Samuel Adams: Jim Koch (2017)

I was worse. I went home.

Oh, not really. When I told him, I was kind of hoping that he'd put his arm around me because this 150-year-old family tradition was going to be carried on. No. He looked at me. He said, 'Jim, you've done some really stupid things in your life. This is the stupidest.'

My dad was a brew master and it's like being the chef in a kitchen. He was responsible for the recipe and the quality of the beer. He wasn't the owner. So he got out of brew master school in 1948 and there were a thousand breweries all over the US. 36 years later when I started Sam Adams, that thousand had dwindled down to 50. And my dad had to move from brewery to brewery as the breweries closed.

No. My dad told me that it was a miserable way to make a living and he eventually left the brewing industry entirely. The last thing that he wanted for me to do was to go back into brewing.

Yes. Every oldest son for six generations has been a brewer. I believe I'm the only sixth generation brewer in the United States.

Honestly, I really didn't know. I had this wonderful educational opportunity that nobody in my family had ever had. After I graduated from college, I started a JD/MBA program and I could just feel this pressure behind me pushing me towards some career decision. So I dropped out.

Well, at the time I was involved in a lot of outdoor activities, rock climbing, kayaking, backpacking, things like that. And my climbing partner, he got me involved in Outward Bound. I was able to do that during the summers. And then I learned that you don't need that much to live on if you're really enjoying what you're doing.

I did it on and off for three and a half years. At the end of that three and a half years, I thought, okay, I think I'm ready to go back and got my MBA and my JD and I started working as a management consultant for a company called Boston Consulting Group. And we flew first class. You consulted with CEOs. Everybody treated you really well. It was a great job for a while.

Well, I had this epiphany, I guess. After 6 years at BCG, I asked myself, well, do I want to do this the rest of my life? And the answer came back, no. And the next sort of corollary to that was, well, if I don't want to do it for the rest of my life, I probably don't want to do it tomorrow.

That's a good question. I knew I didn't want to work in the corporate world, so I thought, I'm going to start my own business. I don't know what it's going to be. But my dad had given me a copy of Inc. magazine and there was an article in there about Anchor Steam, this small brewery in California. It was owned by a great guy named Fritz Maytag. And Fritz had a viable small brewery. It was an outlier. And when I was a consultant, what always fascinated me were the outliers because that's where the real learning was. Like there was obviously the potential to find a market for a really high quality beer. And I started to think about it and I developed a different business model for what is now called craft brewing.

Yeah. 1984. So you call up your dad and you're like, 'Dad, guess what? I'm joining the family business. I'm going to make beer.' Was he?

I was worse. I went home.

Oh, not really. When I told him, I was kind of hoping that he'd put his arm around me because this 150-year-old family tradition was going to be carried on to yet another generation. No. He looked at me. He said, 'Jim, you've done some really stupid things in your life. This is the stupidest.'

Yes. And I left it because staying there was very risky. Leaving it was not risky. And it's the difference in life between things that are scary and things that are dangerous. And there are plenty of things that are scary but aren't dangerous. And there are things that are dangerous but not scary. And those are the things that get you. I can give you a climbing analogy from Outward Bound. Like one of the things we taught people to do was rappel off a cliff. And it's a very scary thing to do. But you're also held by a belay rope and that rope will hold a car. So walking off the cliff backwards is scary but not dangerous. Yeah. Okay. Walking across a 35 degree angle snow field on a beautiful late May afternoon with this bright blue sky. It's not scary at all, but it's very dangerous because the snow is melting. Eventually, it's going to find a layer of ice. The water will lubricate that and you have an avalanche. That is dangerous but not scary. And in my situation, staying at BCG was dangerous but not scary. And the danger there, the risk of it was continuing to do something that didn't make me happy and getting to 65 and looking back and going, 'Oh my god, I wasted my life.' That is risk. That is danger.

He eventually did come around. I sat down with him and the thing that convinced him, I think, because all the American brewers were basically making the same kind of beer. Very light, very easy to drink. And I said, 'Dad, I'm not going to compete with Bud and Miller and Coors. Everybody in the US who wants good beer is drinking the imports.'

Heineken, Becks, St. Pauli Girl, those were considered the great beers of the world. And what I did know from my brewing background is they were not the great beers of the world. That there was the possibility of making beer with a lot of flavor but balanced and there's a particular flavor structure of good beer. When you taste it, you will get that structure and I could give it to people fresh because beer is perishable. Beer has about a four to five month shelf life and the imported beers were almost always stale. They were typically in green and clear bottles and visible light isomerizes a compound in hops. That's why you get skunky beer.

That was easy. After about an hour and a half, when my dad was beginning to get it, he was like, 'Oh, you know, you're right. Nobody's making great beer. Yeah, maybe somebody should do that.' Then he took me up into the attic. He had a trunk and there were family recipes and he took out one of the recipes and said, 'This is the recipe. It was from my great-great-grandfather's brewery. My dad had made a version of this beer at Wooden Shoe Brewery in Minster, Ohio, where he was brew master because the brewery was kind of going down the tubes and he thought maybe we can turn the brewery around by making a big American lager. And the owner tasted it and told my dad, he said, 'Charlie, nobody is going to drink this. People want water with foam on it. So make water with foam on it.'

Yeah, I took the recipe. I started making it in my kitchen. It's extremely difficult beer to make. You can't really do this as a home brewer. It requires much more precise control, but I brewed it and I could tell this is going to be a good beer. If I can make this right, this would be a really good beer.

Well, the first thing I realized I had to find the best brew master in America to help me. He was a man named Dr. Joseph Owades and he was the first American brew master to combine high-level scientific understanding because he was a PhD in microbiology with decades of practical experience.

He turned me down at first. He thought this is really crazy and you don't have enough money to pay me. Which was true. And I said, 'Well, Dr. Owades, I'm not some idiot kid making beer in their kitchen. My dad was a brew master, my grandfather.' And he remembered my dad a little bit. And I said, 'Well, I'll tell you what. I'll give you 2% of the company.' And that piqued his interest. He signed on and he helped me adapt a 19th century recipe to a 20th century brewery.

Well, I realized there are breweries out there and my dad was the one who gave me this insight. What we did is we rented space. Dr. Owades and I showed up, brewed the beer, and then they packaged it, and I didn't have to have my own brewery for several years. When we started, we didn't have things that you think you need for a business. We didn't have an office. We didn't have a telephone. I just asked myself, am I spending money on things that are going to make the beer better or am I spending money on things just because that's what you're supposed to spend it on?

Well, it came from my history teacher when I was a junior in high school when she taught the revolution. She highlighted the role of Samuel Adams. Depending on what books you read, he was a brewer. I wanted a name that was assertively American and that reflected America's history and brewing tradition. So on the label, there it is, brewer, patriot. And I wanted to do what Sam Adams had done only in my little way. I wanted to create a beer revolution and declare beer independence for the United States.

So my dad had told me, you know, you're going to start a business, Jim. It's lonely. It's going to have its ups and downs. See if you can find a partner. So I looked around BCG. It was full of like the best and the brightest from the top business schools. But somehow I couldn't see them being my partner because they had all the same skills I had. Yeah. But then I realized, wait a minute, there is a person here who is energetic, talented, resourceful, great people person, has all the skills that I don't really have. She was my secretary. So it was just me and Rhonda. She was 23 years old, no college degree, bartended at night. We were the perfect complement.

Well, I was hoping that I would get a distributor. There were five beer distributors in Boston. I went to each one of them. They all turned me down because to them it looked like a stupid idea. This was a beer that had a lot of color, had a lot of flavor, had a lot of taste. This was in the heyday of light beer. And they'd ask me, 'Okay, so what's your marketing plan?' Well, I don't really have a marketing plan. 'What's your advertising budget?' I don't have any money for advertising. 'Well, tell me about the company.' It's me and my 23-year-old ex-secretary. So it wasn't very confidence inspiring as a business. And the only way that I could get my beer out there was I would put cold beer in my briefcase every morning. I could fit seven beers. And I had these two blue cool packs and a sleeve of cups. And I went from bar to bar cold calling, just walking in, talking to the managers, trying to get to them. And I'd never sold anything in my life.

Yes. I remember to this day doing my first sales call and hit the streets in Boston. I remember I was like, 'Okay, I'm just going to call on the first bar that I come to.' And I came to a bar and I didn't know what I was doing and I had my consultant suit on. So I started talking to the guy behind the bar and he was nodding and I thought that's a good sign. But he wasn't saying anything. And luckily in the back was the manager because the guy I was talking to was what's called the barback. The barback is the guy who stocks the glasses and this guy didn't speak English. So he was just nodding away. Manager in the back thinking, 'Oh my gosh, there's a guy in a suit here. He's talking to my barback. He's either IRS or he's immigration and naturalization service.' And neither one of those is good. So he rushed up and I kind of had my 30 second drill. 'Hi, I'm Jim Cook. I'm starting a small brewery here in Boston to make a new beer. I'm going to call it Sam Adams.' And my real end point was to get them to try the beer. So I built up to this and I said, 'And would you like to try it?' He said, 'Sure, leave me a bottle.' I said, 'Oh, it's cold and I have some cups here. Let me pour you one.' Before he could say no. And of course in the bar business if you pour a beer, you can't just throw it out. You got to drink it. So we tried it together and he said, 'Kid, I didn't think the beer was going to be this good. I'll take it.' Wow. And I was so excited and of course I went back and actually Rhonda was taking some time off before we started. I called her. I was so excited. 'Rhonda, we got our first customer.' And Rhonda is very practical. She says, 'How many cases did he order?' Oh, I forgot to ask him. So I had to go back the next day and apologize. And I was scared again that he would have changed his mind or anything, but he gave me a 10 case order.

6 weeks after Sam Adams came out, it got picked as the best beer in America.

It happened out in Denver, Colorado. It was at the Great American Beer Festival, which had pretty much beers from every brewer. And they went around over two nights, tasted the beers, everybody got to vote for the best beer, and they did this countdown, 10, 9, 8. And I thought we'd finish in the top 10, but they kept getting lower and lower. And I said, 'Oh, man.' And then they announced the second best beer in America is this. And it's like, well, maybe next year. And then the best beer in America is Samuel Adams Boston Lager. And the whole company was two people, you and Rhonda. Yeah.

Yes, we were profitable from the first full month because going back to what I was talking about earlier, it was the ultimate lean startup. Like I said, we had no office. We didn't even have a telephone. We did all our business from payphones. I knew where all the good payphones in Boston were. The ones that were warm in the winter, the ones where you actually had a little shelf where you could put stuff on. So I was very clear when I started. There were only two things that we needed to do really well. We needed to make great beer consistently and we needed to work our butts off to sell it.

Yeah.

It happened very slowly. I started in Boston. I sort of grew a little bit out of Boston and went to Worcester. I was doing a lot of the selling myself. So one bar at a time and a lot of work, a lot of shoe leather, a lot of Motel 6s. I think the first city out of New England was Washington. So I would go down to Washington Mondays and Tuesdays. I still know a lot of the bar owners here. I was at a bar before I came over here, the Irish Times. Yeah. Famous bar near Union Station. One of my first accounts and I was talking to Brendan, the current owner, but his dad put Sam Adams in there almost 30 years ago. So it was very hard in the beginning getting places to carry it and probably got 95% rejection. So I'd make 20 calls to get one account. And then we got picked as the best beer in America. We got a bunch of publicity around that. People magazine did a story which was good and bad because all that publicity boosted the sales and we ran out of beer.

Well, it takes six weeks to make Sam Adams and we weren't expecting it. So we were out of beer for 3 weeks. We lost a bunch of accounts. Pissed people off. But it was clear that this idea was a bigger idea than I had realized. That this wasn't going to take five years to get to a million dollars.

Yes, exactly. And I remember sitting down at a bar with Rhonda and Rhonda, we had a business plan, but something's telling me this is bigger than we thought it was going to be. That we are climbing a mountain here. And nobody climbs a mountain to get to the middle. We're going to climb this mountain to get to the top. And it may take 30 years, it may take 50 years. And our mountain is I want Sam Adams to be the largest and most respected of the high-end beers in the United States. That's our mountain.

The radio spots came about because there was a radio station in Boston that won a beer for a party. And so we traded them beer for airtime. Now, they gave us airtime at 2:00 in the morning, thinking, 'Who would want that?' To me, I thought that was great because that's when the servers and the bartenders get off their shift. That's when they're listening to the radio. So they gave me all this air time. And I at first was going to get radio talent to record it. And then I found out, well, you can hire that, but there's all these union rules and you have to pay residuals. You got to track it. And I was like, I can't do that. I'll do the spots myself. So my spot was when America asked for Europe's tired and poor. We didn't mean their beer. But the beer they send us is hardly their best. They send us Heineken that's outlawed in Germany because of Germany's strict beer purity law. And the Becks they send us isn't the same Becks they have in Germany. They had forbidden adjuncts to it. That was a bet the company.

Oh yes. But I knew I was right. Having a brewing background, I knew it. And you could also tell it on analysis. So my feeling has always been if you're right about something important, push it.

Well, I thought it was time to do something to reward my investors because at that time, I think a dollar invested was probably worth $400. So I went to a couple investment banks. They describe the IPO process, but when they describe it to you, you realize that there's nothing public at all about it. It's all for their buddies at the big institutions to buy the shares and make a bunch of money. And that bothered me and I thought, I've got to find a way around that. So I started thinking about it and I came up with this idea. So we put coupons on the six-packs that allowed you to buy 33 shares of Boston Beer Company at $15 a share. So it was $495. You just had to send in a check. And the investment banks freaked out about it. They told me, 'You can't do it. It'll never work.' They gave me all these reasons not to. But I stood my ground. I was insistent. And I knew that the investment banks are going to make money on this. So they will let me do it if I refuse to compromise. So I refused to compromise. Eventually they all came around and we got 130,000 people who sent in their checks. We got $65 million. And that was the first time something like that had been done. And other people have continued to do it, followed up on it.

This may sound surprising, but I still don't feel like we're there. But I got to give you some perspective. What do you think our market share in the United States is?

Yeah, that's what everybody thinks. A little over 1%.

Yeah. 90% of the US beer market is in the hands of two big global brewing conglomerates.

We've got a little over 1,400 people. And that to me is also really gratifying because the average W2 compensation is $70,000. So they are good jobs at our breweries. Those are manufacturing jobs, good paying manufacturing jobs in communities all across the United States.

I'll take the luck. So in all humility, a lot of it was luck. I look back and things could have gone wrong. The brew kettle could have exploded or that first guy could have told me, 'This is a really stupid idea. Go back to your job.' A lot of things didn't go wrong that could have.

I never imagined the success that we've been able to have and I never imagined that there would be 4,500 other craft brewers. Many of them enjoying their own success. Today American beer has gone from the laughingstock that it was when I started to the best place in the world to be a beer drinker. And the rest of the world, they're looking at the US going, 'I wish we could do in our country what Americans have done with beer. I wish we had the beer culture that America has.' It makes me feel good every time I have a beer.