Breaking the barriers in the beer industry through Craft-beer-Ship
The Boston Beer Company represents one of the most successful craft brewers in the USA, competing effectively against large mass-produced breweries. “Boston Beer” was founded by Jim Koch in 1985 with a family recipe and entered the market with a crafted beer brand “Samuel Adams Lager”. This brand was initially brewed in small batches with an obsession for quality, freshness and flavor. Samuel Adams beers have won numerous international awards and are still brewed using the time-honored, traditional four-vessel brewing process and are market positioned in the “Better Beer Category”. Samuel Adams is the only brewer practicing a cooperative program with its distributors to buy back its beer when it is past its peak freshness date.
Samuel Adams brand boasts itself as high-quality hand-crafted beer made with world’s finest all-natural ingredients purchased from Bavarian hops farmers. Instead of locking all the capital in production assets, Boston beer has grown primarily through microbrewery production methods and contracting with third-party packers and franchisees to produce all its brands. Boston Beer has launched more than 500 varieties, and released 25 new beers in 2012 and brewed another 55 in-house.
With the strategy of operating in a decentralized and dispersed manner using a chain of contract brewers, Boston Beer was able to market its specialty crafted beers nationally without incurring shipping expenses. From 500 barrels per year during its inception years to brewing close to 4 million barrels per year now, Samuel Adams has grown to be the largest craft brewer with 1 per cent of the total US beer market (www.bostonbeer.com). Samuel Adams brand has become an inspiration and a catalyst to other small and microbrewers. The exemplary performance of microbrewers and specifically specialty craft brewer like Boston Beer Company serves as a testament to the effectiveness of the business strategy of disaggregation and dispersion of manufacturing, marketing and distribution activities. Boston Beer's strategy illustrates how firms can operate profitably in a smaller scale disaggregating their core activities achieving variety, quality, uniqueness and customization. And this shoaling strategy can be effectively replicated in a range of businesses and industries such as food processing, consumer durables and construction for achieving innovation and growth.
In addition to the cost and marketing-related advantages, there are several socio-economic benefits of disaggregating a firm’s value chain. Through disaggregation of operations, a firm can decentralize decision making and provide more autonomy, and thus in turn can develop a sense of ownership among employees and managers. Disaggregation allows for more product or design variations in manufacturing. Decentralized operation enables simple and lean organization structure, reducing the power and salary distance between management and employees. Dispersed value chain allows unit and functional level managers to search for new opportunities resulting in diversification and growth.
With dispersed operation of the value chain, there is more opportunity for sharing or franchising the firm ownership with managers and employees, and thus reducing the cost of capital and investment risk.
Dispersed arrangement helps firms to develop multi-pronged competitive strategies, that is, enabling the firm to develop a unique or optimal strategy for each rival it encounters in the respective market or region. In addition to achieving cost reduction, quality and customer responsiveness, dispersed operations would help companies reduce the environmental cost and enhance the sustainability performance. Samuel Adams's overall success in terms of cost savings, quality, innovation, employee learning and productivity, and overall effectiveness of financial and operational performance attest to the significance and consequence of scale reduction and dispersion of organization and production systems.
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Case study: Samuel Adams' Shoaling Strategy