Packaging Isn't the Problem for Sam Adams and Boston Beer
Boston Beer may have passed by the craft beer industry, growing too big for its own good. Image source: Getty Images.
Whatever the problems Boston Beer (NYSE: SAM) has that make selling its Samuel Adams brand so difficult these days, it's not because of the image on the bottle's label -- though that isn't stopping the leading craft brewer from updating its packaging once again. That it feels the need to do this again, though, shows it's going to take more than sharp images and cool graphics to sell a beer.
Stale beer sales
Boston Beer's, well, beer is in a funk. Depletions, or sales from distributors to retailers -- a reliable industry proxy for consumer demand -- are decreasing at an accelerated rate, falling from 5% in the first two quarters of 2016 to 8% in the third quarter primarily because of decreases in its Samuel Adams brand, though its Angry Orchard, Coney Island, and Traveler brands also exhibited weakness.
Part of it has to do with the overall malaise in the industry. Although craft beer now accounts for 12% of all the beer brewed in the U.S., sales growth is slowing to single-digit rates, or about half the rate it enjoyed previously. Much of the blame can be assigned to the biggest names in the industry, Boston Beer included, but also Craft Brew Alliance, New Belgium Brewing, and others, who are experiencing a pronounced slowdown while smaller breweries continue enjoying significant growth.
However, the decline is also more specific to Boston Beer and its flagship Samuel Adams brand. The beer has been around for more than 30 years, so it's getting a bit long in the tooth in an industry where drinkers seemingly want newness at a regular pace. A mature brewer like this, with more than 3 million barrels sold so far this year, stretches the credulity of hop-heads who are always on the lookout for the next small batch hit.
Out with the old in with the new as the previously updated Samuel Adams logo gets yet another makeover. Image source: The Motley Fool.
Nothing new under the sun
It's also a recurring problem for the craft brewer. It was only a few years ago that Boston Beer was caught in a similar down cycle. In 2011, sales of Samuel Adams were growing slower than the overall craft beer market even though its portfolio of seasonal beers was well received. While Boston Beer had launched its Freshest Beer Program to ensure drinkers were getting peak flavor by having its beer not sitting in a distributor's warehouse or on a retailer's shelf for very long, it'snotable that Boston Beer undertook an image upgrade then, too, albeit a more modest one than what is being attempted now.
Back then, the colored drawing of Sam Adams lifting a mug of beer was only changed slightly: The mug was raised higher, the colors surrounding him were brighter and more vibrant,and the typeface hardly changed at all.
The latest makeover is much more dramatic. Gone is the cartoon figure of Adams, replaced instead by an engraved image of the statue of the man that stands in Faneuil Hall, stern looking with arms crossed. The font is the same, but the highlights on the individual letters have been erased. Also added is a red star reminiscent of Heineken's similar design, but this one has the silhouette of a pint glass added in.
Source: Boston Beer Corporate Youtube Channel.
According to BostInno, founder and CEO Jim Koch says, "The new look reflects a bold, authentic, patriotic version of Samuel Adams and a return to our roots and to the spirit of Samuel Adams, the great Revolutionary patriot."
A passion for beer
Perhaps, and while many have praised the new graphics as a needed update, it doesn't address Boston Beer's underlying issues. People aren't going to start drinking Samuel Adams beer because of the bold label on the bottle, redesigns of which are likely seen as something a big, mass-produced beer maker would try to entice drinkers to it rather than a craft brewer still concerned about the quality of the liquid that's in the bottle.
There's no argument that Koch is passionate about the flavor and quality of his beer, and he has been a dedicated innovator and cheerleader for his industry. It ultimately may be that he's a victim of his own success, the company having grown to such a size, and the beer now distributed across the country, that it has simply outgrown its niche.
Regardless of how it redesigns its label, Boston Beer just might be too big to be a craft brewer and effectively lead the industry, yet too small to wage war on the macro brewers. There may be no middle ground for the leading craft brewer other than going privateand getting away from the Wall Street expectations game,or getting bought out by a bigger rival.
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Rich Duprey has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Boston Beer. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.