Small Business

Keeping the Froth on Sam Adams


By Gerry Khermouch Just as Jim Koch is about to paste a sticker for Samuel Adams beer on the cooler of a Manhattan supermarket, the red-faced manager appears. "Don't you dare put anything on my shelves without my permission," he fumes. The brewer musters his most disarming smile and extends his hand. "Hi," he says in the voice made familiar by 15 years of cheeky radio commercials. "I'm Jim Koch, of Samuel Adams beer." The manager is unimpressed: "It's a little late for that," he says curtly. "Please leave my store immediately."

For C. James Koch (pronounced "Cook"), who just stepped off the 7 a.m. shuttle from Boston, it is not an auspicious start to a day that will be spent, like many others, trolling through convenience stores, supermarkets, taverns, and nightclubs talking up his brand to sometimes indifferent retailers. But as he quizzes barkeeps about what's selling and checks the temperature of the Sam Adams drafts he orders, he also receives praise for the quality of his beer, especially his popular low-cal offering, Sam Adams Light. "Not a bad way to spend a day, huh?" the chairman of Boston Beer (SAM) grins as he lugs a canvas briefcase full of samples down Fifth Avenue in the midsummer heat.

CHAMPION OF THE SUDS. Not bad -- but not exactly the easy life, either. The 54-year-old Koch, son of a fifth-generation brewer, has been hustling ever since he cooked up his first batch of Sam Adams, based on an old family recipe, and began selling it bar to bar in Boston in 1985. He could have sold out to a megabrewer long ago and settled into a cushier existence. In fact, Koch says he has enough money that he doesn't have to work, but never could fathom the idea.

"What would I do if I did sell?" he asks. "I'd go looking for a brewery to buy so I could launch my own brand." As for why he still pounds the pavement, Koch offers a cosmic explanation: "From the meta-marketing to the store shelves, it's all seamlessly connected," he says. (Can you tell he was once a consultant for Boston Consulting Group?) But it's clear that the real reason is more personal: He still gets an adrenaline rush from meeting his customers face to face, indignities and all. "Beer is very complex, and somebody has to love the beer and protect the beer," he says.

Yet if Koch himself shows no sign of fatigue, his brand is definitely betraying signs of age. Once a cutting-edge alternative to stale imports and bland domestic beers, Sam Adams now is just another craft beer on a cluttered shelf. The best-selling one, yes, but one that isn't drawing in many new drinkers. Among young males for whom beer is something like a fashion accessory, it's the brand their fathers drink. Instead, many are choosing more recent creations such as Fat Tire and Magic Hat, exotic-seeming imports like Belgium's Stella Artois, and even ancient domestic brands like Yuengling and Pabst that have been under the radar so long they are novel again.

BREWER'S DROOP. To sell Sam Adams to twentysomethings, Koch has been rethinking everything from his advertising to his assortment of beers. He has tilted the marketing budget toward noisy TV commercials rather than the conversational first-person radio ads that helped establish the brand. He has been flaunting his brewing prowess with 50-proof, $100-a-bottle Utopias, probably the strongest beer ever made. He even launched Sam Adams Light in 2002, after years of deriding the very idea of a light beer.

It's still not exactly clear, however, what persuaded Koch to cooperate with a pair of radio shock jocks who cooked up a promotion dubbed "Sex for Sam" that offered a trip to Boston to the couple who engaged in sex in the riskiest places. When, in August, 2002, a Virginia couple trying to win the prize were arrested for allegedly having sex in New York's Saint Patrick's Cathedral, Koch was in the radio studio. Not exactly the kind of attention he was hoping for. Koch apologized, and the show was canceled.

Still, for six long years, Boston Beer was stuck at about $200 million in sales. Last year, sales spiked up to $238 million but have softened this year. As bad as that looks, other specialty brewers suffered far more in what, by the late 1990s, had become a brutally overcrowded marketplace. In the past two years, Boston Beer's stock has risen 40%, to $15 a share, outpacing the gains of Coors and Redhook. Still, that's only about half what it was worth after an initial public offering in 1995. And although Koch bridles at the "father's beer" tag, he admits that trying to reach a new generation has been a humbling experience. "I know that Sam Adams still stands for quality, passion, authenticity, and innovation, but I don't know how to communicate that to a 23-year-old," he says. It's a strange admission from a man who has long irked rivals with his hucksterism.

BETTER WITH AGE. "In the early days, Koch was so easy to dislike -- and so successful," says John McDonald, founder of Boulevard Brewing Co. in Kansas City, Mo. "Now, I think he's O.K." Koch has always been a pinstripe-suited presence in a denim-clad world. He grew up in Cincinnati, earned degrees in government, business, and law from Harvard University, and along the way became a climbing instructor for Outward Bound. Today he's a closet vegetarian.

Now, despite the bravado, some close to him say he's softening a bit. Koch is notoriously parsimonious: He and his second wife, biotech entrepreneur Cynthia A. Fisher, live in the same modest house in Newton, Mass., that he bought 20 years ago. But he finally splurged this spring on a weekend place in South Dartmouth, Mass., and this summer decided to take Fridays off.

And, who knows, Koch may decide he would be even better off selling the company to someone who could really scare the imports. While he wouldn't walk away with as much as he might have in Sam Adams' heyday, he could pocket at least $70 million. And it is still his choice: As sole owner of the company's Class B shares (in all he has about a 33% stake in the company), Koch has effective veto power over any decision to sell. "While he would never entertain the subject in the past, he's more willing to talk about it these days," says board member Jean-Michel Valette. Still, Valette adds, "it's a notion of unfinished business that's motivating him." Enough encounters with surly store managers, and even that could lose its charm. Associate Editor Khermouch covers brands and business out of New York


Steve Ballmer, Power Forward
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