Boston Beer—Is Greater Growth Possible?
Boston Beer—Is Greater Growth Possible?
1. Have you ever tried one of the Boston Beer brews? If so, how did you like the taste? Was it worth the higher price? I haven’t tried any one of the Boston Beer brews, so I’m not sure whether I will like its taste. I searched the key word “the Boston Beer” on the Internet, I found that there are three distinct characteristics of this brand’s beers: strong-flavor, unique package and high prices. Although a lot of beer aficionados will pay for the high price, as an ordinary beer customer, I don’t think it deserve the higher price. I have two reasons: Firstly, it is difficult for ordinary beer customers to distinguish which kind of beer have a good quality and which kind of beer haven’t. Not to mention, which brewery use premium ingredients to brew their beer. In most of time, we choose to buy a brand of beer just because its advertisement successfully leave its name in our mind or the recommendation from our friends.
On the other hand, we usually drink beer with our friends at home party. So our main objective is to have fun not enjoy tasting high-quality beers. Also, its unique package does not make sense to us. No one will collect them, so the simpler the better. We don’t want to pay the bill for its beautiful package. To pay the same money, we prefer to have more quantity to ensure everyone can have enough beer than ensure everyone can have high-quality beer. On this point, the Boston Beer will lose a big part of beer customers because of its high-price strategy. In summary, the Boston Beer products do not deserve such a high price because their value in quality and package can’t be recognized by the general public.
2. The investment community evidently thought Boston Beer had great growth potential to have bid up the initial price so quickly. Why do you suppose so many fell into this trap? Or was Jim Koch a poor executive in not bringing Boston Beer up to their expectations? So many people fell into this trap because they overestimated the potential for development of the Boston Beer. But in the fact, Boston Beer’s potential is limited. That the growth potential is sorely limited due to two factors: a. Ease of entry into the industry, which encourages a host of competitors. This turned out to be especially true with the influx of microbrewers, to 3,000 in just a few years. b. Finite potential in demand. Demand for specialty beer, while at first robust and rising, was certainly not going to take over the mainstream beer market. Given the rush to microbreweries in an environment of limited demand, the aspirations of Jim Koch to be a dominant force in the brewing industry had to be curbed.
He could still be a profitable firm and do well in his niche, but he would never be a challenge beyond that. Perhaps that is enough for most entrepreneurs. But this is far unable to meet the high expectations of the people of Boston Beer. On the contrary, Jim Koch is a really good market executive. He used excellent marketing strategy when Boston Beer announced its initial public stock offering (IPO) of shares. “The company put clip-and-mail coupons on Samuel Adams six-packs and other beer packages. These offered customers a chance to buy 33 shares of stock at a maximum price of $15, or $495 total.” In marketing, promotion is always a good way for the company to raise sales. Similarly, the Boston Beer use this way to arouse wide public concern, and give the customers the illusion of buying is earning.
“Only one subscription was allowed per customer,and these were honored on a first-come, first-served basis.” People always curious for those limited things, for fear of miss it even in one-second hesitation. By seizing this customers’ psychology, the first-come, first-served basis contributed a lot to bidding up Boston Beer’s initial price and caused so many people fell into this trap. Just because this this two marketing promotion tools, the Boston Beer’s stock was oversubscribed within a short period of time.
3. “The myriad specialty beers are but a fad. People will quickly tire of an expensive, strong-flavored beer. Much of it is just a gimmick.” Discuss. As far as I am concerned, the myriad specialty beers are not just a gimmick, although when too much kind of microbrews appear in the market will make the customer feel difficult to choose any kind of them and sometimes they will feel tired. I want to illustrate them from the following two aspects: a. The microbrews have their own specific market, those who willing to pay for the high price for the strong-flavored or the unique package. For example, a can of Sprite is sold in the supermarket for about 4 dime, but it is sold for 2 dollar in the restaurant with a glass of ice and a slice of lemon. Is a glass of ice and a slice of lemon value 1.6 dollar? Without a doubt, the answer is no. Why will so many people pay for it? Because it is convenient.
Everything has its own market has the reason to exist. b. No matter the other microbrew is just a gimmick, the Boston Beer is not. To a certain extent, its high level represents its high quality. Samuel Adams was not only voted the Best Beer in America four times at the annual Great American Beer Festival, but also received six gold medals in blind tastings. Skimming away its price, just concern the quality, this is enough to explain the Boston Beer has the high quality. Because of its high quality, Boston Beer still keep the leading position and continue to profit in the fierce industry competition.
4. What problems do you see retailers facing with the burgeoning number of different beers today? What might be the implications of this? Nowadays, a number of various beer brands suddenly appear on the horizon so that the competitive grow. Retailers are looking for marketing support and Boston Beer has the best quality and marketing. Lots of the non-traditional beers are still lacking the commercial support from the breweries where they come from and are left to retailers for a smaller group of consumers that may know about them or are curious for new options coming from places with microbrewery tradition like Portland, Colorado, etc. To be successful, retailers must do more deep researches to find out consumers needs and meet consumers’ expectation.
In addition, retailers have to consider how many beer brands they would like to sell and which kinds of beers are popular in general market. Our suggestion is that retailers must focus on selling several kinds of beers instead of selling all kinds of beers. Maybe retailers think that if they can sell all kind of beers to expand the market but it will result in an increase in the logistic cost and a decrease in the quantity. To develop the market, retailers need to use efficient marketing method to promote their products. For example, retailers can provide the discount for consumers once two or three months and combine beers and other goods to sell because consumers always want to save some coin and get the same product with cheaper price.
5. Playing the devil’s advocate (one who takes an opposing view for the sake of argument prices in the world for your beer. The manufactures cost might be the same as traditional beers as quality doesn’t necessarily translates to higher costs. And it’s been seen in several other commercial cases that sometimes the higher price in a product is just a socio-economical status differentiator which makes the consumer that can afford it feel special even when the real support of quality is not completely proven or being tasted. In addition, setting the price is an important step before developing the product into the market because the price is one of factors, which will effect how many consumers will buy it. If the price is too high, some of consumers can’t afford to buy it. Maybe they are willing to try or use the product but they don’t have enough money to re-buy.
Therefore, consumers have many choices because there are a lot of substitute products in the market. In the other words, the high price may decrease the selling and increase the risks in the ownership of inventory, which will become obsoleted or out of fresh. In general aspect, the luxury product is equal to the social status. If the price is too high to afford, it will downsize of the potential market. Even thought you employ the best strategy to promote the product, it doesn’t increase in quantity and increase the profit. In addition, not everyone are good at distinguish the differentiation between Boston Beer and other beers so that they won’t insist to buy the beer with higher price. For example, Mary wants to hold a birthday party and invite the whole freshman to participate. So she has to buy a lot of food, beverage and beers. Because of limited budget, she can’t afford the high price of beer even though the tasty is good.
6. We saw the detection of a problem with the freshness of a beer at a restaurant by Jim Koch himself. How can Boston Beer prevent such incidents from happening again? Can such distributor negligence or shortsighted actions be totally prevented by Boston Beer? In products that maintain a higher price based on quality that quality control investment on the product should go all the way to the retailers. There are several ways that Jim Koch can prevent the bad quality. First, Jim Koch must re-check every step from manufacture to package. The most important part is container because beer is a kind of sensitive product, which needs to store carefully.
Secondly, Boston Beer needs to build up a strong relationship with their retailers and distributors. A good partnership also can prevent the same problem happen again because Boston Beer and their retailers or distributors understand that they are a team, which share the same goals, reputation, and benefits. Thirdly, if retailers don’t know how to store those beers in warehouse or keep the beers in fresh, Jim Koch must send some professional employees or salespeople to educate those retailers and teach them how to keep the beer in fresh. Finally, Jim Koch has to evaluate or visit retailers regularly. The methods above are very useful to avoid the bad quality problem happen again.
7. Do you think Boston Beer can continue to compete effectively against the giant brewers who are moving with their infinitely greater resources into the specialty beer market with their own microbrews? Why or why not? In our group opinion, Boston Beer can continue to compete effectively against the giant brewers who are moving with their infinitely greater resources into the specialty beer market with their own microbrews. There are three reasons to explain it. First, Boston beer has built up a good brand image. When other giant brewers into the specialty beer market with their microbrews, Boston beer has been develop their microbrews a long time. It means the brand of Boston beer has been recognized as one of the industry’s most famous microbrews. It already has relative stable customer group. The second reason is high quality and flavor of beer.
Jim Koch gets a recipe from his great-great-grandfather, Louis Koch. This recipe is more full-bodied than such beers as Budweiser or Miller. Jim Koch also uses best material and longer time in Boston beer so that the quality and flavor is better than other brands of beer. Because the cost of Boston beer is expensive, the sale price must expensive than other beers. In many people’s mind, high price means high quality. People cannot buy expensive car but everyone can buy an expensive beer. When people taste Boston beer, they will be attracted by its quality and flavor. Although the price of Boston beer is higher than giant brewers, it has attracting some relative stable customer groups though the high quality and flavor of Boston beer. This is offer benefits for Boston beer continued growth. Boston Beer can keep a sales force and relative to competitors so that it can provide a higher level of quality service than the larger mass brewers. Consequently, Boston beer has more competitive edge by their quality product and sale service quality in the beer market. The last reason is Boston beer has a good operation principle.
Initial period, Boston beer didn’t have enough money, so it made contracts with other brewery: use Jim Koch’s recipe to produce beer. Boston beer use this way to save the cost of plan and equipment to develop its marketing, such as advertise. If the brewery cannot produce high standards’ beer, they will find another brewery. It not only save money but also ensure the quality and flavor of beer. Therefore, Boston Beer can compete effectively with even the largest beer brand that is moving with their infinitely greater resources into the specialty beer market with their own microbrews. In contrast with giant brewers, Boston Beer has built up its brand in the microbrews market. It still keeps quality and flavor not lower the price and quality. The customers will be used to think Boston Beers first and in this way, the sale force will be strengthened. 8. In 1998, Boston Beer produced more than two dozen styles of beer. Then a few years later it was down to just a few. Now it’s up to more than 21 again.
Do you see any problems with this? Our group fined some problems with this question. First, Boston beer wants produce to attract consumer. However, everyone’s taste is different; a single taste of beer can’t satisfy the needs of all customers. So, Boston beer offered more than two dozen styles of beer for consumers’ choices in 1998. This way can attract many customers. But, it also brings a lot of problems. Boston beer must spend more cost in the propaganda of different kinds of beer. When Boston beer company produce a new style of beer, they must do a process of marketing, like marketing research, product development, pricing and advertising, to find potential consumers and affect them to buy the new product. It needs a lot of money but the new products may not meet customer. It takes stress for Boston Beer Company. Anther problem which Boston beer offers more than two dozen styles of beer is Boston beer will lose some consumers.
Like in the article, an industry analyst said:” After people got inundated with so many choices . . . they kind of stepped back.” Then a few years later, Boston Beer Company find their market share is small—a market that represented just 3 percent of the U.S. Beer Market. Thus, Boston beer Company was down to a few styles of beer, concentrating only on best sellers: the flagship lager and four seasonal brews. This is a very good strategy decision. Boston Beer through calculate from the data and find out most of the consumers prefer which taste and they can adjust marketing strategy. This decision can reduce a lot of unnecessary spending and ensure the interests. Meanwhile, Boston Beer Company also ensures the main products market share in all the microbrews market. Although the decision that Boston Beer Company cut their beer styles to just a few cause Boston beer lost some consumer who like other styles of beer, it brings a lot of advancing for the development of the Boston Beer Company in the overall strategy.
In recent years, Boston Beer Company has development quickly. Even in all beer industry recession, Boston Beer still maintains good performance. Its beer because of high quality and full-bodied flavor won many awards in the beer game. With development of Boston Beer Company, it has become an able company. Its main products are stability, and the customers’ market share close to saturation in micro brew market. In this case, Boston Beer Company to seek new breakthroughs will produce new products. Now, it’s up to their beer more than 21 types again. But, this decision may cause some problems. First, the demand of microbrews is finite. Too many types of beer choices will divide up the main of Boston beer’s market share. Second, in recent years, microbrew competitors has increased dramatically, Boston beer produce many kinds of beer will distract the attention of the main products, to reduce the main product competitiveness. Third, the introduction of new products in Boston beer is too much at the same time. This is confusing the choices of customers.
If Boston beer introduces only three or four styles new beer, consumer can choose one or more than one styles beer to taste. However, Boston beer introduces 21 styles beer, consumer don’t know which one is better and most consumers can’t buy all these new styles beer because the price of Boston beer is expensive. The last problem of this decision is high risk. Every new product into market must have risk and the introduction of new products need a lot of cost.. Boston Beer Company should introduce a few styles beer one time so that we can know the customers to the new product satisfaction as well as the desire to buy. If customers are satisfied with the new products, Boston Beer Company will continue to launch other new products; If customers are not satisfied, the company can find the reasons of customers are not satisfied, and then eliminate these problems put other new products. When Boston Beer Company launches it’s all the new products at short time, the cost of this way and risk will higher than only introduce a few styles beer. Therefore, in different period Boston Beer Company increase or decrease the types of beer will cause some benefits but also brings a lot of harm for its development.