Boston Beer's ongoing revolution
Every revolution needs leaders who believe in the possibilities of the movement. Similar to the namesake of its beer, American revolutionary leader Samuel Adams, Jim Koch, brewer and founder of The Boston Beer Co., Boston, has become an integral figure in the craft beer movement.
Led by the belief that consumers were ready for high-quality American beer, in 1984 Koch began producing Samuel Adams Boston Lager in his kitchen based on his great-grandfather’s recipe. On Patriot’s Day 1985, Koch began selling the lager to bars in Boston. The company quickly began to grow, he says.
“When we started brewing commercially, the company had grown from me to two people,” Koch says. “We doubled, so that’s a big deal, but doubling from one to two. This was 1984 and the beer world in the U.S. was completely different. There was zero awareness and not even a name for what has become craft beer.”
During the years, consumers have continued to gravitate toward beer produced by craft brewers. Koch attributes craft beer’s momentum to the public’s desire to drink less, but drink better quality beer as well as, “the growth of a beer culture in the United States, which today, has become the envy of the world.”
Boston Beer’s humble beginnings are not forgotten as the company has emerged as a leader in the independent brewing industry.
“It’s evolved from me making beer in my kitchen to reaching, I think, 1 percent of the U.S. beer business,” he says. “All the numbers aren’t in yet, but it looks like we might have gotten to 1 percent, which is something that it seems highlights how genuinely small we are. But from making beer in my kitchen to over 2 million barrels in total is, to me, a considerable achievement.”
As the craft brewing trend grows, Boston Beer remains committed to the tenets that it established when the company started.
“I want Sam Adams to continue to be known as one of the most interesting and innovative brewers both in creating new styles of beer and continually raising the bar for quality,” Koch says. “We’re in a unique position in the whole world of brewing because we’re both small enough to want to keep doing those things and big enough to have the skills and resources to do them extremely well.”
History of expansion
The revolution that began with an heirloom recipe quickly broadened within the brewery’s first decade in business. The Samuel Adams portfolio grew to include traditional styles from Europe, such as porters, stouts and dortmunders, but it was not long before Koch began to consider the possibilities outside of the classical styles.
“The real breakthrough was the realization that every great beer that could possibly be made hadn’t yet been made,” Koch says. “That there were great beers that could be made that nobody had ever made before. And that led to another wave of innovation with the first Extreme beer, which was Triple Bock that we made in 1993. That was actually the first time that anybody had aged beer in used spirit barrels. We started aging in used bourbon barrels, and now that’s become the norm.”
Boston Beer’s Extreme Beer series grew from Triple Bock into Millennium and has since expanded to Utopias. Each of the Extreme releases increased the percentage of alcohol and stretched the definition of beer, the company says. Similar to its predecessors in the Extreme Beer series, Utopias rewrites the definition of beer.
“The beer itself pushes the envelope of what beer can be, probably more than anything in history that has ever pushed the envelope of beer,” Koch says. “But it is beer and in its flavor it’s sort of in between a vintage port, a fine cognac and an old sherry.”
Boston Beer is currently aging the next incarnation of Utopias, which is released every two years and retails for $160 for each bottle. This year’s release is slated for May. Utopias is aged in barrels that are blended together, like whiskey, to achieve the company’s desired flavor profile, Koch says. The brewery maintains the stable of barrels first used to age Triple Bock, and through the years has added new varieties. Its barrel repertoire now includes bourbon, scotch, sherry, brandy, Madeira and chardonnay barrels. Although the original contents are gone, the barrels continue to refine as they age, which inherently gives each release of Utopias a different flavor, Koch says.
To showcase the product’s unique taste, the brewery created a tradition of hosting a food and beer dinner with the release of Utopias that includes a blind taste-test of three best-in-class alcohols. A panel of food and wine writers are asked to judge the port wine rated the highest by Wine Spectator, the cognac considered the best by The Spirit Journal and Utopias.
“We don’t tell them what they are,” Koch says. “We don’t tell them anything. We do it blind - you get three snifters and we say, ‘They’re all great. Pick the best.’ We’ve probably done it 20 times, and I think we’ve only lost once. I mean, we almost always win.”
The trial proves the new quality standards that beer can achieve, Koch says.
“It’s shocking to people who hold wine and spirits in very high esteem, but don’t consider beer to be equal,” he says. “The point I want to make is, ‘Hey, I can make a beer that is equal to the absolute best porter or cognac ever made.’”
Inventing new boundaries
Continuing its tradition of experimentation, in November, Boston Beer released Infinium, a champagne-style beer created in collaboration with Germany’s Weihenstephan Brewery. Infinium is the first new beer style created under the Reinheitsgebot principle of beer purity in more than 100 years, the company says. Reinheitsgebot, the German beer purity law, states that all beer must be brewed using only four ingredients: malt, hops, water and yeast.
The partnership began in October 2007 when Josef Schradler, managing director of Weihenstephan, reached out to Boston Beer with the idea of working together on a release.
“Samuel Adams has a reputation for quality and innovation,” he says. “And [Weihenstephan] has a reputation for quality and tradition. So I think there was a lot of both mutual respect and complimentary skills.”
The collaboration also represents the prominence of American brewing in the global landscape, Koch says.
“It makes an extraordinary statement when the oldest brewery in the world and the most technically capable brewery reaches out to a New World brewer - reaches out to a guy who was making beer in his kitchen 25 years earlier - and says, ‘We want to partner with you,’” Koch says. “That to me is a coming of age movement for American brewing, much like when Baroness Phillippine de Rothschild came to the U.S. and reached out to Robert Mondavi, and they created Opus One. That shocked people who were into wine.”
From the start, the two breweries decided the collaboration had to live up to the reputation of each of the breweries, Koch says.
“We together decided we should do something worthy of the two breweries,” he says. “It’s pretty easy to collaborate - you show up, you throw all of the ingredients in and you’re done, but our objective was to make the first new style of beer under the German beer purity law in over a century. We thought that was pretty cool.”
Infinium has a crisp acidity that gives the beer a dryness and tartness on the palate, which is balanced with a smooth malt body, the company says. It has a fruity aroma and contains 10.3 percent alcohol by volume, it says. The beer’s complex flavor took three years to develop and was achieved through mimicking some of the natural processes in malting and brewing, Koch says.
The breweries developed a long, slow cooler malting process that, in essence, mashed the malt at soil temperatures for a couple of weeks, Koch explains. The malt continued to age at the cooler temperature in the fermenter, which because it duplicates the grain’s natural processes coaxes more of the natural flavors out of the malt, Koch says.
The final step is to finish the beer in champagne bottles, which also took experimentation to identify the proper temperature and product rotation, he says.
Infinium was released in a limited edition in the United States in November and sold out in a few weeks, Koch says. Weihenstephan also released a limited-edition amount across Europe and Asia, which also was successful, he says.
“We just ran a marathon and have collapsed at the finish line, but if you’ve ever run a marathon, you immediately start thinking about your next one about an hour later,” Koch says. “We’re kind of in that hour. We’ll do Infinium again next year. We learned some things. So I think can make some improvements, in fact, I know I can make some improvements on it.”
In addition to the debut of a new beer style, Boston Beer expanded its lineup with the debut of Noble Pils as its 2010 spring seasonal. The beer won the company’s 2009 Beer Lover’s Choice election and is brewed with all five Noble hops for a distinct hop character and fresh taste, the company says. Noble Pils, which will return as the spring seasonal this year, was originally brewed for Koch’s daughter’s wedding about five years ago, he says.
“It was a great beer, and I was looking for a place to put it in our portfolio,” Koch says. “We put it in as a spring seasonal and it did really well. I was very happy about that because that beer is the best example you can get of a classic 19th century pilsner, which is one of the foundational styles of world brewing.”
Arriving this year is Latitude 48, which is an India pale ale (IPA) that contains a global selection of hops sourced from the hop-growing areas along the 48-degree latitude, Koch says. The combination of hops gives the beer a distinctive, but not overpowering hop character that is balanced by a slight sweetness and full body from the malt blend, the company says.
“The IPAs out there are big American hop bombs,” he says. “We’ve actually used hops from other parts of the world. We’ve used Bavarian hops, central European hops and English hops.”
This year, the company also is releasing Samuel Adams Revolutionary Rye Ale, which was the winner of its 2010 Beer Lover’s Choice campaign. Revolutionary Rye is a deep reddish-hued ale that has a balance of sweet and spicy flavors, the company says. The addition of malted rye adds a complexity to the beer and delivers a spicy and slightly drying finish, it says.
Boston Beer also plans to expand the distribution of its Barrel Room collection of beers that is currently available in Boston and Denver. Available in American Kriek, New World Tripel and Stony Brook Red varieties, distribution of the Barrel Room Collection has been limited because of the brewery’s supply of barrels that are used to age the beers. The brewery has purchased more barrels to be able to expand the collection’s distribution.
Coming soon to the portfolio, Boston Beer has been brewing a kolsch variety aged with jasmine, Koch says. The addition of jasmine was inspired by the search for floral elements that would complement the natural floral character of hops, he says. The brewery also has another collaboration in the works, Koch reports.
Focus on freshness
In addition to expanding the boundaries of beer, Boston Beer also has maintained the dedication to quality Koch established in his kitchen in 1984.
“Our fundamental business strategy from day one was built around the realization that, ‘Wow, I can give the American beer drinker the best glass of beer they can get,’ and that’s been the mission from the beginning,” Koch says. “We’re not the new kid on the block. We’re not the newest beer out there. We’re not the most local. We don’t have the best marketing or a cute brand name. People have tried Sam Adams, it’s not a new experience.
“This is my belief, the reason that we’ve become the leading craft brewery is because we have always given the consumer the best possible experience and they have rewarded us with their loyalty,” he continues. “That’s why we keep pushing on those things.”
Since the beginning, Koch has re-evaluated the industry’s approach to quality. In 1987, Boston Beer introduced consumer legible freshness dating. Instead of codes, bottles of Boston Beer read, “For brewery fresh taste, enjoy by month notched.” The dating system clearly communicates the beer’s quality to consumers, which is important, Koch says.
“If my beer isn’t fresh, I want the consumer to buy something else,” Koch says. “And I want to make it as easy as possible for them to know because if they have a bad experience with my beer, they may not buy it again. To me, it’s not about trying to get consumers that are trying one beer after another and they never buy again. I’m very focused on giving consumers a great taste in every bottle so I can build brand loyalty based on a reliably rewarding experience.”
Realizing the supply chain also contributed to out of date beer reaching the market, Boston Beer developed an amnesty program with its wholesalers. The program allows distributors to return beer within the three months after its expiration to be reimbursed for the cost of beer, Koch says. If the beer is more than three months beyond expiration, Boston Beer splits the cost with the company, he says.
Through in-market visits, the company also found that about 15 percent of Samuel Adams on draft did not meet the brewer’s high quality standards. In response, Boston Beer trained its salespeople to taste the beer to identify defects and established a procedure to track the cause of the defect. Boston Beer’s staff now conducts nearly 20,000 draft quality audits each year and has been able to reduce the incidence of low-quality draft beer from 15 percent to 3 percent, Koch says.
Recently, Boston Beer began a new era of proactive supply management with its Freshest Beer in Town Program. Through the program, Boston Beer is switching its wholesalers over to just-in-time delivery, which helps to ensure that wholesalers are delivering Samuel Adams as fresh as possible, Koch says.
Boston Beer’s Freshest Beer in Town Program takes wholesaler’s inventory of Samuel Adams down from a month’s worth to a week’s supply by shipping what the distributor sold rather than having the wholesaler order in advance, Koch says.
“One of our bigger wholesalers, this is over-simplified, let’s say they get a delivery every day,” Koch says. “Today with electronic data exchange we will know by 8:00 tonight what that wholesaler is going to deliver tomorrow because they download it from their handhelds and they’re loading the trucks tonight. So if by 8:00 tonight we know what that wholesaler is going to deliver, why don’t we just send them that?”
The program also is advantageous for smaller wholesalers, Koch says. As larger wholesalers receive daily replenishments, smaller distributors’ deliveries take place on a two-, three- or four-day delivery intervals, he says.
In return for the removal of inventory, Boston Beer requests that the wholesaler keep the smaller amount of beer in the cooler, Koch says. Refrigeration of the beer virtually eliminates all of the product degradation that happens through the supply chain, he says. The temperature control also makes it as if the retail account is getting its beer straight from the brewery, Koch says.
Boston Beer’s seasonal releases also benefit from the program because it eliminates the need to forecast the success of a limited-time release, Koch says.
“As we have more SKUs, the wholesalers’ task of ordering and forecasting has become more difficult,” he says. “This program pushes it back into the brewery, so we have to do a better job of forecasting. But if we’re off we can keep the beer in the brewery in a tank where nothing bad happens to it. It doesn’t degrade. It’s sitting there at 34-degrees in an oxygen-free environment. It’s fine, it’s aging.”
The company has begun switching some of its wholesalers to the program, Koch says.
“We have five of them running on it, and we’re bringing another one on almost every week this quarter,” he says. “The experience is that we’ve actually had fewer out of stocks because we’re not asking them to predict a month in advance. We’re not scrambling. We have visibility every day into their inventories and they typically keep a week, so we can see problems coming and we’re looking at them.”
The program also is beneficial for the brewery as it allows Boston Beer to anticipate how much beer it will need to produce over time, Koch says.
“I can tell you with a pretty good of amount accuracy how much beer we’re going to need to produce and roughly what SKUs on February 15, 2012, because I know what we sold last year, and the world doesn’t shift all that dramatically,” he says. “I can’t tell you what the wholesaler orders would be, that’s unpredictable, but the actual sales - they don’t swing that much. If we’re growing at 10 percent it’s a pretty good guess to say they’re going to shift 10 percent more than they did last year.”
The company is continuing to rollout the program, which maintains the brewery’s focus of delivering fresh beer to its consumers, Koch says.
“The reason for this is because it’s a quantum leap in quality for the consumer,” he says. “Is it going to cost us money? Probably, but at the end of the day, I think we may be surprised it may not, because ultimately it’s a more efficient system.”
In addition to the Freshest Beer in Town program, Boston Beer also is making upgrades to its filling equipment to fight against impurities at its breweries in Massachusetts, Pennsylvania and Ohio.
“We have world-class filling equipment with very low levels of oxygen,” Koch says. “We’re constantly upgrading it because frankly the equipment gets better. We’ve redesigned the crowns. I think this was three years ago, we started using a denser crown-liner.”
The brewery’s performance and the upward trajectory of craft beer is a trend that Koch thinks will endure.
“I think in 27 years of brewing Sam Adams, this is the most exciting time,” Koch says. “I do believe that craft beer has a solid foundation for continued growth. Because in 2011, craft beer has become the new wine and the 20-somethings are adopting craft beer in the same way that their boomer parents adopted wine. When that happened in the ‘80s it led to decades of steady, healthy growth, and I’m optimistic that craft beer can have many years of steady, healthy growth.”
As Boston Beer continues its commitment to redefine beer and deliver high-quality products, Koch sees the opportunities presented by the company’s size.
“I do believe that craft beer is in the sweet spot of the entire alcohol beverage business today,” Koch says. “I also believe that we have a really bright future. We’re also very small. Sam Adams can double. We can maybe even triple in the next 20 years.
“It’s not going to happen quickly,” he continues. “That’s one of the other things that I’ve learned is that it takes patience, real passion and commitment. Because we are craft brewers, we are all of us very small and we live in a marketplace that is dominated by people who are 50 to 100 times our size.” BI