Boston Beer Company Strategic Analysis

RUNNING HEAD: STUCK IN THE MIDDLE 1
Stuck in the Middle
Strategic Analysis of Boston Beer Company
Joseph Somervell
Azusa Pacific University
BUSI 450
Professor Daniel Kipley
December 18, 2015

Stuck in the Middle 2
Executive Summary
Boston Beer Company is wrapped up in the booms of the Craft beer, hard cider, and
flavored malt beverage industries. Boston Beer Company is at a rough position because it is
flanked by large multi-billion dollar beverage multinationals and by small, local breweries. This
creates Boston Beer with an interesting market niche, which also causes them to be beaten in two
directions. They are beat in differentiation by small companies, and in cost leadership by the
multinationals. This report compares Boston Beer Company against Anheuser Busch InBev and
Craft Brew Alliance. Although not normally in Boston Beer Companies playing field, since it
has about twenty five times the market share in the overall beer category, AB InBev will be used
as a comparison to the large multinational beer companies, which also includes Molson Coors,
and formally SABMiller, until AB InBev acquired them. Craft Brew Alliance is used to compare
Boston Beer Company to the smaller breweries in the Craft beer industry. Boston Beer Company
is an aggressive company commanding the hard cider industry, growing steadily in flavored malt
beverages, and maintaining market share in craft beer. Boston Beer Company has great financial
position in growing industries. Ultimately, it is concluded Boston Beer Company should expand
its hard cider production, cut its advertising costs, and acquire a small craft brewery using the
recommended strategy, horizontal integration.
Current Mission, Objectives and Strategy
“The Boston Beer Company seeks long-term profitable growth by offering the highest
quality product to the U.S. beer drinker.” (Boston Beer Company, 2014) Naturally, following
this mission statement leads them to their main objective, which is to provide the freshest and
highest quality beverages to their customers. The ways Boston Beer accomplishes these
objectives are the rapidity of shipping, high product testing, product development technology,

and their Freshest Beer strategy (Boston Beer Company, 2014). Boston Beer Company has
always maintained a stance of providing the highest quality products. Jim Koch, the founder,
found a niche in the beer industry with nearly zero competition in 1984 (Boston Beer Company,
2014). In 1984, there was nearly no competition in craft beer, but currently it is the opposite. A
craft beer revolution is in full swing, which is creating a problem for Boston Beer, as there are
almost 4,000 breweries in the U.S. with another 1,500 new breweries in the planning stage
(Boston Beer Company, 2014). This creates a problem for Boston Beer Company, which calls
for a new mission.
New Mission Statement
The new mission of The Boston Beer Company is to seek long-term profitable growth by
expanding the Angry Orchard Cider brand while offering the highest quality products to the U.S.
consumer. Due to Boston Beer’s dominance in the Hard Cider Beverage segment, it should
expand its Angry Orchard division and seek to exploit the desire for hard cider in the US and
European markets. Boston Beer Company should also seek to continue its expansion of in the
Flavored Malt Beverages segment because Twisted Tea has produced well, and will continue to
sell well, if quality is maintained. These two brands have expanded massively in the past two
years, while Boston Beer Company’s beer division has experienced troubles. This transition is
difficult, because the roots of the company are in craft beer, but it is becoming harder to create
profits in the craft beer industry as a massive company because of the extreme abundance of
small, local craft breweries. The reasons for this switch is Angry Orchard hard cider’s dominance
as a product, because it dominates the industry, nearly tripling the sales of the nearest competitor,
while also experiencing an insane growth of 90.3% in product sales (Jacobsen, 2015). Although
this growth is slowing, since the previous years growth was around 200%, this is an industry to

be dominated, and through this, Boston Beer Company could become a multi billion dollar in
sales company.
Firm Structure Analysis
Boston Beer Company runs under a functional firm structure. The top level executives
are the CFO and Treasurer, William Urich, founder and Chairman, Jim Koch, and CEO and
President, Martin Roper. After this comes the Vice president (VP) of Sales, John Geist, VP of
Brewing, David Grinnell, VP of Operations, Thomas Lance, CP of Human Resources, Ai-Li
Lim, VP of Brand development, Robert Pagano, and VP of Legal and Corporate Secretary,
Kathleen Wade (Boston Beer Company, 2014). These parts of the company split up the main
functions of every part of the company, and subdivide them further to managers, who are not
named by Boston Beer Company. These functions complete everything needed for the three
main industries where Boston Beer Company competes. There is no real division in operations,
finances, or sales that differentiate the products of Boston Beer into subdivisions, which makes it
a functional firm.
SWOT Analysis
There are some interesting factors inside and outside of Boston Beer Company, which are
creating a time of analysis and skepticism from investors. The boom of the craft beer industry is
in full effect. As stated above, there is an abundance of breweries opening in the U.S., which
creates a problem for a large company like Boston Beer Company, especially because Boston
Beer is stuck between small competitors and gigantic competitors. Luckily, Boston Beer
Company is a strong competitor in the beer industry and can use its strengths to survive, and
thrive in the increased competition. Boston Beer has strong brand recognition, quality, great

research and development, treats employees well, and has extremely stable finances. These put
Boson Beer in a place where most large beer companies are not. Boston Beer has growing sales,
increasing cash flows, and increasing incomes. These automatically allow it more leverage to
make decisions than other more indebted companies, since the only debt Boston Beer has is a
capital lease for a production facility. As strong as its strengths are, Boston Beer Company has
some glaring weaknesses. The most noticeable are dependence on suppliers and distributors, and
their inability to respond to the increase in competition in the craft beer market. One main
concern with the dependence on suppliers and distributors is that their main strategy is to provide
the freshest beer, yet depend on others to deliver it. Also, the inability to respond to competition
is a concern because of the size of the company, and the fact Boston Beer practically created the
craft beer market. Although Boston Beer has responded indirectly through developing their hard
ciders, and flavored malt beverages, there have been no successful attempts to maintain or gain
market share in craft beer. To solve these weaknesses, Boston Beer must use opportunities to
regain their grasp on the craft beer market. Boston Beer company has many viable opportunities
including: finding domestic suppliers, backwards integration, horizontal integration, pursuing a
new line of cost-leading craft beer, and expanding their subsidiaries. The most attractive of these
opportunities are backwards integration, horizontal integration and expanding subsidiaries.
Boston Beer Company has many suppliers, including hops and apple growers, the most
important of these. Either finding a domestic supplier, or purchasing a supplier would be a great
option because it would decrease cost and provide the same quality if Boston Beer chooses the
correct option. Horizontal integration is an necessary opportunity to exploit because many large
companies are buying up small craft breweries, which add to their market share, and attack
Boston Beer Company’s market share. Boston Beer has bought a few smaller breweries in the

past, but needs to continue this strategy to stay relevant in craft beer. Expanding its subsidiaries
will also help this goal of maintaining and increasing market share, because of the high quality
provided without the direct label of Boston Beer. They are a fresh look for the company. Lastly,
there are threats that cannot be ignored. The most impactful threats are the competition in the
beer industry, large companies buying craft breweries, and the ineffectivity of advertising. These
carry the most weight because competition is extremely fierce in the craft beer industry as stated
above, many times. Competition is only getting more powerful because large companies are
buying up smaller craft breweries, which allow these smaller companies to begin to grab a large
market share because their costs are decreased and they have a wider exposure. However, maybe
the most real threat is the ineffectivity of advertising fro Boston Beer Company. Smaller craft
breweries have little to no advertising cost, while Boston Beer Company is paying massive
amounts to advertise their product. Since craft beer buyers do not always depend on advertising
and choose based on what beer they want to try, advertising can be largely ineffective.
Confrontation
The factors in Boston Beer’s internal and external environments match up decently well.
There are definitely a few areas, which lack strength, but for the most part, BBC can take
advantage of its opportunities, and compensate for the threats it faces. There are also places
where BBC’s opportunities can help solve its weaknesses. The most important matches are:
Stable finances with horizontal integration, product development with the expansion of
subsidiaries, product development with large companies buying craft breweries, high quality
with ineffectivity of advertising, dependency on suppliers with backwards integration, and
inability to respond to competition with expansion of subsidiaries. These six matchups can help
Boston Beer Company move out of their current, stagnant position in the market. Boston Beer

can exploit the opportunity of horizontal integration by buying up smaller craft breweries and
adding them to their subsidiaries, which will increase their profile in the industry. Using product
development to exploit the expansion of its subsidiaries will help Boston Beer increase its market
share with its subsidiaries without throwing more money at the Sam Adams brand name. Moving
to threat matchups, the strength of product development will combat large companies buying
craft breweries because these large companies are entering a market they have only just begun to
fight. It shows desperation that these large companies are buying out small craft breweries for
large amounts of money, because they cannot compete with craft beer. Boston Beer can combat
the ineffectivity of advertising with its high quality, because even if advertising fails, their
quality will stand tall. Quality is the most primary buying motivation in craft beer. This matchup
will keep Boston Beer competitive. A way to solve Boston Beer’s dependency on suppliers is to
integrate backwards. Having its own hop or apple farm will lower supply costs, and remove the
threat of a hops shortage from their radar. Finally, Boston Beer can respond to elevated
competition by expanding its subsidiaries. These subsidiaries can push other competitors out of
the market, while increasing Boston Beer’s market share.
Five Forces Analysis
The beer industry is in a transitional time. Craft beer is growing immensely popular,
while overall beer sales are dropping. It is a hard time for larger companies such as AB InBev,
Molson Coors, and even Boston Beer Company. One would think that Boston Beer being a craft
brewer would not have a problem selling its beer, even though it is a larger company. However,
more and more consumers are looking to support local business and buy local craft beer. This
increased competition has brought immense power to the buyer. Differentiation is a very vital
aspect for any company in the beer industry, while at the same time cost is a factor because

consumers still do not want to overspend on alcohol, which is more of a leisure product than
most products. There is an extreme threat of substitution because the switching costs are non-
existent, differentiation is mostly subjective, and brand loyalties fly out the window when craft
beer is about tasting different types and brands. The threat of new entrants is absurd. As written
above, there are an insane amount of breweries, about 4,000, and another ridiculous amount
planning to open, about 1,500. Because of this ease of entry, and the desire to enter the craft beer
market, competitive rivalry in the industry is very intense. Competition is the main threat in craft
beer, currently. Due to the nature of the craft beer industry, the power of the buyer is extremely
high, and the power of the supplier is very low. This makes Boston Beer’s position in the middle
of big and small breweries, even worse since they must differentiate as a small company, but also
attain cost savings like a large company.
Impact and Probability
The threats facing Boston Beer Company are quite substantial. There are many problems
in the beer industry BBC will have to deal with very soon, or is currently having trouble
handling. The main issue for BBC is increased competition in craft beer. Although the market
segment of consumers and sales are increasing, there is extreme competition in this small
segment of the market. BBC’s market share in craft beer is slowly being eaten by the multitude
of local breweries opening. Another worrying threat is large companies buying craft breweries.
Even though this shows desperation to compete, large companies have access to larger supply
chains and can influence a market much easier because of the pure amount of capital on hand.
Meanwhile, the large companies are affecting Boston Beer through their big brands (i.e.
Budweiser, Corona, Heineken, etc.). This leaves Boston Beer under attack from two fronts by the
large companies from direct and indirect competition, which is already happening. The intensity

of this industry is unreasonably high, and these large companies only add to the insanity. A
shortage of hops is possible in the near future, but not as probable as the other threats listed. In
previous hops shortages, Boston Beer has been able to throw its weight around and survive,
which makes this not as impactful, but it would raise prices, and that could be detrimental to
Boston Beer’s market share. High competition in craft beer has been mentioned many times
previously in this report, and it is exactly the same in this context. There are 4,000 breweries
grabbing for the consumer’s dollars, which makes this self-explanatory.
Positioning Map
There is a very clear definition of segments in the market of beer. The large companies
can reach toward premium beer, and can produce decent quality premium beer, but it will not be
perceived as the same as a premium craft beer, because of the nature of the beer consumer.
Currently in the market, beer consumers want more local brands. Brands that have “sold out” to
bigger companies can be mentally tossed from this list. Craft Brew Alliance includes four
smaller brands, which are premium beers and have slightly higher differentiation than Boston
Beer. Craft Brew Alliance represents many small breweries that are not big enough to be placed
on this positioning map. It is for this reason Boston Beer Company is “stuck in the middle”. BBC
is trapped between local craft beer, and big beer. AB InBev and other large companies are
buying smaller craft breweries and letting them maintain their quality control, but this allows
their production costs to decrease. This factor also causes Boston Beer trouble since it edges
under their price point, and more consumers choose a cheaper craft beer made by AB InBev, or
Molson Coors, instead of a Boston Beer Company product. Boston Beer must find a way to
move more towards premium, or cost efficiency in order to avoid obsolescence.

External Environment Evaluation
Using, the External Environment Evaluation Matrix to analyze Boston Beer Company’s
ability to exploit and respond to outside opportunities and threats, creates a picture of mediocrity
in concordance with the rest of this report. Boston Beer Company can respond very marginally to
the threats it faces currently. The same is true with exploiting the opportunities on its horizon.
Boston Beer Company will have to work extremely hard to exit their current position between
big beer and small craft breweries. As expressed in the SWOT analysis, some of these factors are
much more important. Although expanding subsidiaries is important, its weight is the lowest
because Boston Beer Companies subsidiaries are not very large, and will be hard to expand.
Finding domestic suppliers is rated highest in opportunities because this can lower costs, which
will in turn raise their market share, because consumers looking for cheaper craft beer will be
more apt to turn to Boston Beer products. Horizontal integration is also rated highly because
Boston Beer has capital to spend, and can buy market share with acquisitions. The threats are
very hard to combat against and will take lots of resources to conquer, but Boston Beer can use
horizontal integration to fight high competition in craft beer, the highest rated threat, while also
negating ineffectivity of advertising by gaining market share. Indirect competition is rated the
lowest because it is not very common for craft beer customers to buy bigger mass produced
brands.
Internal Environment Evaluation
The Internal Environment Evaluation Matrix was very useful to determine how strong
Boston Beer’s strengths are combined with how ineffective its weaknesses makes the company.
Through this analysis, it is evident Boston Beer Company has some high flying strengths, but

also has extreme weaknesses that counter these strengths. One instance is Boston Beer’s quality,
the highest rated strength, is very strong, but its inability to respond to increased competition, the
highest rated weakness, is ranked the weakest. The company is a functioning paradox and needs
to find a way to navigate its way out of the cautious terrain in which it is currently encapsulated.
The other strengths are weighted evenly, for the most part, and are also ranked highly, but the
same problem is the average weighted weaknesses are also ranked oppositely low compared to
the corresponding strengths. This evaluation, like the External Factors Evaluation, finds Boston
Beer Company stuck in the middle.
Internal and External Environment
The Internal and External Environment Matrix plots the values from Boston Beer’s
mediocre Internal and External Evaluations almost the exact center. The Matrix suggests a hold
and maintain strategy with these scores. However, it is logical to believe, were Boston Beer to
hold and maintain the current strategy, the company would barely stay floating in the craft beer
industry. Their other industries will keep them increasing in sales, and financials, but this
company needs to gain market share in craft beer, which is there cornerstone product. Which is
why a proper strategy to take is to grow. This has been mentioned above, but horizontal
integration, and expanding current subsidiaries is a must for Boston Beer’s market share. In
doing this Boston Beer could become even larger and take control of the craft beer market, just
as AB InBev has taken control of the lower quality, mass-produced beer market. A growth
strategy is more important because a hold and maintain strategy will only further decrease
Boston Beer’s market share, which in turn will cause a major company crisis because analysis
will say to sell the craft beer division, but management will do anything to keep it, since Jim
Koch, the founder, is still a large part of overall operations.

Strategic Factors Analysis Matrix
Many of the Strategic Factors have been discussed in depth, previously in this report, but
the importance of these factors to the success of Boston Beer cannot be ignored, and therefore
some information will be repeated from above. Many of the strategic factors for Boston Beer
Company are external. These include: finding domestic suppliers, integrating backwards,
integrating horizontally, high competition in craft beer, shortage of hops, and ineffectivity of
advertising. The four remaining strategic factors are internal. These are: high quality, product
development, dependency on suppliers, and the inability to respond to increased competition.
Having more external strategic factors than internal strategic factors forces Boston Beer to have
automatically look outside of itself in order to solve the problem of shrinking market share. The
internal factors are important to controlling and harnessing those outside options, but Boston
Beer must exploit the outside opportunities available while successfully combating the threats to
it, much of which is intertwined. With Boston Beer’s high quality, the company can create a part
of the market for itself, but this would be counter productive when considering the increasing
growth rate of craft beer. Therefore, Boston Beer must use product development, and its stable
financial position (not a strategic factor according to his matrix, but it is key to Boston Beer’s
success) to exploit the integration opportunities available, while minimizing the risk of a
shortage of hops, the fierce competition in craft beer, and ineffectivity of advertising.
Competitive Profile Matrix
Boston Beer Company has competition between large multinational companies, and
small local breweries. This Matrix includes a comparison to AB InBev, a look at its craft beer
section, and Craft Brew Alliance. Obviously, AB InBev wins out in overall rating simply

because of size and ability to dominate a market because of its brand recognition and cost
efficiency. Although people look to buy local, people are willing to buy a large producer’s beer
because of its lower price point. Craft Brew Alliance is a small combination of four breweries, as
stated above, which looks to provide a premium, differentiated product above anything larger
companies can provide. It is included mainly for comparison of Boston Beer to smaller
breweries. Through this analysis, the ability to dominate a market for AB InBev is easy. Its
Shock Top, and Goose Island brands are much less expensive than other craft beers and overtake
the market easily. Although many look for quality, a price drop in exchange for a little lost flavor
is acceptable to consumers. Craft Brew Alliance is lower on the scale because it does not have as
large a portion of the market, inferior financial positions, and little to no global expansion.
However, it is difficult to accurately compare a small company to these beer giants. Even
comparing Boston Beer and AB InBev is a bit far fetched, but only comparing AB InBev’s craft
beer segment makes this matrix accurate. No company controls craft beer, because of the
consumers’ “buy local” mentally. Advertising cannot be valued, or ranked too highly since craft
beer is not high advertising-based. AB InBev has the best management of the three, due to its
sheer size, and the pay grade it can provide. Boston Beer is excellent in innovation, because it
was one of the original craft beer companies, and it also maintains its innovative ways, in both
product and presentation. An example of this is Boston Beer’s custom can, which gives the same
flavor and aroma as drinking from a bottle or glass. Boston Beer’s Research and Development is
definitely far ahead of any in the craft beer industry, but it has followed the trend with some
products, like India pale ales. Overall, the two main competitors in craft beer are AB InBev and
Boston Beer, with Molson Coors a little behind the curve but catching up quickly. Nonetheless,
small, local breweries are creating massive problems for these massive companies, because they

cannot compete with a “buy local” mentality, since it creates massive differentiation advantages
for local companies.
Boston Consulting Group (BCG) Matrix
Boston Beer Company’s business units are an interesting conundrum. Boston Beer
Company is in a tough position because their hard cider brand, Angry Orchard, is out performing
their other two main segments, craft beer, and Twisted Tea. This is particularly tough because
BBC wants to maintain its roots in brewing beer, but a large part of its increasing income is due
to Angry Orchard Cider. Hard Cider, as an industry has been on a rise for the past few years.
Angry Orchard is the largest brand in this segment, and it seems like this trend will continue.
Where as in the craft beer segment, it looks like BBC is losing its footing and continues to lose
market share as more small breweries open. Flavored Malt Beverages (FMBs) is a growing
industry with potential to be a major revenue producer for Boston Beer Company. It looks like
sales will increase, and the market share will push to the lower star, or high cash cow section.
Although the BCG describes Boston Beer’s craft beer section as a dog, this is only because AB
InBev is such a large company and maintains a gigantic market share in all beer segments. It
does not matter if all local craft beer combined holds a large market share, AB InBev has the
largest relative market share in all but hard cider. In FMBs Mike’s Hard holds an extremely large
portion of the market, making it hard for Twisted Tea, Boston Beer’s FMB, to rise out of the dog
section. Returning to hard cider, Angry Orchard has dominated for at least two years, since its
sales the year before the growth reflected on the BCG graph had double the growth attained this
year. This is by far the most promising industry for investment by Boston Beer Company.
Although growth will slow down, most of the industry growth is from Angry Orchard’s sales.
Hard cider would have a much lower growth rate without Boston Beer Company’s Angry

Orchard. Putting a steady investment in Angry Orchard will allow Boston Beer Company to
grow in sales, and continue domination of the hard cider category, having nearly three times the
amount of sales as the nearest competitor. Twisted Tea can maintain its position and experience
its growth naturally without any extra investment, but Boston Beer Company’s craft beer
segment needs investment to compete with AB InBev’s market share. If Boston Beer buys small,
local craft breweries, it can increase its market share immensely, while gaining the attention of a
specific market in the area of the breweries purchased. Boston Beer Company, if aggressive
enough, could attack certain geographical regions and decrease AB InBev’s market share
significantly in an area through horizontal integration.
GE McKinsey Matrix
Through the GE McKinsey, Boston Beer Company’s business unit strength is seen
compared to the industry attractiveness of the product of the business unit. Both hard cider and
craft beer are strong business units, but hard cider is a much more attractive industry than craft
beer. Flavored Malt Beverages (FMBs) is a decently strong business unit, which is increasing in
strength, but the industry attractiveness is lower than both hard cider and craft beer. FMBs are a
less attractive industry because of Boston Beer’s position in the industry. Far from the industry
leader, Twisted Tea is among the higher middle position of a large amount of FMBs, which have
around the same amount in sales. Twisted Tea is gaining market share, and may one day become
an even stronger business unit, much like Angry Orchard’s rise to industry leader, but the top of
the industry is very well controlled by Mike’s Hard products, which makes it difficult to rise
above, because this product practically created the industry, and has been industry leader for
such a long time. Hard cider is a business unit worthy of heavy investment, even at the cost of
taking some investment from the craft beer business unit. The market growth is unsustainable,

but will continue to have numbers far above the growth of the craft beer industry for years. Craft
beer is a strong business unit for Boston Beer Company, but craft beer is becoming less attractive
as an industry because of the volume of competitors. Some call it the craft beer revolution,
because there are so many small, local companies opening and asserting themselves against these
gigantic beer companies. Overall, Boston Beer Company is in a great position because their
business units are above average in all three industries of competition. It is also encouraging for
Boston Beer Company because hard cider, craft beer, and FMBs are all growing as industries.
The lowest industry attractiveness is in FMBs, which is only due to a strong presence by the
industry leader. If comparing the industry leader of FMBs to Angry Orchard, Angry Orchard is
in an excellent place and looks down from a very safe place atop the industry. However, using
the same comparison, it is discouraging for Boston Beer’s craft beer business unit because it may
be extremely hard to gain market share against AB InBev’s craft beer business unit. Boston Beer
Company is in good position in all of its industries, and can compete with or is the industry
leader if more investment is added.
Industry Life Cycle Analysis
Boston Beer Company’s three major industries are mentioned above, but for
thoroughness’ sake, they are craft beer, flavored malt beverages, and hard cider. As is expressed
in the rest of this paper, the hard cider division is by far the most attractive, in the late stages of
the growth stage, meanwhile the craft beer segment has reached maturity, which makes it a
difficult division for gaining profits and market share. In the flavored malt beverages division
there is room for improvement and investment, because like hard cider it is experiencing solid
growth as an industry. Hard Cider is experiencing a growth rate of around 75%, Flavored Malt
beverages are growing near 40%, and Craft Beer is growing near 6% (Jacobsen, 2015). Craft

Beer has a chance of reaching a second stage of growth, but it will take lots of market change,
market penetration, and cost control to increase the craft beer buying population.. This is an
opportune time to reach for the brand loyalty in the millennial group, which can create even
more of a jump in sales in the hard cider and FMB industries and extend the accelerating growth
stage, which is in full effect. Craft beer could experience resurgence with all the young
consumers becoming legal to buy beer. These consumers are very oriented towards craft beer,
rather than the mass-produced beers, such as Budweiser. The Boston Beer craft beer business
unit, which has reached maturity, is in a critical time for building a new customer base. Boston
Beer must innovate in order to differentiate from the other larger companies, which may mean
letting overall production go down to create an even higher quality product. This would cause a
decline initially, but cause revenue to rise later, and production could increase because of the
increase in demand. Strategies for the hard cider and FMB business units are working well, since
there are large growth percentages each year for the two categories. These two business units
have innovated well, and are building strong brand recognition, and have accomplished
differentiation from the competitors in their categories, especially Angry Orchard cider. The
growth rates are slowing down which means these two industries, and thus the products, are
growing closer to maturity, yet are still far away because of how large the growth rates still are.
It would be safe to assume another two years of growth based off the current numbers.
SPACE Matrix
Boston Beer Company shows strong scores in financial strength, and competitive
advantage, while the industry has stability, where as the environment is a little above average.
Boston Beer Company finds itself in the aggressive part of the SPACE matrix, also known as,
Quadrant I. Boston Beer Company is aggressive in its marketing approach, and innovative

tactics, which, in turn, help with product development. Boston Beer Company needs
improvement in its capacity utilization to increase production. This increased production could
be used for Angry Orchard hard cider, which would increase revenues significantly. An obvious
area of improvement is market share in the overall beer market, which is about 2% with AB
InBev swallowing over 50% of the market share, due to the recent acquisition of SABMiller.
Boston Beer Company is on the move and wants to become a force in the overall beer category,
but it is necessary to expand subsidiaries, hard cider, and FMBs, if Boston Beer Company desires
to have any realistic grounding in this aspiration. One place Boston Beer Company is far superior
to its competitors is leverage. Boston Beer Company has little debt. The only piece is a capital
lease. Since Boston Beer Company has very little debt, if it were ever to sell bonds, or get loans,
the company would have a great interest rate, and could take out more than other companies
because Boston Beer Company has none. Taking on some debt could allow for expansion.
Without over stepping realistic expansion, Boston Beer could use a loan to expand Angry
Orchard, and receive well over the required rate of return for the capital from the loan. Yet
another area to improve upon is control over suppliers and distributors. Boston Beer Company is
one of the best companies about sending its beer out fresh in order for the consumer to receive a
fresh product at the high quality factory standard. One way to increase sales of the craft beer
business unit would be market development. Targeting new customers would be extremely
helpful to the craft beer business unit because the market for craft beer is expanding rapidly.
Samuel Adams Light was a fantastic strategic decision to produce. Once again, Boston Beer
Company needs a fresh product to develop the market of craft beer consumers.

Grand Strategies Matrix
The Grand Strategies Matrix recommends for Boston Beer the same strategies deduced
by the SPACE Matrix above. Since there was only small focus on horizontal integration in the
previous section, horizontal integration will be the alternative strategy focused on in this section.
Boston Beer is in a strong position being in Quadrant I. Although there are larger companies in
better strategic positions, Boston Beer Company still has a relatively strong position compared to
many other craft breweries. Boston Beer has strong financial position as well, which means it
can focus on extremely aggressive strategies, such as horizontal integration. Boston Beer
Company needs to begin assessing small craft breweries, which are thriving in their region, in
order to find a strong brewery to purchase to add to their subsidiaries. The Research and
Development branch of the company has found great companies in past years, but struck out in
2014. It is about time for another acquisition, since this powers growth, and allows Boston Beer
to diversify its brand recognition through the subsidiaries it owns. Boston Beer Company has
done a great job diversifying its business units. The decision to begin Angry Orchard which
became the premium option to its Hardcore Cider brand, which is now outdated. Breaking into
the Flavored Malt Beverage industry was also a fantastic decision because it has increased sales
yearly, and now owns a 27% relative market share. Both of these market penetrations worked
wondrously, and have kept Boston Beer Company thriving while it struggles to figure out the
next strategy for its craft beer business unit. The time has come for a new aggressive strategy to
arise from Boston Beer Company’s management. Horizontal integration could be a great answer.

Qualitative Strategic Planning Matrix
Through the Qualitative Strategic Planning Matrix, horizontal integration was deemed the
most attractive strategy over product development. The critical success factors deciding this were
used to determine the two options to choose from in the SPACE and Grand Strategies matrices.
The aggressive position of Boston Beer Company influenced a choice of horizontal integration,
backwards integration, market development, or product development. These four strategies were
the most viable due to Boston Beer Company’s financial position, and relative market share.
Product development, and horizontal integration were chosen for the Qualitative Strategic
Planning Matrix because they had the most success over backwards integration, and market
development in Boston Beer Company’s past. Horizontal integration would be a major help for
Boston Beer Company because of the range of effects it will have for the company. One of the
few negating factors to horizontal integration is the company’s unwillingness to take on debt.
Even though in previous acquisitions, there was never a need to take on debt because of the
company’s financial strength. This is an extreme positive for Boston Beer Company. However,
now is the time for Boston Beer Company to make a bold move and maybe overspend a little bit
for a competitor who will give them a decent chunk of market share. Even if Boston Beer
Company overspends, it is well worth the extra assumed risk, because it is an automatic jump up
on the leaderboard. The company can also afford some risk because its position is set in stone at
the moment. Looking at companies such as Lagunitas, or Stone Brewing is not far out of reach
for Boston Beer Company, but these brands have astonishing growth rates, which could prove to
be too expensive. Other options are buying one of the four brands in Craft Brew Alliance, such
as Widmer, which had a loss in sales in 2013. Purchasing Widmer for a discount could be an
attractive option, since Boston Beer Company Research and Development could find the

problems and restart its growth. Some of the other options on the list may be too large to acquire,
but seeing AB InBev’s new acquisition of SABMiller gives Boston Beer Company a chance to
go after a large competitor, such as Shiner in Texas, New Belgium in Colorado, or Sierra Nevada
in California. Acquiring any of these three companies would increase Boston Beer Company’s
sales by at least a quarter. Horizontal integration seems to be the best way to gain market share in
the beer industry, currently. Boston Beer Company should pursue an acquisition in the next
calendar year for a decent price, but also one giving Boston Beer Company a significant portion
of market share for what the price of the acquisition. There may be debt taken on in the purchase,
but it will be well worth the investment, when Boston Beer Company has an even more
significant portion of the craft beer market.
OSPP Matrix
The OSPP Matrix shows the performance positioning of a firm. Boston Beer Company is
close to the top right corner, which is an excellent place to be. The OSPP shows strategic gaps
between the required aggressiveness of an environment and the aggressiveness of a firm’s
strategies. Boston Beer Company does not have many disconcerting Gaps besides its capacity,
manager capability and culture capability gap. These three items are not all too important besides
capacity, which could be causing unnecessary cost, unless Boston Beer Company is preparing
for a production increase, which would make this gap more explainable. As for manager
capability, Boston Beer Company needs managers above market average to maintain their
aggressive strategies, since they are in such an interesting place in the industry. Boston Beer
Company also has some very healthy gaps: Innovation aggressiveness, marketing
aggressiveness, strategic aggressiveness, structure capability and systems capability. Innovation,
marketing and strategic aggressiveness are all extremely good to see in a healthy area, because

these are the main deciding factors in how the company does business. Boston Beer is healthily
above competition in innovation, but not overly innovative. Its marketing is almost perfectly
matched to the level the environment calls for, and its strategies are not overly aggressive, as to
cause too much expense. However, these gaps do accurately represent Boston Beer Company’s
position, since they are more aggressive than their competitors. Lastly, two areas for caution for
Boston Beer to avoid over aggression are Capability responsiveness and technology capability.
These two gaps coincide because Boston Beer Company’s technology capability has a lot to do
with its overall capability. All of these gaps accurately reflect Boston Beer Company’s current
strategies. Managerially culturally, and overall capability, the company is much more advanced
than the industry, while it is about on par with marketing aggressiveness, innovation
aggressiveness, strategic aggressiveness, structure capability, and systems capability. Finally,
two places to watch are capability responsiveness and technology capabilities. Boston Beer
Company can use this analysis to maintain its current strategies, while also watching out for
overspending in these areas of aggressiveness and positioning.
Alternative Strategies
o Product Development
o Advantages: Increase differentiation, Increased market share, Innovation leadership,
Increased marketing effectiveness
o Disadvantages: High costs, Need for excellent research teams, High expectations on
company from consumers
o Market development
o Advantages: Increased sales, New customer base, Repeat consumers purchase more,
o Disadvantages: Ineffective advertising costs, Overexpansion, Expensive market research

o Backwards integration
o Advantages: Control over supplier, Cheaper Raw Materials Cost, Guaranteed Supplier
during shortages
o Disadvantages: Failure causes doubled monetary losses, Less clarity in company focus,
New learning processes
Recommendations
Through the analysis of the above matrices, ultimately decided by the Qualitative
Strategic Planning Matrix, this report recommends the Boston Beer Company pursue a strategy
of Horizontal integration by purchasing a competing, smaller craft brewery. This report also,
secondarily, recommends The Boston Beer Company expand its dominating Angry Orchard
cider brand, while refocusing advertising towards smaller specific markets. Two Long term
objectives for Boston Beer Company are decreased advertising cost, and expanding craft beer
and hard cider production. Below are Pro Formal financial statements for the year predicted
2016, which reflect these changes, but are estimating conservative growth rates.
Current Financial Ratios (Calculated from 2014 10K Annual Report)
Gross Profit Margin: 51.5%
Net Profit Margin: 10.0%
Quick Ratio: 1.30
Current Ratio: 1.90
Debt to Equity Ratio: 0.00
Return on Investment: 106.2%
Return on Assets: 17.3%
Return on Equity: 24.6%
Return on Capital Invested: 24.5%
EBITA: 20.1%
Earnings per Share: 6.96

Pro Formal Financial Statements

References
Baker, N. (2015, June 15). Hop Shortage Threatens Craft Beer.
Boston Beer Company. (2014, Dec 27). Boston Beer Company Form 10-K. Boston, MA: Boston
Boston Beer Company. (2015, Apr 29). Boston Beer Company Form 10-Q. Boston, MA: Boston
Boston Beer Company. (2015, Jul 30). Boston Beer Company Form 10-Q. Boston, MA: Boston
Boston Beer Company. (2015, Oct 29). Boston Beer Company Form 10-Q. Boston, MA: Boston
Duprey, R. (2015, November 29). $1 Billion for This Tiny Craft Brewer. What Does It Mean for
Boston Beer?
Jacobsen, J. (2015, March 12). 2015 Beer Report: More consumers turning to hard cider.
Keri, J. (2015, January 9). Hard Cider Is Having a Moment.
Kipley, D., & Jewe, R. (2014). Effective Strategic Management: From Analysis
to Implementation. Cognella.
Notte, J. (2015, July 28). These 11 brewers make over 90% of all U.S. beer.
Market Watch.
Solomon, B. (2015, October 30). Smaller Craft Breweries Are Drinking Up Sam Adams' Market
Share.
Tierney, J. (2014, April 15). The State of American Beer.
Yue, L. (2014, May 31). Why MillerCoors doesn't want to miss this party.

Appendix
Firm Structure
SWOT Analysis

Confrontation Matrix
Five Forces Analysis

Impact and Probability Matrix
Positioning Map

External Factors Evaluation
Internal Factors Evaluation

Internal-External Matrix
Strategic Factors Analysis Summary Matrix

Competitive Profile Matrix

Boston Consulting Group Matrix

GE McKinsey Matrix
Industry Life Cycle Analysis

Space Matrix
SPACE and Grand Strategies Matrix

Qualitative Strategic Planning Matrix

OSPP Matrix

Boston Beer Company Strategic Analysis

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