4 Reasons Sam Adams' Secret Start-Up Is a Big Deal for Craft Beer
Last week, The Boston Globeshined a light on Alchemy & Science, a shadowy subsidiary group of The Boston Beer Company (the parent corporation of Sam Adams and far and away the country's largest craft brewer) that's been quietly gathering steam since 2011. The mission: sell more beer. Duh. That's always the mission.
The method, though? Operating with the blessing & financial backing of the Sam Adams empire, Alchemy & Science has pulled four brands under its umbrella: Coney Island, Angel City, Traveler, and Concrete Beach. Those first two are craft breweries that it acquired; the the latter two are labels developed in-house. With BBC's well-developed infrastructure, A&S is getting set to take these brands national, where they can quickly achieve scale and compete against local competition. In other words, the craft industry's biggest player is quietly pulling a move that's straight out of the playbook of big boys like Anheuser-Busch/InBev & MillerCoors.
Alchemy & Science represents a growing trend in the industry, and its success (or failure) will have implications with how craft beer does business. Let's break down four big reasons why.
1. A&S is a start-up incubator for brewing talent
Craft beer success traditionally comes from deeply personal creativity, but A&S is introducing the industry to a new approach: Silicon Valley's penchant for gobbling up creative talent to find the "next big thing." The contemporary craft landscape is a helter-skelter grab bag of homebrewers, on-the-job learners, and technically trained brewers. Consistently finding good brewing talent is an industry-wide challenge.
A&S could alleviate that crunch. It's essentially a start-up incubator (a kindred spirit to Koch's long-running LongShot homebrewing competition) and it has the money & experience to draw top talent. Eventually, it'll have to produce some big wins to cover its costs (it currently doesn't, according to analyst estimates), but as a legacy player in the craft industry with a big war chest, BBC can comfortably have more patience than the average venture capitalist. This will give A&S a lot of runway to groom talent, and a destination for aspiring brewers to hone their skills before venturing out on their own. Win, win.
2. It's run by craft beer's elder statesmen
Craft beer is a business built on personalities, and this subsidiary is the brainchild of two enormous personalities: Koch, and Alan Newman. Koch is a shrewd businessman who (along with others like Sierra Nevada's Ken Grossman & Deschutes' Gary Fish) battled macros in the '80s & '90s -- and won.
BBC went public in 1995 and has grown steadily, all while the wily co-founder managed to retain control of all voting shares. A lot of craft purists now scoff at Sam Adams these days as "too mainstream," but regardless of how the industry feels about Boston Lager, it listens when Koch speaks.
Koch's partner-in-craft is Alan Newman, who founded Magic Hat Brewing Co. in 1994 and sold it to a holding company in 2010. He's on board for the brewing action (along with his one-time Magic Hat comrade Stacey Steinmetz); Koch is there for the business maneuvers.
Run by these two godfathers of the industry, A&S' spotlight is going to be bright, hot, and unavoidable.
3. It could legitimize subsidiary brands
The entire craft beer market in the US produced 22 million barrels of beer in 2014. Sam Adams brewed 4.1 million of 'em -- just under 25%. This is an enormous craft beer company, so much so that the Brewers Association has rejiggered its definition of "craft" just to make sure Koch & co. weren't left out.
Considering BBC's comparative dominance within the craft marketplace, A&S bears some similarity to macro subsidiaries. For example, Tenth & Blake, an obliquely named craft/specialty umbrella in the MillerCoors family, owns Blue Moon, Leinenkugel, and several other familiar "crafty" labels. Those beers are commercially successful, but they don't get much (any?) respect amongst "serious" beer drinkers because they're not "serious" craft beers.
A&S could break that stigma down. No one's lying about where it comes from: A&S discloses its relationship to The Boston Beer Co. on its website (albeit deep in Newman's rambling mission statement), and on BBC's site, you can find mention of the subsidiary after a few clicks.
A&S' brands are subsidiaries. But because they're backed by serious craft brewing heritage & know-how, these subsidiary labels have a better shot to gain traction within the notoriously insular craft community. As the market becomes more saturated and brewers continue to consolidate, that sort of open-mindedness to craft-backed subsidiaries is going to be critical.
4. It gives aging brewers another option to sell
Brewer succession is another central question in craft beer these days. Many of the legacy craft breweries -- Sierra Nevada, Bell's, New Belgium -- have leadership closing in on retirement age. There are a few options: establish a stable corporate lineage, sell out (to a macro, or a private investor outside the beer industry), or shut down. A&S could be an in-between option. There's no word on what its expansion plans are, but given the general market trend, it's a safe bet that A) A&S will be looking to scarf up some breweries down the road, and B) breweries' founders will consider selling to another craft company before an outsider.