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Copy of Boston Beer Company

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by

Marcos Ramirez

on 20 April 2013

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Transcript of Copy of Boston Beer Company

Boston Beer Company Presented by: Bryan Hodge, Chad Delia,
Tia Beckwith, Pat Hamel, Melviz Lugo,
Tim Scheuerman Mission Statement “To seek long-term profitable growth by offering the highest quality products to the U.S. beer drinker.” Corporate Culture "You've got to have passion for beer, a good palette, you've got to be able to blend the science of beer with the art of what makes a great beer.” – Jim Koch "I'm going to go the whole rest of my life, and never have to drink anything but good beer." –Jim Koch Jim Koch Is a 6th generation brewer Was a Harvard law student Found a family recipe from the 1800's
for Louis Koch Lager He brewed his first batch in his
kitchen in 1984 Introduction to Boston Beer Company - Craft brewing company that produces Samuel Adams beer and other alcoholic beverages such as Twisted Tea and Angry Orchard. - Headquarters are in Boston, MA with breweries also located in Latrobe, PA and Cincinnati, OH. - Largest craft brewer in America History - Boston Beer Company was created in 1985, and Samuel Adams Boston Lager made its debut. - Started with 2 employees; Jim Koch, and Rhonda Kallman - By the end of 1985 they produced 500 barrels of beer and started distributing over state lines to Connecticut. - Over the next 3 years they increased production to over 36,000 barrels and they were distributing across the country Growth - In 1995 they went public selling shares of Class A common stock - Was and still is controlled by Koch because he owns 100% of the Class B common stocks - Over the next 15 years Koch and Boston Beer Co. worked to perfect different flavors and varieties to create a high standard of quality beers. Today - Over 900 employees, and their beer is available in all 50 states and 20 foreign countries - Over 50 different beer styles and flavors - They're on the brink of losing their craft beer status Industry - The industry is separated into 2 different categories; Mainstream commodity breweries, and a sub industry of craft brewers. - Boston Beer Co. is the largest producer in the craft brewing industry. Craft Brewing - Industry made $10.2 billion in 2012 - 409 new craft breweries were created in 2012. - United States beer sales went up 0.9% in volume. Driving Forces - A company needs a strong brand name. - Quality control and price matching are important to consumers. - Study consumer behavior to know what customers want. Porters Five Forces Threat of Substitutes: - Cheaper beer is easily available
- Craft beers have started to take over American culture and consumers
- Diversification of product can help lower the threat of substitutes
- American consumers are starting to search for healthier options Threat of Entry:
- Need expertise and connections to get into the market
- Low capital cost needed
- Craft beer industry can be easy to break into, yet hard to stay in long term
- Consumers are loyal to big name brewing companies, making it hard to gain market share
- Larger beer companies are consistently trying to absorb smaller companies Power of Suppliers:
- Many producers with no alternative markets
- Price is fairly stable and varies rarely
- Corporate buyers can choose which brand and product they keep in their stock
- High demand for beer, but even higher supply Power of Buyers:
- Consumers can search for lowest price within the quality that they want
- If a small buyer stops purchasing one brand of beer, it will not affect a brand
- Corporate buyers can control what is stocked on their shelves
- Bars and corporate buyers can choose from a wide variety of big beer brands and craft brews very easily
- Quality has become a very important thing to consumers Intensity of Rivalry:
- Strong brand loyalty amongst consumers
- Competition on local, national, and international levels
- Imports are becoming very popular amongst US consumers
- Markets controlled by big name brewers
- Consumers are divided between beer, spirits, and wines Degrees of Industry - Degree of Concentration in the craft beer market is very high
- The overall beer industry is concentrated around major commodity beer producers - Degree of vertical integration is moderate
- There are small opportunities for craft breweries to increase in size or be absorbed into a larger company - Degree of technological innovation is small
- With exceptions of innovations in flavor and diversification of product lines Competitive Benchmark Analysis - Boston Beer Company is the largest craft brewer in America
- They have 21% of the craft beer market and 1% of the overall beer market - Sierra Nevada is the 2nd strongest craft brewery
- Anheuser Busch and Millercoors are the largest competitors in the overall market Anheuser Busch - Just bought Inbev
- Since the merger they have been on a regiment of cutting costs and jobs
- The creation of bud light platinum Millercoors - Creation of Millercoors was to help Molson Coors and SAB Miller compete with Anheuser Busch
- Millercoors is looking to take advantage of AB recent cost cutting Product/ Prices - 12 pack Sierra Nevada Pale Ale- $12.99
- 12 pack Sam Adams Boston Lager- $13.49
- 12 pack Miller Lt, Coors Lt, and Bud Lt- $8.99 Direct Competition - Sierra Nevada Pale Ale is the number 1 selling craft beer
- As a company they are second in market share Indirect Competition - AB and Millercoors offer a low cost alternative
- Boston Beer is directed towards a high quality drinker where AB and MC are looking to enter into any market they can Market Analysis - Average age of target market for the big companies is 21-30 years old
- Boston Beer's target market is 30-35 year old Caucasian male with a higher salary Size and Growth of Market - Beer market is a portion of the overall alcoholic beverage market
- The market size is stable because when people stop drinking beer more people are coming of age to drink
- The market is slowly growing Customer Needs - Distinguished drinkers look for quality, freshness, and a flavor that appeals to their taste
- The price must be right Distribution Channels - Estimated over 6 million points of sale world wide
- Supermarkets have become more popular amongst beer drinkers Mark-Ups - Markets and gas stations mark-up between 25 and 30 percent
- Bars and Pubs mark-ups were close to 300 percent P.E.S.T. Analysis Political Economical Social Technological International Trends - Heineken is the largest competitor from overseas
- Boston Beer is looking to expand into larger overseas markets SWOT Analysis Opportunities
- Growing demand for craft beer in the US
- Focus on Asia Pacific beer market
- Culture Revolution “Beer is where wine was 25 years ago”
- Growing Hispanic population = marketing for new product types
- Largest micro-brewery in US, allows for dictating of prices
- Expansion into other countries, notably Germany
- Twisted Tea and Hard Ciders add to diversification in the market Threats
- Growing societal pressure against alcohol
- Booming trade in counterfeit alcohol
- Drinks with health benefits are increasing in demand
- A slowdown in US economy is having a negative impact across drink sector
- Target of larger companies looking to grow inorganically
- New entrants from “Better Beer” market, increase need for product differentiation
- Financial performance dependent on market conditions
- Second dip in market could greatly hurt SAM
- If larger beer companies become more successful with their craft beers, those companies can steal market share from SAM
- Trend of consumers switching to wines and spirits from premium domestic brews
- An increase in barrel production may lead to loss of “craft beer” title Analysis of Boston Beer Co. Financial Performance Balance Sheet Summary
*Value in Millions
Dec-12 Dec-11 Dec-10 Dec-09 Dec-08
Cash 74.46 49.45 48.97 55.48 9.07
Total Current Assets 162.34 125.72 112 113.03 68.85
Total Assets 359.48 272.49 258.53 262.94 219.76
Current Liabilities 88.89 67.05 72.2 73.79 67.06
Long Term Debt 0.57 0 0 0 0
Total Equity 245.09 184.75 165.59 173.16 140.03 Income Statement Summary
*Value in Millions
Dec-12 Dec-11 Dec-10 Dec-09 Dec-08
Total Revenue 580.22 513 463.8 415.05 398.4
Total Gross Profit 315.21 284.57 256.33 213.82 183.89
Total Operating Expense 484.64 409.35 382.62 360.78 384.34
Operating Income 95.58 103.66 81.18 54.27 14.06
Net Income 59.47 66.06 50.14 31.12 8.09 SWOT Analysis Strengths:
- Strong market position/ robust brand portfolio
- Effective communication
- US offers one of largest soft an alcoholic drink markets
- Demand for alcohol will not fall due to high per capita income levels
- US consumers open to try product innovations
- Craft beer market is fastest growing beer market
- Spending $8-12 mil on advertising to increase brand name strength
- Freshest beer program
- Alchemy and science is the research and development subsidiary that aims to expand flavors and techniques
- 99% of Boston Beers assets are tangible and contribute directly to revenue
- Uses very little debt to finance operations highest debt to asset ratio has been around 31%
- Don’t use long term debt
- Broad portfolio of products ranging from beers to hard ciders Weaknesses:
- Lack of scale vs. behemoths
- Freshest beer program (2010) delay operating results
- Slow increase for volume sales over past year
- Premiumisation put on hold due to wider economic situations
- Not ready to go international yet
- Do not pay dividends to shareholders
- Competitive industry and Sub-industries
- Competitors offer similar products and prices to same customer groups
- Miller coors, anheuser busch control 90% of market
- Boston beer co. is better beer sub-industry, meaning competing with imports THE END TOWS Matrix Key Strategic Issues Economic
- Increase in hop price
- Cut beer taxes (Could kill term "craft beer")
- Currency fluctuation can cause losses on contracts Industry
- Lacks the scale to complete effectively with its competitors in the beverage industry
-Increase amount of smaller brewers
- Demand for beer in UK and Europe remain fairly static, but in China and the rest of Asia has accelerated
- Growing societal pressure against alcoholic beverages
- Government regulations concerning purchasing and distribution Competitor
- Increase competition from the wine and spirits category
- Larger beer companies
- Domestic craft
- Imported
- Close competition due to pricing and specific target Industry Life Cycle Recommendations Boston Beer Company can revamp their mission statement Expand more westward in the US Grow Stronger Internationally Partner up with a German brewing company Issue more stock
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