Boston Beer Company WACC Project

In this project, you will find and discern the appropriate data to determine a realistic assessment of the weighted average cost of capital for The Boston Beer Company.

You will need to search for data from several sources, use subjective judgment to determine which data to use or discard, use subjective judgment to determine which calculation gives a more acceptable estimate and make some simplifying assumptions.

USE YAHOO FINANCE, VALUE LINE, MORNINGSTAR. ATTACHED IS THE 2015 ANNUAL REPORT FOR USE.

Pages showing data with brief discussion:

There is no page length given for this as it can vary greatly. This section is to be divided up based on the topics. In each section, you must show and explain the equations that are used. In addition, you are to draw any conclusions on the company you can from this data. Please note that detailed worksheets showing all of the calculations for this section are to be included in an appendix.

1.Cost of Equity (Common Stock)

Beta from Regression and two Betas from analysts

Beta Chosen for CAPM and why

Capital Assets Pricing Model (include how determined R_F and[ R_M or (R_M ? R_F)]

Discounted Cash Flow (DCF) (only if dividends ? include how determined)

Own-Bond-Yield-plus-Judgmental-Risk-Premium (include how determine risk premium)

2.Cost of Preferred Stock

3.Cost of Debt (make sure to include table that lists all bond issues with weighted average cost of debt)

4.Market Value of Debt (will have calculated above, but will need to add any long term leases from balance sheet to get total market value of debt)

5.Market Value of Equity

6.Market Value of Preferred Stock

7.Value of Firm

8.Firm?s Tax Rate (explain how determined)

9.Weight for Equity

10.Weight for Preferred Stock

11.Weight for Debt

12.WACC (Weighted Average Cost of Capital)

13.Assumptions

Including but not limited to R_F , R_M, RP_M (which - R_F),growth rate of dividends. This page should have a brief description of how you came up with the estimates with spreadsheets, etc. to be put in the appendix.

14.Appendix

Appendix should include all relevant data including debt data from Morningstar, calculations of weighted average cost of debt, stock returns, betas from analysts, beta regression analysis, method/sourcing for R_F and R_M, growth rates for dividends, different methods to determine tax rates, etc. Detailed descriptions, tables of data and excel sheets etc will be in the appendix.

References

The purpose of the projects is to show some of the sources of measurement errors in financial analysis, to introduce the diverse sources of publicly available financial information and to develop skill in analysis in situations where there are too much or too little data.

\fDear Shareholders, 2015 was an exciting year for craft beer and The Boston Beer Company. In addition to record profits and net revenue that topped $959 million, we continued to innovate both internally and externally. We improved the quality and freshness of our beers, our operations and efficiencies, and we managed record complexity with more than 20 new beers, ciders and teas. These accomplishments occurred in a challenging marketplace, and we continued to be passionate - and some might say obsessive - about providing our drinkers with the quality beers and other beverages they've come to expect from us, along with new and undiscovered brews that highlight our deep love of beer. The American Craft Beer Business in 2015 More than 700 new craft breweries opened in 2015, bringing the total number of independent U.S. breweries to more than 4,000. In 1985, only 100 beers were present at the Great American Beer Festival, compared to more than 3,500 beers in 2015. As a company, we have the enormous benefit of having been at the forefront of the many cycles of the American craft beer revolution for 32 years. We have ridden the rapids of brisk expansion before. Twenty years ago, we saw the entire industry hit a rough patch that lasted for nearly seven years, and we adapted as necessary. We continued to focus on our core of great, delicious craft beers. Those changes have also taught us the importance of remaining nimble, adapting, and constantly innovating across all of our brands. Above all, we have learned that we must remain true to our core mandate: always do what's best for the beer. While the craft segment of the beer business is proliferating, the big breweries are consolidating. In 2016 we will very likely see continued acquisitions and transactions. We are proud to be a leader in the American craft beer revolution. It is a testament to our employees and our success as an independent brewer that industry giants are going to great lengths to adapt to the craft precedent we set forth more than 30 years ago. Beers & Innovation Samuel Adams Boston Lager remains our flagship after more than thirty years, and we continue to be the leading craft brewer of seasonal beers: Cold Snap, Summer Ale, OctoberFest, and Winter Lager. In 2015 we expanded our Rebel IPA styles with the addition of Rebel Rouser, Rebel RAW, and Rebel Grapefruit. Our Angry Orchard ciders lead the U.S. hard cider business with more than 50% market share. We now own a beautiful 60 acre orchard in Walden, New York, and in late 2015 we opened the Angry Orchard Innovation Cider House, our new home for cider research and development. Twisted Tea grew strongly in 2015 as it continued to expand geographically and find new drinkers. Our Alchemy & Science venture remains on its own path to innovation. Angel City Brewery in Los Angeles drew 250,000 visitors to its brewery in the Los Angeles Arts District in 2015, and it has been named one of the top local breweries in LA. On the other coast, Concrete Beach in Miami is up and running, and Coney Island Brewing launched Coney Island Root Beer in July. As we closed the year, Boston Beer continued the flow of energy into our innovation pipeline. We look forward to what the new year will bring, and we intend to keep up the rapid pace of new product development both in capacity and capability. People & Innovation A company is only as innovative as the people who work there, and we are proud of the 1,429 people who now comprise the Boston Beer team. Our most important rule is that every person we hire must \"raise the average\" in the company. This guarantees that the quality of our people continues to improve over time, and that's exactly what happened in 2015 as we hired 273 talented new people and promoted another 230. We especially want to introduce you to two new members of our senior management team: Frank Smalla, our new chief financial officer, and Quincy B. Troupe, our new senior vice president for supply chain. These additions to our team bring extensive knowledge and experience in their fields that will help Boston Beer grow better and grow smarter. At the same time that we welcome new people, we must bid farewell to several valued team members who, after serving as integral parts of the Boston Beer family, have retired: Bill Urich, chief financial officer; Tom Lance, vice president of operations; and Bob Pagano, vice president of brand development. We must also say goodbye to a longtime board member and friend, Pete Cummin, who retired in February 2016 after serving on our board since our initial public offering in 1995. Pete was an early investor in Boston Beer in 1987, and he has been a trusted visionary and wise advisor for nearly 30 years. We thank Bill, Tom, Bob and Pete for their contributions and wish them all the best. Quench Your Own Thirst Late last year, we introduced a new advertising campaign dedicated to teaching drinkers more about beer. Since day one, we have believed that the more people know about beers in general and our craft beers in particular, the more they will love them. Education has always been the cornerstone of our communications, and we look forward to sharing that love for beer and thirst for knowledge into 2016 and beyond. As our shareholders, we always welcome your interest in our company. Financial statements and earnings calls, advertising and social media, websites and our annual meeting all provide information about the company. This spring, however, you will be able to get a whole different level of insight into the history and growth of Boston Beer. A new book, \"Quench Your Own Thirst: Business Lessons Learned Over a Beer or Two\" by Jim Koch is being published by Flatiron Books. It's been a three year labor of love to recount and reflect on many of the pivotal moments at Boston Beer and the building of Samuel Adams. We hope it will help readers, craft beer lovers, and entrepreneurs alike reach the ultimate dream: to be successful while doing what they love. As always, we look forward to greeting many of our shareholders at our annual meeting, which will be held at our Samuel Adams Boston Brewery at 9:00 a.m. on May 25, 2016. We thank you for your continued support of our company. Jim Koch Martin Roper Founder & Brewer President & Chief Executive Officer Revised*_AnnualReport_2015UPDATED_v2.indd 7 4/4/16 9:12 AM UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 26, 2015 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ______________ to ______________ Commission file number: 1-14092 THE BOSTON BEER COMPANY, INC. (Exact name of registrant as specified in its charter) MASSACHUSETTS 04-3284048 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) One Design Center Place, Suite 850, Boston, Massachusetts 02210 (Address of principal executive offices) (Zip Code) (617) 368-5000 (Registrant's telephone number, including area code) SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: Title of each class Class A Common Stock Name of each exchange on which registered NYSE SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE Indicate by check mark YES NO if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files. if disclosure of delinquent filers pursuant to Item 405 of Regulations S-K is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer (as defined in Rule 12b-2 of the Exchange Act) Large accelerated filer Accelerated filer Non-accelerated filer whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). The aggregate market value of the Class A Common Stock ($.01 par value) held by non-affiliates of the registrant totaled $2,284.1 million (based on the average price of the Company's Class A Common Stock on the New York Stock Exchange on June 27, 2015). All of the registrant's Class B Common Stock ($.01 par value) is held by an affiliate. As of February 12, 2016, there were 9,465,306 shares outstanding of the Company's Class A Common Stock ($.01 par value) and 3,367,355 shares outstanding of the Company's Class B Common Stock ($.01 par value). DOCUMENTS INCORPORATED BY REFERENCE Certain parts of the registrant's definitive Proxy Statement for its 2016 Annual Meeting to be held on May 25, 2016 are incorporated by reference into Part III of this report. Q Table of Contents PART I\b 1 ITEM 1.\tBusiness\b1 ITEM 1A. Risk Factors \b7 ITEM 1B. Unresolved Staff Comments \b12 ITEM 2.\tProperties \b12 ITEM 3. Legal Proceedings\b12 ITEM 4. Mine Safety Disclosures \b12 PART II\b 13 ITEM 5. ITEM 9A. ITEM 9B. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities\b13 Selected Consolidated Financial Data\b16 Management's Discussion and Analysis of Financial Condition and Results of Operations\b17 Quantitative and Qualitative Disclosures About Market Risk\b24 Financial Statements and Supplementary Data\b25 Changes in and Disagreements with Accountants on Accounting and Financial Disclosures\b48 Controls and Procedures\b48 Other Information\b49 PART III\b 50 ITEM 10. ITEM 11. ITEM 12. ITEM 13. ITEM 14. Directors, Executive Officers and Corporate Governance \b50 Executive Compensation \b50 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters \b51 Certain Relationships and Related Transactions, and Director Independence \b51 Principal Accountant Fees and Services \b51 PART IV\b 52 ITEM 6. ITEM 7. ITEM 7A. ITEM 8. ITEM 9. ITEM 15. Exhibits and Financial Statement Schedules\b52 SIGNATURES........................................................................................................................................................................................................................................................................................................................... 54 Q Q PART I \u0018PART I PART I ITEM 1.\tBusiness General The Boston Beer Company, Inc. (\"Boston Beer\" or the \"Company\") is one of the largest craft brewers in the United States. In fiscal 2015, Boston Beer sold approximately 4.2 million barrels of its proprietary products (\"core brands\"). During 2015, the Company sold over sixty beers under the Samuel Adams and the Sam Adams brand names, twelve flavored malt beverages under the Twisted Tea brand name, ten hard cider beverages under the Angry Orchard brand name, and over forty beers under four of the brand names of its subsidiary, A&S Brewing Collaborative LLC, under its trade name Alchemy & Science. Boston Beer produces malt beverages and hard cider at Company-owned breweries and under contract arrangements at other brewery locations. The Samuel Adams Company-owned breweries are located in Boston, Massachusetts (the \"Boston Brewery\"), Cincinnati, Ohio (the \"Cincinnati Brewery\") and Breinigsville, Pennsylvania (the \"Pennsylvania Brewery\"). The Alchemy & Science Company-owned small breweries are located in Los Angeles, California (the \"Angel City Brewery\"), Miami, Florida (the \"Concrete Beach Brewery\") and Brooklyn, New York (the \"Coney Island Brewery\"). The Company owns an apple orchard and cidery located in Walden, New York (the \"Orchard\"). The Company's principal executive offices are located at One Design Center Place, Suite 850, Boston, Massachusetts 02210, and its telephone number is (617) 368-5000. Industry Background Before Prohibition, the United States beer industry consisted of hundreds of small breweries that brewed full-flavored beers. After the end of Prohibition, most domestic brewers shifted production to less flavorful, lighter beers, which use lower-cost ingredients, and can be mass-produced to take advantage of economies of scale in production. This shift towards massproduced beers coincided with consolidation in the beer industry. Today, two major brewers, Anheuser-Busch InBev (\"AB InBev\") and MillerCoors LLC (\"MillerCoors\"), comprise over 85% of all United States domestic beer production, excluding imports. The Company's beers are primarily positioned in the Better Beer category of the beer industry, which includes craft (small, independent and traditional) brewers, domestic specialty beers and most imports. Better Beers are determined by higher price, quality, image and taste, as compared with regular domestic beers. Samuel Adams is one of the largest brands in the Better Beer category of the United States brewing industry. The Company's Alchemy & Science brands, which include the Traveler Beer Company, the Angel City Brewery, the Concrete Beach Brewery and the Coney Island Brewery also compete in the Better Beer category. The Company estimates that in 2015 the craft beer category percentage volume growth was in the mid to high teens and the Better Beer category volume growth was approximately 9%, while the total beer category volume was essentially flat. The Company believes that the Better Beer category is approximately 27% of United States beer consumption by volume. that this decline is due to declining alcohol consumption per person in the population, drinkers trading up to drink high quality, more flavorful beers and increased competition from wine and spirits companies. The Company's Twisted Tea products compete within the flavored malt beverage (\"FMB\") category of the beer industry (and the Company's Twisted Tea products are included in generic references to the Company's \"beers\" in this report). The Company believes that the FMB category comprises approximately 4% of United States beer consumption and that the volume comprising the FMB category was essentially flat in 2015. This category is highly competitive due to, among other factors, the presence of large brewers and spirits companies in the category, the advertising of maltbased spirits brands in channels not available to the parent brands and a fast pace of product innovation. The Company's Angry Orchard ciders compete within the hard cider category that has similar characteristics to the beer industry for reporting and regulatory purposes. The Company believes that the hard cider category comprises approximately 1% of United States beer consumption and that the volume comprising the hard cider category increased approximately 9% in 2015. This category is small and highly competitive and includes large international and domestic competitors, as well as many small regional and local hard cider companies, and has experienced very fast growth over the last five years, although this growth stopped during late 2015. The domestic beer industry, excluding Better Beers, has experienced a decline in shipment volume over the last ten years. The Company believes BOSTON BEER COMPANY Form 10-K 1 Q PART I \u0018PART I Item 1 Business Narrative Description of Business The Company's business goal is to become the leading supplier in the Better Beer and hard cider categories by creating and offering high quality full-flavored beers and hard ciders. With the support of a large, well-trained sales organization and world-class brewers, the Company strives to achieve this goal by offering great beers and hard ciders, and increasing brand availability and awareness through advertising, point-of-sale, promotional programs and drinker education. Beers and Hard Ciders Marketed The Company's strategy is to create and offer a world-class variety of traditional and innovative beers and hard ciders, with a focus on promoting the Samuel Adams brand, but supported by a portfolio of complementary brands. The Angry Orchard brand family was launched in the second half of 2011 in several markets and achieved national distribution in 2012. Since 2013, Angry Orchard has been the largest selling hard cider in the United States. The Twisted Tea brand family has grown each year since the product was first introduced in 2001 and has established a loyal drinker following. The Company's subsidiary, Alchemy & Science currently has four brands, including Angel City Brewery, The Traveler Beer Co., Coney Island Brewery and the Concrete Beach Brewery. In 2015, the Company began national distribution of certain styles of the Traveler Beer brand and the Coney Island beer brand, including Coney Island Hard Root Beer. The Company sells its beers and hard ciders in various packages. Kegs are sold primarily for on-premise retailers, which include bars, restaurants and other venues, and bottles and cans are sold primarily for off-premise retailers, which include grocery stores, club stores, convenience stores and liquor stores. Samuel Adams Boston Lager is the Company's flagship beer that was first introduced in 1984. The Samuel Adams Seasonal beers are brewed specifically for limited periods of time and include Samuel Adams Cold Snap, Samuel Adams Summer Ale, Samuel Adams Octoberfest, and Samuel Adams Winter Lager. Certain Samuel Adams beers may be produced at select times during the year solely for inclusion in the Company's seasonal variety packs. During 2015, Samuel Adams Crystal Pale Ale was brewed and included in the Spring Seasonal Collection variety pack, Samuel Adams Harvest Pumpkin and Samuel Adams Hoppy Red were brewed and included in the Fall variety pack and Samuel Adams Old Fezziwig Ale, Samuel Adams Chocolate Bock, Samuel Adams Holiday Porter and Samuel Adams Sparkling Ale were brewed and included in the Winter Classics variety pack. Additionally, beginning in 2011 the Company began limited releases of seasonal beers in various packages. These limited seasonal release beers currently include Samuel Adams Escape Route, Samuel Adams Porch Rocker, Samuel Adams Pumpkin Batch and Samuel Adams White Christmas. After being in test markets during 2013, the Company began a national rollout of Samuel Adams Rebel IPA, a West Coast style IPA brewed with hops from the Pacific Northwest, in early 2014. During 2014 and 2015, the Company added additional styles to support Samuel Adams Rebel IPA, including Sam Adams Rebel Rouser IPA, Samuel Adams Rebel Rider IPA, Samuel Adams Grapefruit IPA and Samuel Adams Rebel Raw IPA. The Samuel Adams Brewmaster's Collection is an important part of the Company's portfolio and heritage, but receives limited promotional support. The Small Batch Collection, Barrel Room Collection and Limited Edition Beers and certain specialty variety packs are produced in limited quantities and are sold at higher prices than the Company's other products. The Company also releases a variety of specialty draft beers brewed in limited quantities for festivals and Beer Week celebrations. Since 2012, the Twisted Tea and Angry Orchard brand families have been available nationally. In 2015 the Company began national distribution of 2 BOSTON BEER COMPANY Form 10-K certain styles of the Traveler Beer brand and the Coney Island beer brand, including Coney Island Hard Root Beer. All of these nationally available brands are available in various packages, including cans. The Company will continue to look for complementary opportunities to leverage its capabilities, provided that they do not distract from its primary focus on its Samuel Adams brand. The Company continually evaluates the performance of its various beers and hard cider styles and the rationalization of its product line as a whole. Periodically, the Company discontinues certain styles and packages, such as Samuel Adams Double Agent IPL, Samuel Adams White Lantern, Samuel Adams Whitewater IPA, Samuel Adams Noble Pils, Angry Orchard Traditional Dry and Twisted Pink Lemonade that were discontinued during 2015. Certain styles or brands discontinued in previous years may be produced for the Company's variety packs or reintroduced. The Company's beers and hard ciders are sold by the Company's sales force to the same types of customers in similar size quantities, at similar price points and through substantially the same channels of distribution. These beverages are manufactured using similar production processes, have comparable alcohol content and generally fall within the same regulatory environment. Product and Packaging Innovations The Company is committed to maintaining its position as a leading innovator in the Better Beer and hard cider categories by developing new beers and hard ciders. To that end, the Company continually test brews different beers and hard ciders and occasionally sells them under various brand labels for evaluation of drinker interest. The Company also promotes the annual LongShot American Homebrew Contest in which homebrewers and employees of the Company submit their homebrews for inclusion in the LongShot six-pack in the following year. In 2015, the Company sold over sixty Samuel Adams beers commercially and brewed many more test brews. The Company's Boston Brewery spends most of its time ideating, testing and developing beers and hard ciders for the Company's potential future commercial development. In 2013, the Company completed a two-year research effort to develop a can to improve the beer drinker's experience compared to the traditional can. The features of this can were designed to enhance the drinking experience and include a wider lid with an opening slightly further from the edge of the lid, an extended lip and an hourglass ridge. Currently, Samuel Adams Boston Lager, Samuel Adams Seasonal Beers, Samuel Adams Porch Rocker, Samuel Adams Rebel IPA and some of the Alchemy & Science beers are available in this uniquely-designed can. In late 2011, the Company formed a subsidiary, A&S Brewing Collaborative LLC, d/b/a Alchemy & Science, headed by Alan Newman, founder of Magic Hat Brewing Company, as a craft brew incubator. Alchemy & Science is headquartered in Burlington, Vermont. The mission of Alchemy & Science is to find new opportunities in craft brewing, which may be geographical or stylistic and some may be with existing breweries or brewpubs. Alchemy & Science has access to the brewing talents and broad resources of the Company, as it looks for opportunities around the country. During 2012 and 2013, Alchemy & Science purchased the assets of Southern California Brewing Company, Inc., a Los Angeles based craft brewer doing business as Angel City Brewing Company, and the assets of the Coney Island beer brand and certain other assets from Shmaltz Brewing Company, a New York based craft brewer. Since 2013, Alchemy & Science has also developed and sold beers under The Traveler Beer Co. brand name, including Illusive Traveler, Curious Traveler and other shandystyle and fruit flavored beers. During 2015, Alchemy & Science built and opened two small breweries and beer halls, one in Miami, Florida, named Concrete Beach Brewery, and one in Brooklyn, New York Q PART I \u0018PART I Item 1 Business named the Coney Island Brewery. Also in 2015, the Company began national distribution of certain styles of the Alchemy & Science Traveler Beer brand and the Coney Island beer brand, including Coney Island Hard Root Beer. In 2015, Alchemy & Science annual net sales were approximately 7% of the Company's total net sales. Sales, Distribution and Marketing Most all of the Company's sales are made to a network of approximately 350 wholesalers in the United States and to a network of foreign wholesalers, importers or other agencies (collectively referred to as \"Distributors\"). These Distributors, in turn, sell the products to retailers, such as pubs, restaurants, grocery stores, convenience stores, package stores, stadiums and other retail outlets, where the products are sold to drinkers, and in some limited circumstances to parties who act as sub-distributors. The Company sells its products predominantly in the United States, but also has markets in Canada, Europe, Israel, Australia, New Zealand, the Caribbean, the Pacific Rim, Mexico, and Central and South America. With few exceptions, the Company's products are not the primary brands in Distributors' portfolios. Thus, the Company, in addition to competing with other beers and hard ciders for a share of the drinker's business, competes with other brewers for a share of the Distributor's attention, time and selling efforts. During 2015, the Company's largest customer accounted for approximately 7% of the Company's net sales. The top three Distributors collectively accounted for approximately 12% of the Company's net sales. In some states and countries, the terms of the Company's contracts with its Distributors may be affected by laws that restrict the enforcement of some contract terms, especially those related to the Company's right to terminate the relationship. Most core brands are shipped within days of completion and there has not been any significant product order backlog. The Company has historically received most of its orders from domestic Distributors in the first week of a month for products to be shipped the following month and the Distributor would then carry three to five weeks of packaged inventory (usually at ambient temperatures) and three to four weeks of draft inventory. In an effort to reduce both the time and temperature the Company's beers experience at Distributor warehouses before reaching the retail market, in late 2010 the Company introduced its Freshest Beer Program with domestic Distributors in several markets. The goal of the Freshest Beer Program is to provide better on-time service, forecasting, production planning and cooperation with the Distributors, while substantially reducing inventory levels at the Distributor. At the close of its 2015 fiscal year, the Company had 139 Distributors participating in the program, which constitutes approximately 71% of its volume. The Company has successfully reduced the inventories of participating Distributors in the aggregate by approximately two weeks, resulting in fresher beer being delivered to retail. The Freshest Beer Program has resulted in lower shipments of approximately 87,000, 103,000 and 212,000 case equivalents in 2015, 2014 and 2013, respectively, as measured at the end of the year by evaluating the year-on-year inventory reduction from the inventory levels that might otherwise have been expected. In 2015, the Company began piloting a small group of distributors on a pure replenishment service model within our Freshest Beer Program, which if successful would further reduce Distributor inventories. The ordering process has changed significantly for Distributors that participate in the Freshest Beer Program and has resulted in a shorter period between order placement and shipment. There are various risks associated with the Freshest Beer Program that are discussed in Risk Factors below. Boston Beer has a sales force of approximately 420 people, which the Company believes is one of the largest in the domestic beer industry. The Company's sales organization is designed to develop and strengthen relations at the Distributor, retailer and drinker levels by providing educational and promotional programs. The Company's sales force has a high level of product knowledge and is trained in the details of the brewing and selling processes. Sales representatives typically carry samples of the Company's beers and hard ciders, certain ingredients, such as hops and barley, and other promotional materials to educate wholesale and retail buyers about the quality and taste of the Company's products. The Company has developed strong relationships with its Distributors and retailers, many of which have benefited from the Company's premium pricing strategy and growth. The Company also engages in media campaigns including television, radio, digital and social media, billboards and print. These media efforts are complemented by participation in sponsorships of cultural and community events, local beer festivals, industry-related trade shows and promotional events at local establishments, to the extent permitted under local laws and regulations. The Company uses a wide array of point-of-sale items (banners, neons, umbrellas, glassware, display pieces, signs and menu stands) designed to stimulate impulse sales and continued awareness. In 2008, the Company launched its core philanthropic initiative, Samuel Adams Brewing the American Dream. In partnership with ACCION, the nation's largest non-profit micro-lender, the program supports small business owners in the food, beverage, brewing and hospitality industries through access to business capital, coaching, and new market opportunities. The goal is to help strengthen small businesses, create local jobs and build vibrant communities. Since the inception of the Samuel Adams Brewing the American Dream program, Samuel Adams and ACCION have worked together to loan more than $8.2 million to nearly 800 small business owners who have subsequently repaid these loans at a rate of more than 98%. Samuel Adams employees, together with local business partners and community organizations, have provided coaching and mentoring to more than 6,000 business owners across the country. These efforts have helped to create or maintain more than 3,000 local jobs. Ingredients and Packaging The Company has been successful to date in obtaining sufficient quantities of the ingredients used in the production of its beers and hard ciders. These ingredients include: Malt. The two-row varieties of barley used in the Company's malt are mainly grown in the United States and Canada. The 2014 North American barley crop, which supported most 2015 malt needs, was well below historical long term averages with regards to both quality and quantity, driven by acreage declines and adverse weather events in key barley growing areas. The 2015 North American barley crop, which will support 2016 malt needs, was generally consistent with historical long term averages with regards to both quality and quantity, though quality from key areas in Canada was highly variable and below long term averages. The 2014 barley crop prices booked early in the calendar year were at prices comparable to historical long term averages. The 2014 crop prices booked late in the calendar year, as the impact of the weather events became clear, were well above historical long-term averages. The 2015 barley crop prices are consistent with historic long-term averages. There has been a long-term trend of declining acres and production in North America against relatively stable malt demand. The Company purchased most of the malt used in the production of its beer from two suppliers during 2015. The Company currently has a multi-year contract with one of its suppliers and a 1 year agreement with the other supplier. The Company also believes that there are other malt suppliers available that are capable of supplying its needs. Hops. The Company uses Noble hop varieties for many of its Samuel Adams beers and also uses hops grown in the United States, England and New Zealand. Noble hops are grown in several specific areas recognized for growing hops with superior taste and aroma properties. These include Hallertau-Hallertauer, Tettnang-Tettnanger, Hersbrucker and Spalt-Spalter from Germany and Saaz from the Czech Republic. The United States hops, grown primarily in the Pacific Northwest, namely Cascade, Simcoe, Centennial, Chinook, Citra, Amarillo and Mosaic are used in certain of the Company's ales and lagers, as are the Southern Hemisphere hop varieties, Galaxy and Nelson Sauvin. Traditional English hops, namely, East Kent Goldings and Fuggles, are also used in certain of the Company's ales. Other hop sources and varieties are also tested and used from time to time. BOSTON BEER COMPANY Form 10-K 3 Q PART I \u0018PART I Item 1 Business The European hop crop harvested in 2015 was well below historical long term averages with regards to both quality and quantity due to warmer than normal temperatures and insufficient precipitation. The United States hop crop harvested in 2015 was consistent with historical long term averages with regards to quality, with an increase in overall quantity driven by expansion of planted acres in recent years. However, the demand for certain hops grown in the United States has risen dramatically due to the success and proliferation of craft brewers and the popularity of beer styles that include hop varieties grown in the United States, with the result that certain United States hops are now in tight supply and prices have risen for both spot purchases and forward contract pricing, accordingly. The Company enters into purchase commitments with eight primary hop dealers, based on the Company's projected future volumes and brewing needs. The dealers either have the hops that are committed or will contract with farmers to meet the Company's needs. The contracts with the hop dealers are denominated in Euros for the German and Czech Republic hops, in Pounds Sterling for the English hops, US Dollars for United States hops and New Zealand Dollars for the New Zealand hops. The Company does not currently hedge its forward currency commitments. The Company expects to realize full delivery on United States and New Zealand hop contracts on the hop crop harvested in 2015. The Company experienced significant under-delivery on European hop contracts on the hop crop harvested in 2015. However, because the Company attempts to maintain up to a two-year supply of essential hop varieties on-hand in order to limit the risk of an unexpected reduction in supply, the underdelivery from current crop is not expected to have a material impact on its operations. The Company believes it has adequate inventory and commitments for all hop varieties. This belief is based on expected growth and beer style mix, all of which could ultimately be significantly different from what is currently planned. Variations to plan could result in hops shortages for specific beers or an excess of certain hops varieties. The Company stores its hops in multiple cold storage warehouses to minimize the impact of a catastrophe at a single site. Yeast. The Company uses multiple yeast strains for production of its beers and hard ciders. While some strains are commercially available, other strains are proprietary. Since the proprietary strains cannot be replaced if destroyed, the Company protects these strains by storing multiple cultures of the same strain at different production locations and in several external laboratories. Apples. The Company uses special varieties and origins of apples in its hard ciders that it believes are important for their flavor profile. In 2015, these apples were sourced primarily from European, United States and New Zealand suppliers and include bittersweet apples from France and New Zealand and culinary apples from Italy and Washington State. Purchases and commitments are denominated in Euros for European apples, US Dollars for United States apples and New Zealand Dollars for the New Zealand apples. There is limited availability of some of these apple varieties, and many outside factors, including weather conditions, growers rotating from apples to other crops, competitor demand, government regulation and legislation affecting agriculture, could affect both price and supply. The 2015 apple crops in Europe, the United States and New Zealand were consistent with historical long term averages. The Company has entered into contracts to cover its expected needs for 2016 and expects to realize full delivery against these contracts. The Company purchased and opened its cidery at the Orchard in 2015. The Company expects to use the apple varieties harvested at the Orchard primarily to experiment and develop new hard ciders. The Company may also use the apples harvested at the Orchard in small quantities in the Company's current hard ciders, but, given the current varieties of apples grown at the Orchard, such use is likely to be insignificant. Other Ingredients. The Company maintains competitive sources for most of the other ingredients used in its beers and hard ciders. Packaging Materials. The Company maintains competitive sources for the supply of certain packaging materials, such as shipping cases and glass. 4 BOSTON BEER COMPANY Form 10-K The Company enters into limited-term supply agreements with certain vendors in order to receive preferential pricing. In 2015, cans, crowns, six pack carriers and labels were each supplied by a single source; however, the Company believes that alternative suppliers are available. The Company initiates bottle deposits in some states and reuses glass bottles that are returned pursuant to certain state bottle recycling laws. The Company derives some economic benefit from its reuse of returned glass bottles. The cost associated with reusing the glass varies, based on the costs of collection, sorting and handling, including arrangements with retailers, Distributors and dealers in recycled products. There is no guarantee that the current economics relating to the use of returned glass will continue or that the Company will continue to reuse returnable bottles. Quality Assurance As of December 26, 2015, the Company employed over twenty brew masters to monitor the Company's brewing operations and control the production of its beers and hard ciders. Extensive tests, tastings and evaluations are typically required to ensure that each batch of the Company's beers and hard ciders conform to the Company's standards. The Company has on-site quality control labs at each of its Samuel Adams company-owned breweries, and supports the smaller local breweries with additional centralized lab services. With the exception of certain specialty products, the Company includes a clearly legible \"freshness\" code on every bottle, can and keg of its beers, in order to ensure that its customers enjoy only the freshest products. Boston Beer was the first American brewer to use this practice. Beer and Hard Cider Production Strategy During 2015, the Company brewed, fermented and packaged over 95% of its core brand volume at breweries owned by the Company. The Company made capital investments in 2015 of approximately $74.2 million. These investments were made to expand the quality, capacity, efficiency and capabilities of its breweries, both to meet the 2015 growth and the anticipated future growth. The Company expects to invest between $60 million and $80 million in 2016, which is highly dependent on estimates of future growth and the capital investments to meet those volume growth estimates. The actual amount spent may well be different from these estimates. The Company believes that by executing this capital plan and expanding its use of production arrangements with third parties, it should be able to support its projected growth in 2016. The Company continues to evaluate capacity optimization at its breweries and the potential significant capital required for expansion of existing capacity. The Company also engages in various product development activities. Such activities include researching market needs and competitive products, and sample brewing and market taste testing. The Pennsylvania Brewery and the Cincinnati Brewery produce most of the Company's shipment volume. The Pennsylvania Brewery is the Company's largest brewery and the Cincinnati Brewery is the primary brewery for the production of most of the Company's specialty and lower volume products. The Boston Brewery's production is mainly for developing new types of innovative and traditional beers and brewing and packaging beers for retail sales on site and in the local market area. The Company's Angry Orchard Innovation Cider House located in Walden, New York, opened in November 2015 and its production is mainly for developing new types of innovative hard ciders and fermenting and packaging ciders for retail sales on site and in the local market area. The Alchemy & Science breweries include the Angel City Brewery, Concrete Beach Brewery and Coney Island Brewery. The production at the Alchemy & Science breweries is mainly for developing new types of innovative and traditional beers and supporting draft accounts in the respective local market areas and providing for on-premise consumption of its beers at its beer halls. Q PART I \u0018PART I Item 1 Business The Company currently has a brewing services agreement with a subsidiary of City Brewing Company, LLC, to produce its products at facilities in Latrobe, Pennsylvania and an agreement with Shmaltz Brewing Company, LLC to produce at facilities in Clifton Park, New York. The Company carefully selects breweries and packaging facilities owned by others with (i) the capability of utilizing traditional brewing, fermenting and finishing methods and (ii) first-rate quality control capabilities throughout the process. Under its brewing and packaging arrangements with third parties, the Company is charged a service fee based on units produced at each of the facilities and bears the costs of raw materials, risk, excise taxes and deposits for pallets and kegs and specialized equipment required to brew and package the Company's malt beverages and hard ciders. other investors. The most significant include Heineken's acquisition of a 50% interest of Lagunitas Brewing Company for approximately $500 million, Constellation Brands' acquisition of Ballast Point Brewing & Spirits for approximately $1 billion and AB InBev's purchase of multiple craft breweries, including Elysian Brewing Company, Golden Road Brewing, Four Peaks Brewing Company and Breckenridge Brewery. During 2015, Pabst Brewing Company acquired an ownership interest in and entered into an exclusive distribution agreement to distribute nationally Small Town Brewery's brands, including Not Your Fathers Hard Root Beer. Also, during 2015, Pabst Brewing Company entered a distribution agreement to distribute various United States cider brands of C&C Group PLC, including 'Woodchuck', 'Magners' and 'Hornsby's.' The Company believes that it has alternatives available to it, in the event that production at any of its brewing locations is interrupted, although severe interruptions at the Pennsylvania Brewery would be problematic, especially in seasonal peak periods. In addition, the Company may not be able to maintain its current economics if interruptions were to occur, and could face significant delays in starting up replacement brewing locations. Potential interruptions at breweries include labor issues, governmental actions, quality issues, contractual disputes, machinery failures, operational shut downs, or natural or unavoidable catastrophes. Also, as the brewing industry has consolidated and the Company has grown, the capacity and willingness of breweries owned by others where the Company could brew some of its beers and hard ciders, if necessary, has become a more significant concern. The Company continues to work with its contract brewers to attempt to minimize any potential disruptions. The Company's products also compete with other alcoholic beverages for drinker attention and consumption and the pace of innovation in the categories the Company competes in is increasing. In recent years, wine and spirits have been competing more directly with beers. The Company monitors such activity and attempts to develop strategies which benefit from the drinker's interest in trading up, in order to position its beers and hard ciders competitively with wine and spirits. Competition The Better Beer category within the United States beer market is highly competitive due to the increasing number of craft brewers, imported beers with similar pricing and target drinkers, and efforts by large domestic brewers to enter this category. The Company anticipates competition and innovation among domestic craft brewers to remain strong, as craft brewers experienced their eleventh successive year of growth in 2015 and there were many new startups. The Company estimates there are over 5,000 craft breweries in operation or in the planning stages, up from approximately 1,409 operating craft breweries in 2006. Also, established craft breweries are building more capacity, expanding geographically, and adding more SKUs and styles, as Distributors and retailers are promoting and making more shelf space available for more craft beer brands. Imported beers, such as Corona, Heineken and Modelo Especial, continue to compete aggressively in the United States and have gained market share over the last ten years. Heineken and Constellation Brands (owner of the United States Distribution rights to Corona and Modelo Especial) may have substantially greater financial resources, marketing strength and distribution networks than the Company has. The two largest brewers in the United States, MillerCoors and AB InBev, have entered the Better Beer category with domestic specialty beers, either by developing their own beers, acquiring, in whole or part, existing craft breweries, importing and distributing foreign brewers' brands or increasing their development and marketing efforts on their own domestic specialty beers that might compete in the Better Beer category. In addition, Miller Coors' Tenth and Blake and AB InBev's High End Division have been formed as business units headquartered in the United States that are focused exclusively on competing in the Better Beer market. During 2015, there were numerous acquisitions announced in the beer industry including AB InBev's $107 billion purchase of SAB Miller and the related sale by SAB Miller to MolsonCoors of its 58% share of the MillerCoors joint venture with MolsonCoors. Both of these transactions are scheduled to close during 2016 and are subject to various regulatory and financing requirements. There were also numerous announcements of acquisitions of or investments in craft brewers by larger breweries, private equity and The Company competes with other beer and alcoholic beverage companies within a three-tier distribution system. The Company competes for a share of the Distributor's attention, time and selling efforts. In retail establishments, the Company competes for shelf, cold box and tap space. From a drinker perspective, competition exists for brand acceptance and loyalty. The principal factors of competition in the Better Beer segment of the beer industry include product quality and taste, brand advertising and imagery, trade and drinker promotions, pricing, packaging and the development of new products. The Company distributes its products through independent Distributors who also distribute competitors' products. Certain brewers have contracts with their Distributors that impose requirements on the Distributors that are intended to maximize the Distributors' attention, time and selling efforts on that brewer's products. These contracts generally result in increased competition among brewers as the contracts may affect the manner in which a Distributor allocates selling effort and investment to the brands included in its portfolio. The Company closely monitors these and other trends in its Distributor network and works to develop programs and tactics intended to best position its products in the market. The Company has certain competitive advantages over the regional craft brewers, including a long history of awards for product quality, greater available resources and the ability to distribute and promote its products on a more cost-effective basis. Additionally, the Company believes it has competitive advantages over imported beers, including lower transportation costs, higher product quality, a lack of import charges and superior product freshness. The Company's Twisted Tea product line competes primarily within the FMB category of the beer industry. FMB's, such as Twisted Tea, Smirnoff Ice, Mike's Hard Lemonade, Bud Light Lime Ritas, and Redds Apple Ale are flavored malt beverages that are typically priced competitively with Better Beers. This category is highly competitive due to, among other factors, the presence of large brewers and spirits companies in the category, the advertising of malt-based spirits brands in channels not available to the parent brands and a fast pace of product innovation. The Company's Angry Orchard product line competes within the hard cider category. This category is small and highly competitive and includes large international and domestic competitors, as well as many small regional and local hard cider companies. Hard ciders are typically priced competitively with Better Beers and may compete for drinkers with beer, wine, spirits, or FMBs. Some of these competitors include C&C Group PLC under the brand names 'Woodchuck', 'Magners' and 'Hornsby's'; Heineken under the brand names 'Strongbow'; AB InBev under 'Michelob Ultra Cider' and 'Stella Cidre' and MillerCoors under the brand names 'Smith and Forge' and 'Crispin Cider'. BOSTON BEER COMPANY Form 10-K 5 Q PART I \u0018PART I Item 1 Business Regulation and Taxation The alcoholic beverage industry is regulated by federal, state and local governments. These regulations govern the production, sale and distribution of alcoholic beverages, including permitting, licensing, marketing and advertising. To operate its breweries, the Company must obtain and maintain numerous permits, licenses and approvals from various governmental agencies, including the Alcohol and Tobacco Tax and Trade Bureau, the Food and Drug Administration, state alcohol regulatory agencies and state and federal environmental agencies. Governmental entities may levy various taxes, license fees and other similar charges and may require bonds to ensure compliance with applicable laws and regulations. The federal excise tax on malt beverages is $18 per barrel, on hard cider (with alcohol by volume of 7% or less) is $0.226 per gallon, and on artificially carbonated wine (hard cider with alcohol by volume greater than 7%) is $3.30 per gallon. States levy excise taxes at varying rates based on the type of beverage and alcohol content. Failure by the Company to comply with applicable federal, state or local laws and regulations could result in higher taxes, penalties, fees and suspension or revocation of permits, licenses or approvals. While there can be no assurance that any such regulatory action would not have a material adverse effect upon the Company or its operating results, the Company is not aware of any infraction affecting any of its licenses or permits that would materially impact its ability to continue its current operations. Trademarks The Company has obtained United States trademark registrations for over 190 trademarks, including Samuel Adams, the design logo of Samuel Adams, Sam Adams, Samuel Adams Boston Lager, Samuel Adams Utopias, Samuel Adams Rebel, Samuel Adams Brewing the American Dream, Angry Orchard, Twisted Tea, Lazy River, The Traveler Beer Co., Coney Island, Angel City Brewery, Concrete Beach. It also has a number of common law marks, including Infinium and Know More Love More. The Samuel Adams trademark, the Samuel Adams Boston Lager trademark, the design logo of Samuel Adams, the Twisted Tea trademark and other Company trademarks are also registered or have registrations pending in various foreign countries. The Company regards its Samuel Adams family of trademarks and other trademarks as having substantial value and as being an important factor in the marketing of its products. The Company is not aware of any trademark infringements that could materially affect its current business or any prior claim to the trademarks that would prevent the Company from using such trademarks in its business. The Company's policy is to pursue registration of its marks whenever appropriate and to oppose infringements of its marks. Environmental, Health and Safety Regulations and Operating Considerations The Company's operations are subject to a variety of extensive and changing federal, state and local environmental and occupational health and safety laws, regulations and ordinances that govern activities or operations that may have adverse effects on human health or the environment. Environmental laws, regulations or ordinances may impose liability for the cost of remediation of, and for certain damages resulting from, sites of past releases of hazardous materials. The Company believes that it currently conducts, and in the past has conducted, its activities and operations in substantial compliance with applicable environmental laws, and believes that any costs arising from existing environmental laws will not have a material adverse effect on the Company's financial condition or results of operations. As part of its efforts to be environmentally friendly, the Company has reused its glass bottles returned from certain states that have bottle deposit bills. The Company believes that it benefits economically from washing and reusing these bottles, which result in a lower cost than purchasing new glass, and that it benefits the environment by the reduction in landfill usage, the reduction of usage of raw materials and the lower utility costs for reusing bottles versus producing new bottles. The economics of using recycled glass varies based on the cost of collection, sorting and handling, and may be affected by local regulation, and retailer, Distributor and glass dealer behavior. There is no guarantee that the current economics of using returned glass will continue, or that the Company will continue its current used glass practices. The Company has adopted various policies and procedures intended to ensure that its facilities meet occupational health and safety requirements. The Company believes that it currently is in compliance with applicable requirements and will continue to endeavor to remain in compliance. There can be no assurances, however, that new and more restrictive requirements might not be adopted, compliance with which might have a material, adverse financial effect on the Company and its operating results, or that such policies and procedures will be consistently followed and be sufficient to prevent serious accidents. Employees As of December 26, 2015, the Company employed 1,429 people, of which 104 were covered by collective bargaining agreements at the Cincinnati Brewery. The collective bargaining agreements involve three labor unions, with two contracts expiring in 2017 and one expiring in 2020. The Company believes it maintains a good working relationship with all three labor unions and has no reason to believe that the good working relationship will not continue. The Company has experienced no work stoppages, or threatened work stoppages, and believes that its employee relations are good. Other The Company submitted the Section 12(a) CEO Certification to the New York Stock Exchange in accordance with the requirements of Section 303A of the NYSE Listed Company Manual. This Annual Report on Form 10-K contains at Exhibits 31.1 and 31.2 the certifications of the Chief Executive Officer and Chief Financial Officer, respectively, in accordance with the requirements of Section 302 of the Sarbanes-Oxley Act of 2002. The 6 BOSTON BEER COMPANY Form 10-K Company makes available free of charge copies of its Annual Report on Form 10-K, as well as other reports required to be filed by Section 13(a) or 15(d) of the Securities Exchange Act of 1934, on the Company's website at www.bostonbeer.com, or upon written request to Investor Relations, The Boston Beer Company, Inc., One Design Center Place, Suite 850, Boston, Massachusetts 02210. Q PART I \u0018PART I Item 1A Risk Factors ITEM 1A.\tRisk Factors In addition to the other information in this Annual Report on Form 10-K, the risks described below should be carefully considered before deciding to invest in shares of the Company's Class A Common Stock. These are risks and uncertainties that management believes are most likely to be material and therefore are most important for an investor to consider. The Company's business operations and results may also be adversely affected by additional risks and uncertainties not presently known to it, or which it currently deems immaterial, or which are similar to those faced by other companies in its industry or business in general. If any of the following risks or uncertainties actually occurs, the Company's business, financial condition, results of operations or cash flows would likely suffer. In that event, the market price of the Company's Class A Common Stock could decline. The Company Faces Substantial Competition. The Better Beer category within the United States beer market is highly competitive, due to the increasing number of craft brewers with similar pricing and target drinkers and gains in market share achieved by domestic specialty beers and imported beers, and more recently the acquisition of craft brewers by the four largest market competitors, AB InBev, MillerCoors, Constellation and Heineken. The Company faces strong competition from these brewers as they acquire craft brewers, or introduce new domestic specialty brands to many markets and expand their efforts behind existing brands. Imported beers, such as Corona, Heineken and Modelo Especial, also continue to compete aggressively in the United States beer market. The Company anticipates competition among domestic craft brewers will remain strong, as craft brewers experienced their eleventh successive year of growth in 2015 and there were many new startups. The Company estimates there are now over 5,000 craft breweries in operation or in the planning stages up from 1,409 operating craft breweries in 2006. Also, existing craft breweries are building more capacity, expanding geographically, adding more SKUs and styles as Distributors and retailers are promoting and making more shelf space available for more craft beer brands. The continued growth in the sales of craft-brewed domestic beers and in imported beers is expected to increase the competition in the Better Beer category within the United States beer market and, as a result, prices and market share of the Company's products may fluctuate and possibly decline. The Company's products compete generally with other alcoholic beverages. The Company competes with other beer and beverage companies not only for drinker acceptance and loyalty, but also for shelf, cold box and tap space in retail establishments and for marketing focus by the Company's Distributors and their customers, all of which also distribute and sell other beers and alcoholic beverage products. Many of the Company's competitors, including AB InBev, MillerCoors, Heineken and Constellation Brands, have substantially greater financial resources, marketing strength and distribution networks than the Company. Moreover, the introduction of new products by competitors that compete directly with the Company's products or that diminish the importance of the Company's products to retailers or Distributors may have a material adverse effect on the Company's business and financial results. Further, the beer industry has seen continued consolidation among brewers in order to take advantage of cost savings opportunities for supplies, distribution and operations. Illustrative of this consolidation in 2015 is AB InBev's $107 billion purchase of SAB Miller and the related sale by SAB Miller to MolsonCoors of its 58% share of the MillerCoors joint venture with MolsonCoors, as well as Heineken's acquisition of a 50% interest of Lagunitas Brewing Company for approximately $500 million and Constellation Brand's acquisition of Ballast Point Brewing & Spirits for approximately $1 billion. Due to the increased leverage that these combined operations will have in distribution and sales and marketing expenses, the costs to the Company of competing could increase and the availability of contract brewing capacity could be reduced. The potential also exists for these large competitors to increase their influence with their Distributors, making it difficult for smaller brewers to maintain their market presence or enter new markets. These potential increases in the number and availability of competing brands, the costs to compete, reductions in contract brewing capacity and decreases in distribution support and opportunities may have a material adverse effect on the Company's business and financial results. There Is No Assurance of Continued Growth. Conversely, the Company May Not Be Able to Manage Demand for Its Products. The Company's future growth may be limited, both by its ability to continue to increase its market share in domestic and international markets, including those markets that may be dominated by one or more regional or local craft breweries, and by the increasing number of competitors in the craft beer and the Better Beer markets. The development of new products by the Company may lead to reduced sales of the Company's other products, including its flagship Samuel Adams Boston Lager. The Company's future growth may also be limited by its ability to meet production goals and/or targets at the Company's owned breweries, its