WEBVTT 00:00:00.000 --> 00:00:02.319 Welcome to the deep dive, the shortcut you need 00:00:02.319 --> 00:00:04.879 to be the most informed person in the room. Yeah. 00:00:05.660 --> 00:00:07.759 Today, we're getting into a really fascinating 00:00:07.759 --> 00:00:10.300 corporate case study. It's the story of a company 00:00:10.300 --> 00:00:12.179 that didn't just, you know, join the American 00:00:12.179 --> 00:00:14.160 craft beer movement. No, not at all. They pretty 00:00:14.160 --> 00:00:16.339 much wrote the playbook for how a founder led 00:00:16.339 --> 00:00:19.690 brand can become a billion dollar. Beverage giant. 00:00:19.929 --> 00:00:22.750 Yeah. We are diving deep into the Boston Beer 00:00:22.750 --> 00:00:25.570 Company or BB Co. It really is one of the most 00:00:25.570 --> 00:00:28.210 foundational stories in modern American business. 00:00:28.269 --> 00:00:31.649 You've got Jim Koch, the founder, who somehow 00:00:31.649 --> 00:00:34.770 manages to take this sixth generation family 00:00:34.770 --> 00:00:38.149 beer recipe. Right. And blend it with this world 00:00:38.149 --> 00:00:41.189 class education in finance and law. He turns 00:00:41.189 --> 00:00:44.130 it into a publicly traded empire that today sells. 00:00:44.619 --> 00:00:46.979 I mean, everything from these super high end 00:00:46.979 --> 00:00:49.759 30 percent ABV specialty beers to, you know, 00:00:49.780 --> 00:00:51.579 the hard seltzers you see everywhere. Absolutely. 00:00:51.740 --> 00:00:54.520 And just the overview of BB Co. today really 00:00:54.520 --> 00:00:56.560 proves how far they've come. It was founded back 00:00:56.560 --> 00:00:59.000 in 1984 by Jim Koch and Rhonda Coleman. Their 00:00:59.000 --> 00:01:01.259 first and let's be honest, most famous brand 00:01:01.259 --> 00:01:04.239 was, of course, Samuel Adams. And that name was 00:01:04.239 --> 00:01:06.700 so strategic, named after the founding father 00:01:06.700 --> 00:01:09.840 who, it just so happens, had his own history 00:01:09.840 --> 00:01:12.120 in brewing. Oh, that decision was brilliant right 00:01:12.120 --> 00:01:14.670 from the start. Tying the brand. to American 00:01:14.670 --> 00:01:17.750 history, to this idea of heritage. It positioned 00:01:17.750 --> 00:01:20.109 the beer as more than just a product. It was 00:01:20.109 --> 00:01:23.090 a piece of history, a rebellion against those 00:01:23.090 --> 00:01:26.609 big, bland corporate loggers. Yeah, a real statement. 00:01:26.870 --> 00:01:28.989 But then you look at the scale of it now. B .B. 00:01:28.989 --> 00:01:31.629 Coteau is the fourth largest brewer in the entire 00:01:31.629 --> 00:01:34.049 United States. They're a public company trading 00:01:34.049 --> 00:01:36.730 on the New York Stock Exchange under, and this 00:01:36.730 --> 00:01:39.430 is just perfect, the ticker SAM. And the financial 00:01:39.430 --> 00:01:41.989 scale is what really underscores this massive 00:01:41.989 --> 00:01:43.230 transformation. I mean, just look. Look at the 00:01:43.230 --> 00:01:45.670 numbers from 2019. Revenues were at, what, 1 00:01:45.670 --> 00:01:49.109 .3 to 9 billion U .S. dollars. An incredible 00:01:49.109 --> 00:01:52.269 number. Supported by a staff of over 2 ,100 employees. 00:01:52.590 --> 00:01:55.709 It is just truly remarkable how a recipe that 00:01:55.709 --> 00:01:58.510 was first brewed in Jim Coe's kitchen could become 00:01:58.510 --> 00:02:01.250 that kind of financial giant in just, what, a 00:02:01.250 --> 00:02:03.489 little over three decades. And that's exactly 00:02:03.489 --> 00:02:06.030 what our mission is today. We want to unpack 00:02:06.030 --> 00:02:10.449 the strategic moves, the the academic background, 00:02:10.590 --> 00:02:13.389 the financial structure, the aggressive diversification 00:02:13.389 --> 00:02:16.669 that allowed Koch, who is widely seen as a founding 00:02:16.669 --> 00:02:19.189 father of American craft brewing, to navigate 00:02:19.189 --> 00:02:23.090 that insane growth and in a way outgrow the very 00:02:23.090 --> 00:02:25.830 category he helped create. OK, let's unpack that. 00:02:25.909 --> 00:02:28.050 We have to explore the origins of Samuel Adams, 00:02:28.150 --> 00:02:29.830 because if you just looked at Jim Koch's resume 00:02:29.830 --> 00:02:32.849 in the early 80s, you would. not think Brewer. 00:02:32.930 --> 00:02:34.810 Not at all. You'd assume he was headed for a 00:02:34.810 --> 00:02:37.189 massive corporate law firm or, you know, Wall 00:02:37.189 --> 00:02:39.669 Street. Definitely not fermentation banks. The 00:02:39.669 --> 00:02:41.830 founder's pedigree is so complex. It's this blend 00:02:41.830 --> 00:02:44.870 of like old world tradition with this very new 00:02:44.870 --> 00:02:47.310 world, high powered education. Charles James 00:02:47.310 --> 00:02:50.729 Koch was born in Cincinnati, Ohio, in 1949. OK. 00:02:50.849 --> 00:02:52.810 And the brewing tradition is deep in his family. 00:02:52.909 --> 00:02:55.449 He represents the sixth generation first born 00:02:55.449 --> 00:02:57.330 son to follow in the family's brewing footsteps. 00:02:57.650 --> 00:03:00.210 His own father was a fifth generation brewer. 00:03:00.449 --> 00:03:03.009 So that family knowledge, that history, it was 00:03:03.009 --> 00:03:06.849 all there. But he took this serious, high powered 00:03:06.849 --> 00:03:09.219 academic detour first. A major detour. Instead 00:03:09.219 --> 00:03:12.680 of going right into brewing, he just accumulates 00:03:12.680 --> 00:03:15.219 one of the most formidable academic stacks you 00:03:15.219 --> 00:03:17.680 can imagine, all from Harvard University, a Bachelor 00:03:17.680 --> 00:03:20.259 of Arts, then an MBA, and then a Juris Doctor, 00:03:20.479 --> 00:03:23.199 a law degree. Exactly. And those degrees from 00:03:23.199 --> 00:03:25.439 Harvard are really the key to understanding the 00:03:25.439 --> 00:03:27.699 sheer business mind behind the Boston Beer Company. 00:03:27.860 --> 00:03:30.840 He wasn't just... you know, a guy who was passionate 00:03:30.840 --> 00:03:32.939 about hops and malt. Right. He understood corporate 00:03:32.939 --> 00:03:36.620 finance. He understood contracts, logistics better 00:03:36.620 --> 00:03:38.400 than pretty much any other early craft brewer 00:03:38.400 --> 00:03:40.580 out there. And before he even started brewing, 00:03:40.780 --> 00:03:43.520 he was honing those skills as a manufacturing 00:03:43.520 --> 00:03:46.280 consultant at the Boston Consulting Group, BCG, 00:03:46.419 --> 00:03:48.560 which is, you know, a very big deal. Top tier. 00:03:48.800 --> 00:03:50.759 He even spent time as an outward bound instructor, 00:03:50.979 --> 00:03:54.099 which is just this fascinating blend of like 00:03:54.099 --> 00:03:57.550 rigorous analytical thinking. and then sheer 00:03:57.550 --> 00:03:59.990 practical grit. And that consulting background 00:03:59.990 --> 00:04:02.770 is precisely why the business plan for Samuel 00:04:02.770 --> 00:04:05.030 Adams wasn't just, you know, scribbled on a napkin 00:04:05.030 --> 00:04:08.110 in a bar. While he was at BCG, he developed the 00:04:08.110 --> 00:04:11.189 entire blueprint for a locally focused beer company. 00:04:11.469 --> 00:04:14.210 He used established, best -in -class consulting 00:04:14.210 --> 00:04:17.290 methods. He knew the gap in the market, and he 00:04:17.290 --> 00:04:19.790 knew exactly how to fill it efficiently. Which 00:04:19.790 --> 00:04:22.269 brings us to the startup capital. It was a true 00:04:22.269 --> 00:04:25.569 bootstrap operation, really. Fueled by his own 00:04:25.569 --> 00:04:28.350 investment and his professional network, Koff 00:04:28.350 --> 00:04:31.310 put in $100 ,000 of his own money. And adjusted 00:04:31.310 --> 00:04:34.730 for inflation, that's closer to $300 ,000 today. 00:04:34.889 --> 00:04:37.569 Wow. So that's a serious personal risk, even 00:04:37.569 --> 00:04:40.550 for a high -level consultant at BCG. A huge risk. 00:04:40.730 --> 00:04:42.910 And then he raised additional funds from his 00:04:42.910 --> 00:04:45.350 professional and personal network. So family, 00:04:45.389 --> 00:04:48.089 friends, former colleagues from DCG. And that 00:04:48.089 --> 00:04:50.430 approach, leveraging his network, it ensured 00:04:50.430 --> 00:04:52.509 the early capital was, well, sophisticated. They 00:04:52.509 --> 00:04:54.290 knew what they were investing in. The company 00:04:54.290 --> 00:04:56.610 was organized as a limited liability partnership 00:04:56.610 --> 00:04:59.189 right from the start, which was a very smart 00:04:59.189 --> 00:05:01.189 move for man. managing liability and the early 00:05:01.189 --> 00:05:03.930 investment structure. But for all the MBA blueprinting, 00:05:03.930 --> 00:05:05.910 the product itself came straight from the heart, 00:05:06.009 --> 00:05:09.410 right? Absolutely. Koch brewed that initial batch 00:05:09.410 --> 00:05:12.209 in his own kitchen using his family's original 00:05:12.209 --> 00:05:14.449 recipe for something called Louis Koff Lager. 00:05:14.629 --> 00:05:16.829 Okay. This was then tweaked a little bit and 00:05:16.829 --> 00:05:21.310 renamed Samuel Adams Boston Lager, a 4 .8 % ABV 00:05:21.310 --> 00:05:24.290 amber or Vienna style lager. And this is where 00:05:24.290 --> 00:05:26.750 the execution really meets the myth. The beer 00:05:26.750 --> 00:05:29.529 was formally introduced in March of 1985 and 00:05:29.529 --> 00:05:32.069 it was over Patriot's Day weekend. Which is such 00:05:32.069 --> 00:05:34.149 an important historical and cultural weekend 00:05:34.149 --> 00:05:36.600 in Boston. It's tied so close. to the Boston 00:05:36.600 --> 00:05:39.019 Marathon. It was perfect timing. So what happened 00:05:39.019 --> 00:05:40.639 next is always talked about like it was pure 00:05:40.639 --> 00:05:43.699 brewing magic. But I have to ask, was it magic 00:05:43.699 --> 00:05:46.660 or was it just incredibly smart, targeted marketing 00:05:46.660 --> 00:05:49.839 hitting a public that was just thirsty for something 00:05:49.839 --> 00:05:52.720 new? I think it was both. And it was catalyzed 00:05:52.720 --> 00:05:55.980 by this massive high -profile win. Just six weeks 00:05:55.980 --> 00:05:58.959 after they launched, Samuel Adams was voted Best 00:05:58.959 --> 00:06:01.560 Beer in America at the Great American Beer Festival. 00:06:01.699 --> 00:06:04.139 Six weeks. Six weeks. Imagine that. You're this 00:06:04.139 --> 00:06:07.000 brand new, tiny local brew, and you're competing 00:06:07.000 --> 00:06:09.379 against 93 established national and regional 00:06:09.379 --> 00:06:12.000 beers, and you take the top prize. That recognition 00:06:12.000 --> 00:06:14.740 had to be absolutely pivotal. It just instantly 00:06:14.740 --> 00:06:17.519 established the brand's credibility, its premium 00:06:17.519 --> 00:06:19.879 identity. Totally. It allowed them to charge 00:06:19.879 --> 00:06:21.600 a higher price point than their competitors, 00:06:21.759 --> 00:06:23.759 which was a key element of that business plan 00:06:23.759 --> 00:06:26.600 from BCG. And for anyone who loves historical 00:06:26.600 --> 00:06:29.459 landmarks, the first place to ever put Samuel 00:06:29.459 --> 00:06:32.939 Adams on tap was Doyle's Cafe in Jamaica Plain. 00:06:33.199 --> 00:06:37.019 A true grassroots, authentic Boston launch. It 00:06:37.019 --> 00:06:39.180 immediately cemented the brand's local roots. 00:06:39.319 --> 00:06:41.480 Even as you know, the founder's ambitions were 00:06:41.480 --> 00:06:43.860 clearly national, if not global. That initial 00:06:43.860 --> 00:06:46.560 explosive success leads us right into the biggest 00:06:46.560 --> 00:06:50.029 challenge any successful startup faces. How do 00:06:50.029 --> 00:06:51.649 you scale? How do you go from a kitchen operation 00:06:51.649 --> 00:06:53.990 to national distribution while still maintaining 00:06:53.990 --> 00:06:56.209 quality and, you know, controlling your costs? 00:06:56.430 --> 00:06:58.129 And this is where we really see the business 00:06:58.129 --> 00:07:00.610 strategy in action. The moves that let BBCO go 00:07:00.610 --> 00:07:02.730 from a great startup story to a national giant. 00:07:02.930 --> 00:07:05.370 The immediate answer was a very strategic use 00:07:05.370 --> 00:07:08.269 of contract brewing. Right. It was designed to 00:07:08.269 --> 00:07:10.350 minimize how much capital they had to put out 00:07:10.350 --> 00:07:12.730 while maximizing their output. Let's clarify 00:07:12.730 --> 00:07:15.649 what contract brewing is, because at the time. 00:07:16.279 --> 00:07:18.839 especially within the like the purest craft beer 00:07:18.839 --> 00:07:22.100 movement. It was pretty controversial. It absolutely 00:07:22.100 --> 00:07:24.839 was. Contract brewing just means that Kulka rented 00:07:24.839 --> 00:07:27.939 excess capacity at larger established breweries. 00:07:28.199 --> 00:07:32.160 This let BBK scale up really, really fast without 00:07:32.160 --> 00:07:34.139 having to build their own expensive infrastructure 00:07:34.139 --> 00:07:36.699 right away. So who were they using? They used 00:07:36.699 --> 00:07:39.240 some big names. Pittsburgh Brewing Company, which 00:07:39.240 --> 00:07:42.339 makes Iron City, Stroh Breweries, Portland's 00:07:42.339 --> 00:07:45.120 Blitzweinhardt, and even the industry behemoth 00:07:45.120 --> 00:07:48.959 S. Abmiller. Wait, S. Abmiller. Using a cornerstone. 00:07:49.259 --> 00:07:51.540 of the macro brewery establishment for production. 00:07:51.980 --> 00:07:54.480 That must have created some huge tension with 00:07:54.480 --> 00:07:57.399 the whole ethos of the early anti -establishment 00:07:57.399 --> 00:07:59.959 craft movement. How did he square that? It was 00:07:59.959 --> 00:08:02.079 a necessary tension. I mean, Koss' argument was 00:08:02.079 --> 00:08:04.079 that contract brewing allowed them to maintain 00:08:04.079 --> 00:08:07.100 quality and volume without taking on the massive 00:08:07.100 --> 00:08:09.600 debt of building their own breweries, which frankly 00:08:09.600 --> 00:08:11.980 would have probably killed the company before 00:08:11.980 --> 00:08:13.720 it even got off the ground. So it was a pragmatic 00:08:13.720 --> 00:08:16.149 choice. Totally. It was a financial necessity 00:08:16.149 --> 00:08:19.310 driven by the Harvard MBA, not just the sixth 00:08:19.310 --> 00:08:22.350 generation brewer. It showed he was prioritizing 00:08:22.350 --> 00:08:25.850 business sustainability over, let's say, immediate 00:08:25.850 --> 00:08:29.480 ideological purity. But that reliance on contracts, 00:08:29.779 --> 00:08:32.159 especially with these big, sometimes foreign 00:08:32.159 --> 00:08:34.360 -owned macro facilities, that's got to create 00:08:34.360 --> 00:08:37.039 logistical and quality control problems in the 00:08:37.039 --> 00:08:39.100 long run. He had to have a plan to move away 00:08:39.100 --> 00:08:41.639 from that. He did. And the first critical step 00:08:41.639 --> 00:08:45.419 toward reducing that reliance came in 1997. That's 00:08:45.419 --> 00:08:47.759 when Koch bought the Hudipol Shunling Brewery 00:08:47.759 --> 00:08:50.100 in his hometown of Cincinnati. And that was just 00:08:50.100 --> 00:08:52.000 a fantastic piece of corporate history, wasn't 00:08:52.000 --> 00:08:54.299 it? The same brewery where his own father had 00:08:54.299 --> 00:08:56.720 apprenticed back in the 1940s. Yeah, it blended 00:08:56.720 --> 00:08:58.799 that. That personal significance with a really 00:08:58.799 --> 00:09:01.340 smart strategic asset acquisition. It must have 00:09:01.340 --> 00:09:03.379 felt like coming full circle. Absolutely. And 00:09:03.379 --> 00:09:05.620 that move gave them a key regional hub, and it 00:09:05.620 --> 00:09:08.440 significantly cut their reliance on outside contractors. 00:09:09.000 --> 00:09:11.879 The next big step came in 2007 with the purchase 00:09:11.879 --> 00:09:14.720 of the old F &M Schaefer Brewing Company Brewery 00:09:14.720 --> 00:09:17.000 in Briningsville, Pennsylvania. Right, in the 00:09:17.000 --> 00:09:19.830 Lehigh Valley. That facility was a game changer. 00:09:19.990 --> 00:09:22.769 It had been used by Diageo to make Smirnoff Ice, 00:09:22.929 --> 00:09:24.850 so the infrastructure was already set up for 00:09:24.850 --> 00:09:27.690 large -scale beverage manufacturing. Exactly. 00:09:27.850 --> 00:09:31.429 And by 2012, that Branningsville hub was producing 00:09:31.429 --> 00:09:34.409 a massive two -thirds of all Samuel Adams beer. 00:09:34.629 --> 00:09:37.730 It solidified BB Co.'s internal brewing capacity. 00:09:38.789 --> 00:09:41.250 The strategy is so clear when you look at it. 00:09:41.350 --> 00:09:44.250 Use low cost capacity, so contract brewing, to 00:09:44.250 --> 00:09:46.629 get your scale. Right. And then consolidate production 00:09:46.629 --> 00:09:49.269 into your own high volume facilities to control 00:09:49.269 --> 00:09:52.429 your quality and your costs long term. It's important 00:09:52.429 --> 00:09:54.450 to note, though, that despite the massive scale 00:09:54.450 --> 00:09:56.970 of these plants, they still maintain that connection 00:09:56.970 --> 00:09:59.570 to their origins. The company keeps a small R 00:09:59.570 --> 00:10:02.549 &D brewery in Boston, in Jamaica Plain, on the 00:10:02.549 --> 00:10:05.360 premises of the old Hafenreffer Brewery. And 00:10:05.360 --> 00:10:07.700 that R &D site is vital. It's for tours, for 00:10:07.700 --> 00:10:10.779 tastings, for maintaining that local craft authenticity, 00:10:10.899 --> 00:10:12.759 even when the vast majority of their beer is 00:10:12.759 --> 00:10:14.720 coming from these huge facilities hundreds of 00:10:14.720 --> 00:10:16.600 miles away. It's like the symbolic heart of the 00:10:16.600 --> 00:10:18.799 brand. Okay, now let's dive into the financial 00:10:18.799 --> 00:10:21.700 architecture, which, as you mentioned, is maybe 00:10:21.700 --> 00:10:24.299 Koch's most brilliant long -term strategic move. 00:10:24.620 --> 00:10:28.740 The 1995 initial public offering. DBK goes public 00:10:28.740 --> 00:10:32.029 on the NYSE, ticker SAM. This is where that Harvard 00:10:32.029 --> 00:10:34.710 education really, really paid off. When Bibico 00:10:34.710 --> 00:10:38.169 went public, they used a dual class stock structure. 00:10:38.250 --> 00:10:41.070 It's a model that was since become famous for 00:10:41.070 --> 00:10:43.289 protecting the founders of, you know, high growth 00:10:43.289 --> 00:10:45.450 tech companies. And here's the key insight for 00:10:45.450 --> 00:10:47.730 anyone who wants to understand power within a 00:10:47.730 --> 00:10:50.409 publicly traded company. The shares that were 00:10:50.409 --> 00:10:52.909 sold to the public, the class A common stock, 00:10:53.190 --> 00:10:55.870 they have no voting rights. That is the absolute 00:10:55.870 --> 00:10:58.350 cornerstone of Jim Cox's sustained control and 00:10:58.350 --> 00:11:01.570 power. Koch owns 100 % of the Class B common 00:11:01.570 --> 00:11:03.710 stock, which is a class that does carry the voting 00:11:03.710 --> 00:11:05.690 rights. So what does that actually mean in practice? 00:11:05.990 --> 00:11:07.830 It means that no matter how much Class A stock 00:11:07.830 --> 00:11:09.830 is bought or sold on the open market, and no 00:11:09.830 --> 00:11:12.509 matter how huge the company gets, Jim Koch retains 00:11:12.509 --> 00:11:16.250 absolute control over everything. Strategic direction, 00:11:16.610 --> 00:11:19.370 mergers, acquisitions, the company's whole identity. 00:11:19.710 --> 00:11:22.250 So this structure allowed him to raise huge amounts 00:11:22.250 --> 00:11:24.690 of capital. which satisfied his early investors 00:11:24.690 --> 00:11:27.330 and funded all this expansion. While completely 00:11:27.330 --> 00:11:31.009 insulating his decision making from, say, shareholder 00:11:31.009 --> 00:11:34.370 activism or a hostile takeover, it's a really 00:11:34.370 --> 00:11:37.309 unusual structure for a 1995 IPO, especially 00:11:37.309 --> 00:11:39.789 for a beer company. And it gave him the freedom 00:11:39.789 --> 00:11:42.509 to pivot aggressively later on, which we're definitely 00:11:42.509 --> 00:11:44.850 going to see in the product portfolio. That control 00:11:44.850 --> 00:11:47.370 is what facilitated their aggressive diversification 00:11:47.370 --> 00:11:50.190 and acquisition strategy. So let's fast forward 00:11:50.190 --> 00:11:53.279 to May 2019. One of the biggest headlines in 00:11:53.279 --> 00:11:57.759 the craft beer world drops. acquires the Delaware 00:11:57.759 --> 00:12:02.360 -based Dogfish Head Brewery for a huge sum, $300 00:12:02.360 --> 00:12:05.580 million. That was a monumental merger. It united 00:12:05.580 --> 00:12:07.879 two of the most significant founder -led craft 00:12:07.879 --> 00:12:10.120 pioneers, Jim Koch and Sam Colagini. It was a 00:12:10.120 --> 00:12:12.960 massive industry consolidation move. And significantly, 00:12:13.220 --> 00:12:15.220 as part of that merger, Sam Colagini and his 00:12:15.220 --> 00:12:17.480 wife, Mariah, they became the second largest 00:12:17.480 --> 00:12:20.759 non -institutional owners of BB Co. So it created 00:12:20.759 --> 00:12:23.500 this powerful aligned leadership structure right 00:12:23.500 --> 00:12:26.230 underneath Koch's overarching control. And the 00:12:26.230 --> 00:12:28.649 most recent strategic investment really signals 00:12:28.649 --> 00:12:31.330 where the financial focus is now, and it's even 00:12:31.330 --> 00:12:35.470 beyond traditional beer. In 2020, BBCO invested 00:12:35.470 --> 00:12:39.610 $85 million in their Cincinnati plant. $85 million. 00:12:39.809 --> 00:12:42.370 Specifically to quadruple its canning capacity. 00:12:42.970 --> 00:12:45.950 And why would you need to quadruple your canning 00:12:45.950 --> 00:12:49.389 capacity? It's simple, but it's financially profound. 00:12:50.009 --> 00:12:52.370 It's to handle the explosive growth of its hard 00:12:52.370 --> 00:12:55.070 seltzers and its hard teas right alongside the 00:12:55.070 --> 00:12:57.529 beer. It's a huge tell. This massive infrastructure 00:12:57.529 --> 00:13:00.429 investment confirms it. While Samuel Adams Boston 00:13:00.429 --> 00:13:03.490 Lager is still the legacy flagship, the company's 00:13:03.490 --> 00:13:05.570 future financial growth is heavily dependent 00:13:05.570 --> 00:13:08.490 on the non -beer parts of its portfolio. It's 00:13:08.490 --> 00:13:10.669 a physical manifestation of that strategic pivot. 00:13:11.070 --> 00:13:12.870 Speaking of that portfolio, let's shift focus 00:13:12.870 --> 00:13:15.450 to the products themselves. Because before they 00:13:15.450 --> 00:13:17.769 were a financial empire, they were known for 00:13:17.769 --> 00:13:20.710 technical quality. And the sheer boundary -pushing 00:13:20.710 --> 00:13:22.950 nature of some of their beers is what really 00:13:22.950 --> 00:13:25.009 earned the brand its initial reputation. You 00:13:25.009 --> 00:13:27.590 have to start with the anchor, Samuel Adams Boston 00:13:27.590 --> 00:13:33.210 Lager. It's a 4 .8 % ABV amber lager, but the 00:13:33.210 --> 00:13:35.889 process is anything but standard. They use these 00:13:35.889 --> 00:13:38.389 traditional methods based on that rediscovered 00:13:38.389 --> 00:13:40.269 family recipe. And those traditional methods 00:13:40.269 --> 00:13:42.330 are super demanding. They include decoction mash 00:13:42.330 --> 00:13:45.110 and krausening. We should probably explain what 00:13:45.110 --> 00:13:46.789 those are because this is why the beer tasted 00:13:46.789 --> 00:13:49.870 so revolutionary back in 1985. Okay, so let's 00:13:49.870 --> 00:13:52.940 start with decoction mash. This is a really complex, 00:13:53.039 --> 00:13:56.159 multi -step mashing process. It often involves 00:13:56.159 --> 00:13:58.980 four different vessels. You take a portion of 00:13:58.980 --> 00:14:00.720 the mash, you boil it separately, and then you 00:14:00.720 --> 00:14:02.820 return it to the main mash. That sounds time 00:14:02.820 --> 00:14:04.879 -consuming. It's incredibly time -consuming, 00:14:04.899 --> 00:14:07.740 and it's very rare today. But its purpose is 00:14:07.740 --> 00:14:10.139 crucial. It enhances the malt flavor, it deepens 00:14:10.139 --> 00:14:13.000 the color, and it provides this unique mouthfeel 00:14:13.000 --> 00:14:16.159 and complexity that a simpler infusion mash just 00:14:16.159 --> 00:14:19.120 can't achieve. What about Krausening? Krausening 00:14:19.120 --> 00:14:21.679 is secondary fermentation. It involves adding 00:14:21.679 --> 00:14:24.320 young, actively fermenting wort, they call it 00:14:24.320 --> 00:14:26.820 krausen, to the finished beer just before you 00:14:26.820 --> 00:14:29.419 package it. So it carbonates in the bottle? Essentially, 00:14:29.500 --> 00:14:32.259 yes. It creates a natural carbonation, which 00:14:32.259 --> 00:14:35.100 results in a finer, softer bubble and more complex, 00:14:35.299 --> 00:14:37.899 lingering flavors compared to just, you know, 00:14:37.899 --> 00:14:40.120 forced carbonating the beer with CO2 from a tank. 00:14:40.600 --> 00:14:43.299 Both methods require painstaking effort, and 00:14:43.299 --> 00:14:45.379 they really show Costa's commitment to quality 00:14:45.379 --> 00:14:48.769 over just speed. And they dry hop the lager using 00:14:48.769 --> 00:14:52.610 two very specific, famous noble hop varieties, 00:14:52.970 --> 00:14:55.929 the Hallertale Middle Frew and the Tetanang Tetananger. 00:14:56.070 --> 00:14:59.470 Why are these noble hops so significant? Noble 00:14:59.470 --> 00:15:02.009 is this historical classification for hops that 00:15:02.009 --> 00:15:04.070 are traditionally grown in specific regions of 00:15:04.070 --> 00:15:06.549 Europe. They're low in alpha acids, which means 00:15:06.549 --> 00:15:08.450 they provide less bitterness, but they're very 00:15:08.450 --> 00:15:11.289 high in aromatic oils. So more aroma, less bite. 00:15:11.490 --> 00:15:14.990 Exactly. They impart this delicate, spicy, floral 00:15:14.990 --> 00:15:17.950 aroma without overwhelming the malt. It's perfect 00:15:17.950 --> 00:15:20.330 for a classic lager. This attention to detail 00:15:20.330 --> 00:15:22.590 is what defined their reputation, although it's 00:15:22.590 --> 00:15:24.889 worth noting even this core product isn't static. 00:15:25.169 --> 00:15:28.169 In 2023, the Boston lager was remastered with 00:15:28.169 --> 00:15:30.370 a change in the process to be, quote, easier 00:15:30.370 --> 00:15:32.750 drinking. Okay, so here's where BB Co. shifts 00:15:32.750 --> 00:15:36.529 from being a traditionalist to a radical. Let's 00:15:36.529 --> 00:15:38.330 talk about the extreme line, where they just 00:15:38.330 --> 00:15:40.970 push the technical limits of fermentation, often 00:15:40.970 --> 00:15:43.590 setting world records for ABV. The lineage for 00:15:43.590 --> 00:15:46.370 that starts back in 1994 with a beer called Triple 00:15:46.370 --> 00:15:51.659 Bock. This thing was a staggering 17 .5 % ABV. 00:15:51.799 --> 00:15:55.379 Wow. It had a black opaque color and critically 00:15:55.379 --> 00:15:58.600 no carbonation at all. They even used maple syrup 00:15:58.600 --> 00:16:01.120 in the brewing process. When it came out, it 00:16:01.120 --> 00:16:03.799 was, simply put, the strongest beer brewed commercially 00:16:03.799 --> 00:16:06.519 at the time. It was the direct forerunner of 00:16:06.519 --> 00:16:08.519 their most exclusive line. Which brings us to 00:16:08.519 --> 00:16:11.159 Utopias. First released in 2002, it was marketed 00:16:11.159 --> 00:16:13.019 as the strongest commercial beer in the world 00:16:13.019 --> 00:16:16.490 at 24 % ABV when it launched. It's not just strong, 00:16:16.549 --> 00:16:18.610 it's a technical marvel. It really is. The ABV 00:16:18.610 --> 00:16:20.909 has just steadily increased over the years. It 00:16:20.909 --> 00:16:25.409 hit 27 % by 2007, 28 % in 2019, and the upcoming 00:16:25.409 --> 00:16:29.029 2025 edition reaches an astonishing 30 % ABV. 00:16:29.250 --> 00:16:31.129 How is that even possible through just fermentation? 00:16:31.350 --> 00:16:33.389 That's the technical challenge. They have to 00:16:33.389 --> 00:16:35.909 achieve this high percentage through fermentation 00:16:35.909 --> 00:16:39.350 alone without any distillation, which would legally 00:16:39.350 --> 00:16:42.750 reclassify it as a spirit. They do it using unique 00:16:42.750 --> 00:16:45.070 yeast strains that can tolerate high alcohol. 00:16:45.129 --> 00:16:48.009 and an extremely high -density wort. And the 00:16:48.009 --> 00:16:50.269 ingredients and the aging process are just spectacular. 00:16:50.529 --> 00:16:53.990 It uses caramel, Vienna, Moravian, and Bavarian 00:16:53.990 --> 00:16:57.389 smoked malts, plus those four noble hops, Hallertauer 00:16:57.389 --> 00:17:01.690 Mittelfrue, Tetananger, Spalter, and Saz. But 00:17:01.690 --> 00:17:04.470 the aging is the real key. It's matured in this 00:17:04.470 --> 00:17:07.349 complex cocktail of Spatelty barrels, scotch, 00:17:07.410 --> 00:17:09.950 cognac, and port barrels for nearly a whole year. 00:17:10.349 --> 00:17:13.470 This imparts this incredible complexity and smoothness, 00:17:13.529 --> 00:17:16.349 almost like a fine brandy or liquor. The packaging 00:17:16.349 --> 00:17:18.630 and the price definitely reflect that exclusivity. 00:17:18.750 --> 00:17:20.880 It's a highly limited release, right? Usually 00:17:20.880 --> 00:17:23.319 only 9 ,000 to 12 ,000 bottles per vintage. Yeah. 00:17:23.400 --> 00:17:25.859 And it's sold in this distinctive ceramic bottle 00:17:25.859 --> 00:17:28.200 that looks like a miniature copper -finished 00:17:28.200 --> 00:17:30.779 brewing kettle. It's beautiful. And the price 00:17:30.779 --> 00:17:33.960 point. It started at $100 back in 2002, which 00:17:33.960 --> 00:17:36.240 was a lot then, reflecting its rarity and intensity. 00:17:36.599 --> 00:17:41.400 The 2025 edition is priced at $240. Wow. However, 00:17:41.519 --> 00:17:44.039 this is where we run into the regulatory friction 00:17:44.039 --> 00:17:46.339 that really defines the challenge of extreme 00:17:46.339 --> 00:17:49.059 brewing. Because that high alcohol content makes 00:17:49.059 --> 00:17:51.180 it flat out illegal in a number of states, right? 00:17:51.319 --> 00:17:54.119 Due to local laws limiting the percentage of 00:17:54.119 --> 00:17:56.700 alcohol in malt beverages. The list is long, 00:17:56.819 --> 00:17:59.339 and it illustrates this massive regulatory headache 00:17:59.339 --> 00:18:02.720 that's involved in distributing utopias. It's 00:18:02.720 --> 00:18:06.000 prohibited in states like Alabama, Georgia, Idaho, 00:18:06.240 --> 00:18:09.160 New Hampshire, North Carolina, Oregon, South 00:18:09.160 --> 00:18:11.759 Carolina, Vermont, West Virginia. That's a lot. 00:18:11.940 --> 00:18:14.339 Plus Arkansas, Missouri, Mississippi, Montana, 00:18:14.779 --> 00:18:18.230 Oklahoma, and Utah. The sheer fact that one of 00:18:18.230 --> 00:18:20.109 their most celebrated products is illegal in 00:18:20.109 --> 00:18:22.720 about a third of the country puts it in such 00:18:22.720 --> 00:18:26.099 stark contrast with their mass market low ABV 00:18:26.099 --> 00:18:28.819 stuff. Shifting to other specialty styles, they 00:18:28.819 --> 00:18:30.839 had some pretty significant run -ins with industry 00:18:30.839 --> 00:18:32.920 definitions, particularly about their seasonal 00:18:32.920 --> 00:18:35.059 cranberry lambic, which they've been making since 00:18:35.059 --> 00:18:37.660 1990. This sparks a really crucial debate within 00:18:37.660 --> 00:18:40.420 the craft industry about style integrity and 00:18:40.420 --> 00:18:43.720 geographic protection. The issue is technical. 00:18:43.920 --> 00:18:46.400 Right. A traditional lambic isn't just a style. 00:18:46.519 --> 00:18:49.319 It's a spontaneously fermented beer that's generally 00:18:49.319 --> 00:18:51.599 only produced in the Pajottenland region. region 00:18:51.599 --> 00:18:54.539 of Belgium, using the wild ambient yeast that's 00:18:54.539 --> 00:18:57.000 just in the air there. And B. Eco's product is, 00:18:57.019 --> 00:18:59.519 well, demonstrably not spontaneously fermented 00:18:59.519 --> 00:19:03.019 in Pejattenland. Correct. So brewers and serious 00:19:03.019 --> 00:19:05.720 beer drinkers charged that the name was mislabeled 00:19:05.720 --> 00:19:07.880 and misleading because it didn't adhere to that 00:19:07.880 --> 00:19:10.599 technical definition. Even the leading beer critic 00:19:10.599 --> 00:19:13.579 at the time, Michael Jackson, called it a misleading 00:19:13.579 --> 00:19:17.140 name. So it raises this ethical question. By 00:19:17.140 --> 00:19:20.440 using the name Lambic, even as an homage, was 00:19:20.440 --> 00:19:23.240 BB Co. just leveraging consumer confusion to 00:19:23.240 --> 00:19:26.059 market a product that was less technically demanding 00:19:26.059 --> 00:19:28.380 to make? The company's defense was that they 00:19:28.380 --> 00:19:30.480 saw it as an homage to the style. They said they 00:19:30.480 --> 00:19:32.359 were celebrating the flavor profile without the 00:19:32.359 --> 00:19:35.390 pain and agony of it. This just highlights that 00:19:35.390 --> 00:19:37.250 tension between marketing shorthand and brewing 00:19:37.250 --> 00:19:39.930 purity that BB Co. was often navigating. They 00:19:39.930 --> 00:19:42.450 were also quick to jump into the IPA wars, which 00:19:42.450 --> 00:19:44.970 really defined craft beer in the 2010s. They 00:19:44.970 --> 00:19:48.069 came out with Rebel IPA in 2014. Yeah, that was 00:19:48.069 --> 00:19:50.529 their West Coast style IPA. It was brewed with 00:19:50.529 --> 00:19:54.890 five distinct American hops. Cascade, Simcoe, 00:19:54.890 --> 00:19:58.509 Chinook, Centennial and Amarillo. And Rebel IPA 00:19:58.509 --> 00:20:01.089 spawned an entire line, right? Including Rebel 00:20:01.089 --> 00:20:03.910 Rouser, a double IPA. It shows they were committed 00:20:03.910 --> 00:20:06.849 to following popular trends. And before we move 00:20:06.849 --> 00:20:09.049 on from beer, we have to mention the fantastic 00:20:09.049 --> 00:20:11.730 historical footnote about Sam Adams Light. Ah, 00:20:11.789 --> 00:20:14.509 yes. When they introduced Sam Adams Light in 00:20:14.509 --> 00:20:17.529 2001, there was genuine consideration given to 00:20:17.529 --> 00:20:20.230 naming it. Turtle Adams. Turtle Adams. After 00:20:20.230 --> 00:20:23.130 Sam Adams' actual pet turtle. That little detail 00:20:23.130 --> 00:20:25.130 just highlights the kind of quirky entrepreneurial 00:20:25.130 --> 00:20:28.009 spirit that still existed even as they were becoming 00:20:28.009 --> 00:20:30.630 this massive corporation. But the real story 00:20:30.630 --> 00:20:33.609 of the modern Boston Beer Company is that aggressive 00:20:33.609 --> 00:20:37.230 diversification. They became a multi -category 00:20:37.230 --> 00:20:39.509 beverage empire, moving way beyond traditional 00:20:39.509 --> 00:20:41.930 beer. And this is why that quadrupled canning 00:20:41.930 --> 00:20:44.130 capacity was so necessary. They started pretty 00:20:44.130 --> 00:20:45.990 early, actually. They launched something called 00:20:45.990 --> 00:20:49.029 Hardcore Cider in 1997, which eventually evolved 00:20:49.029 --> 00:20:51.549 into the hugely successful Angry Orchard brand, 00:20:51.730 --> 00:20:54.309 launched in 2012. Cider was a critical bridge 00:20:54.309 --> 00:20:56.690 product for them. Then came the high -volume 00:20:56.690 --> 00:21:00.059 hard malt beverages. Twisted Tea launched around 00:21:00.059 --> 00:21:04.339 2000 or 2001, a 5 % ABV malt beverage marketed 00:21:04.339 --> 00:21:06.700 as a hard iced tea. And it found massive success, 00:21:06.920 --> 00:21:09.400 particularly in the American Southeast and in 00:21:09.400 --> 00:21:11.839 Alberta, Canada. And of course, the product that 00:21:11.839 --> 00:21:14.299 has just utterly defined their financial strategy 00:21:14.299 --> 00:21:17.180 in the last decade, Truly Hard Seltzer, introduced 00:21:17.180 --> 00:21:20.539 in 2016. These non -beer brands are now absolutely 00:21:20.539 --> 00:21:24.460 vital to their scale and their growth. They also 00:21:24.460 --> 00:21:27.000 operate a bunch of subsidiaries, like the Traveler 00:21:27.000 --> 00:21:29.000 Brewing Company, which does Shandy's, Coney Island 00:21:29.000 --> 00:21:32.059 Brewing Company, and the L .A.-based Angel City 00:21:32.059 --> 00:21:34.200 Brewery. They really transitioned from being 00:21:34.200 --> 00:21:37.119 a craft brewer to being a holistic beverage platform. 00:21:37.420 --> 00:21:39.640 It's just impossible to execute that level of 00:21:39.640 --> 00:21:41.619 growth and diversification without running into 00:21:41.619 --> 00:21:44.140 some intense scrutiny. And Bibico's actions, 00:21:44.200 --> 00:21:46.119 they often drew fire, especially when they were 00:21:46.119 --> 00:21:49.539 navigating industry definitions and marketing 00:21:49.539 --> 00:21:52.099 boundaries. The biggest internal battle, really, 00:21:52.180 --> 00:21:54.380 was over the definition of craft brewery itself. 00:21:54.680 --> 00:21:57.819 In 2018, Bibico actively pushed for changes to 00:21:57.819 --> 00:21:59.799 that definition. Why was that so important to 00:21:59.799 --> 00:22:02.339 them? It was all about scale and categorization. 00:22:02.839 --> 00:22:05.680 The existing definition, which is generally set 00:22:05.680 --> 00:22:08.279 by the Brewers Association, had these strict 00:22:08.279 --> 00:22:10.759 limits on annual production and ownership structure. 00:22:11.099 --> 00:22:12.680 And they were bumping up against those limits. 00:22:12.779 --> 00:22:16.019 Exactly. As their portfolio shifted more and 00:22:16.019 --> 00:22:18.339 more towards ciders and seltzers, they risked 00:22:18.339 --> 00:22:21.839 no longer qualifying as a craft brewery, which 00:22:21.839 --> 00:22:23.680 affects everything from how your market data 00:22:23.680 --> 00:22:26.400 is reported to getting favorable tax implications. 00:22:26.940 --> 00:22:28.420 So they were trying to change the rules of the 00:22:28.420 --> 00:22:31.140 club. Essentially, yeah. Because they had outgrown 00:22:31.140 --> 00:22:33.619 the movement they helped start, they were seeking 00:22:33.619 --> 00:22:36.420 a new definition that would encompass independent 00:22:36.420 --> 00:22:39.440 brewers of traditional or non -traditional craft 00:22:39.440 --> 00:22:42.200 beverages. They also courted some high -profile 00:22:42.200 --> 00:22:44.319 marketing controversies, sometimes with just 00:22:44.319 --> 00:22:48.099 disastrous public -facing results. The sponsorship 00:22:48.099 --> 00:22:50.480 of the radio show Opie and Anthony from 2000 00:22:50.480 --> 00:22:53.960 to 2002 is a prime example of an edgy marketing 00:22:53.960 --> 00:22:56.339 strategy going completely sideways. Oh, that 00:22:56.339 --> 00:22:58.920 was a mess. The sponsorship involved this radio 00:22:58.920 --> 00:23:00.960 promotion called Sex for Sam, which encouraged 00:23:00.960 --> 00:23:03.240 couples to have sex in public places. That sounds 00:23:03.240 --> 00:23:05.210 like a bad idea from the start. The marketing 00:23:05.210 --> 00:23:07.630 team was clearly trying to tap into this controversial, 00:23:07.950 --> 00:23:11.029 high visibility demographic, and it culminated 00:23:11.029 --> 00:23:14.549 in an absolute public relations disaster. It 00:23:14.549 --> 00:23:17.210 resulted in the host being fired after a couple 00:23:17.210 --> 00:23:19.410 was charged with public lewdness for attempting 00:23:19.410 --> 00:23:22.250 to have sex in a vestibule at St. Patrick's Cathedral 00:23:22.250 --> 00:23:24.450 in New York City. In St. Patrick's Cathedral. 00:23:24.470 --> 00:23:28.410 Yes. In August of 2002, it just demonstrated 00:23:28.410 --> 00:23:31.349 the immense risks of associating a premium brand 00:23:31.349 --> 00:23:35.450 with overtly provocative content. Another maybe 00:23:35.450 --> 00:23:38.230 more culturally nuanced controversy centered 00:23:38.230 --> 00:23:40.289 on the words they left out of a commercial in 00:23:40.289 --> 00:23:42.410 2013. That was their Independence Day commercial. 00:23:42.569 --> 00:23:44.930 It quoted the Declaration of Independence, but 00:23:44.930 --> 00:23:47.890 it omitted the phrase endowed by their creator. 00:23:48.069 --> 00:23:50.509 And that drew immediate public outrage from critics 00:23:50.509 --> 00:23:52.970 who felt they were secularizing a core American 00:23:52.970 --> 00:23:55.950 text. It did. But the company's defense was actually 00:23:55.950 --> 00:23:59.029 rooted in regulatory compliance. They cited the 00:23:59.029 --> 00:24:02.170 industry standard, the Beer Institute Advertising 00:24:02.170 --> 00:24:04.730 Code, which strongly advises that advertising 00:24:04.730 --> 00:24:07.390 should not include religion or religious themes. 00:24:07.650 --> 00:24:09.750 So it wasn't necessarily a political statement 00:24:09.750 --> 00:24:11.869 on their part. It was a decision made to follow 00:24:11.869 --> 00:24:14.410 trade association rules. But it drew massive 00:24:14.410 --> 00:24:17.349 public backlash anyway. It just shows the incredible 00:24:17.349 --> 00:24:19.630 tightrope they have to walk as a national brand 00:24:19.630 --> 00:24:21.990 that's so associated with American heritage. 00:24:22.509 --> 00:24:24.589 The company also faced legal challenges that 00:24:24.589 --> 00:24:27.289 are pretty typical of a massive corporation defending 00:24:27.289 --> 00:24:30.210 its intellectual property. In 2007, there was 00:24:30.210 --> 00:24:32.849 the Sam Adams versus Sam Adams trademark dispute 00:24:32.849 --> 00:24:35.730 in Portland, Oregon. That's fascinating. A politician 00:24:35.730 --> 00:24:38.609 named Sam Adams runs for mayor of Portland and 00:24:38.609 --> 00:24:41.400 the beer company goes after him. Correct. Bibiso 00:24:41.400 --> 00:24:43.539 demanded that the domain names of the mayoral 00:24:43.539 --> 00:24:46.839 candidate Sam Adams, things like Sam Adams for 00:24:46.839 --> 00:24:49.420 mayor .com, be turned over to them. Seriously? 00:24:49.579 --> 00:24:52.279 Yeah. The company expressed genuine concern that 00:24:52.279 --> 00:24:54.559 consumers might confuse the politician with the 00:24:54.559 --> 00:24:57.200 beer brand. It just illustrates the aggressive, 00:24:57.299 --> 00:25:00.059 highly formalized defense of their name and their 00:25:00.059 --> 00:25:02.440 IP that's required when you operate at that scale. 00:25:02.619 --> 00:25:05.180 And product safety hit them in 2008 when they 00:25:05.180 --> 00:25:07.630 issued their first major product recall. Right, 00:25:07.710 --> 00:25:11.069 that recall was due to potential defects in glass 00:25:11.069 --> 00:25:13.549 bottles that they got from a third -party supplier. 00:25:14.170 --> 00:25:16.930 They estimated that less than 1 % of the bottles 00:25:16.930 --> 00:25:19.950 might contain small pieces of glass. So they 00:25:19.950 --> 00:25:22.309 issued the recall out of an abundance of caution. 00:25:22.369 --> 00:25:24.690 And thankfully, no injuries were ever reported. 00:25:24.970 --> 00:25:27.730 However, the news still led to the company's 00:25:27.730 --> 00:25:30.670 shares temporarily dropping by more than 3%. 00:25:30.670 --> 00:25:33.509 Wow. It shows that even minor quality issues 00:25:33.509 --> 00:25:36.210 have significant financial implications when 00:25:36.210 --> 00:25:38.369 you're a public company trading on the NYSE. 00:25:38.549 --> 00:25:41.490 And beyond just domestic challenges, they briefly 00:25:41.490 --> 00:25:44.789 pursued a very high profile. international collaboration 00:25:44.789 --> 00:25:48.309 with German brewing royalty between 2009 and 00:25:48.309 --> 00:25:51.309 2011. That was the global partnership called 00:25:51.309 --> 00:25:54.130 Infinium. It was with the Bayerische Staatsbrauerei 00:25:54.130 --> 00:25:56.650 Weinstepfen, which is arguably the world's oldest 00:25:56.650 --> 00:25:59.049 operating brewery. Amazing partner to have. This 00:25:59.049 --> 00:26:02.109 collaboration produced a champagne -like brew, 00:26:02.269 --> 00:26:06.549 also named Infinium, with an ABV of 10 .3%. Yeah, 00:26:06.549 --> 00:26:08.029 the marketing around that was brilliant, playing 00:26:08.029 --> 00:26:11.069 so heavily on tradition. It was marketed as the 00:26:11.069 --> 00:26:14.369 first new beer style created under the Reinheitsgebot 00:26:14.369 --> 00:26:17.269 in over 100 years, referencing Germany's traditional 00:26:17.269 --> 00:26:20.849 beer purity law. They released about 15 ,000 00:26:20.849 --> 00:26:23.710 cases in North America, often positioning it 00:26:23.710 --> 00:26:26.690 as this prestige alternative to sparkling wine 00:26:26.690 --> 00:26:30.009 for, you know, celebratory toasts. Finally, we 00:26:30.009 --> 00:26:32.849 have to look impartially at the political context 00:26:32.849 --> 00:26:35.920 surrounding the founder himself. Jim Koch stepped 00:26:35.920 --> 00:26:38.440 into the political arena pretty publicly in 2018. 00:26:38.819 --> 00:26:40.740 He did. And we should be clear here, we're just 00:26:40.740 --> 00:26:42.559 reporting on the events as they were reported 00:26:42.559 --> 00:26:45.079 and the reactions they caused. Exactly. At a 00:26:45.079 --> 00:26:47.839 White House dinner in August 2018, Koch publicly 00:26:47.839 --> 00:26:51.259 praised the 2017 corporate tax cut. His reported 00:26:51.259 --> 00:26:53.359 assertion was that the tax cut played a major 00:26:53.359 --> 00:26:55.680 role in helping BBSCO become more competitive 00:26:55.680 --> 00:26:57.440 against foreign competitors. And what was his 00:26:57.440 --> 00:26:59.700 specific argument? He pointed out a fact that 00:26:59.700 --> 00:27:02.859 really underpins his worldview. He said 85 percent 00:27:02.859 --> 00:27:05.299 of the beer made in the United States is owned 00:27:05.299 --> 00:27:08.339 by foreign companies. So that statement, which 00:27:08.339 --> 00:27:11.039 he intended to frame the tax cut as a way to 00:27:11.039 --> 00:27:13.240 boost American independence against these global 00:27:13.240 --> 00:27:17.200 giants, it generated a swift and pretty intense 00:27:17.200 --> 00:27:20.380 public reaction. Indeed, there was immediate 00:27:20.380 --> 00:27:23.480 criticism calls for boycotts. There was a highly 00:27:23.480 --> 00:27:26.380 visible call from a Boston area mayor and public 00:27:26.380 --> 00:27:28.980 protests were actually held near the brewery. 00:27:29.339 --> 00:27:31.359 So, again, we're just reporting the facts of 00:27:31.359 --> 00:27:33.480 the statement and the reaction. But it shows 00:27:33.480 --> 00:27:36.279 that when you run a company so associated with 00:27:36.279 --> 00:27:39.539 American patriotism, every comment, even a seemingly 00:27:39.539 --> 00:27:42.880 simple business statement, can just ignite controversy 00:27:42.880 --> 00:27:45.819 when it's tied to a political context. It perfectly 00:27:45.819 --> 00:27:48.660 illustrates the dual challenge. Jim Koch built 00:27:48.660 --> 00:27:50.619 the company on the idea of the small, independent 00:27:50.619 --> 00:27:53.279 American brewer. But once you operate at an international 00:27:53.279 --> 00:27:55.559 financial scale, you kind of lose the insulation 00:27:55.559 --> 00:27:58.640 of being small. To balance that massive corporate. 00:27:58.759 --> 00:28:01.039 and political profile, we really need to explore 00:28:01.039 --> 00:28:03.259 the philanthropic side of the Boston Beer Company. 00:28:03.539 --> 00:28:05.740 Jim Cook has invested heavily in supporting the 00:28:05.740 --> 00:28:08.119 next generation of small businesses, effectively 00:28:08.119 --> 00:28:10.000 paying forward his own experience of launching 00:28:10.000 --> 00:28:12.710 with just a little bit of capital. This is primarily 00:28:12.710 --> 00:28:15.009 channeled through the Brewing the American Dream 00:28:15.009 --> 00:28:18.609 program, which Koch created back in 2008, right 00:28:18.609 --> 00:28:21.250 as the U .S. economy was facing a massive recession. 00:28:21.650 --> 00:28:24.029 It's an initiative designed specifically to help 00:28:24.029 --> 00:28:26.650 small entrepreneurs get their start, often within 00:28:26.650 --> 00:28:28.769 the food and beverage world. The scale of this 00:28:28.769 --> 00:28:30.730 initiative is pretty staggering and it deserves 00:28:30.730 --> 00:28:34.440 focus. As of 2015, the program had assisted more 00:28:34.440 --> 00:28:37.019 than 4 ,000 entrepreneurs. And this isn't just 00:28:37.019 --> 00:28:39.980 mentorship, it's capital. They facilitate financing 00:28:39.980 --> 00:28:42.319 in partnership with a dedicated lending partner, 00:28:42.480 --> 00:28:46.500 Action, and they've made nearly 400 loans totaling 00:28:46.500 --> 00:28:51.119 an impressive $400 million. $400 million in facilitated 00:28:51.119 --> 00:28:53.900 small business loans. That is a serious financial 00:28:53.900 --> 00:28:56.599 commitment to fostering the very ecosystem that 00:28:56.599 --> 00:28:59.170 they came from. It's a structural support system 00:28:59.170 --> 00:29:01.069 for small -scale food and beverage startups. 00:29:01.329 --> 00:29:03.609 And it serves a few purposes, immense goodwill, 00:29:03.690 --> 00:29:06.529 obviously, but it's also an opportunity for Bepiso 00:29:06.529 --> 00:29:08.509 to keep a finger on the pulse of the industry, 00:29:08.710 --> 00:29:11.730 spotting talent, trends, future partners early 00:29:11.730 --> 00:29:14.430 on. It shows a commitment to that American dream 00:29:14.430 --> 00:29:17.009 narrative that underlies the whole Sam Adams 00:29:17.009 --> 00:29:20.289 brand. And that collaborative ethos, it extended 00:29:20.289 --> 00:29:22.829 to directly supporting their competitors during 00:29:22.829 --> 00:29:26.299 times of industry -wide strain. The source material 00:29:26.299 --> 00:29:28.799 is clear about this. During the 2008 worldwide 00:29:28.799 --> 00:29:31.740 hops shortage. Yes. A critical ingredient crisis 00:29:31.740 --> 00:29:35.299 for brewers everywhere. And this was a landmark 00:29:35.299 --> 00:29:38.259 moment of good corporate citizenship. Hops were 00:29:38.259 --> 00:29:40.700 scarce. Prices were soaring. And instead of hoarding 00:29:40.700 --> 00:29:42.599 their supply, which they easily could have done 00:29:42.599 --> 00:29:45.180 to gain a competitive advantage. Right. BBCo 00:29:45.180 --> 00:29:49.019 sold 20 ,000 pounds of its own hops at cost to 00:29:49.019 --> 00:29:52.680 108 smaller craft brewers. all across the United 00:29:52.680 --> 00:29:55.400 States. Selling a critical ingredient at cost 00:29:55.400 --> 00:29:58.059 during a worldwide shortage, that is an act that 00:29:58.059 --> 00:30:00.119 must have earned them considerable, legitimate 00:30:00.119 --> 00:30:02.359 goodwill and respect within the craft community. 00:30:02.680 --> 00:30:04.819 And it wasn't just a one -off publicity stunt 00:30:04.819 --> 00:30:07.359 either. They repeated the act, sharing hops again 00:30:07.359 --> 00:30:09.960 in 2012, which confirms it as this consistent 00:30:09.960 --> 00:30:13.000 policy of supporting a healthy, competitive landscape, 00:30:13.359 --> 00:30:15.240 even when they were the biggest player in the 00:30:15.240 --> 00:30:17.799 room. Another great example of actively fostering 00:30:17.799 --> 00:30:19.759 that community is the long shot competition. 00:30:20.400 --> 00:30:23.279 The Samuel Adams Longshot American Homebrew Competition 00:30:23.279 --> 00:30:26.799 has been running since 1996. It allows amateur 00:30:26.799 --> 00:30:29.359 homebrewers to submit their creations for judging. 00:30:29.539 --> 00:30:32.839 And the prize is a genuine career booster. What 00:30:32.839 --> 00:30:35.000 do they get? They get to see their winning creation 00:30:35.000 --> 00:30:37.680 produced on a larger commercial scale and sold 00:30:37.680 --> 00:30:40.160 as part of a Samuel Adams mixed six -pack the 00:30:40.160 --> 00:30:43.299 following year. It provides this immediate, tangible 00:30:43.299 --> 00:30:46.339 path for amateur talent to gain commercial recognition. 00:30:47.240 --> 00:30:49.779 Moving on to branding, the Boston Beer Company 00:30:49.779 --> 00:30:52.500 has just deeply woven itself into the cultural 00:30:52.500 --> 00:30:54.779 fabric, particularly in its hometown through 00:30:54.779 --> 00:30:57.779 these major sports deals and surprisingly, even 00:30:57.779 --> 00:30:59.980 appearances in high art. The official sports 00:30:59.980 --> 00:31:02.720 sponsorships are just so heavily dominated by 00:31:02.720 --> 00:31:05.779 Boston pride. Starting in the 2018 season, Samuel 00:31:05.779 --> 00:31:08.279 Adams replaced Budweiser, the king of stadium 00:31:08.279 --> 00:31:10.460 beer, as the official beer of the Boston Red 00:31:10.460 --> 00:31:12.380 Sox. That is a huge deal. It's an eight year 00:31:12.380 --> 00:31:14.700 deal that runs through the 2025 season. That 00:31:14.700 --> 00:31:18.180 is massive visibility. and a very deep very visible 00:31:18.180 --> 00:31:20.799 partnership the deal includes extensive signage 00:31:20.799 --> 00:31:23.339 at fenway park the creation of a dedicated sam 00:31:23.339 --> 00:31:25.920 roof deck and crucially the right to use the 00:31:25.920 --> 00:31:29.299 red sox logo for marketing and contests and they 00:31:29.299 --> 00:31:32.140 solidified that connection by creating a specific 00:31:32.140 --> 00:31:36.119 product just for the team wicked fenway ipa It's 00:31:36.119 --> 00:31:40.400 a session IPA at 5 .5 % ABV, marketed as the 00:31:40.400 --> 00:31:43.579 official beer of the Red Sox. That kind of hyperlocal 00:31:43.579 --> 00:31:46.359 branding is incredibly powerful. And the non 00:31:46.359 --> 00:31:49.460 -beer brands are also targeting specific massive 00:31:49.460 --> 00:31:52.140 cultural demographics, right? Particularly Twisted 00:31:52.140 --> 00:31:55.279 Tea. Oh, yeah. Since the 2021 season, Twisted 00:31:55.279 --> 00:31:57.660 Tea has been the naming sponsor of Team Twisted 00:31:57.660 --> 00:32:00.559 Tea Suzuki in the AMA Motocross and Supercross 00:32:00.559 --> 00:32:02.660 championships. That's a very specific audience. 00:32:02.779 --> 00:32:05.039 Very specific. High energy, often a regional 00:32:05.039 --> 00:32:08.000 demographic. The exact market where Twisted Tea 00:32:08.000 --> 00:32:10.400 has seen its greatest success. It shows a really 00:32:10.400 --> 00:32:12.559 segmented approach to sponsorship. Their cultural 00:32:12.559 --> 00:32:15.039 footprint stretches way beyond sports, too. I 00:32:15.039 --> 00:32:17.460 mean, take the media and arts recognition. In 00:32:17.460 --> 00:32:20.240 the 2015 musical Hamilton. Right. In the song 00:32:20.240 --> 00:32:23.220 Aaron. or the character John Lawrence sings the 00:32:23.220 --> 00:32:25.579 line, I'm John Lawrence and the place to be two 00:32:25.579 --> 00:32:27.400 pints of Sam Adams, but I'm working on three. 00:32:27.500 --> 00:32:30.359 That is mainstream cultural integration at the 00:32:30.359 --> 00:32:32.920 highest level. When a brand like Samuel Adams 00:32:32.920 --> 00:32:35.619 is used as shorthand for American history and 00:32:35.619 --> 00:32:38.000 consumption in a Pulitzer Prize -winning musical, 00:32:38.299 --> 00:32:41.440 you know you've achieved true cultural resonance. 00:32:41.759 --> 00:32:43.799 And even their seasonal offerings have earned 00:32:43.799 --> 00:32:47.240 serious recognition among connoisseurs. The seasonal 00:32:47.240 --> 00:32:49.859 Old Fezziwig Brew, for example, won recognition 00:32:49.859 --> 00:32:52.779 as the best Christmas or winter beer in Massachusetts. 00:32:53.259 --> 00:32:55.900 This company has really mastered the dichotomy. 00:32:56.039 --> 00:32:58.559 They can achieve extreme technical quality and 00:32:58.559 --> 00:33:00.720 win accolades for these hyper -specific styles. 00:33:00.720 --> 00:33:03.640 while at the same time executing high -volume, 00:33:03.640 --> 00:33:06.240 broad -appeal marketing through sports and pop 00:33:06.240 --> 00:33:10.160 culture across their entire portfolio. So let's 00:33:10.160 --> 00:33:12.740 bring this deep dive to a close and try to synthesize 00:33:12.740 --> 00:33:15.079 the journey of the Boston Beer Company. We've 00:33:15.079 --> 00:33:17.039 watched a sixth -generation family tradition 00:33:17.039 --> 00:33:19.559 get leveraged and scaled up by a sophisticated, 00:33:20.000 --> 00:33:22.539 Harvard -educated management consultant. It's 00:33:22.539 --> 00:33:25.160 a remarkable trajectory, and it's defined by 00:33:25.160 --> 00:33:27.900 this strategic, almost bulletproof control. Jim 00:33:27.900 --> 00:33:29.839 Cook maintained complete long -term control. 00:33:29.930 --> 00:33:31.809 over the company through his ownership of 100 00:33:31.809 --> 00:33:34.930 % of that non -publicly traded Class B voting 00:33:34.930 --> 00:33:37.450 stock. And that dual class structure is what 00:33:37.450 --> 00:33:39.990 allowed him to raise capital without any risk 00:33:39.990 --> 00:33:42.789 of external shareholders influencing or dictating 00:33:42.789 --> 00:33:44.769 the course of the business. And that control 00:33:44.769 --> 00:33:48.490 is what facilitated a necessary and very aggressive 00:33:48.490 --> 00:33:51.869 diversification. They went from defining American 00:33:51.869 --> 00:33:55.029 craft beer with lagers and these extreme ABV 00:33:55.029 --> 00:33:58.450 beers to aggressively shifting their financial 00:33:58.450 --> 00:34:02.089 focus. into massive high volume categories, hard 00:34:02.089 --> 00:34:04.869 ciders, hard teas, and most critically, hard 00:34:04.869 --> 00:34:08.090 seltzers like Angry Orchard, Twisted Tea and 00:34:08.090 --> 00:34:12.050 Truly. That $85 million investment to quadruple 00:34:12.050 --> 00:34:14.809 canning capacity, it tells you everything you 00:34:14.809 --> 00:34:16.670 need to know about where the future revenue stream 00:34:16.670 --> 00:34:19.050 is projected to come from. That capital investment 00:34:19.050 --> 00:34:21.610 signals a company that is prioritizing the efficient 00:34:21.610 --> 00:34:24.190 production of high volume, lower margin, mass 00:34:24.190 --> 00:34:27.570 market flavored malt beverages. And this presents 00:34:27.570 --> 00:34:29.820 a really interesting... fundamental paradox that 00:34:29.820 --> 00:34:31.199 we've kind of explored throughout this whole 00:34:31.199 --> 00:34:33.840 dive. The company is simultaneously defined by 00:34:33.840 --> 00:34:36.360 two wildly different product strategies. On one 00:34:36.360 --> 00:34:38.659 hand, you have the meticulous, technically demanding, 00:34:38.900 --> 00:34:41.860 noble hop -laden, barrel -aged, highly limited, 00:34:41.940 --> 00:34:45.159 extreme ABV beers like Utopias. These are the 00:34:45.159 --> 00:34:47.159 products that cement the company's reputation 00:34:47.159 --> 00:34:50.219 as technical innovators. They require months 00:34:50.219 --> 00:34:53.440 of maturation in specialized barrels, adherence 00:34:53.440 --> 00:34:56.460 to complex, expensive brewing methods. They're 00:34:56.460 --> 00:34:58.460 restricted in a lot of... because of their alcohol 00:34:58.460 --> 00:35:00.940 content. And they appeal only to the dedicated 00:35:00.940 --> 00:35:04.400 connoisseur who's willing to pay $240 for a single 00:35:04.400 --> 00:35:07.119 bottle. And then on the other hand, you have 00:35:07.119 --> 00:35:11.199 the high volume, broadly flavored, approachable 00:35:11.199 --> 00:35:15.000 mass market beverages that are driving the massive 00:35:15.000 --> 00:35:17.639 infrastructure investments and frankly, the vast 00:35:17.639 --> 00:35:19.889 majority of the company's financial growth. Which 00:35:19.889 --> 00:35:22.969 leads us directly to our final provocative thought 00:35:22.969 --> 00:35:25.750 for you, the learner. Given the intense technical 00:35:25.750 --> 00:35:28.190 specifications required for specialized products 00:35:28.190 --> 00:35:30.789 like Utopias, and the fact that its market access 00:35:30.789 --> 00:35:32.829 is restricted in nearly a third of the country 00:35:32.829 --> 00:35:35.670 due to its ABV, what does the future hold for 00:35:35.670 --> 00:35:38.369 extreme brewing within the Boston Beer Company? 00:35:38.710 --> 00:35:41.110 Essentially, how does the spirit of the craft 00:35:41.110 --> 00:35:44.789 pioneer? the one who's making those $240, 30 00:35:44.789 --> 00:35:48.670 % ABV ceramic bottle specialties? How does that 00:35:48.670 --> 00:35:50.909 coexist with a business model that's increasingly 00:35:50.909 --> 00:35:53.530 fined by high -volume mass -market products like 00:35:53.530 --> 00:35:55.650 hard seltzers, which now command the company's 00:35:55.650 --> 00:35:58.690 decisive capital investment strategy? That tension 00:35:58.690 --> 00:36:01.369 between heritage craft purity and financial necessity, 00:36:01.590 --> 00:36:03.670 that is the defining challenge at the heart of 00:36:03.670 --> 00:36:05.849 the billion -dollar beverage giant Jim Koch built.