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Assignment 2: Conduct a SWOT Analysis for Boston Beer Company at the time of the case (1998). Then, briefly explain whether you recommend BBC launching an attack on the Light Beer market. How is your decision supported by your SWOT Analysis? Limit your response to 2 pages double-spaced with 1" margins and 12-pt Times New Roman font, including both the SWOT analysis (page 1 of your submission) and your recommendation/support (page 2 of your submission). SWOT Analysis Worksheet Strengths What do you do well? What unique resources can you draw on? What do others see as your strengths? Weaknesses What could you improve? Where do you have fewer resources than others? What are others likely to see as weaknesses? Opportunities What opportunities are open to you? What trends could you take advantage of? How can you turn your strengths into opportunities? Threats What threats could harm you? What is your competition doing? What threats do your weaknesses expose you to? Boston Beer Company: Light Beer Decision 9-899-058 R E V : N O V E M B E R 2 0 , 2 0 0 1 ________________________________________________________________________________________________________________ Assistant Professor Linda A. Cyr, Professor Joseph B. Lassiter III, and Lecturer Michael J. Roberts prepared this case as the basis for class discussion rather than to illustrate either effective or ineffective handling of an administrative situation. It is based in part on a field study performed by Mark Lalley, Sarah Leary, Greg Pappas and Christina Wing, HBS MBAs ‘98. This case draws on two existing cases on Boston Beer Co., “The Boston Beer Company, Inc.,” HBS No. 196-138 by Christopher Charron under the supervision of Professor Amy Patricia Hutton, and “Boston Beer Company: Samuel Adams,” HBS No. 597-040 by Mollie H. Carter under the supervision of Professor Ray A. Goldberg. Copyright © 1998, 2001 President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800-545- 7685, write Harvard Business School Publishing, Boston, MA 02163, or go to http://www.hbsp.harvard.edu. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means—electronic, mechanical, photocopying, recording, or otherwise—without the permission of Harvard Business School. L I N D A A . C Y R J O S E P H B . L A S S I T E R , I I I M I C H A E L J . R O B E R T S Boston Beer Company: Light Beer Decision It was April 1998, and Mark Lalley, Sarah Leary, Greg Pappas and Christina Wing could not get their minds off of beer. The four second-year HBS students were nearing the end of their MBA studies, and trying to finish their field study project for Boston Beer Company (BBC), brewers of Samuel Adams Boston Lager and a host of other beers, including Boston Lightship. The subject of the field study was light beer. Boston Lightship—BBC’s existing light beer offering— was a very minor contributor in the Company’s product line. Lightship had been successful, at one point reaching sales volumes as high as 12,000 cases per month. But in recent years, volume had dropped to less than 3,000 cases per month and the Company didn’t believe that it was reaping the returns on its earlier substantial investment in the brand. Although light beer was an exploding category, it still required considerable skill and resources to compete effectively, and BBC had been attempting to maintain Samuel Adams as its primary focus. The students were tasked with determining whether there was an attractive opportunity in the light beer market, and if so, whether Lightship’s performance could be turned around or a new brew introduced. In an effort to answer these questions, the student team had drawn on many of the tools to which they had been exposed during their MBA program: customer surveys, market and competitor analysis, financial analysis, and even the “ZMET,” a new customer research technique that had been invented by HBS professor Gerald Zaltman. Still, the team was not having an easy time crafting its recommendations to the Company. As one team member put it: We keep going around in circles. There are lots of good reasons to come out with a new light beer, and lots of reasons not to. When Jim Koch [pronounced Cook] founded this business in 1984, he went with his heart and not a lot of analysis, so it’s tempting for us to do the same. But there is a lot more to lose today than there was fourteen years ago.1 1 Source: Casewriter interview. For the exclusive use of F. Ande, 2021. This document is authorized for use only by Faissal Ande in MBA 6208 Fall 2021 taught by SCOTT DAVIS, University of Houston - Downtown from Oct 2021 to Apr 2022. 899-058 Boston Beer Company: Light Beer Decision 2 Background2 Jim Koch founded the Boston Beer Company in 1984. Koch, a graduate of Harvard College, the Harvard Law School and the Harvard Business School, left a lucrative consulting career to start a beer company. A sixth generation descendant of German brewers, Koch had observed the changing tastes of American beer drinkers and the general homogenization of most domestic brews. With $100,000 of his own savings, $140,000 from family and friends, and a yellowed recipe for beer that had been handed down from his great-great-grandfather, Koch began brewing Samuel Adams Boston Lager. Spurred on by a strong desire to change the way Americans thought about beer, Koch and the Company’s Samuel Adams Boston Lager were widely credited with defining the craft brew segment. Craft beers were defined as “full-flavored beers brewed with quality hops, malted barley, yeast and water without such adjuncts as rice, corn or stabilizers, or water dilution used to lighten beer for mass production and consumption.”3 When BBC introduced Samuel Adams in 1985, the craft brew segment was virtually non-existent, representing less than 0.1% of the total beer market. By 1997, the craft segment had been officially recognized, and was estimated to account for about 3% of the 190 million barrels of beer sold in the United States that year. In addition, BBC had maintained its position as the well-established leader in the craft segment and was larger than its next five competitors combined. (See Exhibit 1 for U.S. Beer Volumes by Segment) In 1985 and for the 3 years thereafter, Samuel Adams Boston Lager was voted “Best Beer in America” in the consumer preference poll at the Great American Beer Festival. This early success with consumers, combined with Koch’s marketing flair and the novel notion of a consultant chucking it all to become a sixth generation brewer, propelled the Company to rapid growth. From a standing start in 1984, the Company was generating over $21 million in revenues selling 121,000 barrels of beer by 1990. For the year ended December 27, 1997, the Company garnered almost $210 million of revenue on a volume of 1,352,000 barrels. (See Exhibit 2 for Summary Financial and Operating Data and Production Volumes.) BBC had achieved its growth by continuously expanding its product line and broadening its distribution. In April 1998, it offered 14 beers under the Samuel Adams name, as well as 3 beers under the LongShot label, 3 beers under the Oregon Original label, and two “hard” cider products called HardCore. (See Exhibit 3 for Sample Product Labels.) Although regarded as a New England company, BBC was an effective national distributor which sold beers in all 50 states, the District of Columbia and Puerto Rico—in addition to 19 countries—through a network of over 400 distributors. BBC went public in November 1995 at $20 per share. It raised over $40 million and established a $395 million market value.4 The company’s track record, Koch’s skill at creating noteworthy products and the management team that was driving the company were all key factors in this success. (See Exhibit 4 for a Partial Organization Chart.) BBC’s stock rose quickly to $32 per share, tracking Wall Street’s fascination with craft brew offerings. But, by late 1996 the investor interest had cooled with BBC’s stock dropping first back to its $20 per share offering price, then to $12 per share, until it reached a low of $7.63 per share by year end 1997, reflecting the uncertainty of finding a significant position among the giants of the brewing industry as well as the other craft brew entrants. 2 This section is drawn largely from the existing HBS case by Amy Hutton. 3 Source: 1995 Boston Beer Company IPO Prospectus, p. 27 4 After the IPO, Koch maintained control of the Company through a superior class of voting stock which allowed him to elect five of the Company’s seven directors and have most other voting rights. In addition, Koch owned approximately 35% of the Company’s publicly traded common stock. For the exclusive use of F. Ande, 2021. This document is authorized for use only by Faissal Ande in MBA 6208 Fall 2021 taught by SCOTT DAVIS, University of Houston - Downtown from Oct 2021 to Apr 2022. Boston Beer Company: Light Beer Decision 899-058 3 At the time of the case, the Company’s stock was trading in the $10-11 range, implying a market value of more than $200 million with price volatility to be an