Finance Case
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1) Boston Beer Companys strategy has been:
High quality standards-BBC produced high quality craft beer selecting rare breeds of Bavarian and English hops and carefully monitoring the contract brewery by hiring five brew masters in order to test each batch of beer from factories. BBC also offered the freshest beers even at the expense of incurring wastages.
Contract Brewing allowed BBC to minimize its capital and overhead costs. This also give them advantages of selecting brewery in strategic geographic location allowing them to lower transportation cost, superior product freshness and greater manufacturing flexibility.
Intensive Sales and Marketing – BBC spent a high portion of their revenue on marketing programs. The sales force indulged in educational marketing which focused on teaching distributors and retailers about the virtues and characteristics of quality beers. They also developed advertisement focusing on the quality of the beer.
Product Line Innovation – BBC expanded its product line by offering seasonal brews and year-round brews. They also developed other brands though private labeling and joint ventures if offering beers did not match with current product line.
Boston beer company has been successfully executed its strategy. It was showed from its financial statement as follows:
Based on BBC Income Statement, its average gross profit/net sales was 54.47% while the average industry was 45.05%. It shows that BBC had lower cost of goods sold due to its strategy which was subcontracting the brewing process.
Having lower CGS enabled BBC to spend more money in marketing and advertising. It was shown on its high SG&A expense. While the industry SG&A/net sales ratio was 31.22%, BBCs SG&A/net sales ratio was 49.36%. The marketing programs were including educational marketing for distributors and retailers, and advertisement