A 'dumb' idea that paid off
The company Jim Koch started 12 years ago by taking his Samuel Adams beer around US bars now has a market capitalisation of $400m and is heading for a British invasion
Sunday 29 September 1996
The reason I had yeasts for pets is that my father was a brew master. He worked for a series of small breweries in Ohio that, one by one, went bankrupt. They were trying to compete with the big names of the American beer industry - Coors and Bud and Miller - which control 90 per cent of the market here.
I'm the sixth generation in my family to become a brew master. The last member of my family to own his own business was my great-great-grandfather. He bought his business about 150 years ago and called it the Louis Koch Brewery, which wasn't very imaginative. He and later his wife ran it until the end of the 19th century.
It was almost inevitable that I should go into the business, but I fought it at first. I became a manufacturing consultant specialising in quality control, instead. In 1978 I joined the Boston Consulting Group, which drew its clients from the Fortune 500 companies.
It was a combination of family history and a conviction that Americans were ready for great American beer that persuaded me to go into business for myself at the age of 35. But it meant giving up a good job earning $250,000 a year. My father, when I told him I wanted to leave the consultancy, looked at me and said: "Jim, that's the dumbest thing I've ever heard."
But unlike the breweries he used to work for, I had no intention of competing with the huge brewers. I was going to do something unique and small. Americans have always been able to buy good imported beer, but by the time it gets here it's stale. And they've had consistent, inexpensive lager from the major breweries. The difference between what they produce and what I make is, I think, like the difference between water and wine.
The recipe for Samuel Adams was handed down from my great-great-grandfather. It has about six times the hops, much more malt, no adjuncts to lighten it up and no preservatives. The closest thing you'd have to it in Britain would probably be Pilsner Urquel, although Samuel Adams is darker and a little creamier. My father had tried to brew it in the 1950s but the owner said people would never drink it because they wanted water with foam on top.
Financially, we never had any problems. I put $100,000 of my own money into it, and raised another $140,000 from my family, friends and clients. It took all of a weekend. When I told people I was putting my own money into it they were confident it would either be a success or they'd get a lot of free beer out of it at the end.
I started the Boston Beer Company on a microscopic scale in 1984. The whole company was two people, myself and my secretary from the consultancy. I took the recipe and ingredients to a brewery in Pennsylvania and asked them to make me a batch. I removed the papers from my briefcase and packed it with six bottles and a couple of blue cold packs and went from bar to bar in Boston.
I remember a bartender at one of the first bars I went to in the trendy south end of Boston telling me he liked my beer, but that he couldn't sell it. "My customers drink the advertising," he said. Two months later he called me back and said his customers were asking for Samuel Adams. By that time we'd already won our first prize. The Great American Beer Festival in Denver chose Samuel Adams as the country's best beer from more than 100 entries when we were just six weeks old.
I own a small brewery in Boston, but the rest is made under licence at other breweries across the US. We do own a lot of capital equipment which we have installed there to make my recipe. Last fall we had an initial public offering that raised $75m. We altered the labels on our six packs to include a share offer so that our customers could take part. Since 1984 we've grown by 30 to 60 per cent a year. And the market for craft brewing has grown just as fast - it now accounts for 2.5 per cent of the total. There are quite a few companies copying us.
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