The best entrepreneurial advice the admittedly impatient Koch says he's received is, "Jim, nothing good happens fast." That axiom was whispered in his ear by a high school girlfriend. But, says its recipient, "when you're building a company, it's not bad counsel." Thus, in his 1984 offering prospectus he advised potential investors, "Sales of 5,000 barrels per year are required for attractive profitability based on the Boston market alone. I believe this will take 3-5 years, but appears to be achievable." His calculations turned out to be way off. It took him just eight months to sell the first 5,000 barrels.
Koch also described the aims of the proposed company in the prospectus. He opted not to go after Bud and its ilk but to take on premium imports like Heineken and Molson, even though such brands constituted just 6% of the market. To produce the better-than-theirs beer he had in mind would require extra-expensive ingredients, but in the premium market sector, imports' freight bills and currency problems would give him room to maneuver. Eventually, increased volume would allow Koch to achieve economies of scale and deliver beer more drinkable than the imports for the same or less money. And the imports' by-definition inability to deliver a brew as fresh as Koch's would be a promotable edge for BBC.
Getting people to brew the beer, however, was another story. For all the calculated hyperbole Koch was to generate in boosting the cause of local brews, BBC had no local brewery. In the beginning Koch cooked his new elixir, a weighty lager, on his kitchen stove, using a complex recipe he had discovered in his father's attic. He and Rhonda Kallman -- the then-22-year-old secretary he took with him when he left consulting, because, among other business talents, she knew the local bar scene better than he -- lugged samples from pub to pub in quest of direct sales. After they made one, Koch, Kallman, and the company's first hire -- a truck driver -- hauled the cases around the city. No one else was willing to deliver the goods. "When I started, they all thought I was crazy," Koch relates. "Every distributor in Boston turned me down. Not only did we make the calls and get the orders, we had to rent a truck and lease a warehouse. When a batch was ready, we bottled it and delivered it. Try schlepping five cases of beer down the steps of one of those Faneuil Hall restaurants -- you're talking 160 pounds! It gave me an appreciation of who does the hard work in the company."
Partner Kallman now heads a 115-person sales force that's been appraised by one Wall Street analyst as "by far the best in the sector." The group is not only the industry's most efficient -- one rep to every 500 clients -- but its most balanced: half the salespeople are female. "That's way off the scale for the beer business," Koch notes. "I'm often asked why I hire so many women. The answer is, I don't; I hire talented, resourceful, intelligent, energetic people. It happens that God made half of them women."
In the absence of BBC's own facility, the solution to meeting the increased demand as sales expanded to other cities was to outsource brewing to an otherwise-underutilized brewhouse. "Here's what I'd like to do," Koch would say as he made cold calls, shopping his then-novel concept around. "I'll bring you my own recipe and ingredients, and I want to make my beer at your place." One of the takers was Pennsylvania's Pittsburgh Brewing Co., a capacious plant whose own label was then in decline. A nonbeliever when it came to formal market research, Koch chose the name Samuel Adams by printing mock labels and personally polling beer drinkers wherever they gathered, including captive audiences on airplanes. (The runner-up name: New World.) "I figured here's a cheap way to do it, and what better place than a plane? It was my demographic -- businesspeople, a lot of them interested in a better beer." Today BBC products make up the majority of Pittsburgh Brewing's output, and BBC has struck similar contracts with breweries in Oregon, Washington, and New York. Now, Koch crows, "we're able to get beer into any market in the country within 24 hours of shipping."
Koch is such a fanatic for freshness that BBC was the first of the beer crafters to stamp a noncoded sell-by date on its batches. Beer is at its best in the first minutes after bottling, Koch holds, and hangs on for only four or five months before its quality starts to deteriorate. "That's why we pioneered freshness dating. If you're selling quality, freshness is important. You shouldn't allow the consumer to buy stale beer without his knowing it. I'd rather call it back and destroy it than have someone drink it." And he does just that, at no small cost. In 1995 BBC will take back and destroy about $1 million worth of old beer. Every year some is put into a tub, and Koch, dressed in a business suit, sits in a chair over it, charging $1 a throw for the crowd to take potshots at a target and drop him into his own drink. The considerable receipts go to charity.
Actually, destroying the beer increases BBC's profits, Koch calculates. "It sends a clear message to everybody -- consumers, retailers, distributors, our salespeople -- and gives them a simple decision-making rule: 'Date passed, beer goes.' " The bottom-line rationale is "you get a lot of administrative overhead in business because you're always making trade-offs. Therefore, in matters where decisions can be made on clear and obvious principles, such as no old beer, you save time and money. You don't have bureaucracy debating things like 'Well, how old is old?' "
