To think about the future, I’m going to go back to the past. Boston Beer went public in 1995. To let the small investor participate in its IPO, the company offered customers the opportunity to buy 33 shares for $15 each. The offer was right there on its beer labels. A grand total of 30,000 people took advantage of this creative way of selling stock. In its 2010 annual report, Jim Koch proudly boasts that 9,000 people still own those original shares.
The New York Times ran an article about a year after the IPO lamenting the fact that SAM shares had lost 22% from an IPO price of $15. Sixteen years later, those original shareholders are sitting on a 562% cumulative return. This compares favorably with Molson Coors at 454% and the S&P 500 at 111%. If you exclude dividends, there is no comparison.
Sixteen years ago, you might have been sitting on a barstool in Boston somewhere, reading the label’s IPO offer and thinking what a crazy idea it was. Big mistake. Many years later and you have an opportunity for redemption. Despite Boston Beer’s tremendous growth, it still has less than 1% of the U.S. beer market. Companies like Molson Coors are falling all over themselves to get into emerging markets while Boston Beer is just getting started in America.
Visits to its Boston brewery were up more than 25% in 2010, with 3,000 separate tours taking place. The company now offers tours six days a week at a clip of 10 tours a day. Visitors are asked for a small donation with all proceeds going to charities. In 2010, Boston Beer donated nearly $200,000 as a result of its tours.
Craft beer is the real deal. Estimates suggest craft beer sales will double during the next 10 years, with Boston Beer continuing to be a big player in the industry’s development.
Boston Beer might appear expensive to some investors. However, it’s important to keep in mind that it possesses a floor price of sorts because of its attractive position within the U.S. beer market. Molson Coors or any other large beer company would love to own the Sam Adams and Twisted Tea product lines. Jim Koch, however, owns 33.4% of the company. Nothing happens without his say-so. At age 61, he still has plenty of time on the clock, so I doubt he’s in the mood for selling. But when he does, it won’t be for a song. Until then, enjoy the ride.
As of this writing, Will Ashworth did not own a position in any of the aforementioned stocks.