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Boston Beer Company PPT
 

Boston Beer Company PPT

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Boston Beer Company Valuation, Tuck Bridge 2010 Session 2 Group 4 - Andrew Fulham, Scott Sorenson, Joey Aleman, Taylor Williams, Stephanie Soybel

Boston Beer Company Valuation, Tuck Bridge 2010 Session 2 Group 4 - Andrew Fulham, Scott Sorenson, Joey Aleman, Taylor Williams, Stephanie Soybel

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  • Recent acquisition of Anheuser Busch by Inbev and the joint venture of Miller Brewing Company and Coors Brewing Company to create Miller Coors LLCMiller Coors Sells: Miller Lite Coors Light, BLUE MOON, Killian Irish Red Milwaukee's Best, Foster’s, KeystoneBoston Beer sells its product mainly in the US, but also markets them in Canada, Europe, Israel, Pacific Rim, Mexico and the Caribbean.99% of revenue comes from US but, but also markets them in Canada, Europe, Israel, Pacific Rim, Mexico and the Caribbean.Further, these two major brewers have entered the Better Beer category recently, either by developing their own beers, acquiring, in whole or part, existing craft brewers, or by importing and distributing foreign brewers’ brands. On January 11, 2010, Heineken N.V. (“Heineken”) announced its acquisition of the beer operations of FomentoEconomicoMexicano, SAB de CV (“FEMSA Cerveza”) which will make Heineken the number two brewer internationally by revenue and significantly increase Heineken’s ownership position in the Better Beer Market with the addition of FEMSA Cerveza brands, including Dos Equis ®, Sol® and Tecate®.
  • “Determined by higher price, quality, image and taste, as compared with regular domestic beers”(10-k)Better Bear includes most imports and specialty beersPrimarily but not entirely within the Better Beer CategoryIn the Better bear category only behind Corona and Heineken Further, these two major brewers have entered the Better Beer category recently, either by developing their own beers, acquiring, in whole or part, existing craft brewers, or by importing and distributing foreign brewers’ brands. Heineken N.V. (“Heineken”) announced its acquisition of the beer operations of FomentoEconomicoMexicano, SAB de CV (“FEMSA Cerveza”) which will make Heineken the number two brewer internationally by revenue and significantly increase Heineken’s ownership position in the Better Beer Market with the addition of FEMSA Cerveza brands, including Dos Equis ®, Sol® and Tecate®.
  • Beer Category was flat but Craft Beer rose 12%
  •  -SAM is heavily dependent on about 400 wholesale distributors sell to retailers (pubs, restaurants, grocery chains) -These distributors are the same distributors used by AB InBev and SABMiller and are often influenced by these larger companies. -SAM holds this same distribution advantage over smaller regional breweries. -Distributors can terminate service on very short notice and there is no guarantee SAM could find other distributors offering comparable prices. Beer is produced at breweriesThe second tier is distribution. Producers will often provide exclusive rights to a certain company to distribute its product to different retailers, and the post-prohibition landscape usually makes distributors powerful entities within each individual state. This reduces competition and can raise prices, since fewer distributors mean less incentive to reduce prices. Some states also have regulations further defining the relationship between the brewer and a distributor, even going as to legally bind a brewer to a distributor. This can create a headache for consumers since disputes between brewers and distributors can result in certain beers becoming unavailable in an area.The third tier is retail. This is the point at which the general consumer can purchase the product, whether that be a grocery store, bar or state-regulated vendor. As with many things, there is an exception: brewpubs - restaurants or pubs that produce beer on site for sale on site.
  • Percentage numbers emphasis
  • Blue boxes – too strong

Boston Beer Company PPT Boston Beer Company PPT Presentation Transcript

  • Boston Beer Company
    Group 4
    Jose Aleman
    Andrew Fulham
    Scott Sorensen
    Stephanie Soybel
    Taylor Williams
    1
  • Recommendation
    We value Boston Beer Company (NYSE: SAM) at $63.38 per share, and recommend that investors hold these securities.
    Current Market Price of $65.21
    Increased competition will hinder revenue growth and company expansion
    Market Growth within Industry Stagnation
    2
  • Agenda
    Overview
    Financials
    Strategy
    Valuation
    3
  • Boston Beer Company History
    1984
    • Jim Koch founds Boston Beer
    1995
    • IPO at $20 per share
    2001
    • Twisted Tea launched
    2002
    • Sam Adams Light launched
    2007
    • Purchase of PA brewery
    2008
    • Product recall in April
    Overview
    Financials
    Strategy
    Valuation
    4
  • Boston Beer FeelsCompetition from All Sides
    Imports
    Wine & Spirits
    Craft Beers
    Industry Leaders
    Overview
    Financials
    Strategy
    Valuation
    5
  • Consolidation ofDomestic Beer Production
    Source: www.ibisworld.com
    Overview
    Financials
    Strategy
    Valuation
    6
  • Domestic Beer Production is Decreasing
    Source: www.ibisworld.com
    Overview
    Financials
    Strategy
    Valuation
    7
  • Boston Beer operates within the “Better Beer” category
    Craft, Import, and Specialty Beer
    20% of Domestic Beer Market
    Category profitability realized by Major Brewers
    Samuel Adams is the largest domestic brewer and 3rd largest Brewer in the Better Beer Category
    Overview
    Financials
    Strategy
    Valuation
    8
  • Craft Beer: Growth within Stagnation
    Craft Beer experienced 12% growth in 2009
    6th Straight year this category has outperformed the Beer Industry
    Major Craft Beers:
    • Sam Adams
    • Sierra Nevada
    • New Belgium
    Craft Beer drinkers are loyal to the Craft Beer Industry
    Overview
    Financials
    Strategy
    Valuation
    9
  • Boston Beer sells 2 of the top 3 Craft Beers
    Top Selling US Craft Beers in 2009
    1) Sierra Nevada Pale Ale
    2) Samuel Adams Boston Lager
    3) Sam Adams Seasonal
    4) New Belgium Fat Tire Amber Ale
    5) Shiner Bock
    6) WidmerHefeweizen
    7) Sam Adams Variety Pack
    8) Sam Adams Lite
    Source: Beverage Industry Magazine
    Overview
    Financials
    Strategy
    Valuation
    10
  • 3 Tier Distribution System
    Brewery
    Wholesalers
    Retailers
    Overview
    Financials
    Strategy
    Valuation
    11
  • Diverse Product Portfolio
    Boston Beer Co. (SAM)
    8 Flavored
    Malt Beverages (13%)
    1 Hard Cider (0.06%)
    20 Unique Beers (87%)
    Overview
    Financials
    Strategy
    Valuation
    12
  • Current Market Analysis
    Overview
    Financials
    Strategy
    Valuation
    13
  • Market Opportunities and Risk
    Overview
    Financials
    Strategy
    Valuation
    14
  • Overview
    Financials
    Strategy
    Valuation
    15
  • Historical Revenue Growth
    Overview
    Financials
    Strategy
    Valuation
    16
  • Projected Revenue
    Overview
    Financials
    Strategy
    Valuation
    17
  • Cost of Goods Sold
    Overview
    Financials
    Strategy
    Valuation
    18
  • Financial Analysis
    Financial Analysis
    Net profit margin of 7.5% in 2009
    Boston Beer has no short or long term debt
    • Can finance its own capital expenditures
    • ABInbev:12.55%
    • SABMiller:10.6%
    Source: Global Business Browser
    Overview
    Financials
    Strategy
    Valuation
    19
  • Overview
    Financials
    Strategy
    Valuation
    20
  • Competitive Strengths
    Leadership built on scale, quality and branding
    Consumer preferences are shifting towards premium beer
    Agreements with suppliers and distributors yield stability and predictability.
    Overview
    Financials
    Strategy
    Valuation
  • Threats
    Increasingly competitive segment
    Low switching costs among consumers
    Intensified efforts from industry leaders to penetrate the market
    Low barriers to entry at the microbrewer level
    Need to increase differentiation from premium products in wine and spirits industry
    Overview
    Financials
    Strategy
    Valuation
  • Opportunities
    Geographic expansion
    Domestic
    International – Emerging markets
    Risks
    Direct competition with regional brewers
    Competition with major industry leaders
    Product diversification
    23
    Overview
    Financials
    Strategy
    Valuation
  • Overview
    Financials
    Strategy
    Valuation
    24
  • Discounted Cashflow Analysis
    Overview
    Financials
    Strategy
    Valuation
    25
  • Best and Worst Cases
    Overview
    Financials
    Strategy
    Valuation
    26
  • Sensitivity Analysis
    Overview
    Financials
    Strategy
    Valuation
    27
  • Sensitivity Analysis
    Overview
    Financials
    Strategy
    Valuation
    28
  • Recommendation
    29
    We value Boston Beer Company (NYSE: SAM) at $63.38 per share, and recommend that investors hold these securities.
    Current Market Price of $65.21
    Increased competition will hinder revenue growth and company expansion
    Market Growth within Industry Stagnation
  • Appendices
    30
  • Five Forces Summary
    31
  • Larger Competition
    AB Inbev
    Shock Top
    Colorado Native
    Redhook
    MillerCoors produces several craft beers
    Blue Moon
    Henry Weinhard
    Leinenkugel
    32
  • Assumptions
    33
  • Income Statement 2005-2014
    Source: Global Business Browser / Reuters
    34
  • Balance Sheet 2005-2009
    Source: Global Business Browser / Reuters
    35
  • Key Employees
    36
  • SWOT
    • Strengths
    • Strong recent financial performance
    • Robust network of breweries for local distribution
    • Diversified in products and geographical distribution
    • Strong market position
    • Expanding market share
    • Strong growth prospects
    • Weaknesses
    • Much smaller player than most competitors
    • Declining profitability
    • Limited liquidity position
    • Low return on equity
    • Product recalls
    • Opportunities
    • Focused strategy on reducing
    • Dependencies on other brewers
    • Production expansion
    • Growing craft beer market
    • Threats
    • Changing consumer preferences
    • Limitations on advertising
    • Stringent governmental regulations
    • Consolidation in beer industry
    37
  • Financial Ratios
    Source: Global Business Browser
    38
  • Final Notes
    A large amount of information in this presentation was taken from the Boston Beer Company 2009 10k
    39
  • Sensitivity Analysis
    40