The Boston Liquor Company?
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With yesterday's announcement that Boston Beer (NYSE: SAM) will be selling its beer to Berkshire Mountain Distillers for the purpose of turning them into whiskey, one cannot help but wonder: will SAM ever branch out beyond beer? They have slowly built out their Twisted Tea and Angry Cider brands, but these are still malt based and essentially beer. Berkshire Mountain's plan is to use Boston Lager and Cinder Bock as a base for the whiskey making process. The Frankenstein concoction will be branded as Berkshire using Sam Adams beer.
So, the notoriously quality obsessed and brand-protective Chairman of Boston Beer, Jim Koch, has deemed it acceptable to carry the Sam Adams name on a Whiskey. It seems there might be other avenues for the company to take. Would Boston Beer ever turn into a Diageo (NYSE: DEO), a multi-national umbrella of liquor brands ranging from Guinness to Smirnoff to Rumple Minze? Doubtful. But, they very well could take their own path into liquor-hood by maintaining their commitment to "craft" methods. In Boston Beer's case, "craft" is a relative word, given the irony that as the company grows, it will appeal less and less to the craft drinker.
New breweries are popping up every day and companies such as the Craft Brewer's Alliance (NASDAQ: BREW) are working to foster a consortium of small breweries not dominated by any particular brand name, as Boston Beer is by Sam Adams. Of course, Boston Beer could buy up startup breweries just as easily as anyone else can, but craft brew lovers are obsessed with origin, and inevitably it would be revealed in their beer lubricated conversation that the organic, micro, fair trade beer they are holding is actually backed by (GASP!) a corporation! Perhaps that's just the Boulderite in me, but can anyone disagree that Chipotle tasted a little less delicious after they found out McDonald's was a main investor? With a generic, collectivist friendly name like Craft Brewer's Alliance, consumers are given the sense that the craft brewers had no choice but to band together to compete against the big guys.
In this case, Sam Adams is the big guy. Literally, Sam is a big guy. And he's right there on the label. So any beer taken under the Boston Beer label would be, "oh this is made by the Sam Adams people?"
Where does this leave Sam? Beer consumption is declining in the US (Boston Beer's predominant market), but "craft-brewed beer" consumption is on the rise. Craft brew is defined as selling 6 million barrels of beer a year or less. In 2011, Boston Beer sold 2.5 million barrels. Molson Coors' (NYSE: TAP) Coors Light, by contrast, sold 18 million barrels. Boston Beer will eventually outgrow its craft brew pants, and at that point they will have to be seriously competing with the huge multi-nationals. So, liquor could be the fast-growing (US consumption up 1.9% in 2011), high margin business they need to stay competitive.
TheLaowai has no positions in the stocks mentioned above. The Motley Fool owns shares of Boston Beer. Motley Fool newsletter services recommend Boston Beer, Diageo plc (ADR), and Molson Coors Brewing Company. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.
