How big is Sam Adams?

Following up on my last post about the President’s beer summit and some of the industry dynamics at play, I thought it would be interesting to look at the position of the Boston Beer Company in the US beer market and the craft category. A quick look at the relative size of a few well known breweries yields some interesting insights.
The first thing that jumps out to me in the chart on the left is the dominance of the macro lagers and imports in the US. After combining AB/InBev and Miller/Coors, The Boston Beer Company (NASDAQ: SAM) was the 8th largest beer marketer in 2007. But they hold a mere 1% share of the total market, according to Beverage World. Jim Koch has commented in the past that Anheuser-Busch spills more beer than he produces in a year. This is absolutely true: if AB were to have a 2% yield loss on their packaging line alone, this would be more beer than the Boston Beer Company produced in 2008.

However, diving into the craft segment with the chart on the right, we see that the Boston Beer Company is clearly the dominant player in this segment, much larger than even Sierra Nevada or New Belgium. In my mind, this puts Boston Beer in an interesting position with regards to their brand and marketing strategy and makes me wonder, where do they go from here? Owning the identity of being a small craft brewer and one of the pioneers of the industry seems to have been critical to the company’s success so far. But as they continue to grow, it may be hard to have it both ways – claiming to be a small brewer but dominating craft.

I think they are still in a strong position. They’re probably the only craft company that can compete effectively in nearly every market in the US, they can invest far more in advertising and marketing (SAM spent $133MM on advertising, promotional and selling expenses), they can employ a large sales force (which is critical to having presence with distributors and retail accounts), and can make greater demands from distributors and possibly even lobby governments. These advantages are almost completely absent from even the Sierra Nevada, the second largest craft brewer and are out of the question for the smaller guys.

But what do they do about their brand image? As the largest American brewer in the US, they could launch a campaign along the lines of “we are America” or “drink American” and play up the fact that they’re the largest American owned brewery. But I think this would place too much emphasis on their size, an aspect I believe they are keen to downplay. I expect we will see more external messaging from them promoting the craft category, their heritage and their dedication to beer, while simultaneously leveraging the advantage that size and scale gives a dominant player in any segment.