Boston Beer Company Final Presentation December 5, 2010<br />Brian Doran<br />Colin Keil<br />Sharlene Gale<br />Jeff Schafer<br />Kelsey Schmidt<br />Caitlin Smith<br />
Corporate Governance<br /><ul><li>Set regulations governing the interactions between key institutions of corporate governance.
CEO Jim Koch has authority to elect five of the eight board members
The Board of Directors has a Nominating/Governance Committee to review board members at least annually.</li></ul>– This group also sets requirements for new board members<br />– Assess current board members to help set compensation for the members<br />– Assessments includes: Issues of Judgment, Diversity, Age, Experience in Business or Technology relevant to the Company, etc. <br />– This Committee recommends nominees for full board membership to the board<br /><ul><li>Once the majority of Class A Board Members accepts nominees, they are either presented to the stockholders or instated through Board action</li></ul>– Committee may also recommend nominees for a Class B Director to Class B Stockholders.<br />Corporate Strategy<br />
Corporate Governance – Members of the Board<br />The Board must have a majority, or at least 3, directors who meet criteria for independence set by the New York Stock Exchange (NYSE)<br /><ul><li>Board Members have access to all officers and employees of the Company, but should inform the CEO of these meetings.
Board Members are expected to present the board a request to leave the Board – the Nominating/Governance Committee decides if they may under circumstances.
Board must always have three committees: Audit, Compensation, and Nominating/Governance
Each committee has Chairman and the power to hire independent advisors when necessary.</li></ul>Corporate Strategy<br />
Corporate Governance – Interactions<br /><ul><li>Senior officers are welcome at all Board meetings – encourage the interaction between the top levels in the company.
Board members give their decisions/comments to the Chairman, who is expected to give this information to the public.
The full Board annually evaluates the CEO and Chairman.
Consider succession planning for management at least once a year.</li></ul>Corporate Strategy<br />
Organizational Culture<br />“As a company, we look at the world as one without limits, and as one in which we are free to explore, grow, create, and enjoy. Although proud of what we have achieved thus far, we look forward to the opportunities and possibilities that lie ahead.” – Jim Koch<br />Corporate Strategy<br />
Corporate Social Responsibility<br />2008 Hops Shortage Sharing<br />Selected 108 craft brewers to receive the 20,000 pounds of hops it could spare<br />Long Shot Competition<br />Home brewers submit to see their creation in large scale production and sold on store shelves along side Sam Adams<br />Brewing the American Dream<br />Micro-loans to financially-disadvantaged small business owners<br />Corporate Strategy<br />
Brewery Acquisition<br />June 2008, Boston Beer acquired Pennsylvania Brewery from Diageo<br />Core product volume at company-owned breweries increased from 35% to 95%<br />Significantly higher capital costs, change in leadership and execution style<br />Greatly reduces risks, increases flexibility, and reduces operational savings<br />Recent Alliance<br />
Infinium<br />Strategic Alliance with Weihenstephan<br />Completely new ultra-premium beer<br />Weihenstephan<br />Oldest Brewery in the world - 1000 years<br />World’s largest brewing university<br />Owned by Bavarian government<br />Reached out to Sam Adams to deliver the <br /> world’s most premium beer<br />Strategic Alliance<br />Recent Alliance<br />
Related Diversification<br />Economies of Scope <br />Germany and USA<br />Sharing Marketing/Promotion activities<br />Pooling brewing knowledge<br />German Reinheitsgebot<br />ADDING Value Framework <br />Recent Alliance<br />
Better Off Test – ADDING Value Framework<br />Recent Alliance<br />
Ownership Test for Strategic Alliance<br />Modular<br />Soft<br />Medium<br />Medium<br />Low<br />Solution:<br />Strategic Alliance <br />Recent Alliance<br />
Challenges<br />Challenges <br />New market for ultra-premium beer<br />Profitable?<br />Accessible?<br />Brand awareness <br />Not directly associated with Sam Adams<br />Competitor response<br />Recent Alliance<br />
Foreign Sources<br />Two-row wheat barley in malt<br />United States and Canada<br />Noble hops varieties in lagers<br />Germany and Czech Republic<br />Traditional English hops in ales<br />United Kingdom<br />www.naturaltraveler.com<br />International Markets<br />
Implications<br />Dependent on a limited number of foreign and domestic suppliers<br />Operations exposed to quality of crop and timely delivery of dealers<br />Subject to risk of Euro or Pound fluctuating against the U.S. dollar<br />Do not currently hedge forward currency commitments<br />Cannot easily switch suppliers<br />Quality of product and reputation of company is dependent on ingredient sourcing<br />International Markets<br />
Current International Distribution<br />International Markets<br />
Second Dimension: Where?<br />International Markets<br />
Second Dimension: What Sequence?<br />High<br />Strategic Importance of the Market<br />Low<br />Low<br />High<br />Ability to Exploit Market<br />International Markets<br />
Third Dimension: How?<br />LEVEL OF INFLUENCE AND CONTROL<br />Wholly-owned subsidiary<br />Joint Venture<br />Licensing or Franchising<br />Export<br />ENTRY MODE<br />International Markets<br />
Current International Cooperatives<br />Canada<br />Moosehead Breweries Ltd distributes the Samuel Adams family of beer in Canadian markets<br />Israel<br />Tempo Beverages LLC<br />Pacific Rim: Australia, Hong Kong, Japan<br />San Miguel Corporation (acquired J Boag and Son, exclusive distributor of Samuel Adams in Australia)<br />Caribbean <br />Mexico<br />International Markets<br />
Current International Cooperatives<br />Europe<br />UK<br /> Beer Paradise Ltd<br />Germany <br />Weihenstephen Brewery<br />Scandanavia (Norway, Sweden, and Finland) Galatea AB<br />Dr. Joseph Schrädler and Jim Koch. <br />http://www.washingtonlife.com/2010/06/16/wine-spirits-to-infinium-and-beyond/<br />International Markets<br />
Evolution of Strategy<br />1988<br />1990s<br />Present<br />1985<br />Sam Adams available on both East and West Coasts<br />Annual Sales: 36,000 barrels<br />Boston Beer Co continues to offer innovative products to “better beer” consumers<br />Annual Sales: 1.2 million barrels (1997)<br />Boston Beer Co offers over 30 products. Distribution in all 50 States and 20 countries.<br />Annual Sales: 2 million core products + 200,000 non-core<br />Sam Adams available at 25 Boston locations<br />Annual Sales: 500 barrels<br />Product Differentiation <br />Disruptive Technology<br />Domestic “Craft Beers” were essentially non-existent, and no widely distributed micro-brews<br />Differentiation and Growth <br />Differentiation and Small Growth <br />Factors<br /><ul><li>Contract Brewing
Greater quality control</li></ul>Vertical Integration – Decreased Involvement with Third Parties<br />Core product volume brewed at independently owned breweries increased from 35% to 95% from 2007 to 2009<br />Evolution of Strategy<br />
Strategic Recommendations<br />Maintain Current Strategy<br />Westward Expansion in the US<br />Brand Proliferation<br />Recommendations<br />