16 Oct 2014 The Steve Jobs of beer
Ambition made Jim Koch, the head of Sam Adams, the US’s biggest craft beer, a billionaire. It also opened America to a craft-beer renaissance, and like Steve Jobs did with Apple, has made a very successful business out of satisfying a demand people didn’t know they had. Here’s a look at the man and his story…
BENEATH his boozily disarming presentation when featuring in ads for Sam Adams beer, Jim Koch (pronounced “Cook’) is one of the most cannily successful entrepreneurs of our time.
When Koch graduated from Harvard College in 1971 there were barely 150 breweries, large or small, in America. By 1984, when he started the Boston Beer Company with Rhonda Kallman, consolidation had eliminated all but 100.
Now the number of small breweries is just over 3,000, with permits on file for 1,500 more. We’ve come to take the presence of craft brewers—and their more hip counterparts, craft distillers—as important markers of cities that are attracting the young and ambitious. A town with a craft brewery has a sense of the “local”, plus entrepreneurs who start the businesses, plus mainly young customers who spend time and money there.
Koch says that there is an economic explanation for the spread of craft beers—as a share of disposable income, a six-pack of fancy craft beer now costs no more than a six-pack of Bud did 30 years ago, due to a relative fall in food costs—and an even more important cultural one.
“It’s the phenomenon of trading up,” he says, describing the process that in a generation has changed America from the country with the worst selection of good beers to the one with the best. “People want more variety. They are drinking less, so they want to drink better. They want interesting, complex flavours.” This force, he says, drove the interest in wine starting 30 years ago, in craft beer over the past decade, and in craft spirits more recently.
Boston Beer, the company that makes Sam Adams, went public in 1995, with the ticker abbreviation SAM. Based on his holdings, Koch is now a billionaire……
Jim Koch’s father was a brewer, in Ohio. Back through the generations, from the time the first Kochs came to the United States from Germany in the 1840s, the eldest son in each generation had run a brewery. Jim Koch had little interest in the family business, and thought he would break the string. “I watched my dad lose his job every year or two, as the small breweries got driven out of business first by regional and then by national breweries,” he says. “I was going to go a different way.”
After college and business school, he became a consultant with the Boston Consulting Group, specializing in manufacturing. But eventually he felt that he’d stopped learning new things about businesses, and started getting weary of the consultant lifestyle. So he decided to start a small company of his own, returning to the family heritage he thought he had left behind.
His initial business plan foresaw production of 5,000 barrels a year after five years, with eight employees and total revenue of $1-million. “I thought it would level off then, and that was the plan on which I raised my money.” In reality, five years in, his volume and revenue were 20 times higher than projected, and the business was still growing by almost 50 percent a year. Since then, its annual growth rate has averaged 15 percent.
“The primary thing that happened is that people drank the beer,” he said. Six weeks after its appearance, Sam Adams Boston Lager won a contest for Best American Beer. “It’s not that we were smart or daring or full of virtue. It was a new taste”—based on an old taste, a recipe his great-great-grandfather had used in the 1870s—“that people liked, and drank.”
“It was just embarrassing to be an American when everybody laughed at our beers,” he said. “Every time I’d hear the stupid canoe joke I’d get so pissed off.” (Why is drinking American beer like making love in a canoe? Because they’re both fucking close to water.)
This year Koch got something like the Nobel Prize in brewing, as the first American ever invited to give the main address at the Brau Beviale, a worldwide beer gathering in Germany. “Today, for people who pay attention, American beers are generally considered to be the best beers made in the world,” he said.
The US has more new breweries and a wider range of styles than any other country, which has earned it a reputation as the place where beer’s future is being created…..