considering the major players have an eponentially greater amount of funds
availa!le to push products to market. Here" The Boston Beer Company arrives at
a competitive disadvantage and the resulting performance implications yield
average to !elow average returns.
The Boston Beer Company fails to compete with other industry players on
we!site presence and communication channels. However" a major strength lays
in the return policies put in place !y the company. The Boston Beer Company is
the only firm taking a visi!le interest in satisfying customers !y addressing the
issue of product returns. ,taying reputa!le is a focus that the company has tried
to maintain !y providing high levels of customer service to !oth its !uyers and
end consumers. The Boston Beer Company ranks at competitive parity as it
follows all the same customer service standards set forth !y industry leaders.
The company does not overtly distinguish its customer service activities and
thus" yields only average returns.
The Boston Beer Company ecels in Human 1esources -anagement /H1-0. &ts
productivity levels trump others in the industry when looking at revenues per
247
employee. Competitive compensation" a well%educated pool of candidates" and
genuine interest in employee development has contri!uted to Boston Beer Co.2s
strong H1- function. The H1- department yields a!ove average returns and
the competitive advantage of such is reflected in its highly regarded reputation as
an employer.
The Boston Beer Company has esta!lished a strong presence not only in !eer
production !ut in manufacturing alternative alcoholic !everages as well. (s a
result of its 1E? efforts" the Twisted Tea !rand leads the industry segment for
hard iced tea. However" The Boston Beer Company faces more intense
competition in the cider industry" where many industry players have focused their
product developments. ,imilarly" Boston Beer Co. has o!tained a competitive
parity with others in the industry on its a!ility to develop innovative packaging
alternatives. The company2s performance ranks slightly a!ove average and its
1E? function is well%organi$ed to !e eploited in the near future.
The Boston Beer Company has outperformed industry averages across several
metrics including gross margin" EB&T?" and net profit margin. &n 8759" the Boston
Beer Company surpassed the efficiency improvements goals set !y the
eecutive team !y nearly :8 million. -anagerial performance metrics including
1.&" 1.(" and 1.E are all high relative to the industry average. This indicates
superior management and favoura!le positioning within the markets the
company is seeking to eploit. -arket share is a weakness for the company as it
faces considera!le pressure from the industry2s large%cap competitors. The
Boston Beer Company has received nota!le recognition from +or!es and The
Brewers (ssociation" which all lead to competitive advantages for the company.
&t can !e concluded that The Boston Beer Company has numerous competitive
advantages in its 1E? and H1- functions" while it also suffers disadvantages in
.perations" ?istri!ution" and ,C-. The Boston Beer Company leads the !etter
!eer segment and craft !eer industry which is evidenced !y its a!ility to generate
248
more revenue per employee than any other player as analy$ed a!ove. However"
analysis conducted on The Boston Beer Co. as a player in the !eer industry as a
whole" has revealed disadvantages due to limited resources and minimal market
power when compared to industry giants. Boston Beer Company2s success is
attri!uted to its a!ility to consistently innovate and develop products on which it
has !uilt high customer loyalty. (s discussed previously" the !eer industry does
not provide an attractive landscape for potential entrants. However" the strengths
of The Boston Beer Company present it with opportunities to ecel regardless.
The Boston Beer Company is relatively attractive when compared to those
competing only within the !etter !eer segment. However" when analy$ed as a
player in the entire !eer industry" the Boston Beer Company is moderately
unattractive due to its ina!ility to compete with the primary market share holders.
249
,(9" !<
Cor0orate trate$ies
250
orporate Strate/y
OCorporate%level strategies specify actions taken !y the firm to gain a competitive
advantage !y selecting and managing a group of different !usinesses competing
in several industries and product marketsP
F87
. The Boston Beer Company
operates in one industry resulting in its corporate and !usiness strategies
working in parallel
F85
.
Boston Beer Co.2s corporate strategy is to !ecome the leading !rewer in the
!etter !eer and cider categories !y creating and offering high =uality full%
flavoured !eers and ciders
F88
. (s a well trained sales organi$ation employing
world%class !rewers" the company has managed to achieve its goals. Boston
Beer Co. aims to !e a OdifferentP within the industry !y employing a focused
differentiation strategy which provides uni=ue taste and a distinct image at a
higher price.
The company !elieves the strategic marketing focus on the ,amuel (dams
!rand" with an emphasis on Boston *ager" ,am (dams *ight" and seasonal
!eers" will help continue to support long term growth
F89
. &nnovation is a norm at
the Boston Beer Company and creativity and consumer involvement are
recogni$ed as !eing an important part of the process
F8A
.
The Boston Beer Company has formed two strategic alliances to help achieve
the company2s goals. (t the end of 877<" the company developed a distri!utor
relationship with -oosehead Breweries of Canada" and in 8757" it teamed up
520 Lolesky" C. /875A" 7F 850. *ecture A Chapter D# Corporate *evel ,trategy
521 &!id.
522 The Boston Beer Company" &. /875A0. The Boston Beer Co-pan% 2013 Annual Reports.
1etrieved -ay 88" 875A" from http#))www.!oston!eer.com)phoeni.$htmlBcCD<A98EpCirol%
overview
523 Capital &K. /875A0. Boston Beer Co-pan%. 1etrieved 7D 76" 875A" from Capital &K#
https#))www.capitali=.com)C&K?ot@et)+inancial)Hey,tats.aspB
Company&dC99<<ADEstatekeyCF5eDfa8cAA6aA6AF6c7ee<!a5F7d;5dc
524 4ontinen" '. /87550. In$ustr% 90er0ie,: The beer bre,in+ in$ustr%.
251
with >eihenstephan of Germany to create a new !eer that com!ines German
heritage with Boston Beer2s innovativeness
F8F
.
The Boston Beer Company2s corporate strategy is straightforward as will !e
outlined !y the !usiness%functional strategies !elow. These operations take place
in only four geographical regions which demonstrates the simplicity of its value
chain compared to competitors.
-ert!ca, Locat!on
The Boston Beer Company is primarily a midstream resource%!ased company. &t
is engaged in the production and selling of !eers under the ,amuel (dams !rand
in 8759
F8D
. &t also produces malt !everages and hard cider at company%owned
!reweries and under contract arrangements at other !rewery locations
F8;
. &n the
fiscal year of 8759" Boston Beer Co. sold approimately 9.A million !arrels of its
products
F86
. The company solely conducts operations !y transforming raw
materials into high =uality !etter !eer" which comprises the majority of its
revenues.
Lertical integration allows companies to reduce costs and improve efficiency !y
decreasing transportation epenses and reducing turnaround time. (fter
assessing this description of vertical integration" it is clear that Boston Beer Co.
is not vertically integrated due to it only !eing a!le to conduct operations within a
secondary industry /and not related industries such as farming0. Below is a graph
that illustrates alcoholic !everage revenues in par with total revenue at Boston
Beer Co.. This is evidence that outlines the lack of vertical integration.
525 &!id.
overview
527 &!id.
528 &!id.
252
6own"
stream
A 6istri*ut
ors
Mi-"
.tream
A Brewerie
s
C$strea
m
A +armers
of Raw
Materia%
2
0
0
8
.
0
2
0
1
2
.
0
0
500
1000
9e&enue
%co!o%
Be)erages
/ota% Re)enue
Mi##ions J >3
,ource# Capital &K
F8<
Competitors within the !eer industry also operate midstream" as !ecoming one2s
own supplier is more difficult. However" once up stream positioning is achieved"
the industry can !e more easily dominated. (B &n%Bev" the industry2s largest
player" also maintains mid%stream positioning at this point in time.
Hor!Fonta, Locat!on
253
The Boston Beer Company operates under the following separate !usiness
classifications in !oth the @orth (merican Classification ,ystem /@(&C,0 and the
,tandard &ndustrial Classification /,&C0
F97
.
958# Beverage and To!acco product manufacturing
This industry group comprises esta!lishments primarily engaged in
manufacturing !everages.
9585# Beverage -anufacturing
This industry group comprises esta!lishments primarily engaged in
manufacturing !everages.
958587# Breweries
This industry comprises esta!lishments primarily engaged in !rewing !eer" ale"
malt li=uors and non%alcoholic !eer.
The Boston Beer Company2s primary @(&C, code is 958587 and its secondary
@(&C, code is AAF9573 which consist of esta!lishments primarily engaged in
retailing packaged alcoholic !everages" such as !eer" wine" and li=uor. 4rovided
!elow is information and statistics pertaining to the @(&C, codes.
8AIS >12120
530 ,tatistics Canada. /87580. North A-erican In$ustr% Classi*ication "%ste- CNAIC"D Cana$a.
1etrieved 7D 76" 875A" from ,tatistics Canada# http#))www.statcan.gc.ca)pu!)58%F75%)58%F75%
8758775%eng.pdf
254
,ource# Economic Census
F95
8AIS 44?>10
531 United ,tates Census Bureau. 1cono-ic Census: In$ustr% "napshots. 877;.
http#))thedatawe!.rm.census.gov)The?ata>e!RHot1eport8)econsnapshot)8758)snapshot.hrmlB
@(&C,CAAF957 /accessed 7D 59" 875A0.
255
,ource# Economic Census
F98
The primary ,&C code for the industry in which Boston Beer Co. operates is
8768# -alt Beverages /ecept malt etract0. These esta!lishments are engaged
in manufacturing malt !everages primarily involved in !ottling purchased malt
!everages. The secondary ,&C code is F565# Beer and (le. These
esta!lishments are primarily engaged in the wholesale distri!ution of !eer" ale"
porter" and other fermented malt !everages. Boston Beer Co. also operates
under the Glo!al &ndustry Classification ,tandard /G&C,0 code of 97875757. This
classification consists of producers of !eer and malt li=uors
F99
.
532 &!id.
533 Glo!al &ndustry Classification ,tandard. /875A0. 'IC": 'lobal In$ustr% Classi*ication
"tan$ar$. (ccessed 76)7D)5A.
256
Considering Boston Beer Co. operates primarily within the production and
manufacturing of !eer" ale" and malt products" there are several synergies that
eist from its value chain. The first is the capital e=uipment purchased and
utili$ed. The e=uipment used to manufacture high =uality !eer is very similar to
the e=uipment re=uired to produce cider and other products that the company
offers. (nother important synergy that eists within the production and sale of
Boston Beer Co.2s products surrounds marketing and advertising. The products
and ingredients must !e marketed appropriately to correspond with what
ingredients go into making the product. ( similar relationship eists !etween
!randing on packaging and transportation vessels that could !e used in the same
way. These relationships !etween production and the selling)distri!ution of
products allows Boston Beer Co. to minimi$e costs as it is a!le to use its eisting
capital for multiple purposes.
9eo/raph!c 4!(er"!f!cat!on
The Boston Beer Company operates primarily out of the U," !ut also on a limited
!asis Canada" East (sia" &srael" the Cari!!ean" -eico" and Europe
F9A
.
&nternational markets have !een virtually untapped for company sales !ut are still
re=uired to o!tain ingredients and raw materials" as <<N of sales are from U,
markets
F9F
. Barley is purchased mainly from the U, and Canada" the @o!le Hops
come from Germany and the C$ech 1epu!lic" while other materials are
purchased in England
F9D
.
The company relies on a mi of company%owned manufacturing facilities and
contract !reweries yet <FN of its core product volume is produced in house. The
company%owned !reweries are located in Boston" -assachusetts /The Boston
Brewery0" Cincinnati" .hio /The Cincinnati Brewery0" Breinigsville" 4ennsylvania
/The 4ennsylvania Brewery0" and soon" *os (ngeles" California /The (ngel City
534 Euromonitor &nternational. /87590. Passport: Boston Beer Co INC, The In Alcoholic rin!s.
4assport.
536 &!id.
257
Brewery0. The company2s principal eecutive offices are located at .ne ?esign
Center 4lace" Boston" -assachusetts
F9;
. The s=uare footage of each !rewery is
9;"777 s=. ft." 586"F77 s=. ft." 6F9"777 s=. ft." A6"DF7 s=. ft." and A8"A77 s=. ft."
respectively.
The 4ennsylvania Brewery and the Cincinnati Brewery !oth produce the full
range of the company2s core !rands and produce most of the shipment volume.
The 4ennsylvania !rewery is the company2s largest !rewery while the Cincinnati
location is the primary !rewery for the production of specialty and lower volume
products. The Boston Brewery is primarily designed for product innovations and
traditional !eers. The succeeding graph illustrates the amount of revenue
generated in the United ,tates compared to international markets. The United
,tates are a very important part of the success for the Boston Beer Company.
&nterestingly enough" the revenue is identical ecept for a factor of 577.
787000000
7870000
9e&enue 3is0ersion
Cnite- .tates
2nternationa% Re)enue
Row 3
Row 4
,ource# Capital &K
F96
overview
258
The Boston Beer Company is identified as a glo!al company as it has invested
and is present in many countries as discussed in ,trategic -anagement courses.
The company markets its products using the same !randing in all markets. The
product offerings have !een standardi$ed across national markets as production
takes place mainly in the United ,tates
F9<
. ( glo!al strategy should allow the
Boston Beer Company to utili$e economies of scale ecept that its presence is
limited to few countries. The Boston Beer Company operates with the G&C,
97875757 classification that highlights the glo!al strategy adopted !y the
company. The company has developed strategic alliances with various
companies that have ena!led the a!ility to develop a glo!al presence. ( strategic
alliance with -oosehead Breweries in Canada gives the company a presence in
the Canadian market
FA7
. &n addition" the alliance with >eihenstephan in Germany
to create an eclusive champagne style !eer has ena!led entrance into this
geographical region. ?eveloping these alliances has !een !eneficial to !oth
sides in terms of financial gains. The Boston Beer Company is continuously
seeking ways to increase its market share !oth domestically and
internationally
FA5
. +uture mergers and ac=uisitions and strategic alliances will
allow the Boston Beer Company to develop a glo!al presence.
I""ue" :!th orporate Strate/y
The Boston Beer Company has developed a strong reputation !y !ecoming one
of the most recogni$ed craft !eer producers in @orth (merica. (lthough this is
perceived as a strength resulting from its corporate strategies" there are several
issues that have also developed. The company fails to pu!lish a vision and
overview
overview
259
mission statement on its corporate we!site and annual reports. These
statements assist employees and future investors to understand and act in
accordance with the desired culture and attitude of the company. Hey
stakeholders are a!le to support the direction and goals outlined in the mission
and vision statement. (s an emerging company attempting to epand operations"
it is critical for management to provide direction for employees and shareholders.
,(B-iller provides a mission and vision statement !ut the other competitors
have also failed in this regard. 4erhaps this is accepta!le for the larger players
who have very little room for growth left" however" small to mid%si$e firms like
Boston Beer Co. need to provide this sense of direction.
,(B-iller -ission and Lision
,ource# ,(B-iller (nnual 1eport
FA8
Considering the topics discussed a!ove" one of the main internal corporates
issue lies within the lack of vertical integration. The Boston Beer Company is
542 ,(B-iller. Q(nnual 1eport.Q 8759.
260
primarily a mid%stream resource industry !ut needs to move up stream to
!ecome a primary industry. The !rewing industry has the ina!ility to sell its
products directly to consumers due to regulations" !ut developing stronger
relationships with suppliers and controlling production can !e achieved.
(nother important issue that falls within the corporate strategy is the lack of
geographical diversification. (lthough Boston Beer Co. has a minute glo!al
presence" they predominately operate out of the United ,tates. This presents a
major pro!lem for the company if it seeks to o!tain future growth and utili$e
economies of scale. &n addition" in order for Boston Beer Co. to epand its
reputation as a glo!al industry%leading craft !rewery" gaining international market
share is re=uired. &n 877<" 99.9N of !eer production and 9<.AN of !eer revenue
occurred in Europe
FA9
. This is a market that Boston Beer Co. has a limited
presence in. @orth (merica only accounts for 87.AN of total !eer production and
88.8N of revenue shared !y 5"F5D !rewers as illustrated !elow
FAA
.
?istri!ution of 1evenues in the U,
543 &B&, >orld. /875A0. IBI"#orl$ In$ustr% Report C11211&'( 'lobal Beer )anu*acturin+. &B&,
>orld.
544 &B&, >orld. /875A0. IBI"#orl$ In$ustr% Report 31212 Bre,eries in the U". &B&, >orld.
261
,ource# &B&, >orld
FAF
(nother reason why operating only in the U, presents an issue is the increased
cost of operations in @orth (merica. The company2s current strategy" which
keeps <FN of production in house" results in high operational costs due to
salaries and related epenses. Boston Beer Co.2s corporate strategy to enter
glo!al markets through strategic alliances also presents a pro!lem. The company
is re=uired to share revenue with others when strategic alliances are esta!lished.
&n other words" the a!ility to develop su!stantial revenue growth !y entering new
markets is restricted when alliances are created.
orporate Strate/y 3ecommendat!on
The first step re=uired in improving Boston Beer Co.2s corporate strategy is to
develop and pu!lish a corporate mission and vision statement. (fter analysis of
the entire company" we have developed a mission and vision statement /see
!elow0 for Boston Beer Co. to guide its investors" customers" and employees.
The net step is to epand the company into a primary industry !y moving it
upstream and starting farming operations in order to secure raw materials at
lower costs. This will offer access to raw materials and prime locations that will
serve as a competitive advantage in the reduction of logistical costs. The Boston
Beer Company should ac=uire farms and start to produce its own products in
order to lower current epenses and prices on !everages. Canadian farmers are
!eginning to sell operations especially in the ,tirling%1awdon area that will
provide a promising opportunity for Boston Beer Company. *astly" the corporate
strategy of the Boston Beer Company can !e improved !y epanding
geographically. This recommendation will !e discussed in full at the end of this
report" as it is a part of the overall recommendation provided to the Boston Beer
Company.
#!""!on Statement
545 &!id.
262
OTo provide the leading choice for craft !eer consumption and investment !y
producing !etter !everages" innovating for =uality" and respecting our people and
our planet.P
This mission statement provides employees and investors with a strong sense of
what the company aspires to achieve on a daily !asis. 4roducing high =uality
products with the assistance of innovation is a regular activity. The company
needs to pu!lish this formally so that it !ecomes em!edded in the minds of its
followers.
-!"!on Statement
OTo !ecome the industry leader in !etter !eer production in every market that we
operate and to !ecome the company of choice for#
&nvestors3
+uture and current employees" and most importantly3
Beer lovers.P
4u!lishing the a!ove statements on the corporate we!site and throughout the
company2s !reweries will improve camaraderie and provide a sense of direction
for everyone. -anagement can control the direction the company will go !y
pu!lishing this information for everyone to understand. The mission statement
should !e developed as the company grows in order to reach its final goalU
which is the vision statement. &n order to maintain the effectiveness of the
mission statement" Boston Beer Co. should survey its employees a!out its core
competencies and what they view as the key strengths of the company.
4rovided !elow is a timeline for Boston Beer Co. to develop and implement a
successful vision and mission statement. &f the company follows this timeline and
scheduling" employees will finally understand the direction and motive of the
company. The costs associated with pu!lishing and developing a mission and
vision statement are miniscule compared to the results and success that will !e
achieved. The costs associated with pu!lishing a mission and vision statement
263
A ,u*%is! an-
announce mission
an- )ision statement
Mon-ay
Mon-ay
A E)a%uate success
an- un-erstan-ing
of statements
A 6e)e%o$ new mission
if re:uire-
3
mont!s
3
mont!s
A 6e)e%o$ new mission
statement to
corres$on- to
current *usiness
o$erations
A ssess )a%i-ity *y
sur)eying
em$%oyees
1 year
1 year
A #ontinue to e)a%uate
success an-
acce$ti*i%ity of
mission statement
A 6e)e%o$ new
statement to
corres$on- wit!
o$erations
5 years
5 years
would !e directly linked to the physical printing of the signage to post in the four
!reweries and in corporate head=uarters.
#o(!n/ Up"tream
Becoming an upstream resource !usiness entails growing and owning the
manufacturing and farming of raw materials. (lthough Boston Beer Co. does not
speciali$e in the farming industry" we think it would !e a wise !usiness decision
to sei$e advantage of this type of epansion opportunity. The company currently
contracts supply to eternal farmers" which re=uires coordination !etween all
parties in terms of shipping" storing" and negotiating prices. &f Boston Beer Co.
was to purchase one of its main suppliers" it could reap the !enefits of o!taining
materials at a lower cost than its competitors while also maintaining high =uality.
This way" Boston Beer Co. would only have to rely on itself as the sole supplier of
raw materials. (c=uiring farms near the four production facilities would also assist
in reaching economies of scale. The initial financial investment to implement this
264
#ontact current
su$$%iers
#ontact current
su$$%iers
,re$are an
oDer for
$urc!ase
,re$are an
oDer for
$urc!ase
@ocate ot!er
farmers an-
su$$%iers
@ocate ot!er
farmers an-
su$$%iers
,re$are Bna%
oDer an-
a%%ocate
resources
,re$are Bna%
oDer an-
a%%ocate
resources
Maintain !ig!
:ua%ity an-
e<$erience
%ower $rices
Maintain !ig!
:ua%ity an-
e<$erience
%ower $rices
c:uire more
farms
c:uire more
farms
.e%% $ro-uct to
com$etitors at
a%itt%e !ig!er
$rice
.e%% $ro-uct to
com$etitors at
a%itt%e !ig!er
$rice
plan of action would !e very large !ut the company is likely to see yearly returns
on investment. &n addition to the return on investment" Boston Beer Co. would !e
a!le to advertise the fact that it produces its own ingredients" making its products
more desira!le !y the !etter !eer drinker. This move would also increase the
num!er of jo!s availa!le and stimulate local economies. The advertisement of
environmental operations could potentially !e a huge seller for the craft !eer
industry. Companies that advertise products" which are manufactured locally"
tend to attract customers who are willing to pay a higher price.

Upstream .perational Epansion
(s outlined a!ove" the first step for Boston Beer Co. in epanding its operations
upstream is to contact and arrange a meeting with its current suppliers. This
should !e done during the winter months. ?uring this time" farmers are surviving
off of savings and have very little work to do. They are more vulnera!le to
purchase offerings and will make deals in order to o!tain the funds needed to
support themselves
FAD
. ?uring the arranged meetings with the supplier" Boston
Beer Co. should a prepared offer on the ta!le. >orking together with the farmer
546 Brandt" Zachary. +arming Eperience. 875A)59)7D.
265
and its master !rewers" Boston Beer Co. will !e a!le to develop the highest
=uality raw materials. (c=uiring more farms as operations epand and !ecome
successful would !e the net step. -ore supplier locations will reduce the costs
of transportation and distri!ution to the company2s !reweries. &f supply !egins to
eceed demand at the ac=uired farms" the company can start to sell its raw
materials to other small !rewers or the appropriate retailers. The company
should not sell its high =uality ingredients to competitors that directly threaten its
operations.
266
,(9" <
Business 2unctiona# trate$ies
267
Bu"!ne"" . 0unct!ona, Strate/!e"
Introduct!on
Business%level strategies are plans of action eecuted !y a firm which eploit key
competencies in order to gain competitive advantage
FA;
. These !usiness
strategies govern the choices a firm makes in one or several different product
markets. By segmenting the market !ased on consumption patterns and taste
preferences" Boston Beer Co. has identified different consumer groups it has
gradually !uilt to serve. ,ituated in the !rewing industry" or more !roadly" the
alcoholic !everage manufacturing industry" Boston Beer Co. ehi!its
competencies in three main product markets therein. Beer" cider" and malt%!ased
1T?s /1eady%to%?rink0 comprise the industry segments that the company
currently occupies.
$orter@" 0our 9ener!c Strate/!e"
Beer
(lthough !eer is projected to lose ground in all regions ecept Eastern Europe
and *atin (merica" !y 875; it will still !e the world2s most popular drink
FA6
.
1ecogni$ing the returns that the !eer market will still have to offer in the near
future" Boston Beer Co. has esta!lished its roots in the industry with the
presence of its 97 year%old ,amuel (damsI craft !eer !rand. The company is
capitali$ing on the trend of increased sales in craft" import" and premium !rews
which make up the Better Beer segment. Boston Beer Co. has epressed its
ecitement in this area !y producing and selling over DA different styles of !eer
under the ,amuel (dams !rand in 8759
FA<
.
Boston Beer Co. ehi!its a broad d!fferent!at!on strategy in its !eer production
!usiness. >hile some of its major competitors uphold the cost leadership
547 Hitt" -." &reland" 1. ?." E Hoskisson" 1. /87590. "trate+ic )ana+e-ent: Co-petiti0eness A
'lobaliEation: Concepts 10. Cengage *earning. .
548 Cunnington" 'eremy . 'lobal Alcoholic rin!s Consu-ption Beco-es )ore 1clectic.
.pinion" Euromonitor &nternational" 8759.
549 The Boston Beer Company. /87590. Annual Report.
268
reputation in the industry" Boston Beer Co. differentiates itself !y creating value in
the way its products are made and marketed. ,amuel (dams !eers are still
!rewed using the time honoured traditional four%vessel !rewing process to
ensure the !est =uality and most distinctive flavours
FF7
. The company2s !rewers
also use the world2s finest all%natural ingredients3 working closely with growers to
determine ideal harvesting times" hand selecting the !est of the year2s crops" and
shipping the ingredients when the temperatures on the (tlantic are coldest to
keep the hops fresh
FF5
. The etra steps that Boston Beer Co. takes in
manufacturing its wide selection of micro!rews give the company the edge it
needs to distinguish itself and justify the price markup of ,amuel (dams versus
other" more generic (merican !rands.
!der
-ore recently" Boston Beer Co. launched (ngry .rchard to give the company a
fresh" new image in the alcoholic !everage industry2s fastest%growing category U
cider. &n the U," hard cider occupies only 5N of the market" !ut sales have
soared !y nearly 577N in a recent F8%week period
FF8
. &n (pril 8758" when (ngry
.rchard made its national de!ut in the U," the cider category had grown 89N
the preceding fiscal year. ,ei$ing advantage of the continuously growing
segment" Boston Beer Co. retired its former Hardcore Cider !rand and !egan
targeting 89%97 year%olds with a variety of flavoured ciders under the (ngry
.rchard la!el
FF9
. Cider attracts a younger" more affluent demographic and thus
may serve to !roaden a company2s target market
FFA
. (s a result" the strategic
intent !ehind Boston Beer Co.2s launch of the (ngry .rchard !rand is clear.
550 The Boston Beer Company. Bre,er% an$ Cra*t. 875A.
http#))www.samueladams.com)!rewery%and%craft /accessed 'une 58" 875A0.
551 &!id.
552 Tuttle" Brad. 4astest&'ro,in+ Alcoholic Be0era+e Cate+or%? It5s Not Cra*t Beer. (pril 97"
875A. http#))time.com)68D87)fastest%growing%alcoholic%!everage%category%its%not%craft%!eer)
553 1amsay" 1eid. Boston Beer5s An+r% 9rchar$ Ci$er (aunches Nationall% in April. 'anuary
5D" 8758. http#))!eerstreetjournal.com)!oston%!eer%company%to%launch) /accessed 'une 55"
875A0.
554 Tuttle" B. /875A" (pril 970. 4astest 'ro,in+ Alcoholic Be0era+e Cate+or%? Its not cra*t beer.
1etrieved 7D 59" 875A" from http#))time.com)68D87)fastest%growing%alcoholic%!everage%category%
its%not%craft%!eer) /accessed 'une 55" 875A0.
269
&n its cider !usiness" Boston Beer Co. is applying a focu"ed d!fferent!at!on
strategy. +irms use a focus strategy when they use their core competencies to
serve the needs of a particular industry segment or niche to the eclusion of
others
FFF
. Here" Boston Beer has targeted a particular consumer demographic
and is applying its !rewing epertise and resources to hard apple cider
manufacturing. Boston Beer Co. has opted to focus on a narrow industry
segment within the market for alcoholic !everages" while also differentiating it
cider products !y the manner in which they are produced. The company has
entered the niche cider segment !y eperimenting with hand selected apples
from +rance and &taly to create Oa really imaginative" creative recipeP
FFD
.
3+4"
The 1T? !everage category has seen steady growth and product improvements
over a short time period which has opened up new opportunities to companies
looking to diversify their product offerings. The 8.9N increase to D<.6 million
/8.8F%gallon0 cases in 8755 is attri!uted to a few key market players including
Boston Beer Co.2s Twisted Tea !rand
FF;
. Ten years after its launch in 8775"
Twisted Tea grew !y 87N in 8755 to 8.A million cases" and sales of its .riginal
and Half%and%Half flavours have !oth risen upwards of A7N in certain retail
channels such as food" drug" and convenience stores
FF6
. Twisted Tea has also
gained lasting consumer recognition" winning two consecutive Hot Brands
(wards in 8757 and 8755
FF<
. Boston Beer Co.2s percentage total share of the
1T? market steadily rose from 8776 to 8758" while some of its major competitors
'lobaliEation: Concepts 10. Cengage *earning.
556 (ngry .rchard Cider Company. The 9ri+ins o* An+r% 9rchar$. 875A.
http#))angryorchard.com)VZ)origins) /accessed 'une 58" 875A0.
557 ,hanken @ews ?aily. RTs5 Rise Propelle$ B% )i!e5s, T,iste$ Tea. 'uly 9" 8758.
http#))www.shankennewsdaily.com)inde.php)8758)7;)79)9A96)rtds%rise%propelled%!y%mikes%
twisted%tea) /accessed 'une 55" 875A0.
558 &!id.
559 &!id.
270
like ,(B-iller have eperienced rapid decline during the same four year period
FD7
/see ta!le !elow0. -oreover" industry giant and close competitor (nheuser%Busch
&nBev did not so much as have a presence in the 1T? segment until 8758. This
is evidence that Boston Beer Co. has found a means to eploit its competencies
in 1T? !everage manufacturing with its Twisted Tea and Twisted *emonade
!rands and has gained competitive advantage in this particular segment as a
result.
ompany Share" of 3+4"BH!/h.Stren/th $rem!'e"J K +ota, -o,ume 200A 5
2012
,ource# Euromonitor &nternational
FD5
,imilar to its cider product line" Boston Beer Co. ehi!its a focu"ed
d!fferent!at!on strategy in its Twisted Tea%!randed 1T? segment. The
company2s proven a!ility to serve the 1T? segment more effectively than
industry%wide competitors is evidence that Twisted Tea2s focus strategy is
working. The !rand2s flashy la!els and packaging tied together with its highly
visi!le epert social media presence have served to differentiate Twisted Tea
from competitors and have su!se=uently helped to gain a loyal customer
following. By epanding its T,iste$ !rand to include a line of hard lemonades"
560 Euromonitor &nternational. Q1T?s)High%,trength 4remies in the U,.Q Category Briefing"
8759.
561 &!id.
271
Boston Beer Co. is /radua,,y tran"!t!on!n/ from a focu"ed d!fferent!at!on
"trate/y to one that !" more broad. ,ince Twisted *emonade is still in its early
adoption stage" more time is re=uired !efore an informed judgement on the
effectiveness of the company2s move to !roaden the scope of its 1T? offerings
can !e offered.
I""ue" :!th Bu"!ne"" Strate/!e"
Beer
The forces driving the !eer industry include the entrance of new !rewers"
changing consumer taste preferences" !ehaviour" and demographics" as well as
the availa!ility of raw materials and strong !rand positioning of eisting market
players. These driving forces add compleity to the mature dynamics of the
industry and present a challenge for most !reweries seeking to conduct
!usiness. The growth in craft !eer consumption has prompted an influ of craft
!eer entrants" threatening eisting !rewer2s market share" and making for an
increasingly competitive environment. The growth rate of the industry for
alcoholic !everages U of which !eer holds a AD.;N share U has grown at an
average 8N over the past five years
FD8
. ?espite industry growth" drastic shifts in
consumer preferences !rought on !y adapting tastes and increased glo!al health
awareness have shrunk the market of !eer drinkers. ,tandard lager in 8759 in
developed markets posted a 9N decline in volume sales and performance is
anticipated to remain stagnant over 875A%8756
FD9
.
The threat of competition" num!er of su!stitutes" and high !uyer and supplier
power were previously identified as major threats against Boston Beer Co. and
its three product segments. However" adopting a differentiation strategy to help
guide its ,amuel (dam2s !rand in the !eer segment is very well suited to
overcoming these types of threats. +or eample" customers tend to !e loyal
563 (lkhati!" (min. 4la0oure$B)i2e$ (a+er 3elps to "lo, Beer5s 90erall Golu-e ecline.
.pinion" Euromonitor &nternational " 875A.
272
purchasers of products that are differentiated in ways that are meaningful to
them
FDA
. The ,amuel (dams !rand and its flagship Boston *ager hits close to
home for many (mericans deciding which si%pack to pull off the shelf. (s such"
the !rand has garnered much attention in the U, craft !eer community and as
customer loyalty increases" Boston Beer Co. sustains a competitive advantage
over its competitors !y following a differentiation strategy.
The distinctiveness of the ,amuel (dams product line has reduced customer
sensitivity to prices /threat of high !uyer power0. This is !ecause customers tend
to !e more accepting of higher product mark%up when they perceive that the
value of the differentiated product is enhanced in one way or another !y the etra
costs. However" one of the greatest risks of Boston Beer Co.2s differentiation
strategy in this regard is that customers may start to perceive that the price
differential !etween ,amuel (dams and the cost leading product it too large
FDF
.
Here" Boston Beer Co. may !ecome vulnera!le to its competitors if it cannot
deliver differentiated products whilst remaining in the target consumers2 price
range.
(nother risk facing the Boston Beer Co. is also closely linked to the threat of
su!stitutes3 a challenge most players in the industry face. &t has to do with
eperience and how trying and comparing products can narrow the customers2
perceptions of the value !ehind the differentiated features of ,amuel (dams
!eers. +or eample" a customer that has not developed a sophisticated palate for
craft !eers may dismiss the idea of paying more for ,amuel (dams when they
claim that a cheaper alternate /which uses lesser =uality ingredients0 tastes just
as good. (s a result" Boston Beer Co. will lose what was seen previously as a
competitive advantage to alternative products supplied !y its competitors.
565 &!id.
273
!der and 3+4"
Considering Boston Beer Co.2s cider and 1T? product lines follow the same
differentiation strategy as its !eer segment" most of the threats and risks are
similar. The difference is that the cider and 1T? segments are *ocuse$ in their
differentiation strategies and come with additional risks as a result.
The threat that is most likely to put Boston Beer Co. at risk in the cider and 1T?
segments is if and when a competitor decides that the niche markets the
company occupies are attractive and worthy of pursuit. Boston Beer Co. has
already ehi!ited this type of !ehaviour against others in the industry. (n
eample of this is when the company launched its Twisted *emonade product
line to compete with hard lemonade2s market leader3 -ike2s Hard *emonadeI.
The risk for Boston Beer Co. arises when major competitors that have the funds
and resources to engage in mass distri!ution and large%scale marketing
campaigns venture into the hard cider and hard lemonade markets. ( move like
this would offer the consumer !ase" which originally gravitated towards (ngry
.rchard and)or Twisted Tea products" more alternatives. &f customer loyalty
cannot !e maintained" cheaper pricing of these alternatives may lessen the
appeal of what once were the products of Boston Beer Co.2s core competencies.
This risk is magnified !y the fact that cider is the alcoholic !everage industry2s
fastest growing category" and the threat of new entrants is likely to !e high as a
result
FDD
.
(nother risk of the focus strategy applied !y Boston Beer Co. to its cider and
1T? segments is that the needs of customers within these narrow markets may
evolve and grow similar to those of industry%wide customers over time
FD;
. (s a
566 Tuttle" Brad. 4astest&'ro,in+ Alcoholic Be0era+e Cate+or%? It5s Not Cra*t Beer. (pril 97"
875A. http#))time.com)68D87)fastest%growing%alcoholic%!everage%category%its%not%craft%!eer)
274
result" the need to emphasi$e *ocus as part of the differentiation strategy may !e
eliminated altogether.
+inally" risks to players in the alcoholic !everages industry are often a result of
the strictly regulated environment. Underage drinking legislation will always pose
a threat to forecast sales of 1T?s. 1T?s are often sweetened" making them
more palata!le for instant consumption !y younger consumers who are new to
drinking
FD6
. (ny type of drink that attracts underage drinkers will also !ring with it
negative attention" perhaps even causing a regulatory !ody or the government to
intervene
FD<
.
Summary
(s a whole" The Boston Beer Company uses 4orter2s d!fferent!at!on strategy to
guide its !usiness decisions in the alcoholic !everages industry. Boston Beer Co.
differentiates itself from competitors !y using the finest ingredients and fostering
a tradition of high =uality and taste in all of its drinks. To ade=uately analy$e the
types of strategies the company uses and the pro!lems they pose" Boston Beer
Co. has !een segmented into three main !usiness divisions.
The !eer segment" !randed under ,amuel (dams" applies a !road differentiation
strategy as it caters to a large market segment to which it supplies a vast num!er
of !eers. >ith enough flavours and styles of !eer to try a new one each day for
over two months" it is clear that ,amuel (dams is trying to differentiate itself
while appealing to the greatest num!er of consumers possi!le. The greatest risks
facing the company2s !eer segment include price differentials and lack of
customer eperience" !oth of which may induce customers to purchase
alternative products supplied !y competitors.
568 Euromonitor &nternational. Q1T?s)High%,trength 4remies in the U,.Q Category Briefing"
8759.
569 &!id.
275
The company2s (ngry .rchard cider !rand and T,iste$%!randed 1T?s use a
focused differentiation strategy. Here" the company appeals to much narrower
industry segments while offering products that most competitors have failed to
duplicate. The greatest risk is the threat of new entrants and products. These
risks will heighten the competitive framework that Boston Beer Co. will have to
surmount if it epects to survive in the long run.
0unct!ona, Strate/!e"
Supp,y ha!n
The Boston Beer Company has several faults in its supply chain function that
negatively impacts its a!ility to compete with larger firms. To !egin with" the
ac=uisition of raw materials from countries overseas increases costs associated
with transportation and logistics. The company ac=uires its !arley from the
United ,tates and Canada" !ut other ingredients such as hops and yeast come
from as far as Germany" the C$ech 1epu!lic" and the U.H
F;7
. ,ince Boston Beer
Co.2s !reweries are only located in the U," it incurs high costs to do more
comple and epensive shipping methods. Companies with !reweries across the
glo!e travel shorter lengths to o!tain their desired inputs and also make larger
volume purchases which increase their !argaining power. (s a result" these
competitors incur reduced transportation and supply costs and are at an
advantage over Boston Beer Co. in terms of reaching economies of scale.
(nother weakness of the Boston Beer Co.2s ,C- function is its poor inventory
turnover rate. (s a company that offers seasonal and limited release products" its
turnover rate should !e much higher than a company that does not speciali$e or
differentiate its offerings. ,(B-iller and Heineken had inventory turnover rates of
5F and 6 times in 8759" respectively
F;5
. The Boston Beer Company2s inventory
/(ccessed 875A0
276
turnover rate has !een decreasing over the last four years !y one cycle per
year
F;8
. 4oor inventory turnover is also a direct reflection of how many days a
product or raw material supply spends in inventory. The Boston Beer Company
has an average FD days in inventory over the last two years where as
competitors ehi!it lower rates at AF and 8F days for Heineken and ,(B-iller"
respectively
F;9
. This presents a major pro!lem for Boston Beer Company2s supply
chain system" as it is una!le to turn product over as =uickly as competitors. >ith
the lower turnaround time" holding and storage costs increase. These metrics are
illustrated !elow to provide a comparison !etween industry players.
2
0
0
9
.
0
2
0
1
0
.
0
2
0
1
1
.
0
2
0
1
2
.
0
2
0
1
3
.
0
2
0
1
4
.
0
0
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4
6
8
10
12
14
16
!n&entory "urno&er
/!e Boston Beer
#om$any
n!euser"Busc! 2nBe)
.BMi%%er
4eine5en
"i'es E
,ource# Capital &K
F;A
573 &!id.
574 &!id.
277
2009.0 2010.0 2011.0 2012.0 2013.0 2014.0
0
20
40
60
80
100
120
3ays in !n&entory
/!e Boston Beer #om$any 12.600 4.100 28.000 30.200 27.100 18.000
n!euser"Busc! 2nBe) 19.600 "8.900 2.400 1.900 9.400
.BMi%%er "8.900 4.400 "3.000 "0.600 "5.800 "0.600
4eine5en 41.100 "18.900 19.400 12.100 18.000 "5.300
3ays F
278
,ource# Capital &K
F;F
Recommendation
The Boston Beer Company must address the aforementioned issues immediately
in order to reduce costs and !ecome more efficient. The ,C- function re=uires
significant capital investment to improve its eisting system. The company should
first work to ac=uire raw materials within closer proimity to its !reweries so that
it can !enefit from more efficient and less costly transportation methods.
,econdly" the company must increase its inventory turnover rate !y coordinating
with the marketing and sales team to ensure pricing and !rand positioning is
optimal for attracting the most customers.
Technically !eer in itself is not a commodity" which gives !uyers no etra power
in this regard. However" raw ingredients like water" hops" and !arley that go into
making !eer are commodities. &ndustry eperts argue that although prices for
these raw materials will continue to increase" people will continue to drink !eer
even under the poorest economic conditions
F;D
. Hence the opportunity waits for
!reweries seeking competitive advantage to o!tain the cheapest raw material
inputs to keep production costs to a minimum. This opportunity could !e
multiplied if the !rewery chose to !ackwards integrate and invest in its own hops
and !arley farms. The !rewery cannot" however" engage in forward integration as
strict regulations governing the sale of alcohol prohi!it firms from !uying out any
distri!utorship.
Transportation and 1aw -aterials
The company should sei$e advantage of the opportunity to form partnerships
with other retailers and distri!utors purchasing products overseas in order to
generate economies of scale. The more products that are purchased at once" the
higher of a discount the company will receive. The costs of operating the
company2s supply chain are highly influenced !y where its raw material inputs
575 &!id.
875A.
279
come from. Each of Boston Beer Co.2s key ingredients typically originate from
only one or two regions which limits the company2s !argaining power and
logistical flei!ility. Considering that <<.58N of !arley and 9A.6;N of yeast
imported into to the U, comes from Canada" the Boston Beer Co. must maintain
good ties to its northern%facing neigh!our
F;;
. 4rovided !elow is a chart that
outlines all of the countries from which the United ,tates imports its yeast and
which may affect Boston Beer Co.2s future supply agreements.
,ource# .!servatory of Economic Compleity
F;6
Unfortunately" the idea of Boston Beer Co. o!taining all of its supplies from
Canada and the United ,tates isn2t feasi!le as it relates to hops purchases. The
United ,tates imports DD.;5N of Hops come from Germany while only 5N comes
from Canada
F;<
. These num!ers are illustrated further !elow.
577 &!id.
578 &!id.
579 &!id.
280
,ource# .!servatory of Economic Compleity
F67
Therefore" the Boston Beer Company should continue to purchase as much of its
raw material as possi!le from Canada and local farmers to reduce costs. Hops
appears to !e the only raw material that would not to !e applica!le to this
recommendation. &t is also suggested that the company esta!lish a shipping and
transportation partnership with Trillium Brewing Co. and Cam!ridge Brewing
Company" !oth of which are located in 4ennsylvania thus catering to Boston
Beer Co.2s !rewery in that area. (s the company2s main production plant" the
4ennsylvania !rewery can then share shipping costs of hops with the
4ennsylvania Brewing Company" (ppalachian Brewing Company" and
>eyer!acher Brewing Company. These companies are some of the other major
!reweries in the area" and would most likely !e interested in creating a
relationship with the largest craft !eer competitor /Boston Beer Co.0 to create
economies of scale.
580 &!id.
281
&nventory -etrics
The other major issue surrounding Boston Beer Co.2s supply chain function is its
ina!ility to achieve a high inventory turnover rate. This issue needs to !e at the
forefront of the ,C- function2s priorities in order to reduce holding and storage
costs and assist to increase revenue. ,howing an increase in inventory turnover
rather than a yearly decrease would !e a start for the company. -atching the
inventory turnover rate of Heineken that has over 577 product lines would suffice
until the company can fully implement a successful marketing and pricing
strategy that increases demand and su!se=uently reduces inventory.
-mp%ementation
Transportation and 1aw -aterials
The Boston Beer Company already has a distri!ution and shipping contract with
*andstar *ogistics" a su!sidiary of *andstar ,ystem &nc. for all of its products and
goods. 4roducts classified as !eer" malt" or hard cider !everages and goods
refer to empty !ottles" pallets" packaging material" and empty kegs. They have
not esta!lished a relationship with this company yet for raw material. &n the
current contract" it states that *andstar *ogistics can not transport other products
in the same trailer as ,am (dams !rand" !ut this contract can !e renegotiated
once a contract with Canadian farmers and local !reweries has !een
esta!lished. The contract is provided !elow.
282
,ource# .neC*E
F65
4rovided !elow are the steps re=uired for the Boston Beer Company to reduce
transportation costs in terms of ac=uiring raw materials used in the production of
!eer.
581 .necle. /875A0. "a-ple Business Contracts. 1etrieved 7D 59" 875A" from .neC*E#
http#))contracts.onecle.com)!oston!eer)landstar.transport.5<<<.79.75.shtml
283
Cse an e<isting
#ana-ian $ro-ucer or
%ocate a %oca% EC.F
farmer to $ro)i-e t!e
nee-e- raw materia% at
t!e fairest cost an-
!ig!est :ua%ity
Cse an e<isting
#ana-ian $ro-ucer or
%ocate a %oca% EC.F
farmer to $ro)i-e t!e
nee-e- raw materia% at
t!e fairest cost an-
!ig!est :ua%ity
Esta*%is! a contract
an- agreement wit!
@an-star @ogistics to
-e%i)er $ro-ucts from
t!e farmer to eac!
*rewery
Esta*%is! a contract
an- agreement wit!
@an-star @ogistics to
-e%i)er $ro-ucts from
t!e farmer to eac!
*rewery
Esta*%is! a re%ations!i$
an- contract wit! %oca%
*rewers in or-er to
o*tain 4o$s from
7ermany at a %ower
$rice
Esta*%is! a re%ations!i$
an- contract wit! %oca%
*rewers in or-er to
o*tain 4o$s from
7ermany at a %ower
$rice
6e)e%o$ a contract
wit! @an-star to
trans$ort $ro-ucts
from 7ermany to t!e
Cnite- .tates wit!
$artnere- com$anies
6e)e%o$ a contract
wit! @an-star to
trans$ort $ro-ucts
from 7ermany to t!e
Cnite- .tates wit!
$artnere- com$anies
.et contracts in
motion
.et contracts in
motion
&nventory -etrics
The Boston Beer Company can improve its inventory turnover rate !y following a
simple process provided !elow. The inventory turnover rate is epected to grow
in the future as the company o!tains a larger market share !ut these steps can
provide immediate resolution. The company needs to take these steps in order
ensure future financial sta!ility.
284
.te$ 6G
.te$ 6G
Re-uce t!e amount of $ro-uction in or-er to -ecrease !o%-ing an- storage costs
.te$ 5G
.te$ 5G
+ocus on $ro-ucing on%y $ro-ucts t!at are in !ig! -eman- suc! as .am -ams *ran-s
.te$ 4G
.te$ 4G
.et a *etter $rice for t!e $ro-ucts to increase
-eman-& w!ic! in turn *oosts sa%es an-
in)entory turno)er
/em$orary -iscount or $ermanent %ower $rice
.te$ 3G
.te$ 3G
3Der a sa%es $romotion to t!ese regions as t!ey are t!e most fre:uent *uyers E!a%f $rice cansF
.te$ 2G
.te$ 2G
+ocus a-)ertisements to %ocations in eastern #ana-a an- eastern an- western C.
.te$ 1G
.te$ 1G
2ncrease -eman- for t!e $ro-uct *y coor-inating acti)ities wit! mar5eting team
Cost-)enefit Ana%ysis
Costs for freight shipping from Germany to the United ,tates vary depending on
the shipping service used" the si$e of the load" and the final destination city. The
standard rate from Germany to the United ,tates !y !arge is :F U,? per cu!ic
285
foot with a destination dock fee of :5F7 U,? per weight measurement
F68
. The
cost of transportation for truck from Canada to the United ,tates is averaged at
:8;)km
F69
. Clearly" the costs associated with trucking from Canada to the U,
compared from Germany to the U, are much smaller. The cost for the Boston
Beer Company to implement this strategic move would !e the costs associated
with !reaking current contracts and esta!lishing new ones.
The !enefits of increasing inventory turnover outweigh the costs significantly. The
costs re=uired to improve inventory turnover would !e allocating more of the
!udget to improve advertising and marketing. The !enefits would result in a
decrease in holding and storage costs.
2perat!on"
The operations of Boston Beer Co. act as a competitive disadvantage for several
reasons. The main reason is the company2s desire to compete directly with the
industry2s largest players such as (nheuser%Busch &n%Bev and ,(B-iller. The
company has not !een a!le to overthrow these players as evidenced !y the
num!er of !arrels it produces and the revenue it generates each year /shown
!elow0. -any of its competitors have !reweries located across the United ,tates
and in several countries overseas whereas Boston Beer Co. has limited
operations in four locations in the United ,tates.
582 (5 +reight +orwarding. /875A0. 9cean 4rei+ht (C(. 1etrieved 7D 5D" 875A" from
http#))www.a5freightforwarding.com)=uote)rate5.php
583 ,*H Transport &@C. /875A0 1etrieved 7D 5D" 875A" from
http#))www.slh.ca)en)coverageRcrossR!order.asp
286
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0
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3
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0
0
10000000000
20000000000
30000000000
40000000000
50000000000
9e&enue
4eine5en
n!euser"Busc! 2nBe)
.BMi%%er
#ar%s*erg
> 3o##ar
F6A
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585 &!id.
287
"ota# Barre#s o#d 2009
/!e Boston Beer #om$any n!euser"Busc! 2nBe) Mi%%er #oors 4eine5en
#raft Brew %%iance
,ource# Company (nnual 1eports" 877<
F6D
(nother major weakness from an operational standpoint is the lack of information
that addresses the environmental concerns over !rewing which has not !een
pu!lished on yearly reports or on the company2s we!site. ,(B-iller and
Heineken have clearly outlined its environmental concerns and their efforts to
reduce their car!on footprint are highly visi!le to shareholders. The Boston Beer
Company has only stated that it is focusing on reducing its car!on footprint !ut
has not provided any numerical data to support this claim.
Recommendation
The Boston Beer Company must epand operations into several more !reweries
in order to o!tain economies of scale" larger market share" and recognition. &n
terms of addressing its second operational weakness" Boston Beer Co. must
make pu!lic its environmental impact and any green initiatives that it is
undertaking on its we!site and annual reports. ,hareholders and employees
should !e a!le to see the progress the company is making. &n addition" this type
of information provides a sense of direction for the company which will support
the a!ove recommendations surrounding its corporate strategy. Generally"
overview
288
companies that demonstrate genuine concern over their car!on footprint will gain
more societal acceptance and will likely outperform competitors that do not.
-mp%ementation
The most important step in energy management and conservation is measuring
and accounting for energy consumption. The Boston Beer Company re=uires the
a program that will help it track its energy usage. &nstalling high efficiency
lighting" heat recovery" and energy star e=uipment are practices that should !e
followed at each of its !rewing locations. -anaging the energy data will prevent
savings that are incurred !y capital projects and operation practices from going
unnoticed. The Boston Beer Company2s corporate offices will also !e a!le to
assess which !rewery is consuming the most energy and analy$e why this is
happening. (fter the data has !een collected" the company will have to assess its
validity and accuracy. >ithout relia!le data" especially as an initial !enchmark" it
will !e difficult to track progress. Having accurate data is also important to
monitor new energy efficiency opportunities and GHG reduction efforts.
,u!se=uently" !enchmarking will !ecome the net step for Boston Beer Co. to
help operators and management teams understand the relationship !etween
energy usage" month%to%month variances" and the costs of production. 4rovided
!elow is an eample of a cost saving calculation provided !y the Brewers
(ssociation.
Calculation of Cost ,avings
(t A< k>h)BB* Y 88"F77 B*, C 5"578"F77 k>h)yr
(t average total energy cost of :.7A;) k>h the total cost C :F5"65;
4otential ,avings# :D5"<;7 % :F5"65; C :57"5F9 or 5;N of energy yearly
costs
F6;
+inally" The Boston Beer Company must set measura!le goals and o!jectives it
is inclined to reach in terms of energy savings. ( good target must !e realistic
289
and achieva!le for each !rewing location. 4rovided !elow is an eample of the
same energy cost reduction planning that the Boston Beer Company should
implement.
F66
.nce the causes for high energy consumption have !een identified and its
energy%saving initiatives are in progress" constant monitoring of the process and
upgrades to the appropriate e=uipment will !e re=uired.
#ar6et!n/ and Sa,e"
4roduct
(s previously discussed" (lchemy and ,cience is an independently operated
su!sidiary of The Boston Beer Company and is charged with finding" creating"
and managing craft !eer opportunities. Currently" (lchemy and ,cience !rands
are only availa!le in limited markets and operations account for less than 5N of
the organi$ations total revenues
F6<
. 1ecent market trends indicate consumers are
trading up within the !eer market" and are seeking a larger variety of premium
!rewers
F<7
.This has spurred an increase in the num!er of small and new%entrant
!rewers in the @orth (merican craft !eer market. (s such" the threat of new
entrants has !ecome an increasingly relevant issue for Boston Beer Co. who
588 &!id.
overview
290
must continue to innovate and produce a variety of premium !everages in order
to maintain and epand its current market position. (s it stands" (lchemy and
,cience2s lack of tangi!le returns to the company threatens its market position.
The influ of new and emerging craft !rewers represents considera!le
opportunities for the Boston Beer Company that must !e more effectively
capitali$ed on !y its (lchemy and ,cience su!sidiary.
The Boston Beer Company prides itself on its superior =uality standards. Each of
its manufacturing plants contains an on%site =uality control la!" and products
undergo etensive testing to ensure they conform to the desired standards
F<5
.
This diligence is critical to the company2s !rand image and success thus far and
represents and opportunity for the company as they work to epand their product
portfolio and take on new craft !eer" cider" and malt opportunities.
Boston Beer Co.2s seasonal !eers and its ,amuel (dams Utopia line have
reali$ed increased demand since 8755
F<8
. These !rews are released periodically
and are availa!le for only a limited amount of time each year. >ith recent trends
indicating consumers are seeking a larger variety of T!etter image2 !eers" Boston
Beer2s variety packs and seasonal !everages will play an increasingly significant
role in their market offerings
F<9
.
4lace
?espite !eing a leader within the craft !eer market" the Boston Beer Company is
not the primary !rand in any of its distri!utors portfolio2s" with few eceptions.
?istri!utors are credited with making or !reaking the success of smaller craft
!rewers who lack the selling power of the !eer industry2s major market players.
?istri!utors are under little to no o!ligation to promote the !rands they distri!ute"
and manufacturers face difficulty in terminating distri!uter contracts regardless of
592 &!id.
291
whether they are pleased with the service
F<A
. &n considering this" Boston Beer
Co.2s lack of leverage with distri!utors" and its lack of presence on distri!utor
shelves" threatens the company2s a!ility to continue reaching consumers and
epand its market share. (s the num!er of craft !rewers continues to grow this
threat !ecomes increasingly prevalent.
?eveloping markets have spearheaded growth within the !eer industry over the
past several years. (s disposa!le incomes rise" consumers of developing
markets are trading up from spirits to professionally !rewed !eers and from there
to premium =uality !rews. (s a result" (sia" (frica" and *atin (merica have seen
considera!le growth in !eer sales volume
F<F
. &n these developing markets the
focus is epected to !e on premium !rands" new variants" and pricing. The
growth of these foreign markets is an opportunity for Boston Beer Co. who has
only !egun distri!uting its products internationally. (s the company continues to
epand the num!er and capacity of its production facilities" and improve the
efficiency of its operations" the a!ility to capitali$e on international market
demand !ecomes more feasi!le.
Boston Beer Co.2s introduction of a custom designed can has created new
opportunities for the company in the form of increased potential distri!ution
channels and an increase in consumer engagement. &n reali$ing the importance
of !rand image within the highly competitive !eer industry the new custom can"
!elieved to improve drinkers2 eperience as compared to traditional cans"
reinforces the company2s image in producing premium =uality products and
differentiates it from its competitors. The can has also opened up new distri!ution
channels" such as sporting arenas" where glass !ottles are prohi!ited
F<D
.
595 ,(B-iller. Q(nnual 1eport.Q 8759.U. 'lobal )ar!et Tren$s . 875A.
http#))www.sa!miller.com)inde.aspBpageidC9< /accessed 'une 58 875A" 875A0.
596 Company" Boston Beer. 2013 Annual Reports. 875A.
http#))www.!oston!eer.com)phoeni.$htmlBcCD<A98EpCirol%news(rchiveEarnings /accessed
292
Epanding its distri!ution network is very important for the growing Boston Beer
Company that lacks sufficient promotion within its eisting distri!uters
F<;
.
&ncreased eposure offers Boston Beer Co. the opportunity to engage consumers
and epand its long%term customer !ase.
4romotion
Boston Beer Co. is !elieved to have one of the largest sales forces in the
domestic industry. The focus of the sales team is education" as it is !elieved that
in educating potential and eisting customers on what differentiates its products"
and classifies it as a superior choice within the !etter !eer" malt" and cider
markets" they will gain greater appreciation for the care Boston Beer Co. takes in
each !everage produced and !ecome long%term loyal customers. The Boston
Beer Company has also invested an increased portion of revenues into
advertising" promotion" and sales initiatives" with ependitures up 88.65N from
the previous year
F<6
. These investments are strengths that can !e leveraged in
reinforcing the company2s !rand image and distri!utor relations" and
differentiating its product as the company epands !oth domestically and
internationally.
4rice
Boston Beer Co.2s current price point rests approimately 58N a!ove the
average !eer price in @orth (merica
F<<
. This higher price point is !elieved to !e
appropriately aligned with the company2s premium !rewer practices and !rand
positioning !ut can potentially threaten its success. ?espite market trends
indicating that consumers are trading up towards premium !rews" and their
corresponding price points" its imperative to remain competitively priced within
the premium market or else risk losing market share. The recent consolidation of
the glo!al !eer industry and the growing threat of new entrant craft !rewers
'une 58" 875A0.
597 &!id.
598 &!id.
http#))www.reuters.com)finance)stocks)financialHighlightsBsym!olC,(-.@ /accessed -ay
8D" 875A0.
293
places considera!le pressure on Boston Beer Co." who does not have the si$e to
compete with the major market players2 economies of scale" !ut whose operation
si$e re=uires a greater investments than a local micro !rewer
D77
.
Recommendation
&t is recommended that Boston Beer Co. further leverage its (lchemy and
,cience su!sidiary" so as to identify and capitali$e on craft !rew opportunities in
the form of new market entrants. 1ather than working to develop new !rews in
house" (lchemy and ,cience will actively seek out new market entrants that
showcase potential. @ew market entrants" and small craft !rewers" offer a large
array of new recipes to !e synergi$ed with Boston Beer Co.2s superior sales
force and =uality management capa!ilities.
The higher than epected profits reali$ed in 8759 are largely attri!uted to the
company2s diverse !rand portfolio2s" and vast array of !everage offerings
D75
. This
versatility is !elieve to !e aligned with the seismic shifts in the !eer industry with
consumers moving away from household !eers towards premium craft !rews"
ciders" and malts. ?espite this" it is not financially feasi!le for the company to
continuously create and produce new products at the =uantities needed to meet
demand. >ith industry trends indicating an increased demand for a variety of
premium craft !rews" and the num!er of new market entrant craft !rewers
increasing along with it" it will !ecome more challenging for Boston Beer Co. to
compete
D78
. &n taking over small !reweries Boston Beer Co. has the opportunity
to further increase the diversity of its product offerings and satisfy a growing
market of premium craft and alcoholic !everage consumers. &t also offers the
opportunity to leverage the scale and epertise of its eisting sales force" while
600 ,napshot" Beer Bi$. Beer )ar!et Insi+hts . 875A. http#))www.!eerinsights.com) /accessed
'une ; 875A" 875A0.
'une 58" 875A0.
294
appealing to consumers2 preference for locally !rewed !everages. This strategy
can !e applied internationally" allowing Boston Beer Co. to seek out and
purchase up and coming craft !rewers in developing nations with growing
alcoholic !everage markets. This eliminates the need to invest in larger
production plants" while also avoiding heavy taation from the importing country.
(s the !eer industry2s major market players continue to consolidate" Boston Beer
Co. must work to remain competitive" and capitali$e on the growing population of
small craft !rewers who offer a financially feasi!le means of epanding market
share.
-mp%ementation
The Boston Beer Company has an eisting su!sidiary in place" (lchemy and
,cience" e=uipped to seek out and capitali$e on craft !eer opportunities. &t is the
responsi!ility of the su!sidiary leaders" lan @ewman and ,tacey ,teinmet$" to
leverage their eperience in the market and the access to Boston Beer Co.
resources to develop a recruitment team that works to find and invest in local
start%ups around @orth (merica
D79
. Through these investments Boston Beer Co.
will offer local !rewers the opportunity to increase its production capacity" while
also providing distri!ution networks" and =uality management practices
recogni$ed !y premium consumers. Upon selecting a feasi!le" and epectedly
profita!le" investment" (lchemy and ,cience will !e responsi!le for transitioning
the newly ac=uired !rewer to the practices and epectations of the Boston Beer
Company in terms of efficient production practices and =uality management. The
!randing" flavours" and image of the !eer should not !e changed. This is to
maintain the locally !rewed image desired !y consumers. &t is suggested that in
order to !etter identify potential craft !rewers to !e ac=uired" while maintaining a
positive image within the !rewer2s local community" (lchemy and ,cience should
host TBeer Bash2 contests in which !rewers from within a specified radius come
and compete for a Best Brewer Title. Boston Beer Co. would sponsor the event
603@ewman" &an. About Us. 875A. http#))www.alchemyandscience.com) /accessed 'une 6"
875A0.
295
and all persons of age are welcome to come and enjoy their local !rews" and
have the opportunity to vote on which one they think is !est. This event serves
multiple purposes in that Boston Beer Co. eposes consumers to its eisting
products !y sponsoring the event" improves its !rand image" and offers them a
pool of potential investment candidates. The top !rewers of the contest will !e
given the opportunity to join the Boston Beer Co. !rand portfolio.
&t is important to note that while (lchemy and ,cience was originally created for
the purpose of increasing awareness of craft !rewed !eers and !oth creating and
incu!ating new !reweries" it is considered to !e relatively ineffective thus far"
accounting for less than 5N of the Boston Beer Co.2s annual revenues. &t is
suggested that (E, move away from the creating its own new !rews" and invest
in actively seeking out already esta!lished small craft !reweries in @orth (merica
and a!road. &n doing this it is !elieved that Boston Beer Co. epand its product
portfolio" and with that its glo!al market share.
&mplementation Breakdown
5. ,eek out up and coming" and new market entrant craft !rewers to invest in
8. Esta!lish the newly ac=uired !rewer as a !rand under (lchemy and ,cience
9. *everage eisting epertise and distri!ution networks needed to effectively
grow the newly ac=uired !rand.
A. Continue process throughout @orth (merica and in developing countries with
growing !eer markets.
Cost )enefit Ana%ysis
&n considering that (lchemy and ,cience is already an esta!lished su!sidiary of
the Boston Beer Company" and its eisting mandate corresponds to the
proposed recommendation" there are little start%up costs to !e considered.
&nvestments would need to !e considered on a case%!y%case !asis in which
Boston Beer Co. and (lchemy and ,cience carefully consider which geographic
regions" within @orth (merica and a!road" offer the greatest potential payoff in
296
the form of new investment opportunities. The costs of seeking out !rewers
would !e dependent on the scale of the contest the company chose to host" with
more concentrated !rewer areas re=uiring larger scale competitions" as well as
the country in which the contest !eing hosted. (side from the costs associated
with the recruitment competitions" the primary costs come from the actual
amount of money needed to ac=uire the new craft !rewing company. &t is
suggested that Boston Beer Co. and (lchemy and ,cience esta!lish a range of
how much they are willing to invest. This range would !e dependent on the
eisting !udget allocated to (lchemy and ,cience and additional funds provided
!y Boston Beer Co. should the !udget !e insufficient.
(s previously discussed" the primary !enefit of this recommendation is greater
capitali$ation on the seismic shifts in the !eer industry and consumer
preferences. &n eercising the proposed strategy Boston Beer Co. will epand its
product portfolio offering consumers a greater variety of premium =uality
products" while effectively catering to locally !rewed consumer preference
trends. This strategy offers Boston Beer Co. the opportunity to increase its
international presence at a minimal cost in comparison to setting up a
manufacturing plant" or eporting large =uantities of alcoholic !everages that are
su!ject to high taing.
4!"tr!but!on
The Boston Beer Company has a relatively strong distri!ution system currently in
place yet incurs weaknesses in the form of high transportation and distri!ution
costs. The company2s four !reweries must distri!ute its products across the U,
and Canada and in some cases" to the European and (sia 4acific regions. &ts
costs are much higher than competitors that have !reweries strategically located
across @orth (merica in an effort to reduce shipping costs. (n opportunity eists
for the company to partner with smaller !reweries that also re=uire their products
to !e distri!uted to retailers. The stringent distri!ution regulations" which heighten
!uyer power" pose a threat to Bnoston Beer Co.2s distri!ution functi. The three%
297
tier distri!ution system" eclusivity agreements" and franchise laws make it
challenging for craft !eers to consistently make it to the shelf and limit the
company2s a!ility to epand distri!ution networks.
Recommendation
The Boston Beer Company must ac=uire more !reweries in order to reduce the
cost of distri!ution. By having more than four !reweries" the company can lower
travel time to various retailers. Competitors including Heineken and ,(B-iller
have hundreds of !rewing locations across the glo!e in order to reduce
transportation and distri!ution costs. ,ince the !eer industry players have !een
restricted from selling directly to end consumers" they must colla!orate to
maintain efficient distri!ution activities amongst the three%tier system.
-mp%ementation
Boston Beer Co.2s current operations are located in 4ennsylvania" *os (ngeles"
Boston" and .hio. .!taining at least another four !reweries in Canada would
assist to disperse distri!ution and reduce time of travel from the manufacturer to
retailer. Kue!ec City" Toronto" Calgary" and Lancouver will likely prove to !e the
most ideal locations. These locations are home to the highest population density
in Canada would result in lower transportation and distri!ution costs. +urther
epansion into the United ,tates should also !e considered !y Boston Beer Co.
1aleigh" @orth Carolina3 ?es -oines" &owa3 ?enver" Colorado3 'ackson"
-ississippi3 and Boise" &daho would all provide great opportunities for epansion
as is epressed !y the high population density in the figures !elow.
!ty $opu,at!on
4en(er, o,arado 8"FF8"5<F
4e" #o!ne", Io:a F67"8FF
3a,e!/h, 8orth aro,!na 5"597"A<7
Lac6"on, #!""!""!pp! F9<"7F;
Bo!"e, Idaho D5D"FD5
298
Huebec !ty A<5"5A7
+oronto 8"D5F"7D7
a,/ary 5"7<D"699
-ancou(er D79"F78
,ource# Google -aps
D7A
299
,ource# Google -aps
D7F
The a!ove areas have !een strategically placed so as to !e dispersed evenly
across Canada and the United ,tates. Boston Beer Co. would have to pay on
average :5.8F million U,? to start a new !rewery at each location or it could
ac=uire current operations if such eist
D7D
. (c=uiring previously esta!lished
operations may perhaps cost more !ut there are several advantages. @ot only
will the company o!tain the geographical market share" it will ac=uire the
e=uipment and !rand names. &n addition" there is a potential opportunity that lies
in o!taining any proprietary information such as secret recipes that would help
the company to epand its current product lines and offerings.
605 &!id.
606 -odern Times /875A0 1etrieved 7D 59" 875A from" http#))moderntimes!eer.com)!log)how%
much%does%it%cost%to%start%a%!rewery
300
?enver" Colorado
The Boston Beer Company has a large selection of !reweries from which to
choose if it decides to make an ac=uisition in ?enver. ?enver has over 58 small
!rewers as outlined !elow. Epic Brewing appears to !e an ideal option for
purchase !y Boston Beer Co.. Epic Brewing is attempting to grow as a craft
!rewer !ut only has nine different flavours. +ortunately" Epic !rewing has a
location in ,alt *ake City that would !e included in this ac=uisition. (fter
assessing the likelihood of whether or not Epic2s partners would !e willing to sell
the company" it has !een determined that they likely would !ased on the fact
each of the three co%founders only opened the company as a past time
D7;
.
-icro!reweries in ?enver
,ource# Google -aps
D76
607 Epic Brewing. /875A0. About 1pic. 1etrieved 7D 5D" 875A" from Epic Brewing#
http#))www.epic!rewing.com)a!out%epic
301
1aleigh" @orth Carolina
1aleigh Brewing would also lend itself as a strong ac=uisition for the Boston Beer
Company. The company is a small%scale craft !rewer that has 9"977 s=%ft. of
home!rew store capacity
D7<
. The 1aleigh Brewing Company has a !eautiful
facility that would !e home to the innovative climate set forth !y The Boston Beer
Company.
,ource# Google -aps
D57
.verall" The Boston Beer Company has little choice !ut to ac=uire more
locations if it epects to epand its operations and increase its market share. The
company will not !e a!le to uphold its new mission nor compete against industry
giants like (nheuser%Busch &nBev !y remaining with only four !reweries.
6091aleigh Brewing Company. /875A0. About. 1etrieved 7D 59" 875A" from
http#))raleigh!rewingcompany.com)!rewery)
302
Heineken is smaller than (nheuser%Busch &nBev even though it has over 87
!reweries in the (mericas and 5D; !reweries across the world
D55
. (s @orth
(merica2s largest craft !rewer" The Boston Beer Company should increase its
operations to include at least 57 !rewery locations3 regions for which have !een
suggested a!ove.
u"tomer Ser(!ce
&n the value chain analysis conducted previously" it was concluded that Boston
Beer Co.2s customer service activities U although valua!le U are neither rare"
costly to imitate" non%su!stituta!le" nor organi$ed to !e eploited. These
conclusions are of increasing concern to industry analysts who have recogni$ed
the impact that customer service has on company returns. ( 8755 research study
conducted !y 1ight@ow on the impact of customer service revealed that 6<N of
customers declined further offerings from a company and turned to competitors
after incurring a !ad eperience
D58
. These kinds of eperiences can easily
translate into lost sales and a tarnished reputation of the firm or any of the !rands
associated with it.
(t Boston Beer Co." improvements to its we!site presence and other
communication channels are re=uired in order to maintain visi!le and useful
service offerings. ( comparison against other major industry competitors
revealed that Boston Beer Co.2s corporate we!site is missing a simple
mechanism for customer feed!ack" while also failing to maintain authentic and
modern%looking functionality. (s a pu!licly traded company capa!le of attracting
high%profile investors" Boston Beer Co. must take greater care in maintaining its
customer service function. ,ince the >e! is often the first place a potential
investor or customer interfaces directly with the company entity" upholding a
strong we! presence will !e vital to the continued success of Boston Beer Co..
611 Heineken. Q+orm 57%H (nnual 1eport.Q 8759.
612 ,toiciu" ,a!ina. The I-portance o* 12cellent Custo-er "er0ice an$ 4ee$bac! "ur0e%s.
?ecem!er 8" 8759. http#))www.!usiness8community.com)customer%eperience)importance%
ecellent%customer%service%feed!ack%surveys%7D<65ADVZME7E> /accessed 'une 59" 875A0.
303
Recommendations
The company2s we!site should !e improved to include a feed!ack form template
for email in=uiries. The majority of Boston Beer Co.2s top competitors include this
type of form on the contact page of their corporate an$ !rand%!ased we!sites.
The form should include user%defined fields in which customers can add their
contact information" comments or =uestions that pertain directly to their in=uiry"
and the method in which they would prefer to receive further communications. (s
simple as it sounds" there are several !enefits of implementing this
communication tool for !oth the customer and the company. Boston Beer Co. will
likely see the advantages in data control as it will !e a!le to specify precisely
what information it would like to capture from the user. ,ince all of the information
will !e received in the same way" the emails from the contact form are also
consistent and will help the customer service function to stay organi$ed
D59
. .ften
these forms also give the user the option to sign%up to a mailing list to stay
informed on the company2s latest dealings and promotions. This !enefits !oth
sides !y epanding Boston Beer Co.2s media distri!ution list while offering
customers insider deals and loyalty privileges in return.
&t is important to address the current status of Boston Beer Co.2s we!site !efore
the epectation that customers will actually utili$e the feed!ack form materiali$es.
The company2s corporate we! presence" which hosts all of its investor relations
material" is out%dated and fares poorly when contrasted against major
competitors2 glit$y we!sites. (s it is the customer service function2s aim to
provide the !est eperience for online users" it is recommended that Boston Beer
Co. invest more resources into improving we! design across its corporate
we!site. ( more upscale template is needed to avoid !eing critici$ed when
compared side%!y%side in a !rowser net to the likes of ,(B-iller" -olson Coors"
Heineken" or virtually any other of Boston Beer Co.2s close competitors.
(ppealing fonts and graphics would enhance the visual effect of the we!site and
613 -arkle" Brad. A$0anta+es o* Usin+ a Contact 4or-. .cto!er 8<" 8758.
http#))www.inmotionhosting.com)support)edu)we!site%design)adding%contact%forms)advantages%
using%contact%form /accessed 'une 59" 875A0.
304
adding up%to%date photos of the eecutive team mem!ers will provide online
viewers with a familiar face that they can associate with Boston Beer Co. and its
affiliates. &ncreasing authenticity of the company in this manner is likely to have
more of a lasting impact on investors and customers than if they could not see
with whom they are conducting !usiness with.
-mp%ementation
&mplementation of the two aforementioned recommendations will take little time
and preparation. However in order to !e successful" the company must recogni$e
the importance of OlooksP as it relates to its online presence3 which may !e
challenging see as it may not fall high on the Boston Beer Co.2s list of customer
service priorities. The fact is that Boston Beer Co. has put visi!le effort into
developing sophisticated and attractive we!sites for all of its !rands. The
argument here is that investors and people seeking higher%level corporate
information are going to look directly to the &nvestor 1elations Center to fulfill
their needs. &t is on this site that the company needs to improve its
communication methods and enhance its image.
To implement the online feed!ack form" the company will simply have to contract
a we! designer or someone of e=ual skill to do the work. This person will !e
re=uired to program the appropriate code to em!ed the email template into the
we!site. He or she must finish the jo! !y ensuring a clean and function user
interface is in place for use !y the customer. These tasks are estimated to take
no more than two days" with an additional day for functional testing. &deally"
Boston Beer Co. should advertise the feed!ack forum and encourage online
guests to try it out !y providing a link to it from the &nvestor 1elations Center
homepage. These steps are outlined in the chart !elow.
2n,!ne 0eedbac6 0orm Imp,ementat!on
305
#ontract=!ire a
9e* 6esigner
E1 wee5F
#ontract=!ire a
9e* 6esigner
E1 wee5F
,rogram t!e
fee-*ac5 form
tem$%ate into
we*site E1 -ayF
,rogram t!e
fee-*ac5 form
tem$%ate into
we*site E1 -ayF
Cser 2nterface
6esign
E1 -ayF
Cser 2nterface
6esign
E1 -ayF
#arry out
functiona% testing
of emai% tem$%ate
E1 -ayF
#arry out
functiona% testing
of emai% tem$%ate
E1 -ayF
Reconci%e any
errors incurre-
-uring functiona%
testing
E1 " 2 -aysF
Reconci%e any
errors incurre-
-uring functiona%
testing
E1 " 2 -aysF
7o"@i)e wit!
tem$%ate on
?#ontact Cs? $age
of 2n)estor
Re%ations we*site
7o"@i)e wit!
tem$%ate on
?#ontact Cs? $age
of 2n)estor
Re%ations we*site
-)ertise t!e
fee-*ac5 form as
$art of t!e co #.
oDerings
-)ertise t!e
fee-*ac5 form as
$art of t!e co #.
oDerings
To implement the newfound we!site design" Boston Beer Co. will undergo a
similar process. ( we! designer will need to assess whether it is feasi!le to alter
the eisting we!site to meet the company2s needs or if it is reasona!le to !uild a
new online platform from the !ottom up. ?epending on the outcome" the entire
process is estimated to take from two to si weeks. Boston Beer Co. should take
necessary steps to inform its online visitors that its corporate we!site is
undergoing upgrades for the duration of the project. &ncreasing awareness while
the we!site it under construction will reduce the impact that any inconsistencies
such as !roken links or missing information may have on visitors. (gain" Boston
Beer Co. should advertise its new online look when the we!site is fully finished
and has !een tested to ensure everything it in order. The company can use its
eisting social media platforms and communication channels to guide visitors to
the new site" encourage eploration and feed!ack" and increase online
viewership overall.
=eb"!te 3ede"!/n Imp,ementat!on
306
#ontract=!ire a
9e* 6esigner
E1 wee5F
#ontract=!ire a
9e* 6esigner
E1 wee5F
sses if t!e
we*site can *e
amen-e- or must
*e *ui%t from
scratc! E1 -ayF
sses if t!e
we*site can *e
amen-e- or must
*e *ui%t from
scratc! E1 -ayF
9e*site re-esign
E2 " 6 wee5sF
9e*site re-esign
E2 " 6 wee5sF
#arry out
functiona% testing
of site
E3 -aysF
#arry out
functiona% testing
of site
E3 -aysF
Reconci%e any
errors incurre-
-uring functiona%
testing
E1 " 3 -aysF
Reconci%e any
errors incurre-
-uring functiona%
testing
E1 " 3 -aysF
7o"@i)e wit!
9e*site
7o"@i)e wit!
9e*site
-)ertise t!e
site?s new %oo5 to
increase
)iewers!i$
-)ertise t!e
site?s new %oo5 to
increase
)iewers!i$
Cost-)enefit Ana%ysis
Ultimately" two events may occur when a customer or investor visits a corporate
we!site. /,0he may find valua!le content that will prolong his)her visit or /s0he
may incur several things that force him)her to stop their visit or move on to other
we!sites. &n terms of cost%!enefit analysis" users in the first case seem to get
more !enefit than the incurred cost of visiting the site
D5A
. The !enefits associated
with visiting a we!site can !e seen in the form of improved customer knowledge"
enjoyment and empowerment3 while the incurred costs may refer to navigation
pro!lems" digression pro!lems" and slow download speeds
D5F
. (s a result of
improving its overall online presence" Boston Beer Co. will have worked to avoid
many of these costs and may positively influence revisit intention as a result. (n
increasing num!er of site visits implies higher we! traffic rates" which will !ring
Boston Beer Co. to par with its competitors. (s has !een made evident" the
company may incur an initial short term cost associated with paying the wages of
a we! designer3 however" it is likely to reap much larger returns when its we!
presence garners more positive attention a!out the improvements to its online
customer service.
614 ,antosa" 4aulus &nsap. A Cost&Bene*it Anal%sis o* #ebsite esi+n an$ Its 1**ect on Re0isit
Intention. ?epartment of &nformation ,ystems" @ational University of ,ingapore" .ZCH&" 877A
615 &!id.
307
3e"earch 7 4e(e,opment
1apidly evolving consumer tastes and preferences" as well as increased glo!al
health awareness have prompted alcoholic !everage manufacturers to develop
new and improved products. These factors threaten companies that cannot
demonstrate the flei!ility re=uired to a!olish traditional ideas and adopt
innovative alternatives. The Boston Beer Company2s has demonstrated
impressive performance against the competition in terms of new product
development. &ts 1T? product line has fared especially well in the market for
hard iced tea. ?espite increasing competition in this segment" Twisted Tea
remains the market leader as a result of strong sales eecution" the release of
!old" new flavours" and continuous customer support
D5D
.
>here Boston Beer Co. !egins to face more onslaught from the competition is in
the hard cider segment. 1ecent product launches into the cider category !y
(nheuser%Busch &nBev" Carls!erg" and *a!att /a su!sidiary of (B%&nBev0 have
heightened the level of rivalry. (lthough no cider !rand clearly dominates the
market yet" all of the competitions2 products have !een met with stellar reviews
so far3 Carls!erg even la!eling its ,omers!y Cider as the Ofastest growing glo!al
cider !randP
D5;
. The fierce competition in the cider segment poses a threat to
Boston Beer Co.2s (ngry .rchard la!el" should it not have the resources to
continue earning more market share. (s a result" Boston Beer Co. needs to !e
pro%active in making more advances !oth within and outside the cider segment.
*ikewise" Boston Beer Co. faces competition from its rivals in the product
packaging side of its !eer manufacturing !usiness. ?espite eploiting all possi!le
opportunities that the recent launch of its O,am CanP has opened up" the market
for !eer packaging has seen !rewing companies compete neck%to%neck for the
market%leading standard in package innovation. Hegs" aluminum !ottles" and re%
617 'oseph" ,e!astian. QCarls!ergXs 4remiumisation 4ush *ifts 1evenue.Q )ar!etin+#ee!. -ay
;" 875A. http#))www.marketingweek.co.uk)sectors)food%and%drink)news)carls!ergs%
premiumisation%push%lifts%revenue)A757A59.article /accessed 'une 8" 875A0.
308
seala!le closures are among some of the most prominent innovations that
Boston Beer Co.2s 1E? function must compete with.
+inally" a com!ination of increased health concerns and pressure from lo!!yist
groups has seen an upsurge in growth of the non%alcoholic market segment.
-others (gainst ?runk ?riving /-(??0 has o!tained continued support from
communities across the U, and Canada3 influencing perceptions a!out alcohol
consumption. &n +e!ruary 8758" -(?? tapped into the !illion%dollar non%
alcoholic drink industry with its sleek%looking line of -(?? Lirgin ?rinks
D56
. This
eample represents the threats that Boston Beer Co. faces in developing and
providing consumers with relevant su!stitutes3 in this case" ones that are an
alternative to alcohol altogether.
Recommendations
+rom the o!servations a!ove it is clear that Boston Beer Co. faces the threat of
new entrants and new products across various categories including the cider and
non%alcoholic segments" as well as in !eer packaging. (lthough the company
does not ehi!it any distinctive weaknesses !ased on the L1&. framework" it
must remain proactive in its 1E? value chain function in order to main relevant
and competitive in the industry.
The most useful action Boston Beer Co. can take in this regard is to etend its
research into the eternal environment3 engaging" surveying and interacting with
consumers to determine what its most feasi!le options are. Boston Beer Co. has
already esta!lished successful channels of communication with its end%
consumers" including its Twisted Tea sweepstakes that give entrants the chance
to have their photo printed on the la!el of Twisted Tea !ottles. These photos are
also posted on the !rand2s we!site3 profiling Twisted Tea drinkers from across the
United ,tates and Canada. This communication medium offers insight into
patterns and trends in consumer !ehaviour. The photos are accompanied with
618 Haynes" -egan. Q-(?? Taps into Billion%?ollar @on%(lcoholic ?rink &ndustry.Q "trate+%.ca.
+e!ruary 59" 8758. http#))strategyonline.ca)8758)78)59)madd%taps%into%!illion%dollar%non%
alcoholic%drink%industry) /accessed -ay 5F" 875A0.
309
written feed!ack and together indicate what flavour" where" and on what
occasions customers are drinking Twisted Tea products. This data can !e
collected and analy$ed to determine which factors U such as the season of the
year or geography U may influence the success of a new or improved product.
( campaign similar to Twisted Tea2s would !enefit Boston Beer Co.2s remaining
product lines including the (ngry .rchard cider !rand. Considering the immense
competition in this segment" the company2s 1E? function should consider how
important it is to stay connected with cider drinkers. +inding out what desires
consumers have !efore the competition does will give Boston Beer Co. a
competitive advantage.
To maintain competitive" Boston Beer Co. also needs to address the increasing
num!er of !reakthroughs in !everage packaging. To do this the company must
consistently monitor what its competitors are doing in this regard. &t is difficult to
say without some guessing how the company will have to move forward in order
to remain competitive in product packaging. Competitors" such as Heineken" are
well%recogni$ed for their innovations in take%home ?raught Hegs which have
!ecome a staple product for these companies. +rom this o!servation it can !e
concluded that Boston Beer Co. would likely eperience similar success if it
engineered porta!le containers that held its ,amuel (dams !eer for larger
groups to enjoy. .verall" two key factors will play a !ig part in helping to uphold
Boston Beer Co.2s reputation in the packaging side of the !eer industry. +irstly" it
is important that the company recogni$es what steps its rivals are taking and at
least attempt to imitate or make improvements to the things they are doing. &n
addition" the company must continue to maintain a culture that encourages
eperimentation of ideas and fosters creativity amongst its employees. The 1E?
function will fail to survive if company policies or !ureaucratic modes of thinking
limit the amount of innovation demonstra!le !y the Boston Beer Co..
310
orporate Leader"h!p
(s discussed previously in the report" Boston Beer Co.2s corporate leadership
represents a significant strength for the company. The current eecutive team is
comprised of highly eperienced individuals with diverse educational
!ackgrounds who are well e=uipped to handle the performance and direction of
the company. 4roof of their effectiveness is seen in the financial success of the
company over the past five years. &n 8759 alone Boston Beer Co. reali$ed 89N
growth in depletions" significantly epanded its product line" and improved
production efficiency !y :<.D million. Beyond this" the companies five year
average gross margin" net profit" EB&T?" return on assets" return on investments"
return on e=uity" and sales growth than the five year%industry average
D5<
. These
financial successes highlight Boston Beer Co. as a superior investment relative
to other competitors in the market lying at" or !elow" the industry average" and
demonstrate successful financial management from the company2s eecutives.
&n addition to the Boston Beer Co.2s own financial performance" growth in the
craft !eer market" which is up 56N in volume and 87N in retail dollars" makes
Boston Beer Co. an attractive option for investors
D87
. (s one of few pu!licly
traded firms within the craft !eer market" Boston Beer Co. is poised to take
advantage of continued market growth projections" and the high demand for craft
!rewer stock that is likely to follow. The company2s continuous epansion and
diversification of product lines" which includes craft !eer" malts" and ciders"
coincides with recent shifts in consumer tastes and indicates effective forecasting
and market awareness from the company2s eecutives.
The Boston Beer Company has received considera!le recognition in its relatively
short life in the pu!lic sector. The company was ranked 68
nd
on +or!es2 list of
http#))www.reuters.com)finance)stocks)financialHighlightsBsym!olC,(-.@ /accessed -ay
8D" 875A0.
311
T>orld2s -ost &nnovative Growth Companies of 875A2" and 59
th
on +or!es2
T(merica2s Best ,mall Companies2 list. The Brewer2s (ssociation" who works to
promote and protect (merican craft !rewers" places Boston Beer Co. as its top
craft !rewer" and fifth in the overall U.,. !rewing market
D85
. These
accomplishments and continued efforts showcase considera!le strength in the
company2s corporate leadership and poise them to take advantage of upcoming
market opportunities.
>ith respect to corporate leadership" the Boston Beer Company2s weaknesses
lie in its relatively small market capitali$ation and a low de!t to e=uity ratio
relative to major market players and the industry as a whole. Boston Beer Co.
market capitali$ation currently sits at :8.;<F !illion" classifying it as a mid%cap
si$ed firm. ?espite having market cap growth of approimately :8.9;F !illion" or
FDDN" over the past five years" it still remains much lower than that of the
industries leaders who are classified as large%cap firms
D88
. *arge%cap firms are
considered well known within their respective industries and are considered a
sta!le investment. This threatens Boston Beer Co.2s appeal to investors and
a!ility to continue generating e=uity from its common shares. This threat is
heightened !y the company2s reliance on e=uity funding as seen its low de!t%to
e=uity ratio relative to the industry average.
Recommendation
&n considering Boston Beer2s Co.2s current strengths and weaknesses it is
proposed that the company take on more de!t financing to !e invested in the
ac=uisition small craft !reweries seen to have potential. This will work to increase
the company2s market share and allow them to reali$e greater investment
returns" while also capitali$ing on the ta !enefits associated with de!t financing
and low interest rates.
621 (lley" &. /875A0. The )ar!et Cap . 1etrieved -ay 85" 875A" from
http#))www.investorsalley.com)mc5A)7F%86)!eer.html
875A0.
312
-mp%ementation
&n order to eecute this recommendation" Boston Beer Co. must present the idea
to the !oard of directors" and gain their approval in taking on more de!t. *ittle
o!jection is anticipated as the company is currently operating well !elow the
average de!t to e=uity ratio for capital%intensive firms such as itself. Upon gaining
approval from the !oard of directors" Boston Beer Co. must work with its de!tors
to make satisfactory loan term agreements. +rom there" the new funding will !e
funnelled primarily through (lchemy and ,cience" the independently operated
su!sidiary charged with finding and investing in up and coming !rewing
opportunities with the purpose of !ettering the company and the industry as a
whole. The ta !enefits associated with this recommendation re=uire no
implementation setup as interest epenses are deducted automatically
D89
. &t is
suggested that Boston Beer Co. continue to increase its de!t financing for the
purpose of ac=uisition investments until it is aligned with the industry average or
until the marginal ta !enefits e=ual the !ankruptcy costs associated with taking
out another dollar of de!t.
,teps
5. 4ropose de!t increase to B.?
8. Esta!lish loan terms with de!tor
9. (llocate funds appropriately" with the !ulk of the money !eing funnelled into
the (lchemy and ,cience su!sidiary
A. (c=uire up and coming craft !rewers in @orth (merica and a!road
Cost to )enefit Ana%ysis
The cost of this recommendation is the interest epense" which varies depending
on the applica!le prime rate or *&B.1 rate at the time" plus .AFN. (s of 'une 57
th
875A the prime rate stood at 9.8FN and the *&B.1 rate at .589FN
D8A
.
623 Chron. The A$0anta+es o* ebt 4inancin+ A Ta2 e$uctabilit% . 8759.
http#))small!usiness.chron.com)advantages%de!t%financing%ta%deducti!ility%D;6F5.html /accessed
'une D" 875A0
624 1ates" Glo!al. U" (IB9R Interest Rate. 875A. http#))glo!al%rates.com)interest%
rates)li!or)american%dollar)american%dollar.asp /accessed 'une 58" 875A0.
313
The !enefits associated with this recommendation are the interest ta
deductions. The companies corporate ta rate for 8759 was 96N
D8F
.
Summary
Supp,y ha!n #ana/ement
?ue to a highly dispersed supply chain network" Boston Beer Co. incurs high
transportation and logistics costs" and deficiencies in inventory turnover. The
company is currently not a!le to turn over products as =uickly as its competitors.
To mitigate this pro!lem Boston Beer Co. should seek to o!tain its resources
from local suppliers to reduce transportation costs. Creating alliances with
suppliers from Canada when possi!le will reduce shipping and handling costs
and allow for !etter =uality control.
2perat!on"
The Boston Beer Company has only four locations in contrast to its competitors
who have locations dispersed across the U, and overseas. This poses as a
weakness for the company as it is not a!le to achieve economies of scale or
lower distri!ution costs. &t is recommended that the company epand its
operations into Canada in order gain larger market share and remain
competitive. 4u!lishing its environmental impact online and in its annual reports
is an important step the company should take to show potential investors and
employees the direction in which the company is moving. &n addition"
!enchmarking will play a key part in helping operators and management teams to
understand the relationship !etween energy usage and the cost of operations.
'une 58" 875A0.
314
#ar6et!n/ and Sa,e"
The Boston Beer Company faces an e=ual num!er of threats as it does
opportunities in its marketing and sales value chain function. -arket trends
indicate that the craft and premium !rewing market is rapidly growing and as
such" the threat of new entrants and new products threaten the future of the
company. ,imilarly" the price of Boston Beer Co.2s products sit relatively higher
than average !eer prices due to premium =uality. This makes it difficult to
maintain competitive advantage !ased on price. &t is suggested that Boston Beer
Co. ac=uire smaller !reweries to increase the diversity of its product offerings
and satisfy growing demand for premium !eer.
4!"tr!but!on
The company is faced with high distri!ution costs as its suppliers of raw material
are geographically dispersed. Here" an opportunity eists for the company to
partner with smaller !reweries along its transportation routes to minimi$e the
costs associated with raw materials. However" the company will continue to face
threats as stringent distri!ution regulations limit the a!ility to epand distri!ution
networks.
u"tomer Ser(!ce
To remain competitive on the element of customer service" Boston Beer Co. is
re=uired to make improvements to its online presence including its we!site. Two
major projects it should see through in the future are the implementation of an
online feed!ack form as well as an overall we!site redesign to update its image.
These recommendations come at virtually little cost compared to the other
recommendations provided" and will have a positive impact on the company2s
a!ility to serve its customers.
3e"earch and 4e(e,opment

Continuously changing consumer preferences offer Boston Beer Co. multiple
opportunities to tap into several rapidly growing product segments. Cider" non%
315
alcoholic drinks" and product packaging are especially of interest to the company
who faces an onslaught of competition in these domains. &t is recommended that
Boston Beer Co. maintain strong ties to its eternal environment to ensure it
stays aware of these trends. &n addition" the company must constantly monitor
what its competitors are doing and act accordingly. +inally" Boston Beer Co.
should continue to foster an environment that encourages creativity and
eperimentation" so that innovations may come easily as a result.
orporate Leader"h!p
&t is suggested that Boston Beer Co. continue to increase its de!t financing for
the purpose of ac=uisition investments until it is aligned with the industry average
or until the marginal ta !enefits e=ual the !ankruptcy costs associated with
taking out another dollar of de!t.
onc,u"!on
The Boston Beer Company should sei$e advantage of any opportunities it has to
ac=uire smaller !reweries in an effort to !oost its market share and increase its
num!er of product offerings. The company will have to grow the si$e of its
organi$ation whilst developing prosperous relationship with suppliers and
distri!utors to remain competitive against its current rivals. To support the
epansion process" the company must guide its employees !y promoting a
strong mission statement and upholding its corporate and social team !uilding
traditions. To retain its shareholders and customers throughout the process" the
company should update the channels on which it interfaces with the pu!lic and
stay informed of shifting trends in the market. Ultimately" Boston Beer Co. should
hire the three analysts that have prepared this paper. Their epertise and
newfound understanding of the !rewing industry has peaked their interest in
tasting and further developing the product lines that Boston Beer Co. has to offer.
316
The Boston Beer Company can epect to pay approimately :5.9F million per
facility and over :AF7"777 in yearly e=uipment upgrades to maintain parity with
industry standards of =uality control. &n addition to the facility costs"
supplementary la!our support is re=uired totalling over :5 million per facility at an
annual salary rate of :F7"777 per employee. (lthough the costs are prohi!itive"
the !enefits are etremely rewarding. The company can epect to generate an
additional :5<7 million per location each year. &n addition to the increased
revenue generated" transportation and procurement costs will decrease
significantly.
o"t" +ota,
0ac!,!ty Ac1u!"!t!on :5.9F million)location Y <
new locations
:58.5F million
&1u!pment Up/rade" :AF7"777)facility Y < new
locations
:A.7F million
Labour /:F7"777 per employee Y
87 new employees0 Y <
new locations
:< million
3educed
+ran"portat!on
:877"777 per location Y
<
/:5"677"7770
+2+AL 2S+ <2>D40 m!,,!on
Benef!t" +ota,
Increa"ed #ar6et Share 4rice *ess
Add!t!ona, 3e(enue /:;9< million)A current
locations0 Y < new
locations
:5"DD8";F7"777
+2+AL B&8&0I+ Un,!m!ted
317
,(9" <!
Bi7#io$ra0hy
318
B!b,!o/raphy
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324
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4ontinen" 'ennifer. Q&ndustry .verview# The !eer !rewing industry.Q 8755.
4rint -easurement Bureau. QBeer Types 4ersonally ?rank.Q P)B e-o+raphics
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1aleigh Brewing Company. About. 875A.
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,(B-iller. Q(nnual 1eport.Q 8759.
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/accessed 'une 58 875A" 875A0.
,chuhmacher" Harry. Potential Pit*alls o* the cra*t beer re0olution. ,ept. 75" 8759.
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,*H Transport &@C. 875A. http#))www.slh.ca)en)coverageRcrossR!order.asp
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325
,tatistics Canada. North A-erican In$ustr% Classi*ication "%ste- CNAIC"D
Cana$a. 8758. http#))www.statcan.gc.ca)pu!)58%F75%)58%F75%8758775%eng.pdf
,tephenson" 4hilip (. Beer cans are *inall% +ettin+ the creati0e $esi+ns the%
$eser0e. @oveme!er 85" 8759. http#))=$.com)5A6;;A)!eer%can%design%is%
officially%a%thing) /accessed 7F 59" 875A0.
,tore" The Beer. The Beer "tore. 875A.
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875A0.
Tennessee%Tom!ig!ee >aterway. Car+o Capacit% o* $i**erent transportation
)o$es. http#))!usiness.tenntom.org)why%use%the%waterway)shipping%
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The Boston Beer Company" &nc. 2013 Annual Reports . 875A.
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The Boston Beer Company" &@C. About Us. 875A.
http#))www.!oston!eer.com)phoeni.$htmlBcCD<A98EpCirol%homeprofile
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Reports. 875A. http#))www.!oston!eer.com)phoeni.$htmlBcCD<A98EpCirol%
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E,4(? 1eport.Q 1"PA Reports. -ay 95" 8758.
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,U--(1M.pdf /accessed -ay 5A" 875A0.
The Huffington 4ost. 1urope5s Alcohol Consu-ption (ar+est in the #orl$, sa%s
#39 Report. -arch 86" 8758.
http#))www.huffingtonpost.com)8758)79)86)europe%alcohol%consumption%who%
reportRnR5969A7A.html /accessed -ay 5A" 875A0.
The -odern Times Beer Blog. 3o, -uch $oes it cost to start a bre,er%H. 58 57"
8758. http#))moderntimes!eer.com)!log)how%much%does%it%cost%to%start%a%!rewery
The world Bank. Population ensit%. 8759.
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Thomas" H1" and 4H,- 1ahman. QBrewery >astes. ,trategies for
,ustaina!ility.Q 877D.
Tierney" 'ohn. The "tate o* A-erican Beer. 875A.
http#))www.theatlantic.com)!usiness)archive)875A)7A)the%state%of%american%
!eer)9D7F69) /accessed -ay 88" 875A0.
Times" The @ew Mork. Be0era+es&Bre,ers. 875A.
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industryCFA555 /accessed -ay 8;" 875A0.
Tuttle" Brad. 4astest 'ro,in+ Alcoholic Be0era+e Cate+or%? Its not cra*t beer.
(pril 97" 875A. http#))time.com)68D87)fastest%growing%alcoholic%!everage%
category%its%not%craft%!eer) /accessed 'une 55" 875A0. /accessed 7D 59" 875A0.
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&ncreased Cancer 1isk among East (sians.Q National Institutes o* 3ealth Ne,s.
-arch 89" 877<. http#))www.nih.gov)news)health)mar877<)niaaa%89.htm
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http#))thedatawe!.rm.census.gov)The?ata>e!RHot1eport8)econsnapshot)8758)
snapshot.hrmlB@(&C,CAAF957 /accessed 7D 59" 875A0.
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4ra-e,or! /7F 85" 875A0.
>eisman" 1o!ert. QThe Benefits and Health 1isks of Beer and >ine.Q The
Boston 'lobe. @ovem!er 5;" 8759.
http#))www.!ostonglo!e.com)!usiness)8759)55)5;)!eer%and%wine%!enefits%health%
risks)MT!$&a-7fs;8Ge<GdUE17*)story.html /accessed -ay 5A" 875A0.
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articles)article)what%is%supply%chain%management /accessed 7D 78" 875A0.
>ikipedia. (ist o* Unite$ "tates Cities b% population. 875A.
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>orld Health .rgani$ation. Alcohol. 875A.
>orld Health .rgani$ation. 'lobal "tatus Report on Alcohol an$ 3ealth 201@.
Geneva# >orld Health .rgani$ation" 875A.
327
U. )ana+e-ent o* "ubstance Abuse: Alcohol. 875A.
U. )ana+e-ent o* "ubstance Abuse: 'lobal "tatus Report on Alcohol an$
3ealth 201@. 875A.
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/accessed -ay 5F" 875A0.
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sC,(-Eannual /accessed 7F 59" 875A0.
MCharts. 8Charts& "A) . 875A. http#))ycharts.com)companies),(- /accessed
-ay 8D" 875A0.
328
,(9" <!!
(00endi4
329
Append!'
+he Bo"ton Beer ompany
+he Bo"ton Beer
ompany
(nnual Balance
,heet
4eriod Ended
58)86)5
9
58)8<)5
8
58)95)5
5
Update Update Update
7F)5D)5
A
7F)5D)5
A
7F)5D)5
A
&n millions of U,?
/ecept for per
share items0
Cash E E=uivalents A<.F8 55N ;A.AD 85N A<.AF 56N
Cash and ,hort
Term &nvestments
A<.F8 55N ;A.AD 85N A<.AF 56N
(ccounts
1eceiva!le % Trade"
Gross
A8.5D <N D9.85 56N 89.9 <N
4rovision for
?ou!tful (ccounts
%7.5D 7N %7.59 7N %7.7; 7N
(ccounts
1eceiva!le % Trade"
@et
A8 <N D9.76 56N 89.89 <N
1eceiva!les % .ther 8.78 7N 8.<6 5N 57.9F AN
Total 1eceiva!les"
@et
AA.78 57N DD.7D 56N 99.F6 58N
&nventories %
+inished Goods
5;.7< AN <.7< 9N D.85 8N
&nventories % >ork
&n 4rogress
6.AF 8N 6.< 8N D.D; 8N
&nventories % 1aw
-aterials
9F.58 6N 8;.6; 6N 85.5< 6N
&nventories % .ther %A.8D %5N %5.F 7N %%
Total &nventory FD.A 59N AA.9D 58N 9A.7; 59N
4repaid Epenses 6.8; 8N 9.AF 5N 9.6; 5N
?eferred &ncome
Ta % Current (sset
F.;5 5N F.A5 8N A.9D 8N
.ther Current
(ssets
7.9F 7N %95.A %<N 7.9< 7N
330
.ther Current
(ssets" Total
D.7; 5N %8F.<< %;N A.;F 8N
Total Current
(ssets
5DA.86 9;N 5D8.9A AFN 58F.;8 ADN
Buildings % Gross F5.69 58N A8.6D 58N 86.<A 55N
*and )
&mprovements %
Gross
89.8D FN 8A.F8 ;N 8A.8F <N
-achinery )
E=uipment % Gross
99A.D ;FN 8A9.95 D6N 5<8.5A ;5N
4roperty ) 4lant )
E=uipment" Total %
Gross
A7<.D< <8N 957.D6 6DN 8AF.99 <7N
(ccumulated
?epreciation" Total
%5A9.59 %98N %587.;9 %9AN %575.;A %9;N
4roperty ) 4lant )
E=uipment" Total %
@et
8DD.FD D7N 56<.<F F9N 5A9.F< F9N
Goodwill" @et 9.D6 5N 8.FA 5N 5.96 5N
.ther *ong Term
(ssets
<.FD 8N A.DD 5N 5.6 5N
.ther *ong Term
(ssets" Total
<.FD 8N A.DD 5N 5.6 5N
+ota, A""et"
444D0A 100
K
>?9D4A 100
K
2C2D49 100
K
Account" $ayab,e >4D42 AK 2AD> AK 1ADA1 CK
Accrued
&'pen"e"
>ADC> 9K >4D>4 10K 2?D66 9K
8ote" $ayab,e B
Short +erm 4ebt
0 0K 0 0K 0 0K
urrent $ort!on of
Lon/ +erm 4ebt B
ap!ta, Lea"e"
0D0? 0K 0D06 0K ..
u"tomer
Ad(ance"
2D6C 1K 4D11 1K 2D>2 1K
Secur!ty 4epo"!t" 19D4? 4K 1?DA1 4K 1>DAC ?K
Income +a'e"
$ayab,e
ADA> 2K 4DA 1K >DA1 1K
2ther urrent
L!ab!,!t!e"
0D2> 0K 1D4C 0K 2D?9 1K
2ther urrent
,!ab!,!t!e", +ota,
>1D1C CK 26D19 CK 22D?A AK
331
+ota, urrent
L!ab!,!t!e"
104D>A 24K AADA9 2?K 6CD0? 2?K
Lon/ +erm 4ebt 0D?A 0K 0D?C 0K ..
+ota, Lon/ +erm
4ebt
0D?A 0K 0D?C 0K 0 0K
+ota, 4ebt 0D64 0K 0D6> 0K 0 0K
4eferred Income
+a' 5 Lon/ +erm
L!ab!,!ty
>2D>9 CK 20D46 6K 1CD>? 6K
4eferred Income
+a'
>2D>9 CK 20D46 6K 1CD>? 6K
2ther Lon/ +erm
L!ab!,!t!e"
4D64 1K 4D4C 1K >D>? 1K
2ther L!ab!,!t!e",
+ota,
4D64 1K 4D4C 1K >D>? 1K
+ota, L!ab!,!t!e" 141D99 >2K 114D>9 >2K ACDC4 >2K
ommon Stoc6 0D1> 0K 0D1> 0K 0D1> 0K
ommon Stoc6,
+ota,
0D1> 0K 0D1> 0K 0D1> 0K
Add!t!ona, $a!d.In
ap!ta,
1C>D0> >9K 1?CD>1 44K 1>AD>4 ?1K
3eta!ned &arn!n/"
)Accumu,ated
4ef!c!t*
129D>? 29K AAD?4 2?K 4CD12 1CK
2ther
omprehen"!(e
Income
.0D42 0K .0DAA 0K .0DA4 0K
2ther &1u!ty, +ota, .0D42 0K .0DAA 0K .0DA4 0K
+ota, &1u!ty >02D09 6AK 24?D09 6AK 1A4DC? 6AK
+ota, L!ab!,!t!e" 7
Shareho,der"M
&1u!ty
444D0A 100
K
>?9D4A 100
K
2C2D49 100
K
332
ar,"ber/
333
334
SAB#!,,er
335
336
Anheu"er.Bu"ch InBe(
Anheu"er.Bu"ch
Inbe( SA )8;SJ
BU4*
A" 3eported Annua,
Ba,ance Sheet
3eport 4ate 12B>1B2
01>
12B>1B2
012
12B>1B2
011
urrency US4 US4 US4
Aud!t Statu" 8ot
Hua,!f!
ed
8ot
Hua,!f!
ed
8ot
Hua,!f!
ed
on"o,!dated ;e" ;e" ;e"
Sca,e #!,,!on
"
#!,,!on
"
#!,,!on
"
4roperty" plant E
e=uipment" gross 9657;
8D.<7
N 99576
8;.77
N 959F;
8;.6<
N
?epreciation E
impairment losses %
property" plant E
e=uipment %5;856
%
58.5F
N %5DDA;
%
59.F6
N %5F99F
%
59.DA
N
4roperty" plant E
e=uipment 8766<
5A.;F
N 5DAD5
59.A8
N 5D788
5A.8F
N
Goodwill D<<8;
A<.9D
N F5;DD
A8.88
N F5978
AF.D9
N
&ntangi!le assets 8<996
87.;5
N 8A9;5
5<.66
N 89656
85.5<
N
&nvestments in
associates 56;
7.59
N ;7<7
F.;6
N DD<D
F.<D
N
&nvestment securities 5<9
7.5A
N 8FD
7.85
N 8AA
7.88
N
?eferred ta assets 5567
7.69
N 67;
7.DD
N D;9
7.D7
N
Employee !enefits 57
7.75
N 58
7.75
N 57
7.75
N
Trade E other
receiva!les" net 58F8
7.66
N 5886
5.77
N 599<
5.5<
N
Total non%current
assets 588<;D
6D.65
N 575<<5
69.56
N 57757A
6<.7A
N
&nvestment securities 589
7.7<
N D68;
F.F;
N 579
7.7<
N
337
&nventories 8<F7
8.76
N 8F77
8.7A
N 8ADD
8.5<
N
&ncome ta
receiva!le 998
7.89
N 5<F
7.5D
N 958
7.86
N
Trade receiva!les E
accrued income 8<9F
8.7;
N 8;9D
8.89
N 8F;8
8.8<
N
&nterest receiva!le 96
7.79
N D;
7.7F
N 99
7.79
N
Ta receiva!le" other
than income ta A8<
7.97
N 869
7.89
N 99F
7.97
N
?erivatives D7;
7.A9
N 9<6
7.98
N DF<
7.F<
N
*oans to customers F7
7.7A
N <
7.75
N 57
7.75
N
4repaid epenses D5D
7.A9
N AF9
7.9;
N A9A
7.9<
N
.ther receiva!les D6;
7.A6
N ;;
7.7D
N ;6
7.7;
N
Trade E other
receiva!les F9D8
9.;6
N A789
9.86
N A585
9.D;
N
Cash E cash
e=uivalents <69<
D.<F
N ;7F5
F.;F
N F987
A.;9
N
(ssets held for sale 6A
7.7D
N 9A
7.79
N 5
7.77
N
Total current assets 56D<7
59.5<
N 87D97
5D.68
N 58989
57.<D
N
+ota, a""et" 141666
100D0
0K 122621
100D0
0K 11242C
100D0
0K
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1D41
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1D?4
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1?D62
K
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K
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1CD6A
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K
&1u!ty attr!butab,e
to e1u!ty ho,der" of
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K
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>6D?1
K
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,oan" 7 borro:!n/" 412C4
29D1>
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K >4?9A
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K
&mp,oyee benef!t" 2A62
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K >440
>D06
K
4eferred ta'
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9D06
K 1116A
9D11
K 112C9
10D0>
K
+rade 7 other
payab,e" >222
2D2C
K 2>1>
1DA9
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1D>A
K
$ro(!"!on" ?>2
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0D?2
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0DCA
K
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,!ab!,!t!e" 60C>1
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K ?6CC2
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K
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0D00
K . . A
0D01
K
Intere"t.bear!n/
,oan" 7 borro:!n/" CA46
?D?4
K ?>90
4D40
K ???9
4D94
K
Income ta' payab,e 110?
0DCA
K ?4>
0D44
K 499
0D44
K
+rade payab,e" 7
accrued e'pen"e" 9A>4
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6D91
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K
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"ecur!ty payab,e" 11C>
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0D?4
K
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K 149C
1D22
K 144C
1D29
K
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K AC0
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K A29
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K
on"!/ned
pac6a/!n/ 6A2
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4eferred
con"!derat!on on
ac1u!"!t!on" A61
0D61
K 41
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0D16
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K
+rade 7 other
payab,e" 164C4
11D6>
K 1429?
11D66
K 1>>>C
11DA6
K
339
$ro(!"!on" 196
0D14
K 1A0
0D1?
K 241
0D21
K
+ota, current
,!ab!,!t!e" 2?62C
1AD09
K 2040A
16D64
K 19644
1CD4C
K
+ota, e1u!ty 7
,!ab!,!t!e" 141666
100D0
0K 122621
100D0
0K 11242C
100D0
0K
He!ne6en
He!ne6en 8D-D
)8ether,and"*
)8BBJ H&I8 ;*
A" 3eported
Annua, Ba,ance
Sheet
3eport 4ate 12B>1B2
01>
12B>1B2
012
12B>1B2
011
urrency &U3 &U3 &U3
Aud!t Statu" 8ot
Hua,!f!
ed
8ot
Hua,!f!
ed
8ot
Hua,!f!
ed
on"o,!dated ;e" ;e" ;e"
Sca,e #!,,!on
"
#!,,!on
"
#!,,!on
"
4roperty" plant E 5;5D7 F5.A; 5;5D8 A;.;7 5FF95 F;.8F
340
e=uipment" gross N N N
?epreciation E
impairment losses %6;7D
%
8D.58
N %69;7
%
89.8D
N %;D;5
%
86.86
N
4roperty" plant E
e=uipment 6AFA
8F.9D
N 6;<8
8A.AA
N ;6D7
86.<;
N
Goodwill" net 5775D
97.7A
N 57;67
8<.<D
N ;F97
8;.;D
N
Brands" net 9A<8
57.A;
N A7A9
55.8A
N 87F5
;.FD
N
Customer related
intangi!les" net 5F<<
A.67
N 5<88
F.9A
N <D7
9.FA
N
Contract !ased
intangi!les" net D7<
5.69
N ;F;
8.57
N 5F<
7.F<
N
,oftware" research
E development E
other" net 856
7.DF
N 889
7.D8
N 59F
7.F7
N
&ntangi!le assets"
net 5F<9A
A;.67
N 5;;8F
A<.8D
N 5769F
9<.<A
N
&nvestments in
associates E joint
ventures 5669
F.DF
N 5<F7
F.A8
N 5;DA
D.F7
N
.ther investments E
recieva!les ;D8
8.8<
N 57<<
9.7F
N 558<
A.5D
N
(dvances to
customers 975
7.<7
N 958
7.6;
N 9F;
5.98
N
?eferred ta assets F76
5.F8
N FDA
5.F;
N A;A
5.;F
N
Total non%current
assets 8;6A8
69.F8
N 97AA8
6A.D5
N 88A5<
68.DA
N
&nventories 5F58
A.FA
N 5F<D
A.AA
N 59F8
A.<6
N
.ther investments 55
7.79
N 55
7.79
N 5A
7.7F
N
Trade receiva!les
due from associates
E joint ventures 88
7.7;
N 8;
7.76
N A8
7.5F
N
Trade receiva!les 567A
F.A5
N 5<AA
F.A7
N 5DF;
D.55
N
.ther receiva!les FFD
5.D;
N F8<
5.A;
N F8A
5.<9
N
?erivatives AF
7.59
N 9;
7.57
N 9;
7.5A
N
Trade E other 8A8; ;.86 8F9; ;.7F 88D7 6.99
341
receiva!les N N N
4repayments E
accrued income 856
7.DF
N 898
7.DA
N 5;7
7.D9
N
Cash E cash
e=uivalents 58<7
9.6;
N 579;
8.66
N 659
9.77
N
(ssets classified as
held for sale 9;
7.55
N 58A
7.9A
N <<
7.9D
N
Total current assets FA<F
5D.A6
N FF9;
5F.9<
N A;76
5;.9D
N
+ota, a""et" >>>>C
100D0
0K >?9C9
577.7
7N 2C12C
577.7
7N
Share cap!ta, 922
2DCC
K 922
8.FD
N 461
5.;7
N
Share prem!um 2C01
AD10
K 2C01
;.F5
N 12?C
A.D9
N
3e"er(e" .A?A
.
2D?C
K >6?
5.75
N 2C2
5.77
N
3eta!ned earn!n/" A6>C
2?D91
K CC0>
85.A5
N 2A14
57.9;
N
&1u!ty attr!butab,e
to e1u!ty ho,der"
of the ompany 11402
>4D20
K 11691
98.A<
N 4A04
5;.;5
N
8on.contro,,!n/
!ntere"t" !n
He!ne6en 8D-D 9?4
2DA6
K 10C1
8.<6
N 49C0
56.98
N
8on.contro,,!n/
!ntere"t" !n
He!ne6en 8D-
/roup compan!e" . . >1A
5.5;
N
+ota, e1u!ty 12>?6
>CD06
K 12C62
9F.A;
N 10092
9;.87
N
Loan" 7
borro:!n/" 9A?>
29D?6
K 114>C
95.;<
N A199
97.88
N
+a' ,!ab!,!t!e" 112
0D>4
K 140
7.9<
N 160
7.F<
N
&mp,oyee benef!t" 1202
>D61
K 16>2
A.FA
N 11C4
A.99
N
$ro(!"!on" >6C
1D10
K 41A
5.5D
N 449
5.DD
N
4eferred ta'
,!ab!,!t!e" 1444
4D>>
K 1C90
A.<6
N A94
9.97
N
342
+ota, non.current
,!ab!,!t!e" 129CA
>AD9>
K 1?41C
A8.6F
N 10AC6
A7.7<
N
Ban6 o(erdraft" 1CA
0D?>
K 191
7.F9
N 20C
7.;D
N
Loan" 7
borro:!n/" 219?
6D?A
K 1A6>
F.56
N 9A1
9.D8
N
+rade payab,e" 2140
6D42
K 2244
D.8A
N 2009
;.A5
N
3eturnab,e
pac6a/!n/
depo"!t" ?0C
1D?2
K ?12
5.A8
N 490
5.65
N
+a'at!on 7 "oc!a,
"ecur!ty
contr!but!on" A04
2D41
K C?1
8.7<
N 66?
8.AF
N
4!(!dend >6
0D11
K 4C
7.59
N >>
7.58
N
Intere"t 1AA
0D?6
K 204
7.F;
N 100
7.9;
N
4er!(at!(e" 149
0D4?
K ?>
7.5F
N 164
7.D7
N
2ther payab,e" 260
0DCA
K 299
7.69
N 24>
7.<7
N
Accrua," 7
deferred !ncome 104C
>D14
K 116>
9.89
N 920
9.9<
N
+rade 7 other
payab,e" ?1>1
1?D>9
K ?2C>
5A.DD
N 4624
5;.7F
N
+a' ,!ab!,!t!e" >1C
0D9?
K >0?
7.6F
N 20C
7.;D
N
$ro(!"!on" 1C1
0D?1
K 129
7.9D
N 140
7.F8
N
L!ab!,!t!e"
c,a""!f!ed a" he,d
for "a,e 11
0D0>
K >9
7.55
N .
+ota, current
,!ab!,!t!e" A00>
24D01
K CA00
85.D6
N 61?9
88.;7
N
+ota, ,!ab!,!t!e" 209A1
62D94
K 2>21C
DA.F9
N 1C0>?
D8.67
N
+ota, e1u!ty 7
,!ab!,!t!e" >>>>C
100D0
0K >?9C9
577.7
7N 2C12C
577.7
7N
343
344

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BUSI 4609A

September 19, 2014

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