just On Call - No 'desire' to compete with value craft beer pricing - Boston Beer Company
The Samuel Adams brewer is feeling the effects of the increasingly crowded US craft beer market
Boston Beer Company does not plan to lower its prices despite 'value' craft beers creating a bigger and extra competitive market for the category.
The Samuel Adams brewer's president & CEO, Martin Roper, has said that the category's price stability is being threatened by aggressive pricing, particularly by a “domestic speciality” brand. During an analyst's conference call yesterday (1 November), following the firm's Q3 results, Roper said: “The whole pricing structure of the high end American craft beer and domestic speciality beer is evolving a little bit and it’s not quite as clean as it was five to six years ago.”
Boston's chairman Jim Koch said there are now no “clear lines of demarcation”, in what he referred to as “the better beer category”.
“There are new ‘value crafts’ coming from the big mass domestic producers, and you have even got things like Yuengling that effect our volume,” Koch said. “We compete in a pretty comprehensive space and this year our price increases have been higher than the comparable brands.”
Despite a strong Q3 – when profits and volumes both rose - Boston Beer Co saw its YTD profits fall, mainly due to a higher spend on advertising and sales staff. The group now has 60 more staff than at this time last year.
But Koch added: “We have always competed as a craft brewer and have often price leadership. So, we don’t have a lot of incentive or desire to take the category price down. Our economics and the cost of our ingredients put us at a disadvantage if that’s part of the game.”
The company is investing in improving its brewing and packaging operations for the future, as well as increasing its brand building activities. But, asked about these CapEx rises, Bill Urich, Boston's CFO & treasurer, hinted that the company could fund this through loans in future.
“Historically, we have elected not to take on any debt and to fund any capital projects through our cash, our cash flow,” he said. “And that’s what we have done year-to-date and have current plans right now, but that could change.”
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