Jim Koch-Boston Beer Company

On Tuesday Jim Koch came to school to talk to the Entrepreneurship class (and those of us who were simply interested in what he had to say.) He asked the group some questions first so he could tailor his presentation to the crowd, which I thought was an interesting touch.

Jim went to Harvard undergrad and was in the JD/MBA program for a year before dropping out. He essentially became an outdoorsman and had a great time making very little money with a "crazy Australian" friend of his who is now a college professor.

He talked about his work at Boston Consulting Group (and how he got dinged at Bain by Harvard classmate Mitt Romney) and how it led to Boston Beer Company. Essentially his wife got sick of him traveling all the time and wanted him to find a job closer to home. His family has brew masters running back five generations and he had access to some great recipes (that ended up being Sam Adams Boston Lager) so he decided to make beer.

He believes that you can have success in business if your product does one of two things. It either has to be better than existing products or it has to be cheaper. He felt that American beer had become so tasteless and stale that Americans had turned to imports to get flavor. Since beer only has a 4 month shelf-life, the imports were also stale and often skunky. He decided to brew a high quality beer that would target the higher end of the beer-buying market. He planned to sell about 8000 barrels of beer five years after starting, figuring this would provide him and his family with a comfortable living. Boston Beer Company actually sold 100,000 barrels of beer in its fifth year and now sells over 1,000,000 barrels per year (which accounts for 6/10ths of one percent of the U.S. beer market.)

As Jim said, they went from infinitismal to microscopic and now strive to be small.

While Boston Beer has done very well and made Jim a lot of money, he said that getting rich was never his intent. As he says, he can only live in one house and only drive one car. He argues that you should try harder to do something that makes you happy than something that makes you money.

He mentioned that not a single one of the partners at BCG invested in Boston Beer, although a few of his colleagues did. His crazy Australian friend invested $2000 and eventually got back $4000 for every $1 he invested. His friend told him that either they'd get rich or they'd have one hell of a party when the company went belly up and they had to drink off the left-over beer.

For the first six months, Boston Beer consisted of two people; Jim and Rhonda. Rhonda was in charge of sales and Jim claims that "her natural habitat is a bar." Jim told a great story about how he mentioned that they had only one truck and needed to load up and map out a route of bars to hit to sell it. Rhonda started mumbling to herself and writing and came up with 100 bars in about 20 minutes. When Jim asked how she's done it she claimed she just started walking and writing down names.

She was in charge of building a sales force that is currently more than half of the company's employee total of 500. Rhonda figured she's learned everything Jim could teach her and knew she's never get Jim's job so she started her own brewery (with Jim's blessing.)

There focus was two things. One, make great beer. Two, sell it. They quickly realized they would not be able to build a brewery with the limited funds they had, so they contracted brewing to a firm in Pennsylvania. Jim still personally supervises the beginning of each batch of beer (which takes about six weeks to become a finished product.)

Six weeks after making their first batch of beer they won the "Best Beer" at the Great American Beer Festival. That pretty much launched the company into what it is today.

Jim mentioned that Sam Adams is targeting the higher-end beer market, which luckily for them is the only segment that has been growing consistently.

In an interesting side note, Jim mentioned that Michelob Ultra will actually float on water (much like Guinness floats on the top of a Black and Tan.) He mentioned that when you make beer that way, you have very little room for error.

Brewing is at the heart of what Boston Beer is all about. Once a year the company has a contest where all the employees home-brew beer (about 90% take part) and the winners get a free all-expenses paid trip to Oktoberfest. Not too shabby.

They brew about thirty beers total every year. When you start work at Boston Beer Company you spend the afternoon with Jim "sampling" every beer the company makes.

Not too shabby.