A week from today, leadership overseeing the Boston Beer suite of brands – most notably Samuel Adams beer – will present their Q1 earnings report. If recent hints by founder Jim Koch are any indication, there’s reason to suspect (conspiratorially or not) that it may not be all sunshine and roses.
The last few years have been tough for Boston Beer. Declining interest across a variety of brands accounted for a 7% drop in dollar sales for the Sam Adams portfolio in 2016, sentiment that has only continued into this year.
Through nearly the first quarter of 2017, Boston Lager dollar sales dropped around 8% compared to the same timeframe last year. Rebel, the IPA that was supposed to reinvigorate interest in the brand, got remade to start this year. It’s down 20% in dollar sales so far in grocery, convenience and other bread-and-butter stores for the company.
I, like many others, see Sam Adams as the brand that launched a lifetime of beer geekdom. But things are changing rapidly for the company. For longtime devotees, it’s not much for better as it is worse.
According to figures shared by Beer Marketers Insights at the recent Craft Brewers Conference, Nielsen is tracking the entire Sam Adams franchise as down 20% during the first few months of 2017. Revenues and operating income are declining. Boston Beer’s stock price continues to tread water, hovering around a three-year low in recent weeks.
These changes come at a time in which AB InBev, which now owns Vienna-lager flagships from Devils Backbone and Blue Point, continues to encroach in territory, shelf space and consumers’ minds for Sam Adam’s longtime #1, Boston Lager. Even seasonal beers, once a core area of interest for Sam Adams, has had it rough, with reports of its Hopscape (hoppy wheat ale) seasonal release dragging down sales. In 2015 and 2016, Sam Adams’ main seasonal SKU was down double digits compared to the year prior, including nearly 16% in 2016 vs. 2015.
The trick to keep things from capsizing has been differentiation. Outside of beer, Angry Orchard and Twisted Tea have long helped to buoy Boston Beer’s non-beer sales, and last year, the company jumped into the suddenly popular hard seltzer market, releasing Truly Spiked & Sparkling with a national release.
What this has done to beer production, however, threatens a core credo of the craft industry.
Boston Beer, a pillar to “craft,” continues its slide toward no longer maintaining that designation. According to Brewers Association definitions, a “craft” brewer “has a majority of its total beverage alcohol volume” produced in beer. According to estimates, here’s how beer has fared as part of the Boston Beer portfolio alongside cider and flavored malt beverages in the last seven years:
| % of barrels as beer production | |
| 2010 | 88.9 |
| 2011 | 84.8 |
| 2012 | 78.9 |
| 2013 | 68.3 |
| 2014 | 62.3 |
| 2015 | 59.1 |
| 2016 | 57.2 |
If trajectory holds, it’s ironic that we may hit 2020 when Boston Beer is hovering around that majority beer production mark, potentially losing “craft” status, at the same time the Brewers Association was once hoping to achieve 20-share of the beer market.
Since Boston Beer’s beer production hit a peak in 2014 with an estimated 2.55 million barrels, overall beer volume has been declining. In 2017, things may be closer to production we saw in 2012, when 2.15 million barrels were made. As other brands grow, the beer percentage continues to decline. It’s part of company leadership’s acknowledgement that funding and attention has to shift toward “highest growth initiatives” that simply are no longer just beer.
And, most important, the competition Sam Adams is now facing isn’t just AB InBev or MillerCoors. It’s from all the small upstarts Jim Koch inspired through his 30 years of success. “Perhaps there is no room for the middle ground,” was something posed on the most recent episode of Jeff Alworth and Patrick Emerson’s Beervana podcast. Emerson, an economics professor at Oregon State University, ruminated:
On one end, you have the big, macro brewers who can brew perfectly good beer, but just at massive scale which gives them enormous cost advantage, and they can brew decent versions of lots of these beers. Then on the other end, you’ve got this incredibly robust, but very local, very … nimble craft beer scene, so you can get lots of stuff that’s local, that’s relevant to you, that’s constantly changing – new flavors, new varieties – and beer drinkers are willing, potentially, to pay a premium for that … Then for the macro beer drinkers they’re excited about a price point that’s very manageable.
In this instance, Boston Beer finds itself getting “beat up” by the robust craft beer scene, Emerson said, noting that Sam Adams, along with other breweries like Sierra Nevada, have turned to flagship variants of Pale Ale (Sidecar Orange Pale Ale) or Rebel IPA (Grapefruit) as a reactionary way to try and gain interest once again.
“These beers suggest what they’re trying to do is stay relevant in the craft beer market rather than chisel away at the macro brew,” he said. “Early on it was all a war about wedging your way into the macro brew world … now its all about staving off competition from below.”
Life comes at you fast.
Naturally, the question is, “what comes next?” Well, there’s that earnings call on April 26. On April 27, Jim Koch is the keynote at The Beverage Forum, where he’ll “address what he and other brewers in the market are doing to bring those growth numbers to where they were as well as what the future holds for craft beer in the America.” There was also that recent NYT op-ed. Jim Koch is a busy man.
BUT. As a fan of Sam Adams (really, they do make good beer that changes beer-focused lives), I understand that Koch deserves to be heard. He’s a goddamned American hero, apparently, but a public tour like this seems more aligned with a book release, like the one from Koch last year, not just for fun. Any investigation on my part is as much pure curiosity as scene setting for what may come next.
And what that is … we’ll get a better idea in a week.
Bryan Roth
“Don’t drink to get drunk. Drink to enjoy life.” — Jack Kerouac
This Is Why I'm Drunk 
Good article Bryan, well-argued. But I think BBC could do much better with a trimmed and focused beer range. The affiliated Coney Island brewery’s Mermaid Pilsner has tremendous potential. In simple gastronomical terms, it’s a much better beer than Boston Lager, IMO.
Stock Ale is one of the best in the range but hard to find. The Baltic porter of some years ago, really good. Rebel IPA was a disappointment IMO, I’d discard it, same for Rebel Rouser. The names are great but the beers didn’t live up to them.
I’d focus on five-to-seven beers, stop the seasonal program, and issue occasional one-offs from the JP facility in Boston.
They may decide to focus more on the non-beer side going forward, if so fine and I don’t see that it matters if they remain craft or not. Good beer is what matters and is how craft brewing started, for which BBC and Jim Koch deserve much praise. But the company needs to focus more on the actual palate of its beers, that is the key to regaining ground, the rest is more window dressing.
Gary
The “soul searching” you’re talking about is something that has come up repeatedly in conversations on this topic. “Who is Sam Adams?” is a question that needs to be answered, especially in the modern, industry context.
Boston Beer is dying. Good Employees are being forced to leave because they don’t pay; they have inept management in place with turnovers in just about all senior executive management positions. Koch has been selling his shares as have been other and with the upcoming depeeture of Roper coming, the ship is tanking.
Alas Koch has an ego and he created this mess by helping along his untold craft beer competitors although noble, Jim boy did you ever think you would actually outduel The big boys, AB ImBev or Miller?
Naught Jim plus your expanding the craft beer market competition killed your market share.
Newbies like start ups and variety, short and simple; BB will hold it original old base clients because they have now become our forefathers.
Your done Jim; no more creations and expansions! Your venture into sparkling water failed; too stiff is the competition.
Your young employees are flocking out the door because you don’t want to pay them.
The hip cool chick gig or working at BB is gone because your inadequate and unprofessional supervisory staff s—.
Talent breeds success and your failing there Jim! It is OK. Your creedo of it not being about the money is BS.
Your rich; in the 1 percent area; yes time for another book. You were told by savy accountants and estate planners what to do, you want to preserve your legacy so just do it. An ESOP is coming or the draconian ending you did not want, selling the last American brewed and owned brand.
Do the later Jim because your legacy won’t last long with the ESOP with the incompetent collusion based fools you now rely on to run the place…..
Lights out Jim. Start singing the swan song…..we are relieved because our vested interest although forced out by unscrupulous supervisors was a blessing in hindsight. Yes, a law suit would be fun by watching the ship sink will be more “fun” shall I say.
Has Sam Adams ever tried to open tap rooms across the country? Besides being the places where breweries make the best margins, they also build brand loyalty and create visibility. I could see BJ’s-style or Karl Strauss-style “Sam Adams Brew Pubs” being successful in a lot of markets–both as stand alone ventures and as ways to draw more people to the beer again. Jim Koch, if you are reading this, give me a call. 😉
This could violate certain “tied house” rules at the federal and state level, depending on how the deal is structured. Karl Strauss can do it in California, because the state allows you to have 6 taproom locations (assuming some beer is brewed there) in addition to the main production facility. So yes, Sam Adams could do tap rooms around the country, but would create legal hurdles in states with more restrictive laws.
I can’t disagree with you and the fact that Koch / Sam Adams really kicked off beer-geekery in this country, but I do believe that Sam Adams has grown utterly stagnant, despite all efforts to the contrary. I might be one of the few craft beer enthusiasts that I know who’d admit that I actually think Boston Lager is pretty damn good. Like, I’d drink four or five of those guys in the morning on a sunny, slightly-too-warm kind of day… or after mowing the lawn… or with a hearty stew, for example. It’s pretty unique and refreshing. To my mind, they’d do better to focus on that, eliminate most of the peripheral stuff (save for a few obligatory brews… maybe Rebel does SOMETHING for some IPA lover out there), and keep with their non-beer brands (I’m speaking purely of economic success, not artistic).
For my money, Rebel and a number of other experiments that I’ve taken past gambles on have, well, pretty much sucked total ass. No success whatsoever in the experiment department. To my mind, there was one winter ale, probably something akin to a Belgian (it boasted coriander seed and orange peel, so sounds like it) that actually came pretty close to hitting the mark it was aiming for. Otherwise, Koch should probably keep a lower profile and stick to financial success. Just my two cents worth.
… Sam Adams lost their identity in the bottom of their first barrel of Utopias…
Scratch that… they officially lost it in the first 10 seconds of “Enjoy the Colors of Summer.” It’s like watching a corporate version of Jerry in slow-mo already out over his skis as he approaches the rock- faced precipice…
I think they’ve also kind of hurt themselves with the success of their own non-craft beer items. They’ve used those items (Twisted Tea & the Seltzer) to bolster sales, but when those items are linked to Sam Adams beer, it devalues the credibility of the beer brands. So to keep sales up, they continue finding non-beer revenue streams which continue to hurt the reputation and sales of the beer…