This past Friday, May 27th, was Jim Koch’s 67th birthday and, as we do every year we take this week to revisit Jim and Boston Brewing. 2016 is a year in which we find Boston Beers in an unfamiliar position, a position which is driving pundits to question the future of the brewery.
Recently, Berenberg, the German firm, upgraded SAM from sell to hold. Part of their change is that SAM’s share price has fallen 55% since its high in January 2015. Berenberg goes on to say that SAM is ripe for a takeover considering the drop in share price, failure to turnaround core brands and that SAM has a “key asset” with their distribution network. That in itself would be attractive to a large foreign investor/brewery.
All of these points are well taken, but Berenberg also states that they believe Boston will soon begin to lose some SKUs in the off premise where they enjoy almost four SKUs more than the average craft brewer. They estimate this reduction would mean an additional volume loss of -14.8%. That is a big number!
Boston is being squeezed on both sides of the craft spectrum. Large companies ABI, MC, Constellation, and now Heineken, have purchased large, successful crafts and are pumping resources into these companies that were not previously available to them. On the lower end of the spectrum, the local start-ups, who are new, are tied into their customers much more than a large national company as Boston is capable of doing.
Considering all of the above, one wonders if, Boston left behind their core vision. For years Jim was determined not to develop a light craft beer, however, he finally did, Sam Light, over 10 years ago which is still one of his better sellers. While Boston had a number of flavors and specialty beers at that time, once Sam Light hit the market it almost seemed to open the door for a number of new products.
The question in this year is Boston trying to be all things to all people? Has Boston lost its focus on its core business and gone to the extreme? Would Boston have been better off by just focusing their IPA efforts on one, successful brand, Rebel, instead of adding two line extensions to Rebel? No doubt the Rebel introduction was highly successful in the crowded IPA segment, but was a Rebel with a higher ABV and a lower ABV really smart?
Twisted Tea, Travelers, and Angry Orchard can all be called successful, but in many ways have transformed Boston from a craft beer to a beverage company. Not that there is anything wrong with this model, but clearly something is not working right now.
One can bet that Boston is being closely watched by a number of possible acquirers including all the big boys. If someone does get Boston, you can be assured that the landscape will change dramatically. Boston will need to move quickly to bolster their stock and stave off any advances; however, it might be too late.
This week next year when we look back at Boston Beers it will be interesting to see how all this unfolds, but until then, happy 67th birthday to Jim!