Unlike some of his competitors, Boston Beer founder Jim Koch doesn't want you to gulp down his beers. He prefers that you drink them "mindfully," as one might approach a fine wine, or perhaps even a yoga pose. Otherwise, these tough economic times might lead beer drinkers to trade down from Sam Adams to cheaper, less flavorful pints.
The idea that luxury is worth its price is, after all, a central reason that Boston Beer, brewer of Samuel Adams, went from being a start-up in 1984 to being the largest American-owned beer company in 2008. While the general beer category has been flat in recent years, higher-end "craft" beers such as Sam Adams have enjoyed double-digit growth. ("Beer is the new wine," Koch says.) Those consumer preferences, along with nimble management of its brand name, explain why Boston Beer has been able to stand out amid a crowded table of brew masters. Last year, it earned $342 million, an increase of almost 20 percent over 2006 and 100 percent since 1998.
Now, Koch (pronounced "Cook") must convince beer drinkers cutting back on almost everything else that better beer is still worth the splurge. So far, he seems to be winning that argument. Third-quarter sales to retailers were up 12 percent, although the company slightly lowered its full-year earnings forecast because of rising costs. As of October, the craft-beer category was still growing at a healthy 10 percent clip from its relatively small base—5 percent of the total beer market share. In the even smaller category of seasonal brews—Boston Beer's specialty—growth nears 30 percent.
"Extreme." Instead of changing to reflect the frugal times, Koch has taken his products in the opposite direction. The new Samuel Adams Chocolate Bock, a decadent beer infused with cocoa nibs, has just been released for the holidays. A 750-milliliter bottle, which looks like a wine bottle and carries a pewter label, retails for around $15. The company also occasionally releases "extreme beers" that test the limits of—and stereotypes about—typical brews. "I thought, 'Why should I believe that every worthwhile style of beer has already been invented?'" says Koch. The first, Triple Bock, released in 1993, was 36 proof, packaged in a dark-blue bottle, and sealed with a sherry cork. A more recent concoction, Utopias, which contains 27 percent alcohol, now sells on eBay for upwards of $400.
Koch notes that most Sam Adams beers are little luxuries most people can afford. Sam Adams six-packs typically run around $8, just a couple of bucks more than cheaper brands. "Anybody can afford to trade up from Bud Light to Sam Adams," says Koch.
Yet the consumers most likely to actually do so earn over $75,000 a year, read financial publications such as the Wall Street Journal, and are either baby boomers or "millennial drinkers" in their 20s, according to Nielsen research on craft-beer drinkers. "They're looking for brands with a good image, a lot of cachet, and a message that identifies who they are," says Nick Lake, vice president of beverage alcohol for Nielsen, an information and media company. Koch adds that many Sam Adams drinkers also drink wine, so "they are drinking for quality, not quantity."
Indeed, by treating beer more like wine—with its own glasses, varietals, and tasting menus—Koch plugs into Americans' changing culinary preferences, too. Beer stands up well to the spicy, strong flavors of global cuisine, he says, adding that it pairs better with Mexican, Ethiopian, and Chinese food than wine does. "Beer cleanses your palate between spicy bites, like bread does," he says.
Smell, sip, reset. Koch himself can take an hour to finish off a pint. Before each sip, at least while this reporter was watching, he stops to smell the beer and then wrinkles his brow as it hits his tongue. Tasting beer, he says, is at least "a three-second process." Then, he says, it takes 30 seconds to reset the palate, so he pauses between bites and sips.
Morningstar equity analyst Ann Gilpin warns there's reason to worry that not all consumers are quite so, well, mindful. "You want to have some beers at your tailgate party, but maybe it's not worth it to pay for higher-priced Sam Adams," she says. And Boston Beer's relatively small size makes it more vulnerable to hikes in commodity prices, including those of hops and glass.