Believe it or not, Sam Adams is kind of small in the world of beer.
Yes, on the continent of craft, it’s the largest country around, exporting about 3 million barrels of beer, almost 2 million more than second-ranked Sierra Nevada. But put that into the context of a globe filled with nuclear powers of AB InBev, SABMiller, Heineken and more, and all of a sudden Sam Adams annual output doesn’t seem so powerful.
It’s not clear cut, given that Sam Adams six-packs and boxes of seasonal releases adorn the shelving at supermarkets and convenience stores across the country, but Boston Lager, Rebel IPA and all their friends only hold 1.3 percent of beer market share. In the grand scheme of the industry, that’s quite a lot, but it’s also roughly the same as Bud Light Platinum.
Which is why Boston Beer has been upping its advertising game. But it may not be as simple as a perceived land grab to take up more space on TV or radio, leading to the annexation of of space in your beer fridge.
Rather, there are hints that the Sam Adams’ marketing strategy simply adheres to co-founder and chairman Jim Koch’s outlook on the beer industry and where Boston Beer sits among it all.
To first get an idea of why Boston Beer has ramped up their marketing, let’s put it on context of their overall financial situation, which is very solid. In this year’s first quarter, dollar sales were up 41.2 percent – more than $173 million. On a whole, the company is expected to achieve revenues of $1 billion at some point in 2015.
That’s freed up cash to focus on advertising, which increased from $26 million in 2012 to a projected $42 million in 2014, a jump of 38 percent.
But why such a big escalation? In 2012, Jim Koch started laying it out:
He also spoke about the craft beer bubble being near a popping point. He thinks the market share could grow to 10 percent by the end of the decade, but he thinks that most stores have reached their limit for all the new breweries. He said there are too many breweries brewing similar beers without adding anything to the market.
Since then, Koch’s opinion has evolved, saying the industry could handle as many as 4,000 more craft brewers, but that doesn’t mean Boston Beer is going quietly into the night. Koch understands the shifting marketplace, especially the continued importance of convenience stores and other “off-premise” shopping locations where craft brands are jockeying for shelf space:
And there are some stores where you will go in that you really can’t see a whole lot more space coming out of that into the cooler. … So I’m starting to see a little bit more warm shelf activity. It’s much easier to make space for craft beer on warm shelves that are already there in the store and carrying something else, but that is less shopped and less desirable space.
… There’s still some running room, but it’s pretty visible that it can’t go on forever at this point.
Obviously, Koch and his Board want to win this land battle, but it’s not as easy as drawing a sword and cutting down competitors. Thank goodness it’s nothing like the ongoing pissing contest between AB InBev and MillerCoors, which both rely on slick advertising to move units over craft options.
In fact, here is where Boston Beer’s unique, almost cooperative business strategy starts to take hold.
Instead of simply coming after competitors – hell, Jim Koch even endorses them – Boston Beer focuses on educating consumers on the benefit of craft beer with what seems like the simple hope that they’ll choose Sam Adams over other brands in the process. More often than not, you’ll find Boston Beer advertising its products by straddling a line of (obviously) hyping their brands, but not necessarily being pushy about it.
For example, take one of the common TV advertising tactics employed by Boston Beer: average drinkers (let’s hope not actors) being surprised with a beer and sharing their thoughts:
It’s smart because when it comes to consumer behavior, word of mouth is arguably the most influential method of advertising success – the same process that small breweries rely on and Big Beer has to avoid by selling a lifestyle. Boston Beer has plenty of money to spend in an effort to portray why they believe their beer is superior to everyone else, but they keep it simple. The company just wants people to drink good beer.
Friend of the Program Sean Creel, co-founder at BrewKeep and beer manager at Abingdon, Maryland’s Friendship Wine & Liquor, met Koch in May. He raved about his interaction with Boston Beer’s chairman and his rapport with other strangers:
All he wanted to do was walk around and talk to people about beer. He was in person exactly the way he presents himself in his TV commercials. And it felt completely genuine. His enthusiasm is contagious. Not only to his customers but also to his employees. I met the new Boston Beer rep for my region yesterday, and I’ve never seen someone so excited and enthusiastic about the company they work for. And it stems back to his encounters with Jim.
Ultimately, it’s about a belief system. It’s about people and the beer culture, not being a cutthroat business in an industry that’s increasingly getting crowded. The end game seems to be pushing more people toward craft, even if it’s not Sam Adams brands:
Given that Boston Beer Company’s margins have stayed relatively stable over the past few years, it seems like the company’s current strategy is to promote awareness of its brands rather than leaping on more immediate profits—an approach that the craft beer segment needs.
Koch knows things are getting tight when it comes to attracting consumers – whether it’s competition from Big Beer or limited shelf space – but he also realizes there is more to beer than the money he can make off it. It’s about promoting his industry.
Why does this all matter? To me, the more I research into Boston Beer, the more I perceive them as relatable to the “little guys.” It just so happens they’re a publicly-traded company with hundreds of millions in revenue.
Instead of using its vast advertising budget to jam Boston Beer products down our throats, the company is more focused on adhering to a gameplan it relied on when it started 30 years ago, focusing on its product and shifting people to a different expectation of beer. Not it may just feel a Frankenstein company at times, with a big, powerful body constructed from all sorts of successful brands, but provided the mind of the Little Brewer That Could.
Marketing Sam Adams and other brands is just the start, though. The real success is company’s its commitment to diversity and innovation – just like that brewer next door.
What are your impressions of Boston Beer and how they market the company and its products?
Posts in this series:
- There’s Craft in Your Beer: A Giant, An Industry and a Definition
- Marketing Boston Beer: When Ad Spending Is About More Than the Ads
- Diversifying Boston Beer: How a Company Mindset Leads Growth, Innovation
- The Road Ahead for Boston Beer: Where They’re Going, They Don’t Need Definitions
“Don’t drink to get drunk. Drink to enjoy life.” — Jack Kerouac