A six-pack of Boston Beer 'sSAM +7.62% Sam Adams Boston Lager sits displayed on a table during a Bloomberg Television interview in New York, U.S., on Thursday, April 3, 2014. Armed with a family recipe and a flair for marketing, Koch popularized craft beer in the U.S. and turned Boston Beer Co. into the third-largest American-owned brewery.
The beer world may get a lot hoppier in the coming years.
During a Thursday earnings call, Boston Beer Company Co. Chairman Jim Koch said that he gets asked repeatedly when Americans’ thirst for India Pale Ales, or IPAs, will fizzle and other beer styles will become fashionable. But he doesn’t see an end to IPA’s growth coming any time soon.
“Everybody is asking, ‘What’s the next IPA?’ And it turns out the next IPA is just more IPA,” Mr. Koch said.
Boston Beer is benefitting from Americans reaching for IPAs, which features more of the plant that gives bitterness and flavor to beer, bars and grocery stores. The company launched Samuel Adams Rebel IPA this year, and Mr. Koch said it was “the largest, most successful craft beer launch in history.” He added that the company plans to launch some product extensions of Rebel IPA in the future that aim to tap into consumer appetite for the hoppier ales.
Rebel IPA combined with Samuel Adams Lager, Angry Orchard Cider and Twisted Teas to help Boston Beer deliver net revenue of $269.7 million for the quarter, up nearly 25% from $216.4 million a year earlier. The company said the increase in revenue stemmed from a 23% increase in shipments over the period.
Sales of craft beer surged nearly 20% last year to take a nearly 8% share of the $100 billion U.S. beer market. Mr. Koch, who brewed his first batch of Sam Adams in 1984, expects the growth to continue in the coming years.
During the Thursday earnings call, Mr. Koch predicted the craft segment will experience “multiple years of double-digit growth.” The segment is becoming more crowded as more and more people try to cash in on craft’s popularity. This year alone more than 700 brewers are expected to start operations, according to Mr. Koch.
“I see a very good future for those of us who are already in,” Mr. Koch said. “At some point, it will be tougher for new entrants.”
As the category continues to evolve, Mr. Koch said he expects drinkers to become “much more eclectic” and increasingly open to sampling different categories of beer. He pointed to cider’s growth in recent years as an example. Cider has doubled its share of the beer market to 1%, up from just 0.5% in 2012. Boston Beer capitalized on that growth with its Angry Orchard brand, which launched two decades ago and now claims more than a 40% share of the cider market.
Just as cider surged in popularity, Mr. Koch said, “There’s also going to be over the next five or 10 years other opportunities for all brewers, big and small, to innovate and engage drinkers that aren’t obvious now.”
Boston Beer won’t be among the brewers innovating next year. The company said it won’t launch any new products in 2015. Instead, it plans to focus on promoting its existing lines of beer and cider, and it will do so by increasing its spending on advertising and sales by $25 million to $35 million. The company said it hopes the bump in advertising will help it continue to grow in an increasingly competitive market.
