Boston Beer the toast of Wall Street
For diligent citizens watching the seemingly endless series of Republican Presidential candidate debates, the Washington Times Newspaper on 16 January 2012 devised a beer drinking game which tells viewers which craft beer to down as candidates deliver a painful litany of clichés.
As befits American political rhetoric, the "founding fathers", the "writers of the constitution" often get mentioned in these debates. So the best beer to enjoy at that moment, says the Washington Times, is a Samuel Adams, named after Mr Samuel Adams, signer of the Declaration of Independence and inspiration for the Boston Beer Company’s Sam Adams Boston Lager.
We are not sure Sam Adams beer needs this sort of recommendation. Boston Beer has been in the news so often in the past two years not least because its shares have been on fire, rising more than 30 percent since October 2011.
Some analysts think there are fundamentally three reasons why Boston Beer has performed so well on the stock market and outperformed the market, whose volumes have been steadily declining: founder and chairman Jim Koch, the quality of the product it sells, and the company’s shrewd investment policy.
Readers of BRAUWELT International will need little explaining who Mr Koch is. He is probably the best beer salesman the U.S. brewing scene has, never shying away from a camera or a microphone. Since launching Samuel Adams in 1984 Mr Koch has led the company in accordance with his passion for good beer. Mr Koch may only serve as chairman of his company these days and leave the role of CEO to Martin Roper, but as the sole owner of the Class B shares (i.e. those with the voting rights), he can make sure the company is run the way he wants it.
By maintaining his hold on the company, Mr Koch is able to keep the products under the Boston Beer umbrella up to his exacting standards. Boston Beer was one of the first breweries to place a "freshness" date on its beers.
Although at 2.8 million hl of beer sold in 2011 Boston Beer accounts for only 1 percent of the U.S. beer market in volume, its stock has outperformed its larger competitors over the past two years. And that’s despite not paying a dividend. Instead of paying a dividend, Boston Beer has reinvested the income. In addition, Boston Beer has managed to grow its business without racking up debt, giving it flexibility in going forward.
The good performance of the stock has been driven by increasing revenues, with net revenue increasing more than 76 percent over the past five years. In 2010 revenue stood at USD 463 million (EUR 350 million). Furthermore, revenue is expected to exceed USD 500 million for the first time in company history when the 2011 annual results are reported on 22 February 2012.
In an industry dominated by large, multinational brewers, Boston Beer is the largest craft brewer in the U.S. with a market capitalisation of USD 1.3 billion (EUR 981 million). Craft volume grew at a double-digit pace in 2011, says Beer Marketers’ Insights, and closed in on a 6 percent share of the U.S. beer market. Craft-like entries from Anheuser-Busch and MillerCoors put up some serious growth numbers and gained increased attention.
Competition in the craft beer segment has intensified, as big brewers aggressively push their craft brands. Nevertheless, Boston Beer has been making craft beers much longer, so they should not be too worried.
After all, there is always that beer drinking game to be played as Americans head for the next Presidential Elections.
This being America, the Washington Times thought it fit to publish the following disclaimer which would amuse Mr Koch no end: "In this litigious, risk-averse society, we must pause here to admonish anyone reading this column that it is strictly for entertainment purposes ONLY. Please drink responsibly if at all. Please do not be a dunderhead and drink and tweet/post/drive, or you will never be able to run for public office."
