What is the structure of the beer industry, and how does this affect choice of strategy?

The Boston Beer Company, known for its Samuel Adams brand, is the largest craft brewery in the United States, holding a 1 percent stake in the overall beer market. It faces growing competitive threats from other breweries, both large and small. In the past several years, the beer industry as a whole has been on a decline, while sales of wines and spirits have increased. The Boston Beer Company competes within the premium beer industry, which includes craft beer and premium imported beers like Heineken and Corona. Although the beer industry has been on a decline, the premium beer industry had seen a small amount of growth, and the craft beer industry had seen a surge in popularity. Because of this success of the craft breweries in particular the major breweries had taken notice and many new craft breweries had sprung up.

According to the Brewers Association, 1,940 craft breweries and 1,989 total breweries operated in the United States. While craft breweries accounted for over 97 percent of all the breweries in the United States, they only produced approximately 25 percent of all beer sold. However, with the rise in popularity of premium beers, the craft breweries were expected to continue to grab more of the market. As the country’s largest craft brewery, the Boston Beer Company had revenue of over $900 million in 2014 and sold over 2 million barrels of beer. Other large craft breweries included New Belgium Brewing Company and Sierra Nevada Brewing Company. In addition, some smaller breweries had been merging to take advantage of economies of scale and enhance their competitive position. Because of the growth of the craft brewers, Samuel Adams beer would be competing with over 1,000 other craft brewers around the country.

However, The Boston Beer Company competed not only with domestic craft breweries but also with premium beer imports, such as Heineken and Corona, which sold beer in a similar price range. Like Anheuser-Busch Inbev and MillerCoors, Heineken and Corona had large financial resources and could influence the market. It was projected that premium imported beers will grow by 6 percent over the next five years.

The Brewers Association defined a craft brewery as brewing less than six million barrels per year and being less than 25 percent owned or controlled by another economic interest. Maintaining status as a craft brewery could be important for image and, therefore, sales. The size of the Boston Beer Company, however, was an issue. With continued growth, the brewery could potentially increase its volume output to more than 6 million barrels per year, thus losing its craft brewery status. Also, because of its size, Boston Beer had less in common with other craft breweries and more with the major breweries in regards to distribution. Furthermore, with the size of the company and its ability to market nationwide, the company ran the risk of alienating itself from other craft breweries who believed Samuel Adams no longer fit the profile. Many craft breweries already believed the company, which had been public since 1995, was more concerned with making money than with providing quality beer and educating the public on craft beers. So who did Boston Beer compete with?

The Boston Beer Company was facing a difficult competitive environment. It was facing direct competition from both larger and smaller breweries and from premium imported beers. Some of the smaller craft breweries were growing quickly and wanted to be larger than the Boston Beer Company. Other craft breweries felt that the Boston Beer Company was too large already. Thus, while further growth would be beneficial in terms of revenue, growing too large would negatively affect the company’s status as a craft brewery and the perceptions of its customers. Starting with its win in 2000, Samuel Adams had subsequently won more awards in international beer tasting competitions than any other brewery in the world. It didn’t want to lose that premium status. How could Boston Beer Company continue to brew flavorful beers, maintain a loyal customer base, yet see continued growth in the future?