Sam Adams may lose 'artisan beer' label

Despite starting a craft beer craze, a 2 million barrel threshold could cost brewer Boston Beer its status

By InvestorPlace Jun 15, 2010 8:36AM

sam adams artisan beerIn the business world, there’s rarely a thing as growing too big. But unfortunately for Sam Adams brewer Boston Beer (SAM), the price of success could be higher costs -- and the loss of its label as an "artisan" craft beer.


That’s not to say a cold bottle of Sam Adams Summer Ale will taste any different to consumers. But according to the Brewers Association," artisan" brewers include small outfits that put out less than 2 million barrels of suds a year. That means the brewer that almost single-handedly sparked interest in smaller batch brews with more flavor could be pushed into the same category as the big beer vendors like Anheuser Buch Inbev (BUD) and Molson Coors (TAP).


That has some at the company pretty frothy. As Jim Koch, president of Boston Beer, told The New York Times, “If we’re not a craft brewer what else are we? We’re certainly not Budweiser.”


SAM stock has soared so far in 2010, up over 50% year to date even as the broader market has slid backwards a bit. That’s partially because Boston Beer’s first quarter earnings report boasted profits that topped Wall Street expectations by over 80% thanks to strong sales. It’s strange then to think that those brisk sales could actually work against the brewer.

The cost to SAM could be much more than just the ability to label its drinks as craft or artisan beer. Specifically, The federal government defines small breweries with a similar mark as the Brewers Association with a 2 million threshold, and grants a lower tax rate to operations under that mark. Putting out more beer could actually hurt Boston Beer when it comes to tax time.

According to company estimates, Boston Beer will surpass the 2 million mark some time in 2011 at current rates. Help could be on the way in the form of a bill introduced last month to the U.S. Senate, increasing yearly production limits to 6 million barrels. The bill would also cut the excise tax rate for small brewers to $3.50 per barrel from $7 for the first 60,000 barrels produced and to $16 from $18 for each additional barrel, according to The New York Times. But with so many more weighty issues at hand in Congress, it’s hard to imagine that the beer bill will get priority any time soon.


Some craft beer connoisseurs are furious over the name game, since the creation of Boston Beer in 1984 is one of the watershed events in changing public tastes away from "mainstream" beers like Bud, Miller and the like. As Jim Koch puts it, a craft beer is all about taste where other beers look to appeal to a broader audience with milder, easy-to-drink brews. Other less charitable beer snobs would call it Sam Adam’s commitment to putting out beer that actually has flavor.


Who knows whether Sam Adams will be able to keep its old title of an “artisan” beer in the mind of beer industry groups. But the bottom line is that Boston Beer has made a name for itself with quality brews that connect with a group of consumers looking for more than just a cold one on a hot day. That type of status and brand loyalty should serve SAM well – no matter what labels the industry wants to put on the company’s beer.


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84Comments
Jun 15, 2010 12:05PM
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I clean my sewer pipes with Yuengling, that's all it's good for.
Jun 15, 2010 12:04PM
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Sam is good, but lately I have been drinking the 60's formula Schlitz. I don't know why it is only available in a few markets but it has a great taste. Not like the Schlitz that is watered down and is available everywhere. 
Jun 15, 2010 12:04PM
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I used to love SAM but as the price increased I found myself trying and enjoying some other equally tasty craft beers.  When I found out that they are now brewing SAM in Pennsylvania that was kinda the last straw.....they are certainly no longer a "small, local, craft brewery".  Oh, I'll still enjoy one every now and then, but is it really Boston Lager when it's not even brewed in Boston?
Jun 15, 2010 11:58AM
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What the hell is an artisan craft beer?  The article made no sense to me because it doesn't explain that. 
Jun 15, 2010 11:57AM
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Our business was a significant MRO supplier to one of the A-B breweries for a number of years.  Out of a sense of local-business-loyalty (and knowing who helped butter my bread) I always drank A-B brands.  After selling our business, I stepped out and tried some craft brews.  Hmmm......there IS a difference!  In fact, at a visit to a local big-chain grocery store this morning, my eye was drawn to the "Craft" beer aisle.  What a treat to review all the brands, and to contemplate quaffing a few new ones!  And, I've always liked Sam Adams.....
Jun 15, 2010 11:55AM
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I DONT CARE FOR ALL THESE CRAFT BEERS?WHY DO I WANT MY BEER TO TASTE LIKE WHEAT ANYWAY.WHAT IS WITH ALL THESE WEIRD ASS TASTING BEERS ANYWAY.NO THANKS.I WILL STICK WITH MY MILLER HIGH LIFE!!!Beer mug
Jun 15, 2010 11:54AM
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Once again, this greedy government has to step in a take more than it should. Actually it does that with every business and citizen. It's time to bite this hand off. One reasonable tax should cover all.
Jun 15, 2010 11:50AM
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Sam Adams does not brew any beer except a small amount in it tourist attraction factory . All brewing is outsourced, not that is a problem the beer is still quality.

I enjoy many beers including Sam Adams but I believe the amount should stay the same for the "artisan" designation. To say the big boys cannot brew good beer is crazy they brew different types of beer all with good drinkability. Believe it or not my favorite beer is Old Milwaukee in a cold pint glass. I guess it brings me back to my Father and I sharing a cold one out back or fishing.

Jun 15, 2010 11:48AM
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Most of you so called beer drinkers on this page are probably under 25 or 30. For any real man over 50  Bud and Miller are still the King of Beers. I've been drinking beer for over 40 years and I'm completely sold on Bud Select 55. I walk into the liquor store and beeline straight to the freezer where it's located and pay for it and walk out. Bud selct 55 has a good bite and is the lowest caloried beer in the world and it's my beer-absolutely love it.
Jun 15, 2010 11:48AM
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Guess I'm drinking Sam today, It'll getcha drunk!
Jun 15, 2010 11:35AM
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"I only drink beer for a buzz"   - got a problem?
Jun 15, 2010 11:33AM
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I bought SAM stock many years ago based my very technical analysis--I drank the beer and noticed that it was REALLY good. I also noticed that more places were carrying it. You can call it a craft beer or you can call it coca cola--but the larger scale of their operation has not compromised their standards. The flagship Boston Lager is still as good as it ever was.


Jun 15, 2010 11:31AM
Jun 15, 2010 11:28AM
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All brewers should be taxed the same.  Same as all people should be taxed the same.  But then - it's fashionable to bash the big guy.
Jun 15, 2010 11:25AM
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Who cares?  It will still be the same exact beer.  If you drink Sam Adams simply because of the "artisan" craft beer label, then you are a tool.   Why is this even an issue?
Jun 15, 2010 11:22AM
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Ever taste a new beer from one of the big companies which is supposedly a craft beer with flavor?  They are watered down and have very little flavor.  You'll never see a big brewer make a really good beer, it's just not their business plan.
Jun 15, 2010 11:18AM
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It tastes like cold puke anyway. Nasty. I just want the beer buzz anyway, give me a Coors Light.
Jun 15, 2010 11:17AM
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Very interesting business dilemma in an industry that apparently penalizes growth. The availability of German and Dutch imports sustained "premium" beer sales (at a very low rate) in the USA right up to the beginnings of the microbrew movement in the 80s. Sam Adams, like Anchor Steam, began as a microbrewery-produced particular style of lager. The breweries diversified into a variety of ales, stouts and porters to reflect our nation's increasingly refined taste. Now, even the Big Boys are producing "craft-like" brews such as Michelob Amber Bock. My big question is...once the A/B's and Miller's realize there is profit in smaller batches of better-tasting beers, what's to keep them from introducing new products that taste enough like Sam or Anchor Steam to eventually swallow up the smaller brewers? 
Jun 15, 2010 11:16AM
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I guess this is news to day traders and people who like "the Fiat of beer".

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