Why Samuel Adams Supports Its Competitors
Jim Koch is chairman of Boston Beer, a pioneer of the craft-beer movement and brewer of Samuel Adams. The business, which Koch founded in 1984, had $739 million in revenue last year. Since 2008, Boston Beer has given out more than $3 million in microloans to craft brewers and other small businesses in the food, beverage, and hospitality industries. As Koch explains to Inc. editor-at-large Leigh Buchanan, supporting competitors can sometimes make sense.
The reason I support competitors becomes obvious if you think about the way yeast ferments beer. If enough yeast are working together, they can change the ecosystem for the mutual benefit of all. If they aren't, other organisms take over, and the yeast will fail. Craft brewing is kind of like that.
We are happy to share our innovations with the industry. We were the first brewery to age beer in used spirits barrels back in the early 1990s. So we got a lot of calls: Where do you get the barrels? How do you do it? How do you get approval for it? We shared with anybody who asked us. About a year ago, we invested $1 million to develop a beer can that allows you to get more air when you drink, so you experience the taste and smell of the beer at the same time. We licensed the design to a manufacturer on the condition that it let other craft brewers use it for free. It will help differentiate craft beers from beers the big guys have developed to compete with us.
In 2008, there was a worldwide hops shortage. A lot of craft brewers got caught short--particularly the smaller ones. We had enough because we buy in advance and on contract. So we put out an announcement to craft brewers that we would sell them our hops at cost. We were able to help more than 200 breweries--some were faced with shutting down without a supply. We did it again in 2012, when there was a shortage of a very desirable kind of hops used in IPAs [India pale ales]. Some of the brewers we helped sent us a few bottles made with our hops as a thank-you.
Through our Samuel Adams Brewing the American Dream program, we've made loans to about a dozen microbrewers and provided coaching to another 30. They are a lot of fun. For me personally, and for us as a company, it connects us with our small-business roots. And if one of these companies is successful enough that they take some market share from us, well, more power to them. I don't worry about that. I worry about how we create a beer culture that respects the art of brewing and wants beer with flavor, taste, and authenticity. If we can create that environment, there will be plenty of business for all of us.
I don't want to be a Goliath. It's a lot more fun to be a little shepherd boy, as long as you have got more than one David. You read the story of David--his life kind of sucked after he became king.
Previously in Inc.: Jim Koch told his startup story in the March 1988 feature "Portrait of a CEO as Salesman."