The Small Business Professor

Samuel Adams - A Uniquely American Beer

Jim Koch (pronounced “cook”) founder of Samuel Adams Beer comes from a long line of brew-masters. In fact, Koch represents the sixth generation of eldest sons to make and sell the liquid gold. There were over 1200 small brewers when Koch’s dad became a brewer in 1948, but by the time Koch started Sam Adams in 1984 there were only 35 left.

As a teen, Koch started an entrepreneurial lawn care business cutting 25 lawns a week. In the summer, he tarred driveways, always working for himself. To help pay his tuition at Harvard, Koch delivered newspapers for all 4 years, and graduated in 1971 with a Bachelor’s Degree in government. Not knowing what he wanted to do, he applied to Harvard’s combined JD/MBA program. He began thinking that he should experience life a little bit before committing himself to a career path so he dropped out after two years of the program, planning to come back later if he so chose.

A fellow mountain-climber and friend helped Koch get a job with Outward Bound, an organization started during World War II to train British Merchant Marines to survive in difficult conditions. Young and fit men who had no experience surviving tough times were dying, while older men were able to face challenging life or death situations and come out alive. The program was developed to teach survival skills through controlled exposure to hazardous situations, to build confidence, and improve self image. Koch stayed with Outward Bound on and off for three and a half years and credits the experience with some of the most valuable lessons he has learned.

In September of 1976, Koch went back to Harvard to finish the program he dropped out of earlier, but not before climbing Alaska’s Mount McKinley where the wind-chill can reach 100 degrees below zero. A few months before graduation in 1978, Koch joined the prestigious Boston Consulting Group, an international business consulting firm where he was exposed to varying ideas of how to move business forward. By the time he left seven years later, he felt ready to meet an entrepreneurial challenge.

In 1984, Koch went back to his roots; using a recipe developed by his great-great grandfather, Koch experimented with making world-class fresh beer, a taste lost with the mid-nineteenth century consolidation of breweries. He believed that if he could give people a type of beer they’d never tried, with a fresh taste, a market would develop. Koch wanted to change the way Americans think about their own beer, in the same way vintners in the Napa Valley changed the way people think about American Wine. He wrote a business plan, guessed at the potential market size, and hoped to be making 8,000 barrels of beer a year after five years. At that level, he believed he could make an acceptable living for his family.

Informal methods of market research determined that the beer be named Sam Adams, after a brewer in Boston during the Revolutionary War period. Laws governing the distribution of alcohol forced Koch into becoming a distributor as well as a brewer of beer, so he rented a truck and hit the streets convincing bar owners to try the beer a case or two at a time.

Six weeks after the product’s introduction in 1985, Koch entered Sam Adams into the Great American Beer Festival in Denver and was chosen as America’s best beer. Sales grew 30 – 60 % per year. Now, 20 years later, the company is still driven by grassroots selling with 200 sales people, 18 different beers, and 400 distributors serving 20 countries.
 

The Small Business Professors' Words of Wisdom

Through Outward Bound, Jim Koch learned the importance of leadership and challenging yourself, but more important, he learned to assess risk in a way that has been an asset to him ever since. There is a difference between objective risk (that which can harm or kill you) and subjective risk (that which scares you). Entrepreneurial business risk is subjective; it might be scary and could potentially lead to financial success or ruin, but you’ll still be breathing. This perspective can lower the anxiety level of making any business decision. Starting Sam Adams was scary; Koch had already left a good job and couldn’t get distribution or an investor to believe in him, but he knew these were subjective risks he could overcome. Like most great American entrepreneurs, he believes in himself and knows that failure isn’t fatal.

Case History: www.bostonbeer.com

Entrepreneur’s Strategy: Reintroduce a long-lost favorite utilizing modern business strategy and tactics.

Could This Work For Me? Often the products sold long ago have boutique appeal now. What’s in your attic?
 

Six weeks after the product’s introduction in 1985, Koch entered Sam Adams into the Great American Beer Festival in Denver and was chosen as America’s best beer.