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A Struggling Company in a Booming Market

Over the past several years, new entrants into the craft beer market have hit established breweries hard. Boston Beer company (SAM) experienced a decrease in revenue of 6% from 2015 to 2016 while the latest data from the Brewers Association states that the market has historically been growing in the mid-teens. In their craft beer category specifically, they saw a 6% decrease in volume of barrels shipped.

Craft breweries have been popping up all over the country giving consumers an almost overwhelming amount of choice and variety when it comes to drink selection. In 2012 there were 2,456 craft breweries across the U.S. The number nearly doubled to 4,269 in 2015 (the most recent data). Boston Beer has been unable to capture the growth of this market because their market share has been eroded quicker than industry growth.

The trend seems undeniably unfavorable, however there may be reason to weather the storm. In their latest quarterly report management put forward uncertainty towards their future volumes and shipments, but they gave clear answers on their strategy. Their strategy along with the currently shifting trends in the retailers who carry their products may prove to be the correct long term strategy for the company.

As stated in the Q&A portion of their Q4 2016 earnings call, the market is becoming saturated with new entrants. Retailers are getting burned attempting to stock a variety of products for continuously shifting demand. This past year retailers overstocked on hard sodas, according to Martin Roper (CEO), and as a result they are becoming more cautious in their purchasing. Retailers are beginning to simply their product offerings. The multitude of product offerings are maxing out the space in their display cases, and causing slow inventory turnover. Boston Beer’s strategy is to position their brand to be the go-to strong seller for retailers.

Boston Beer continues to invest in their new product pipeline, however they have also shifted their marketing strategy to awareness and shifted operations for cost cutting. The expected result is that as retailers consolidate supply, the strongest and most recognized brands will be favored. The result is less competition for shelf space and a regain of market share and therefore growth.


Management has stated that this “shake-out” could be one to two years in the making. The strategy will undoubtedly cause short-term uncertainty in their product mix, but over a long-term investment horizon it should see them through this turbulent period in the market.

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