A CASE STUDY OF

“THE BOSTON BEER COMPANY:

POISED FOR GROWTH”

COR JESU COLLEGE

GRADUATE SCHOOL
Sacred Heart Avenue, Digos City

By

Escarlan , Marygel
Estanol, Jerwen
Estrella, Gemar
Famor. Mitchelle

January 2023

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 A CASE STUDY OF
“THE BOSTON BEER COMPANY:
POISED FOR GROWTH”

A Case Study
Presented to
Bro. Ernesto Jr. Quidet

In Partial Fulfillment
Of the Requirements In
BA 939 Strategic Management

By

Escarlan , Marygel
Estanol, Jerwen
Estrella, Gemar
Famor. Mitchelle

January 2023
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 TABLE OF CONTENTS

SECTION PAGE

I. EXECUTIVE SUMMARY ……………………………………………. 4

II. INTRODUCTION …………………………………………………….... 4
III. ANALYSIS ……………………………………………………………… 5
1. Buy Power …………………………………………………………… 5
2. Supply Power ………………………………………………………... 5
3. Threats of New Entrants, Threats of Substitution, ………………… 5-6
and Competitive rivalry
IV. ALTERNATIVES AND DECISION CRITERIA ……………………. 6-7
V. RECOMMENDATIONS AND ACTION PLAN …………………...... 7
1. The advantages on size and supplies power …………………………. 7
VI. CONCLUSION …………………………………………………………. 7
VII. REFERENCES …………………………………………………………. 8

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 I. EXECUTIVE SUMMARY

The Boston Beer Company is the largest craft brewery in the United States. However, in the year
2016, new craft brewers entered the market and the beer industry started its trend of depletion
even in the succeeding years.

In 2017, due to the continuing infiltration of new craft beer and cider category, Boston Beer’s
revenue declined 14 percent according to the third quarter financial results of 2016.

The question remained that if customers had so many options to choose from, why should they
buy Boston Beer? What was so special about it?

To better understand what caused the decline, this report analyzes the craft brewery industry,
environment and the company.

II. INTRODUCTION

Jim Koch started the Boston Beer Company in 1984 along with fellow Harvard MBA graduates
Harry Rubin and Lorenzo Lamadrid. The company began with the sale of the now popular
Samuel Adams Boston Lager, named after the famous American patriot who was known to have
been a brewer himself. The recipe for the lager was passed down from generation to generation
in Koch's family, dating back to the 1860s.

To avoid the high up-front capital costs of starting a brewery, Koch contracted with several
existing breweries to make his beer. This allowed the production of the Boston Lager to grow
quickly from the relatively small quantities Koch could brew himself.

The company went public in 1995, selling Class A common stock to potential investors. The
stock was sold at two different prices, $15 to loyal customers and $20 through an IPO run by
Goldman Sachs.

However, in recent years, the company faces shrinking market share and challenging competition.

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 III. ANALYSIS

In this study, I adopted the Porter’s Five Forces analysis. It offers an overview if the craft beer
industry and explores the industry in the context of buyer power, supplier power, threat of new
entrants, threat of substitution and competitive rivalry.

Buyer Power

The consumption habits of beer drinkers appear to have changed in recent years. The beer
industry as a whole was declining gradually over the years.

Anheuser-Busch Inbev and MillerCoors, LLC, accounted for over 80 percent of the beer market
in the United States. They had caught on the current trend in the beer industry toward higher-
quality beers to its loyal customers. These companies also began to purchase smaller craft
breweries and they used their massive marketing budgets to tell people about their craft beers.

Many aficionados of craft breweries already believed that the Boston Beer Company was more
concerned with making money than with providing quality beer and educating the public on craft
beers.

Supply Power

While expansion and growth were more commonly deemed positive attributes, the Boston Beer
Company was aware of the many possible risks in the growth of its business. Its reliance on
independent distributors, a mishap in its relationship with major distributors could lead to
complications within its supply chain. The Boston Beer Company also depended on foreign
suppliers of raw material ingredients for its beer. An unexpected shortage of a crop might lead to
a drop in production volume. In effect, the image of the company would diminish if its products
were not available to loyal fans whose enjoyment of the brand relied on the wide accessibility of
its craft beer. With the surge of an enormous number of other craft-beer choices, customers had
many options to choose from.

Threats of New Entrants, Threats of Substitution, and Competitive rivalry

According to the Boston Beer Company, there were approximately 770 craft breweries that
shipped their product domestically, up from only 420 a decade earlier. There were also an

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estimated 800 craft breweries in the planning stage, expecting to be operational within the next
two to three years. Boston Beer Company assumed that 300 of those 800 would be shipping
breweries (i.e., breweries that sell their product beyond their local market). Thus, within the next
few years, Samuel Adams beer would be competing with over 1,000 other craft breweries around
the country.

IV. ALTERNATIVES AND DECISIONS

For Boston Beer Company, the continued infiltration of several brewing companies posed threats
that forces them to deal with the possibility of increased threats for loss.

During 2017, several management changes had been made including the hiring of a new Chief
Financial Officer, Chief Marketing Officer, and senior supply chain executive. However, the
departure of the main leadership of the company diminished confidence of shareholders and
investors about future of the company.

The Company also launched two new beers, however, neither of the new beers achieved the
expected response from consumers. Expanded capacity to increase production has added to the
complexity of the company’s product development, brewing, packaging, marketing and selling
process.

In trying to improve its supply chain and distribution it cost the company missed acquisition
opportunities taken by its competitors.

Lastly, although large breweries had power over the independent distributors because they
accounted for most of their business and could influence the distributors that make it difficult for
craft breweries to sell their product, for Boston Beer Company, because of its size, it had fewer
problems with distributors than its smaller competitors did. This was good for the Company but
maybe bad for its image. One Company said that the Boston Beer Company was becoming too
large to be considered a craft brewery and that its substantial connections with distributors
proved it.

Clearly, the Boston Beer Company was facing a difficult competitive environment. It faced
direct competition from both larger and smaller breweries and from premium imported beers.
Some of the smaller craft breweries were growing quickly and wanted to be larger than the
Boston Beer Company. Other craft breweries felt that the Boston Beer Company was too large
already. Thus, while further growth could negatively affect the company’s status as a craft

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brewery and the perception if its customers. The company had to pay close attention to
maintaining its image among the growing customer base of premium-beer drinkers.

V. RECOMMENDATIONS AND ACTION PLAN

The advantages on size and supplies power

Being the largest craft brewer, Boston Beer enjoys brand loyalty from consumer due to its first
mover strategy. Should Boston Beer focuses its resources in craft beer, it may be able to achieve
net higher operational efficiency to larger breweries, which spread their resources across a wider
range of products.

Boston Beer should increase its number of raw materials suppliers especially for the barley and
hops supply since they contribute significantly to the total cost of raw materials. This will
diversify risk on the increase of cost of goods sold and will ensue that there will be a decrease in
shortages of raw materials as more alternatives will be available. Increasing leverage can also
bring about a higher return in equity, albeit increasing the riskness of a company.

VI. CONCLUSION

There are plenty of opportunities for craft beer companies to expand in the short term to gain
profitability and growth. Although the long term effect would be different as the increasingly
fierce competition and the saturated market of craft brewing segment hiders the long term growth
of the craft beer companies.

With a good total asset turnover as a result of efficient use of assets and with the craft beer
industry so reliant on assets for its brewing of beer, Boston Beer may significantly grow for more
years. However, there are inherent risks that remain for Boston to mitigate. The rising cost of
goods sold is a pertinent issue that Boston Beer has to resolve.

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 VII. REFERENCES
Campas, et. al. (2019), The Boston Beer Company: A Case Study

Courtney, et. al. (2017), The Boston Beer Company Poised for Growth Case Study

Moshe, et. al. (2015), Case Analysis: Boston Beer Company

Ng, et. Al. (2019), The Boston Beer Company: The Next Big Thing Brewing

Yanjing Wang (2011), The Boston Beer Company, Inc. Case Analysis,