I plead guilty to enjoying a cold beer or two, and I’ve watched with amazement as the decade-long bull market in the craft beer industry shows no signs of abating.
In 1984, Jim Koch (pronounced “cook”), then in his mid-30s, made the leap from working in management consulting at Boston Consulting Group to start Boston Beer Co. The company, makers of Samuel Adams, rented space and equipment from other breweries for more than a decade before Koch purchased his first brewery. Today, Koch is a billionaire and Boston Beer Co. is the second-largest craft brewery in America. In his 2016 book “Quench Your Own Thirst,” Koch shares tales of that growth and business lessons he learned along the way.
SMM: You make no bones in the book about your disdain for marketing, quoting your dad (also a brewmaster) advising you as you started out, “Make a good beer and don’t worry about the marketing. People drink the beer; they don’t drink the marketing.” Do you look at marketing differently now that you’ve become such a successful company?
KOCH: Probably not that much differently. They are both important. In the book I really felt strongly that I wanted to emphasize the role of selling and person-to-person communication. Not disdain for marketing, but rather a reaction to the disdain that a lot of people have for sales. To me, they are both important and, done right, both respectful and dignified activities.
SMM: You clearly embrace a pound-the-pavement approach to sales as essential.
KOCH: Absolutely. It surprised me how important that was, and more than that, how valuable it was. The stereotype that a lot of educated people – maybe overeducated people – have about sales is just wrong. It’s the stereotype that comes out of popular culture, whether it’s Willy Loman or “Wolf of Wall Street” or “Tin Men” or “Glengarry Glen Ross.” Those portrayals of sales really don’t do it justice. Done right, it’s really respectable. The same is true of marketing, but a lot of it is just bad practitioning. I would read these books on it and I would struggle to get anything out of them because they were full of abstractions, and when you boiled it down, there wasn’t much there. I was much more skeptical about a lot of the activities that go under the name of marketing.
SMM: What are your thoughts on social media marketing?
KOCH: It’s important. I have an 18-year-old and a 20-year-old. I see how young people spend their time. If you want to reach them, you have to do it through social media. I don’t know that we’re particularly good at it. We’re trying to get better. It’s a whole new world that is changing very quickly, but it is how we’re going to be reaching our drinkers.
SMM: Do you still feel the practice of what you call person-to-person selling is the foundation of good sales? How do you train the salespeople that join your team?
KOCH: The idea that great salespeople are born, not made is baloney. It’s very learnable, and you have to approach it that way. We have a very extensive curriculum. There are about a dozen different courses that our people go through, starting with basic selling skills, then holding effective wholesaler meetings and building brands through distributors and chain selling, and then strategic selling. We’re constantly upgrading our people’s skills. They master one thing and then go to the next level. We’ve really spent a lot of time, effort and thought on how you train people to be great salespeople.
SMM: Are your salespeople doing things much differently than when you were a two- or three-person company and you were personally going bar to bar, restaurant to restaurant in Boston to get new accounts?
KOCH: No, it’s really the same stuff. We do it better and in a more educated way, but it’s the same stuff.
SMM: You talk about “Holy Shit” moments, which you describe as wondrously creative moments that lead to paradigm shifts. Do you still have those regularly and can you recall a recent one?
KOCH: They don’t come along every year or every month. You may have one or two a year, but when they come along they are paradigm shifts. Six or eight months ago, we realized we could make a hard sparkling water. You’ve probably seen the success of companies like LaCroix because of the wellness benefits. The holy shit moment was, “Hey, we could make a hard version that would address what people drink vodka and soda for.” A 12-ounce serving would have 100 calories, 5 percent alcohol and one gram of sugar. It’s called Truly Spiked & Sparkling, and it comes in several flavors. Is it going to be a big thing? I don’t know. But that was a holy shit moment.
SMM: Is it easier to take those types of chances when you are a fledgling startup or when you have grown into an industry leader?
KOCH: Frankly, you need both. For us, that’s the sweet spot that we’ve been in for decades. On the one hand, we’re small enough to want to do innovative, groundbreaking things and still big enough to be able to do them. We have capabilities in terms of talented people, brewing skills and equipment, etc. that we didn’t have when we were little. On the other hand, we’re crazy enough to want to do this kind of stuff. If you address it as a dichotomy, neither one can do it well. But if you have the mindset and the mentality of a small, innovative company, and you couple that with skills and capabilities – and a lack of bureaucracy – then you can do it. We’re still a founder-led company. As big as Apple got, during Steve Jobs’ tenure they were arguably the most innovative company in the world.
SMM: That advantage of being a smaller, more nimble company is something you call the “strength of the weak.” You talk about fighting the colossal breweries by going restaurant to restaurant and making an impression one account at a time while they take a “carpet bomb” approach to marketing. Do you find that now that you are a bigger ship, it’s harder to deploy that sort of niche sales and marketing approach?
KOCH: Not at all. We can make things that don’t sell in significant quantity, but if they say “Sam Adams,” people will give them a try. For example, we make and commercially release over 60 beers every year. The average drinker won’t see many of those. But if you go to a specialty store, you will find things like Sam Adams Tetravis or Sam Adams Stony Brook Red.
SMM: What do you make of the consolidation of the beer industry over the last decade? Today’s top five brewers represent more than 50 percent of the total global market versus 32 percent in 2003.
KOCH: You have these two contradictory trends. Since I started (in 1984), you have consolidation to the point where today, 90 percent of the beer made in the U.S. is made by just two foreign-owned conglomerates (Anheuser-Busch InBev and SABMiller). On the other hand, you have a thousand new craft breweries opening up every year. In total, they make up a little more than 10 percent of total sales.
SMM: I’m sure you’ve been offered to be bought out. Have you fought that and if so, why?
KOCH: I have a great job. I like what I do. I started at eight this morning doing a tasting and analysis of 10 different trial beers that we made here with different yeasts and different fermentation curves to see if we could improve certain flavor characteristics of certain beer. I’ve watched what happens to other craft brewers that have sold out. The founders generally leave after a relatively brief period of time. If they don't leave, they just become employees. I have this odd career in that I’ve never had a job in which I’ve had a boss. I’m constitutionally not a good subordinate.
SMM: Was it a difficult decision then to take your company public in 1995?
KOCH: We went public in a unique way. The public shares are non-voting shares. I own 100 percent of the voting shares. It’s a very good structure in that we have the transparency of a public company while we have the founder with the controlling shares who is able to focus on long-term success.
SMM: You’re something of a godfather to the craft brewing industry. You invite other brewers in to learn from your staff and you do a lot of other things to support the industry. What’s your objective in that regard?
KOCH: I’ve always looked at other craft brewers as colleagues rather than competitors. All of us are small and we’re all in this together, whether you’re Sam Adams or a guy who started in his garage yesterday. I’ve learned that as craft brewers, we’ll succeed together or we won’t succeed at all. In a world where there are two huge competitors who have 90 percent of the U.S. market and 5,000 of us have 10 percent of the market, it doesn’t really matter much whether there are 3,000 or 4,000 or 5,000 craft brewers.
SMM: How often do you taste a beer that you feel is better than yours?
KOCH: There are a lot of good beers out there. We make a good deal of them. But I’m always tasting other beers because I can learn from them. I may like the way one beer’s bitterness comes through cleanly and think about how they did it and might even talk to the brewer. That’s part of the craft brewer revolution. We all learn from each other.
SMM: Is there a risk that we’re in a craft brewing bubble?
KOCH: Oh sure. That’s just the nature of things. People pile in and overshoot, and then there is a correction.
SMM: You write a lot in the book about how important your employees are and your focus on building a great corporate culture. You feature your workers in a lot of your ads. We just had a cover feature on the high cost of employee disengagement in which we cited a decade or more of surveys from Gallup that show employee disengagement increases every year. In fact, Gallup estimates that as many as seven out of 10 employees today are disengaged. Do you feel your company is an anomaly or do you fall in there somewhere? How do you deal with disengagement?
KOCH: Well, to start out with, we make beer. How can you disengage from making, enjoying and selling beer? People come here for that reason. I would almost have to turn them off. My job, at its core, is two things: I’m responsible for the quality of the beer and for maintaining the culture of the company. It is a culture of engagement, excitement and having fun doing something cool and meaningful. We helped start this entire craft beer revolution. What could be cooler than that?