15 March 2011

Cheers to the great american startup

The American beer industry has long been known for its deep roots and rich history. From the Midwest boom years to the more recent ubiqitous TV brand building, the industry has long had visibility in most households. Despite all of this, it's ironic that in this current day, the largest American beer company is only 25 years old, founded by a Harvard MBA, and runs like a startup.

Boston Beer Company's (aka Sam Adams) roots dates back to an 1860s family recipe used in its most popular Boston Lager. It was founded by Jim Koch in 1984 with the simple goal of bringing quality craft brew to the American public. At the time, microbrews were non-existent, so it was virtually impossible for him to catch the attention of distributors and bar owners; Koch literally brewed the first batches at home and drove bar to bar with samples trying to convince establishments to serve the local beer on tap. Growing first in the Boston area, it gained national prominence by winning the top spot in the Great American Beer Festival just a few years later. The rest is history - it amassed $500M of revenue in 2010.

Despite having less than 1% of the US market, Sam Adams is the largest remaining American brewer. Budweiser sold to Inbev (Brazil/Belgium), Miller to SAB (South Africa), Coors to Molston (Canada). As these players commoditize the industry by getting bigger and bigger, Sam Adams takes the exact opposite approach. It remains very localized, differentiatied, independent, and driven by passion for quality. Annual trips to Germany are made for its premium raw materials; Sam Adams kept production local and acquired the brewery locations to ensure consistency (95% of the beer is brewed in its company-owned breweries in the US). Koch owns 100% of the voting stock and has somehow built a strong foundation in the midst of significant pressure from industry consolidation.

Sam Adams revolutionized the industry by its success. When Koch started, there were no US craft breweries. Now there are roughly 1600, representing almost 10% of the market. They frankly put quality beer on the map - No longer were tastings and premium ingredients reserved for wine aficianados. Koch also supports the industry despite potential negative impacts to his company. It sold 20,000 pounds of hops to competitive craft brewers at cost during a 2008 shortage; it funds new brewers (and other new businesses) through a partnership with a microfinance organization.

Its refreshing to see a successful American startup stay true to its roots despite its rapid growth. Sam Adams has successfully created a new concept in the midst of mass commoditization, led the industry in innovative products, remained independent, and kept production here in the US. So next time you are in an airport, have a cold Boston Lager in appreciation for the great American startup; its a shame that Obama chose a foreign beer (Bud) at his reconciliation "beer summit."

1 comment:

  1. All good, but it's too damn hoppy. Franconia is much better, as well as being a good Texas brew.