Jim Koch Biography

Addresses:

Office —Boston Beer Co., 75 Arlington St., Boston, MA 02116.

Career

Instructor for Outward Bound, 1973–77; business consultant, Boston Consulting Group, 1979–84; founded Boston Beer Co., 1984.

Sidelights

Jim Koch gave up a lucrative career as a business consultant to become a brewer. His family had been brewers back to his great–great–grandfather, but Koch's parents had steered him to a different profession. Koch (pronounced "Cook") founded Boston Beer Company in 1984, and brought American drinkers a domestic beer, Samuel Adams, that competed with imports on taste and quality. Koch's marketing skill made Samuel Adams the best–selling craft beer in the United States. Koch began by aggressively promoting his beer at bar after bar, trying to persuade Boston innkeepers to stock Samuel Adams. Now he presides over a company with sales of more than $200 million, at what might be called the largest small brewer in the country. A fanatic for taste, Koch still personally samples every batch of Samuel Adams.

Koch was born in Cincinnati, Ohio, to a family of German descent. His ancestors had made beer in the old country, and his father was a brewer for a Cincinnati beer–maker. Koch did well in school, and was accepted to prestigious Harvard University. After completing an undergraduate degree in government, Koch went on to a combined program at Harvard that offered both a law degree and a master's in business. It was a particularly difficult course of study that attracted some stellar candidates. One of Koch's classmates was Mitt Romney, who went on to become governor of Massachusetts. But Koch was dissatisfied with life at Harvard. At the age of 23, he felt he had done nothing in his life yet but go to school. He wanted different kinds of experience. So he left his graduate program and became an instructor at the outdoor adventure school Outward Bound.

Outward Bound was a rigorous wilderness program that taught often troubled teens how to survive the outdoors, work in a group, make good decisions, and assess risks. Koch was keenly aware that he held the lives of his students in his hands. During his four years with Outward Bound, he traveled across the West, gaining insights that helped him later in his business career. In a story he wrote for the New York Times in 2003, Koch recalled how his Outward Bound groups always used a lot of nylon string. So he started out giving everyone more string than they would need, just in case. That group failed to take care of its string, and ended up with too little. For his next group, he doled out less string than necessary. This group learned to conserve the essential asset, and finished the adventure with string left over. Though it was years later that Koch started his company, it stuck with him that it was possible to do more with less.

Koch eventually returned to Harvard and finished his double degree. He then got a job with a business consulting company called the Boston Consulting Group. He worked there for five years, but he found he was still not doing what he really wanted. He decided to quit the consulting group and invest his savings in brewing beer. His father, a lifelong brewery worker, was appalled. When Koch told his story for Reader's Digest, he said, "When I told Dad, I was hoping he'd put his arm around me and get misty about reviving tradition. Instead he said, 'Jim, that is the dumbest thing I've ever heard!'"

Yet Koch's plan was far from naïve. He had carefully researched the market, and he believed beer drinkers were ready for a good domestic beer. In the early 1980s, sales of imported beer were growing. European beers had a reputation for better quality than mass–market American brands such as Coors and Miller. Yet European brewers frequently resorted to preservatives and fillers in order to make their products last for overseas shipment. At the same time, the United States market was seeing a flood of domestic beers made by very small brewers, called microbreweries. While these microbrews often won big on taste, their makers rarely had the marketing know–how to get their beers to a wide audience. Plus, most microbrewers had made large financial commitments to their physical plants, and had little money left over to push for wider distribution or to run advertising. Koch planned to make a fine–quality domestic beer that would compete with both imports and microbrews. But he aimed to grow beyond a regional market and become a national player.

Koch started out with $100,000 of his own savings, plus $140,000 in loans from family and friends. Instead of buying a brewery with his capital, Koch took his great–great–grandfather's authentic German beer recipe to a contract brewer in Pittsburgh. He named his creation Samuel Adams, after the Revolutionary War hero and brewer. Though he saved an estimated $10 million by not building his own brewery, Samuel Adams still turned out to be an expensive beer. Using the quality ingredients Koch insisted on, Samuel Adams retailed for about 15 percent more than leading imported beers. This made it very difficult to sell. Koch roamed Boston, serving samples to bartenders and bar owners while telling them about his new company and his family tradition. Koch claimed he sometimes had to make 15 visits to a bar before he could persuade the owner to carry his brand.

Boston Beer began advertising heavily in 1986. Unlike other beer advertising, which relied primarily on images of attractive, happy drinkers, Koch depicted Samuel Adams as simply a quality brew. Early advertising also emphasized that Samuel Adams was a domestic brand, with slogans like "Declare your independence from foreign beer." Perhaps because it was so different from established beer advertising, the Samuel Adams campaign attracted a lot of media attention. The brand caught on, and in 1992 it went into markets across the country. Sales grew by over 60 percent that year. By 1994, Koch's company was bringing in $50 million in sales, and Samuel Adams was the best–selling specialty beer in the United States.

Sales continued to grow, and Koch's company was bringing in about $200 million by the mid–1990s. Koch took Boston Beer Company public in 1995. Koch told Gerry Khermouch of BusinessWeek that he could have sold the company any time he wanted, and never worked again. But that did not appeal to him. "What would I do if I did sell?" he asked Khermouch. "I'd go looking for a brewery to buy so I could launch my own brand." Even as his company grew to have hundreds of employees, Koch remained intimately connected with the brewing process. The company began experimenting with unusual beers in the late 1990s, including pricey, extra–strong brews, and special seasonal flavors. Koch confided to Sarah Theodore, of Beverage Industry, that he still tasted every batch Boston Beer produced. "I'm still the protector of the beer," he told her. Not only did he make sure his company's beer tasted good straight out of the cask, but he traveled to bars, restaurants, and convenience stores to check how the beer was selling and make sure draft kegs were the right temperature and not beyond the sell date.

After two years of research and development, Koch's company brought out a light (low–calorie) beer in 2002. Light beers were often disdained by the kind of beer connoisseurs who relished Samuel Adams and other craft beers. But Sam Adams Light aimed for a different kind of flavor than the typical light beer, and it was evidently very successful. Sales at Boston Beer climbed more than ten percent the year the light brew came out.

By 2004, Koch was in his fifties and celebrated 20 years as head of Boston Beer. He was clearly not ready to retire, and brushed off talk of selling the company. His share of the company was then worth about $70 million. He was keen on introducing Samuel Adams to younger beer drinkers, who often bypassed the brand for more exotic–sounding microbrews. He continued to tinker with beer recipes, brewing what he believed to be the world's strongest beer, a 50–proof special edition, to keep himself interested.

Sources

Beverage Industry, May 2003, p. 32.

BusinessWeek, September 1, 2003, pp. 54–56.

Management Review, April 1994, p. 16.

New York Times, July 20, 2003, sec. 3, p. 12.

Reader's Digest, February 1, 2000, pp. 28–30.

— A. Woodward