Boston Beer Company Barclays 19th Annual Global Consumer Conference

Well, let's see. When I think about that, I go back to our mission statement that we actually wrote in the '90s, early '90s. We had, I guess, a portent of what the market was going to be like in 20 or 30 years. Our mission was to seek long-term profitable growth by offering the highest quality products to the U.S. beer drinker. We have not really changed. That is our mission. It was our mission in 1992. It is our mission tomorrow. Luckily, I think, the future that we saw came true, that there were wonderful, delicious, desirable beverages that were out there, but nobody had yet made. I think that opportunity continues to exist for us. We are really the company built around growth, and finding it in many different ways.

I see the beer category or beyond beer category as continuing to be both mature and dynamic. It is kind of like this box, and you look at it at the outside, it is the same height, width, depth, not really moving around or anything, but then you open it up and all hell is breaking loose in there. That is what I see going on, and if I were to be more specific, what I would use as our success metrics is that revenue growth, and continued margin expansion, and continuing to return cash to the shareholders.

Yeah. I guess I am not totally sure what proprietary means here. We do not have patent protections.

Yeah on anything. It is really kind of more know-how, but to build an innovation engine is not easy, particularly at any kind of scale.

My experience in doing that is it is a combination of culture, processes, manufacturing capabilities, systems, habits. It starts with a growth culture and a growth mindset, but then you have got to build a lot of different capabilities around that. There is speed to market and reading consumers and being close to the retailer. I could go on. It is not easy to duplicate all of those.

It is a common phenomenon that big companies struggle to innovate, and the way they end up doing it is finding companies that are about to be successful and make them more successful. They are internal, and that is true in beverages, and it is true in life sciences. The big pharma companies, they are not that innovative, but they know how to buy technology. In some ways, it is probably economically rational for them because their hurdle rate may be higher than the return rate from the entire ecosystem of small innovators.

Yeah. I think that read is exactly right, and in some ways, it's inherent in premiumization. Premiumization generally means fragmentation. Maybe a model is the hard liquor market. You look at that and what the biggest brand in spirits is Tito's, and Tito's is less than 4% of the volume. You add up the top 20 and I don't think you get to 50%. You maybe, when you add up the top 10, down at the bottom of that list of the top 10, the first digit is 1%, maybe it's 1.5, but that's very fragmented. Also spirits have been really good at premiumizing over the last 40 years. So I think that is a model for the fourth category and probably all of alcoholic beverages.

To your question about how do we then allocate resources, this is to me a very advantageous market for us because something that is a half a percent of the beer market is transformative for us. If we can bring out a product that's a half a percent of the beer market, that's more than 10% growth just there. We're willing to over-invest in things that we know can't be the next Michelob ULTRA. But if they're the next Sun Cruiser, that's a big deal for us. As part of that philosophy, we lean very heavily towards making the margin accretive. For example Sun Cruiser, it's 30% higher price than Twisted Tea and commensurately higher margins. If it's going to fragment, our philosophy would be it also has to premiumize.