The Boston Beer Company Case Analysis

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Competitive Environmental Analysis

What is competitive advantage? By definition, competitive advantage is “a superiority gained by an organization when it can provide the same value as its competitors, but at a lower price, or can charge higher prices by providing greater value through differentiation”. The Boston Beer Company is the largest craft brewery in the United States. The brewery had revenue of over $500 million in 2011 and sold over 2 million barrels of beer, so why are they concerned about their competitive advantage? It would seem apparent with the size of the brewery, that the company had all of the competitive advantages in the market, but this is far from the truth. Although The Boston Beer Company is a craft brewery it competes within the premium beer industry, which includes not only craft beers but also premium-imported beers. Although the Boston Beer Company's size dominates the market, the companies who brew premium and craft beer have similar prices. The Large size of the Boston Beer Company leaves the company in a gray area. The Brewers Association defines a craft brewery as brewing less than six million barrels per year and being less than 25 percent owned or controlled by another economic interest. The Boston Beer Company is continuously growing, and with its’ growth, the brewery could potentially increase its volume output to more than 6 million barrels per year, thus losing its craft brewery status. The Boston Beer Company’s continuous growth isolates the company from other craft breweries. It is said the company is not focused on increasing the quality of the beer, and they are not providing education to the public on craft beers. This lack of concern of the current trends in the beer industry will only leave The Boston Beer Company lagging behind if they continue to grow. The company has to change their strategy in order to gain more competitive advantage in the beer industry.

Internal Company Analysis

The Boston Beer Company is a brewery who specialized in craft beers. They are a leader in the premium beer market. The company’s income statement is a strong one based off information provided in the book and filing from the company to the SEC. From Boston Beer SEC filing, in fiscal 2013 they sold approximately 3.4 million barrels of its proprietary products. Also from the SEC filing during 2013, the Company sold over fifty beers under the Samuel Adams® or the Sam Adams® brand names, ten flavored malt beverages under the Twisted Tea® brand name, eight hard cider beverages under the Angry Orchard ® brand name, and over twenty beers under four of its Alchemy & Science subsidiary’s brand names. The Company sells its products to approximately 350 wholesalers throughout the United States and to a network of wholesalers; importers or other agencies throughout the foreign markets. The Boston Beer company has about 1,120 employees presently. The Company uses many forms of media to advertise primarily keeping to the basics which include television, radio, billboards and print. The Company has a philanthropic program called “Samuel Adams Brewing the American Dream” which helps small business owners and microbreweries through the hard start-up years. As of 2013, the company has made over $2.8 million in loans to around 310 small business owners and craft brewers. The company’s revenues from 2007 to 2013 were up $310 million while operating cost went up only $120 million during the same time. (“Boston Beer Company SEC File”, 2014) The net income was also up $77 million and the stock price is $304.23 up from $13 in 1995 at its initial public offering. The brewing competition is very fierce with Anheuser-Busch and Miller Coors holding over 90 % of market share for all United States domestic beer production. The company competes for the other 10% with companies like Heineken, Sierra Nevada brewing, New Belgium brewing and other smaller up and coming breweries. The company does sell its premium beer at a higher cost than other companies based on the “high-quality” of its product. Overall Boston Beer Company is in a tough position as a middle player in both the small craft beer market and the bigger premium market held by the Anheuser-Busch and Miller Coors. (“Boston Beer Company SEC File”, 2014)

Strengths

How does The Boston Beer Company stand out above the crowd? The Boston Beer Company is ranked twenty-first for America's best small companies and eighty-second for the most innovative growth companies (Forbes.com, n.d). In existence for over three decades, the Boston Beer Company is the largest selling craft beer company in America. The Boston Beer Company has the advantage of experience, which other companies cannot compare to. The Boston Beer Company has broadened its market over the years by offering more than just your typical craft beer. The Boston Beer Company offers nine different categories of beers including; the Boston Lager beer, the Seasonal beer, the Rebel Family beer, the Brewmaster's beer, the Sam Adams Light beer, the Barrel Room Collection beer, the Limited Release beers, the Small Batches beer, and the Beers of Summer. Each category of beer has several different beers within them. With so many choices for customers, it is not surprising that the company has won more awards at international beer tasting competitions in the last five years than any other brewery in the world (Bostonbeer.com, n.d., para. 1). Innovation keeps the Boston Beer Company on top. The Boston Beer Company pioneered the extreme beer movement, which challenges drinkers’ perceptions of what beer can be. Extreme beer can be a beer with alcohol content that rivals spirits, beers aged in bourbon or even beers brewed with chocolate (extreme beer, 2003). The possibilities of the extreme beer movement are endless. At the end of the 4th quarter of 2014, the Boston Beer Company’s net revenue was 217.8 million, which is a 6% increase over the same period in 2013 (Boston Beer 4th Quarter Results, 2014, para. 1). If the Boston Beer Company continues to build on its strengths as a business they will be a secure business for many years to come.

Weaknesses

The Boston Beer Company has a couple of weaknesses that affect them. First, in 2012 the best beer, best brewery, and best portfolio lists came out that showed good and bad things for the company. While the Russian River Pliny the Elder beer was rated number one flavor, the Samuel Adams Boston Lager was rated a lower 31 on the list. They also were listed at 11th place on the best brewery list. In addition to this, even though it is the largest craft brewery in the United States, it only holds a mere 1 percent stake in the