Although he's "always wanted to have a brewery," Koch has yet to own a full-fledged factory of his own. (A miniature one on the outskirts of Boston is devoted to visitor tastings and research and development -- of such concoctions as cranberry beer.) In 1987 he obtained venture capital earmarked to build a factory that could produce 225,000 barrels a year and bought $2.7 million worth of equipment. But when construction estimates came in at twice his budget, Koch scrapped the project, abandoning 30 huge tanks that had already been delivered to the site. "It was a big mistake," he admits. "I remember thinking, 'Jeez, I'm almost 40, and I just wrote off more than I've made in my whole life.' " But pushing on would have sunk the company -- not to mention annoyed its VC backers -- "and wouldn't have made my beer any better."
After almost a dozen years into it, he's found extra merit to the contract route. "In the value-added chain, I choose the parts I can do better than anyone else," Koch says. "I capture the art-and-science part of brewing, while they run the plant. I'm not better at getting a roof fixed than they are." With Pittsburgh Brewing's labor pact with the union due to expire last May, Koch called union management five months in advance and suggested that negotiations start right away, saying, "If you take it to the deadline, I will already have found another place to brew my beer." The union settled in March. "Owning something can tie you down," Koch believes. "My beer gets good treatment because if the contractor were to do anything wrong, I could leave. Whereas with their own beer, they can't leave. So Sam Adams is brewed especially well."
So well, in fact, that it was the first American beer allowed into Germany, the only country in the world that enforces a beer-purity law. Koch seized the moment to hint that the language of the law showed that while his beer met stringent standards, his competitors' brews didn't. A relentless challenger who compares the opposition's products unfavorably with his own, Koch has more than once irritated his rivals, as any innovative merchant is apt to, by pushing claims to the edge of exactitude -- but not beyond. In fact, the statute didn't bar other beers because they had worms or such; it barred them simply because their recipes called for ingredients German brews didn't contain. BBC brands are exported to England and Ireland as well and were sold in Japan until Koch pulled them because "the distribution system there has so many layers, we weren't getting fresh beer into consumers' hands." But Koch's forays into foreign markets aren't so much for profit as for posture: we're as good as the imports, he likes to say. "Going international is not a priority," he admits. "We got Iowa only last year."
With the Hawkeye State under their belts, Koch and Kallman now have covered all 50 states. Little wonder that, Koch charges, Anheuser-Busch recently tried to cut him off from a critical source of raw materials by bullying the farmers who supply him with rare Bavarian hops. Koch didn't blink. He flew to Hallertau, Germany, and invoked his family's longstanding relationship with the farmers themselves: "It's likely my great-great-grandfather bought hops from their great-great grandfathers. I maintain good relationships with those farmers because to me, part of being a strong competitor is making sure you take care of the people you need." August Busch "is as tough a competitor as there is in American business today," Koch concedes. "But I'm a tough competitor, too. I enjoy the challenge. Let me answer them this way: we still have the hops."
And they're no ordinary hops. Koch spends as much as 20 times the going rate for "really elegant" varieties. Without costlier ingredients, he insists, BBC's 14 offerings -- from a light lager to a 34-proof syrupy distillate that Koch invented and has applied for a patent on -- would fall short of the distinctive tastes he claims BBC customers expect. "People ask how come Sam Adams is so expensive. My response is, how come it's so cheap, when we have higher ingredient costs by far? World-class beer for a buck more a bottle!"
Koch's excited admiration of his own products may or may not be just another promotional posture; regardless, he's found a way to make it feel infectious. Those who share a sample with him in his model pub at BBC's R&D site receive an education in sight as well as taste. Here's Koch pouring cream stout: "See how it forms! It's almost like a parfait. It's beautiful! A well-made, well-served stout will have a head like that. This has an acid bite to it. When you smell it, the fermentation smell should be a little like black coffee." His guest tastes. "Get that bite!!"
Thus ads and promotional pieces stress a painstaking brewing process that Koch himself supervises, standing by contractors' vats and tanks as a given recipe is nursed into fruition. While the rest of the industry's marketing features the party-thick lifestyle one's beer choice supposedly guarantees, BBC's emphasizes freshness, rich and complex tastes and fragrances, and exquisite ingredients. Samuel Adams's tabletop menu cards for restaurants picture a patriot with fire in his eye, not a terrier with a black eye. Explains Koch: "I'm trying to educate American beer drinkers the same way California wine makers changed people's minds about American wines 15 years ago. Creating trust in the market is a competitive advantage against the big guys. They're still trying to figure out how to make something that looks and tastes like Samuel Adams."
Accordingly, Koch has been acclaimed for innovative marketing. But he insists the acclaimers have it wrong. He's an innovative salesman and deems the person-to-person aspect so important to the soundness of a business that he still goes on the road two days a week. "At the start," he concedes, "I focused on selling because I couldn't afford advertising or marketing. Other microbreweries didn't have brewing backgrounds, so they were into the marketing aspect: 'We have to have a little local brewery because that's what people are buying,' they figured. I said, 'That's not right. People buy beer, not shtick. I can sell beer in Boston if it's great beer. But I can make it anywhere." BBC didn't add a marketing director until last year. "We became a household word without a marketing department," boasts Koch.
