Trouble for Sam Adams’ Flagships? Three Charts Explain

Over on Good Beer Hunting, I wrote this week about Boston Beer’s latest financial report and some of its implications. Of note, I gathered some IRI data to help show changes in company sales structure that proved to be rather eye opening.

Among the variety of findings, this one stood out the most: in IRI-tracked spaces (grocery, convenience, big box, etc.) the Twisted Tea family of brands surpassed the collection of Sam Adams brands in year-to-date dollar sales. In fact, it’s been a long time coming.

Through the first 39 weeks of 2017, Twisted Tea ($199,353,081) has outsold Sam Adams ($197,857,496) by $1.5 million. To put this in perspective, Sam Adams had sold $76.2 million more through the same time in 2016.

Part of the challenge has been the decreased sales of flagship brand Boston Lager as well as the challenge of keeping interest in Rebel IPA. Both are still selling *millions* worth of six and 12-packs, but Boston Beer is a publicly traded company and these kinds of things get a bit awkward when success can’t be sustained.

Note this is *just* for packaged Boston Lager tracked through IRI stores off-premise, and this beer’s significant draft footprint most certainly buoys its decline seen here.

The same applies for Rebel IPA, which had the most profitable debut of a craft beer ever in 2014, and even built on that in 2015, and has declined since.

An odd time for a company that has “beer” in its name when its flavored malt beverages are really the ones showing the most energy at the moment. Maybe a New England IPA (really) and a rose (wine)-inspired cider (yes, really) will be a solution in 2018?

You can find more details in this story on Good Beer Hunting.

Bryan Roth
“Don’t drink to get drunk. Drink to enjoy life.” — Jack Kerouac

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What’s Happening to Sam Adams?

sam adams logo eye

As every day goes by and yet another brewery opens, things keep getting interesting for one of the stalwarts of the industry.

By now, you may have heard about the rough go Boston Beer (read: Sam Adams and brands) had over the first four months of 2016. Shipments are down, projections are off and that stock price took a Humpty Dumpty like tumble last week. But really, it’s all activity that was expected. Going back to 2014, Boston Beer leadership was candid that they “expect the competitive environment to be tougher” across beer.

Here we are, with that challenge front and center. Competition not just coming from the growing behemoth of AB InBev, but from the rapidly expanding craft beer base, increasingly comprised of the local and regional breweries that play such a pivotal role in customer choices. People want “craft” in their goods these days and beer is the place to find it. One Nielsen poll showed 56 percent of respondents see craft as a “small, independent company” while a Harris poll indicated themes of “handmade/handcrafted” and “limited edition” were the most likely sign of quality.

At a time when consumers are looking for these kinds of connections across all kinds of goods, it’s no wonder Boston Beer is simply trying to tread water. From the company’s own admission of increased difficulty with distribution to drinkers’ localized tendencies, it’s only getting harder for Boston Beer.

Strangest of all, could these changes officially spell the end of Boston Beer as “craft”?

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The Defining Reason to Talk About Sam Adams Not Being ‘Craft’

Sam-Adams-craft beer

If you’re deep in the weeds of today’s industry – or if you read my recent Beer Money series – you’ve no doubt heard about the Fair BEER and Small BREW acts, opposing legislation that have been geared toward presenting tax breaks to the beer industry. The Small BREW Act was created to address only breweries producing less than 6 million barrels of beer a year, while the Fair BEER Act would benefit all brewers, including Big Boys like Anheuser-Busch, MillerCoors and Heineken.

Those attempts are now more or less scrapped in lieu of a bill known as the Craft Beverage Modernization and Tax Reform Act, which is jointly endorsed by the Brewers Association (“small guys”) and Beer Institute (all of beer) who were previously on opposite sides of the spectrum.

This new bill – with bipartisan support from beer trade organizations, just like Congress – does have one hiccup, according to this piece: it might push Boston Beer, maker of Sam Adams, out of the “craft” beer club due to tax relief tied to production limits of 6 million barrels:

…Boston Beer’s production in 2009 was roughly half of its 2014 total. That’s an average of more than 20% growth a year. If that pace continues, Boston Beer will be over the 6 million bar in less than three years and, for tax purposes, would be considered a macro.

But here’s the thing. None of these bills are likely to pass, so we don’t need to worry about definitions and labels – yet.

Because Boston Beer could still lose its “craft” definition, just not for the reason everyone’s talking about.

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The Road Ahead for Boston Beer: Where They’re Going, They Don’t Need Definitions

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Over the last few posts, we’ve tried to take a deep dive into Boston Beer to better grasp their business practices and more important, highlight how their decisions are influenced by a beer-loving culture established by chairman Jim Koch.

Depending on your level of beer nerdom – *points at self* – there may be a question underlying all the business talk and expansion and product creation: is Boston Beer too big to be craft beer?

My answer: who cares?

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Diversifying Boston Beer: How a Company Mindset Leads Growth, Innovation

sam lineup-boston beer

“They all want to grow, but the more they grow the less crafty they are,” he said. “They are getting fairly large and they are getting into each other’s space. They are having a hard time defining themselves as craft brewers because of their size.”
Pete Coors

You may recall the above foolishness of the MillerCoors chairman in May, when he made some rather wrong misguided surprising comments about the beer industry – especially the craft segment. Throughout Coors’ gripes, it was clear he has a disconnect from the state of the industry, but especially a misunderstanding of his main competitors in craft.

While a definition of “craft beer” may be bestowed upon companies like Boston Beer, there is little difficulty for these breweries to adhere to their own roots and belief systems. Especially when product diversification continues to play a pivotal role in daily operations.

Today’s plight of breweries isn’t just making good beer, it’s making a variety of beer that is also good.

When it comes to marketing and production, a brewery may focus on the biggest demographic of craft beer drinkers: Millennials. If the largest group of potential customers takes a laissez-faire attitude toward brand loyalty, a brewer needs to focus on variety:

Craft beers appear to be the biggest beneficiaries of that adventurous character. Julia Herz, craft beer program director for the Brewers Association, says 46% of new craft beer drinkers are Millennials. Even when craft beer drinkers do “commit” to a brand, that “adventurous” character seems to mean they’re still interested in variety.

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Jim Koch and his … variety.

But this post is not about Millennials. It’s about Boston Beer. If the idea of new discovery is pivotal to your brewery’s fan base – increasingly so for all demographics – what are you supposed to do when you’re a successful company nearing $1 billion in annual revenue?

You either double-down on what you have, stay satisfied and minimize your overall potential or you recognize the opportunity to grow, innovate and continue to push. Which one do you suspect Boston Beer chariman Jim Koch would learn toward?

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