Brooklyn Brewer

Brooklyn Brewery: Setting the Course for Growth

ID#160404

PUBLISHED ON

AUGUST 24, 2018

BY STE PHAN MEIE R * AND DAN J. W ANG †

Video Prologue: Before reading the case click here to see Brooklyn Brewery and meet the company’s leaders.

Introduction

When Eric and Robin Ottaway took on greater responsibilities in 2010 as senior executives

with Brooklyn Brewery, the company was thriving. The brewery, founded by Steve Hindy and

Tom Potter (CBS ‘83) in 1987, had grown exponentially from a neighborhood enterprise,

brewing traditional lagers for local beer enthusiasts, to one of the top US craft beer producers.

By 2014 the firm ranked ninth among US craft breweries with 260,000 barrels and $60 million

in sales. Brooklyn Brewery beers were sold in 26 states and exported to 20 countries.

But times were changing in the craft beer marketplace. Giant industrial brewers like Anheuser-

Busch InBev (AB InBev) and MillerCoors were entering the segment, selling their own “craft-

like” beers or buying up craft breweries outright. Simultaneously, the craft beer business was

attracting a multitude of local start-ups, and each new entrant promised consumers their local

version of fresh, flavorful craft beer.

In 2015, anticipating tougher times to come, the Ottaways—now with Eric as CEO and Robin

as President—considered several strategic options: upgrading production, broadening

distribution, adding new products, investing more in advertising, or pursuing other ventures.

With these options in mind, the brothers called together the senior team—Chairman and Co-

founder Steve Hindy, Brewmaster Garrett Oliver, and Director of Operations Matt Gordon

(CBS ’12)—to determine the firm’s best path forward.

Author affiliation * Associate Professor of Business, Columbia Business School † Assistant Professor of Business, Columbia Business School

Acknowledgements Kate Permut ’83 provided research and writing support for this case.

Copyright information © 2015-2018 by The Trustees of Columbia University in the City

of New York. This case includes minor editorial changes made to

the version originally published August 14, 2015.

This case is for teaching purposes only and does not represent an

endorsement or judgment of the material included.

This case cannot be used or reproduced without explicit permission

from Columbia CaseWorks. To obtain permission, please visit

www.gsb.columbia.edu/caseworks, or e-mail

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Company History

The idea for a craft brewery in Brooklyn first came up in a conversation in 1986 when journalist

Steve Hindy and banker Tom Potter met as neighbors in Park Slope. Both were looking for a

new career challenge. They decided to team up and share their love of dark, rich, hoppy beers

with other discerning New Yorkers. At first Potter was skeptical: “What I knew about the beer

industry was that it was big, consolidated, not very profitable, actually shrinking, and it

seemed an unlikely place to stick a small business and try to compete with the giants.”1 But

after attending the US microbrewers’ conference in Portland, Oregon, Potter became

convinced that there was an opportunity at hand. “It really intrigued me. I thought, ‘yes, it’s a

good idea, and more particularly, it could be a good idea in Brooklyn.’”2 The founders put

together a business plan, raised $500,000 from friends and family, discovered a century-old

lager recipe from a long-gone Brooklyn brewery to use for their first beer, and launched

Brooklyn Brewery to sell “fresh, copper colored, full-bodied” premium craft beer in New York

City and beyond.3

LAUNCHING THE BEER

It was a bold move to christen the new venture “Brooklyn Brewery.” As Eric Ottaway

explained, “When Tom and Steve started the company years ago and decided they wanted to

call it ‘Brooklyn’ people thought they were crazy.…Brooklyn back then represented crime,

industrial decay.…If you needed to place the crime scene in a movie, you shot it in Brooklyn.

That was what Brooklyn represented.…But [Tom and Steve] really believed that, under all this

mess, there was still a burning ember…a sort of undercurrent of creativity. Plus, Brooklyn had

a huge brewing tradition.…In 1900 there were over 100 breweries in NYC and half of those

were in Brooklyn. They wanted to bring back this brewing tradition.”4

Renowned graphic designer Milton Glaser, best known for creating the iconic I ♥ NY logo, was persuaded to create the Brooklyn Brewery logo. His elegant white letter B on a green

background became the brewery’s easy-to-spot label. (See Exhibit 1 for the logo in use.) He

also advocated for a strong local positioning, saying “Brooklyn is recognizable the world over,

and somehow it fits with beer. Lay claim to Brooklyn.”5 Glaser continued to work with the

brewery for decades on design and branding. Hindy recounted, “The naming of beers and the

developing of packaging [labels] was basically Garrett [Oliver], and me, and Milton.”6

Although the founders put Brooklyn in the beer’s name, it was actually brewed in upstate New

York. F.X. Matt Brewing in Utica was hired to produce and bottle Brooklyn Lager on a contract

basis. This arrangement had a major benefit: it allowed Hindy and Potter to start selling beer

immediately. But it created challenges, too. Cases of beer had to be shipped 250 miles to the

Brooklyn warehouse. The brewing schedule for each batch of Brooklyn Lager was controlled

by F.X. Matt. There was also the awkward marketing issue: “One of the first PR problems that

we faced was the fact that we were not brewing Brooklyn Lager in Brooklyn, but upstate New

York,” said Hindy.7 “We overcame this problem by rooting our story in the history of brewing

in Brooklyn.”

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EXPANDING THE BUSINESS

Potter recalled that the Brewery “made tons of mistakes, like every small company would.”8

But with a growing list of beers, inventive marketing, prices on par with imports, and

unrelenting sales efforts, the firm’s sales grew. By 1993 sales were 11,000 barrels a year.9 In

1994 Hindy convinced expert brewmaster Garrett Oliver to join the firm. With the opening of

a small brewhouse in Williamsburg in 1996, using leased space, Brooklyn Brewery was able to

achieve two goals: they now actually produced some beer in Brooklyn and the new equipment

enabled Oliver to test different flavors and beer styles. He experimented with great flair,

winning Carlsberg’s Semper Ardens Award for brewing innovation and the James Beard

Foundation Award for culinary excellence.10

As the business grew, some hurdles were tougher to overcome than others. “We were slow to

realize the power of distribution,” Potter remarked. “It’s the least glamorous of what a

company like ours does. [But] it was the key to succeeding.”11 Mastering this function was

complicated by the US three-tier alcohol distribution system set up in 1933. As a result of an

amendment to the US Constitution, a firm could only operate in one area of the marketplace:

production (producing and packaging beer), distribution (warehousing and delivering beer),

or retail (selling to consumers on-premise in bars and restaurants or off-premise in stores).

This three-tier system was meant to prevent monopolies, increase competition, and provide

greater consumer choice. In some states, companies could only operate in one tier. But some

states allowed producers to distribute their own products and some allowed producers to

distribute and sell at retail. According to New York law, Brooklyn Brewery had to sell its beers

through a New York distributor. Direct consumer sales were allowed only in the brewery’s

local tasting room.

When the company looked for a regional distributor they could not find a partner. Regional

beer distributors were more interested in selling large-volume brands than small craft brews.

With big territories to cover, most distributors did not have the time, nor interest, to educate

bartenders and store owners on craft beer’s many styles and flavors. Rather than accept

second-class service, Brooklyn Brewery expanded into self-distribution. This type of business

was legal in New York State if a brewer set it up as a separate division. Brooklyn Brewery’s

team targeted upscale restaurants, bars, and stores in New York City, primarily Manhattan.

Soon other craft brewers and foreign beer importers asked them to distribute their beers there,

too. Hindy and Potter said yes. The distributor group grew so rapidly that its profits soon

surpassed the brewery. In 1995 the division expanded to Massachusetts and was named Craft

Brewers Guild. Eric and Robin Ottaway, sons of an investor, joined to run the distribution

division, now headquartered in Boston.12

TRANSITIONING TO THE NEXT PHASE OF GROWTH

In 2000 Brooklyn Brewery sold 30,000 barrels of its own beers while distributing 120,000

barrels for other craft brands.13 Hindy and Potter grew concerned about the imbalance. There

had been many benefits to running Craft Brewers Guild: their staff became extremely

knowledgeable about craft beers; new products were noticed quickly; consumer insights were

gleaned directly from retailers. But the company’s resources were stretched and selling

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competitors’ beers undermined Brooklyn Brewery’s market share. Hindy and Potter sold the

division in 2003. The $10 million from the sale was reinvested in the Williamsburg plant, new

IT, and a regional sales force.14

In 2004 Potter decided the time was right for him to leave and he sold his part of the firm (50

percent of the company’s voting shares) to the Ottaway family. Hindy sold his voting shares

to the Ottaways in 2010 and they assumed majority and full controlling ownership of Brooklyn

Brewery.15 Day-to-day management shifted to Eric and Robin Ottaway, while Hindy stayed

on as chairman and public spokesman.

The ownership transition was smooth, according to Eric Ottaway, with the 60-plus

employees16 remaining a happy, tight-knit group. As he explained “I think people like being

here.…We have very, very low turnover. We take good care of our people.…I think people

appreciate that.…that loyalty has come back and paid off many, many times.”

By 2014 the firm was listed among the top 10 US craft brewers, had $60 million and 260,000

barrels in sales, was sold in 26 states and exported to 20 countries. (See Exhibit 2 for top US

craft brewers and Exhibit 3 for Brooklyn Brewery sales.) Private ownership has continued to

make sense for Brooklyn Brewery. Eric Ottaway noted, “All the big players have approached

us…[but] it didn’t match what we thought was right for the company…There’s so much

growth ahead of us, why would I want to sell now?”17

The US Brewing Industry

The global beer industry earned $514.6 billion in 2013, a slight increase of 2.9% over the

previous the year. The US was the globe’s second largest beer market in terms of total beer

sales volume, but was 13th in per capita consumption. (See Exhibit 4 for countries ranked by

sales volume and Exhibit 5 for per capita consumption rankings.) Europe was the largest beer-

drinking region, with 37.4% of the world’s beer volume. European drinkers spent $192.6

billion in 2013 to enjoy their beers.18

PRODUCERS

A striking characteristic of the industry was the dominance of four breweries. The leader was

Belgium-based AB InBev, which sold 20% of the world’s beer. SABMiller was next with a 12%

global share, followed by Heineken NV at 9.2%, and Carlsberg A/S at 5.7%. Industry analysts

had long noted a decline in the number of macro brewer firms. (See Exhibit 6 for the decline

in macro brewers and related rise in industry concentration.) The market shares enjoyed by

the top four came about primarily through mergers and acquisitions, not organic growth.

These four brewers used their market dominance to lock in long-term commodity price deals,

secure top ad placements, and efficiently spread operations across multiple sites to minimize

transport costs. (See Exhibit 7 for the top firms’ production capabilities.)

In the US in 2014 there were over 3,400 breweries making beer, but many were quite small,

producing less than 1,000 barrels a year.19 (See Exhibit 8 for the US brewery count by size.)

Some believe this proliferation of craft breweries had its roots in a 1978 bill eliminating excise

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taxes for home brewers.20 As home breweries experimented with craft, consumer preferences

began to change—leading to the launch of craft breweries. As consumer preferences and the

composition of the industry changed, several distinct tiers of US beer producers emerged:

 Major industrial firms. The top two global breweries dominated US beer sales. The largest firm, AB InBev, controlled 50.4% of US beer volume in 2013. MillerCoors

controlled nearly one-third, garnering 29% of US market share.21

 Second-tier domestic producers. Independent private breweries and regional producers also captured a portion of US sales, together accounting for a nearly 10%

share.

 Import companies. Corona was the US top-selling imported beer, with $1.3 billion and 41 million cases sold in 2013. Heineken was the next largest, with 2013 sales of over

$670 million. Constellation Brands imported leading global beers such as Corona,

Modelo, and Tsingtao.22 Diageo imported Guinness, Red Stripe, Harp Lager, and other

brands. 23

 Craft breweries. American craft beer producers were identified by three factors: size (annual production of six million barrels or less), independence (no more than 25%

owned by a larger non-craft beer alcohol beverage company) and ingredients (majority

of beer’s flavor derived from traditional or innovative brewing ingredients). 24 The

number of new microbreweries launched in the US had recently soared. (See Exhibit 9

for yearly growth of US craft brewers.) In 2014 craft beer sales were 21.8 million

barrels.25 Total dollar sales hit $19.6 billion, up 22% from 2013. Craft brewers were the

only beer producers to experience annual double-digit growth.

CONSUMERS

In 2013 two-thirds of US adults consumed alcohol. Among those, 41% preferred beer versus

31% wine and 23% spirits.26 Yet, while beer was a clear favorite, the market had been in a

decades-long decline since 1994, when nearly half of Americans preferred beer. The amount

consumed had been dropping, too. United States’ beer per capita consumption declined from

25 gallons in 1981 to 20 gallons in 2012.27 Forecasts to 2018 predicted a drop of -0.3% CAGR as

consumption slowly declined.28

In terms of taste preferences, half the beer Americans consumed was light beer, 100 million

barrels in 2014. (See Exhibit 10 for top US beer brands based on volume.) Bud Light topped the

list of individual brands, selling 295 million cases for nearly $6 billion in 2014.29 But its flavor

was rated “awful” by BeerAdvocate, an independent grassroots community of beer drinkers

and beer professionals. The tastiest beer among the top 20 sellers was Yuengling Lager, an

historic beer from a Pennsylvania regional brewer.30

Although volumes were declining, US consumers were still spending a lot on beer, paying

$101.5 billion in 2014, up nearly 1% from 2013 spending.31 The slight rise in dollar spending

was a result of many beer drinkers trading up to better–and higher priced–brews. Twenty five

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percent of beer volume and 35% of dollars spent on beer were attributed to consumer

purchases in the high-end beer segments.32

MANUFACTURING PROCESS & COSTS

Startup costs for a new brewery were low, depending on the owner’s decisions on how to

operate the business. First, the firm had to decide whether to build a plant, get new or used

equipment, or use a “contract arrangement” to rent another brewery’s excess capacity. Second,

raw materials were needed. Water was available for a small charge, depending on location.

Although grain and hops were relatively inexpensive for small quantities, the quantities

needed were huge. Malt prices averaged 40 cents to 50 cents per pound.33 Hops usually cost

$4-$6 a pound, though some special varieties neared $20.34 Third, the firm decided on a beer

recipe. The amount of malt controlled alcohol content, color, and sweetness. Hops effected

bitterness and aroma. Yeast varieties determined whether ales or lagers were produced. By

adding other ingredients, altering brew times, and adjusting temperatures, one brewhouse

could produce many beers. Packaging costs (bottles, cans, kegs), warehousing, shipping, and

taxes varied by volume produced.

Video Insight: Click here for a tour of the Williamsburg plant, led by Brewmaster Oliver, to

understand the beer production process. See also Appendix 1.

Brewers managed the manufacturing process closely to maximize efficiency. Product loss

could occur when liquids transferred between vessels or if something went amiss and a batch

had to be discarded. Losses varied by facility, near 15%-20% in older plants and 5% in newer

breweries.35 There were some economies of scale in brewing, from production to bottling. (See

Exhibit 11 for estimated minimum efficiency scale (MES).) Jimmy Valm, Brooklyn Brewery’s

production manager noted that recipes made for a 25-barrel system, when scaled up to brew

in a larger plant, used only 85% more hops and yeast to brew 100% more beer, preserving the

same flavor. However, there were no such economies of scale for malted barley.36

Determining the right amount to brew was a delicate calculation. Brewers wanted their

product to be fresh when it reached consumers. If beer sat in a warehouse it could potentially

be exposed to heat and light, which eroded flavors. Brewing beer in the optimal quantity, so it

was fresh when bought, required constant process adjustments and fine-tuning.

In general, beer manufacturers enjoyed sizeable margins. Both large and smaller brewers

reported earning substantial gross profits and regularly made double-digit returns. But the

scale of industrial manufacturers allowed them to typically outperform smaller brewers on

most key financials measures. (See Exhibit 12 for a comparison of key financials of industrial

brewer AB InBev versus craft brewer Boston Beer Company.)

DISTRIBUTORS

The role of American beer distributors was to manage beer inventories, deliver beer in cans,

bottles or kegs to bars, restaurants, and retailers, stock shelves, set up promotion materials,

and collect taxes. Almost every state required breweries to sign an exclusive contract with a

single distributor. This gave the distributor virtual carte blanche to decide how a brewer’s beer

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was sold in bars and stores.37 Beer breweries took great care to sign with the right distributor

since, once the state-approved relationship was established, it could only be broken if the

distributor agreed to relinquish the brand. The distributor paid the brewery for its beer then

set its own price for retailers. Distributors cultivated relationships with many stores, bars, and

restaurants then worked together with them to promote different beers during the year.

Just as consolidation took place among producers, it also developed among US distributors.

Where once there were 5,000 US beer distributors, in the 1970s, there were only 3,333 by 2013.38

These firms were supposed to be independent, but AB InBev and MillerCoors dominated

many operators. Many distributors were asked to sign an “equity contract,” to sell either AB

InBev or MillerCoors’ beers, not both.39 As AB InBev’s North American president stated “I’m

loyal to my wholesalers. Why would I not expect the same loyalty to me?”40

“Big Beer’s” influence created problems for regional and microbrewers. They had to rely on

high customer demand and high margins per case or keg to keep their distributors’ attention.

As a rule of thumb, distributors usually added at 33% markup to the wholesale price when

they sold their beers to retailers. 41 In 2013 distributors averaged a $4 margin per case of

American light lager beers compared to a $7 margin per case of craft beers.42

RETAILERS

The retail part of the three-tier system consisted of businesses where consumers bought their

beer either on-premise, at a bar, restaurant, or concession, or off-premise at grocery or

convenience stores, supermarkets, package liquor, mass merchandise, or other types of stores.

 On-Premise. In 2013 US on-premise beer sales reached $56.2 billion, equal to 53.3% of dollars and 17.9% of volume, and were predicted to grow 14.6% through 2018. 43

Reaching these retailers required intensive sales efforts, as the category was

fragmented, with high turnover: 80% of new restaurants closed within five years.44 A

new beer was easily added to a menu, or its tap handle added to a bar’s draft line-up,

but slower selling beers could also be easily eliminated. On-premise managers set the

consumer price, typically multiplying the beer’s cost by about five to calculate the

amount charged.

 Off-Premise. Beer sales in US stores reached $49.3 billion in 2013, accounting for 46.7% of dollars and 82.1% of volume sold. Off-premise grew 3.9% annually on average, with

craft beers leading the field at an annual growth rate of 18.2%.45 Firms such as Wal-

Mart, Costco, and Target accounted for a large share of off-premise sales, especially

dominating the market in states like California that allowed beer sales in grocery stores.

Hindy reported that some of his colleagues out West told him that Safeway (a large

supermarket chain with stores throughout the western United States) was a quarter of

their business.46 Stores set consumer prices by marking up costs per case by anywhere

from 33%-50%.47

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MEDIA SPEND

US beer companies spent $1.35 billion on traditional advertising media in 2013.48 Anheuser-

Busch InBev spent the most at $572 million, followed by MillerCoors spending $429 million,

Constellation Brands $125 million, and Heineken $123 million, respectively. Television ads

were closely associated with iconic sports events like the National Football League’s Super

Bowl, the National Collegiate Athletic Association’s March Madness basketball tournament,

and Major League Baseball’s World Series. Among the most enduring were Bud Light’s “Yes,

I Am,” Miller Light’s “Tastes Great, Less Filling,” and Bud’s “Whazzup!” campaigns.

Among craft brewers, only Boston Beer Company made a significant investment in traditional

advertising media. The company spent $38 million in “measured media” (TV, print, radio) out

of a $45.6 million marketing budget in 2013.49 Few other craft breweries had the financing to

pay for traditional TV or print media, even on the local level. These brewers relied on social

media, promotion, signage, samplings, events, and word of mouth to grow their customer base

and sales instead.

The Craft Beer Revolution

According to most beer aficionados, the craft beer movement began in California and the

Pacific Northwest in the 1960s when home brewers started making fresh European-style beer

to enjoy with friends. Craft beers featured strong, hoppy tastes and a large variety of styles,

e.g., pale ales, IPAs (Indian pale ales), stouts, porters, bitters, and more. When Brooklyn

Brewery launched in 1987, there were 33 microbreweries in the US.50 By 2014 the craft beer

revolution was well underway as 3,418 craft brewers produced 22.2 million barrels, a volume

rise of 18% annually.

With $19.6 billion in sales, craft beers captured a double-digit share of the total US beer market

in 2014, representing 11% of volume consumed. 51 IPAs were the most popular style sold,

accounting for 17.7% of craft sales, with seasonal and special edition beers close behind for

16.3% of sales.52 In 2014 new microbreweries were opening at the rate of 1.5 a day53 and the

majority of Americans lived within 10 miles of a local craft brewery.54

CRAFT BEER DRINKERS

The rise of Millennials was an important part of craft beer’s success. These drinkers wanted

beers that were “local, small-batch, authentic, cool and new.”55 Among the most coveted

group, 21- to 27-yearsold, 44% had never tasted a Budweiser.56 Studies found that “consumers

buying specialty beers...balked at beverages brewed by large corporations. 57 Steve Hindy

noted “microbrews appeal to younger drinkers [who are] very suspicious of Budweiser ads

during the Super Bowl. My own children scoff at ads that target them in a deliberate and

heavy-handed way."58

The largest-volume craft drinkers were men ages 25-34. Women were significant customers

too, consuming a third of volume sold. 59 Household income was the strongest factor

determining purchase. Of respondents with annual household income above $150,000, a third

drank craft beer regularly.60 These enthusiasts were interested in trying new beers, sharing

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their knowledge, and learning more about craft whenever possible.61 They viewed their drink

preferences “not only as a beverage choice…but as a lifestyle choice, to express their individual

sense of style.”62

MARKETING AND PROMOTION

At the start of the craft revolution, microbreweries positioned their beer as “the American

alternative to imported beer” to convince US drinkers to give craft brews a first try. Since craft

pioneers often had tight budgets, they used public relations and promotions to build sales. As

Kim Jordan, founder of New Belgium Brewery, explained, her business grew through heavy

“barstool-to-barstool” marketing. “We simply didn’t have the resources to throw at things like

television.…We relied on our sales force to go out, meet and interact with customers…[then]

relied on our communities of fans to help us spread the word.”63

Strong customer ties helped craft companies tap social media, as marketing became more

digital in the 2000s. Facebook, Twitter, and Instagram were natural places to expand lively

barstool conversations and became the place where brewers and fans directly interacted. As

Steve Hindy noted, “Social media has just been the biggest benefit for craft brewers…Because

the special thing about craft beer I think is that the beer drinkers discover us. “

Craft brewers also used low-cost philanthropic efforts to build local awareness and sales.

Donating a few cases of beer to community events, benefits, art openings, and fundraisers was

an easy way to promote trial among consumers. Event sponsorship was another successful

marketing channel. By 2015 there were over 1,300 craft beer festivals across the US annually.64

PRICING

Craft beer was more expensive than regular American light lager, but industry research

discovered that craft beer was an affordable luxury for many consumers. 65 Microbrewers

looked at imports and their craft peers to set pricing policy. As Brooklyn Brewery’s Matt

Gordon described their approach: “we try to ‘line price’ with our main competitors. Sam

Adams and Sierra Nevada are two we constantly look at.”

On-premise a glass of craft beer averaged $6, versus $4.25 for a domestic beer.66 Many bars

expanded their beer offerings during the craft revolution. Where four beer taps was the

average number in the 1990s, by 2005 most bars offered 10 or more drafts.67 Specialty beer

establishments offered 70 or more beers to choose from.68 Despite their higher price point, craft

beers captured 26.5% of all on-premise beer volume sales for 2014.69

Higher priced craft beers did well off-premise, too. In terms of dollars, craft beer totaled 15.4%

of supermarket beer sales in 2014 and was growing 17.5% annually, the fastest of any beer

segment. The average consumer price per case was $34 for a craft beer, versus $28 for

imported, and $25 for a US super-premium brand, so craft sales offered supermarkets the

highest margins. 70 When crowded store shelf space became a challenge, craft brewers

responded by creating “variety packs,” which were 9% of off-premise sales in 2014.71 Seasonal

and limited edition craft offerings helped store managers create more excitement, and sales, in

the beer aisle.

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TOP CRAFT COMPANIES

By 2014 the craft beer segment was well developed, with several companies gaining

nationwide reach. Each of these brewers used a different approach to expand beyond their

initial local base:

 Boston Beer Company. This firm was home to Sam Adams Boston Lager, the best- selling craft beer in the US. Its 2013 revenues were $739 million, up 24% for the year.

The firm netted $70 million in profit on sales of 3.4 million barrels, brewing 64 different

beers in its four Boston, Cincinnati, Los Angeles, and Breinigsville, Pennsylvania

plants.72 Boston Beer products were sold in 50 states and 20 countries. Its line of Angry

Orchard hard ciders dominated that beverage category, reaching $200 million in sales

and a 57% share of the emerging cider market in just three years. In 2015 the firm

planned to expand its retail offerings, launching “beer halls” next to new breweries in

Los Angeles and Miami. (Boston Beer Company went public in 1995. Its IPO opened at

$20 a share and founder Jim Koch netted $100 million. But in 1999 the stock sagged to

$9.50 and Koch worked for years to regain Wall Street’s favor.)

 Sierra Nevada Brewing Company. As the second largest US craft brewer, Sierra Nevada beers were sold in 50 US states, Canada, Australia, and 14 European countries.

The brewer offered 55 different brands.73 Sales reached one million barrels and over

$200 million in 2013. 74 The company expanded production outside California,

spending nearly $200 million to build a new brewery in North Carolina to open in 2015.

The added capacity would allow fresher beer to be delivered to East Coast and

European outlets, saving on transportation costs as well.

 New Belgium Brewing Company. This employee-owned brewery was home to Fat Tire Amber Ale and the third largest US craft company. New Belgium produced 945,000

barrels. They reported revenues of $190 million in 2013, reaching customers in 39 US

states and Canada. All beer was brewed in Fort Collins, Colorado but the company

invested $140 million to build a new plant in Asheville, North Carolina, scheduled to

open in 2016. The firm sold a core group of nine beers, with several new seasonal and

limited edition brews issued each year. CEO Kim Jordan planned to expand

distribution to all 50 states by 2018.75

COMPETITIVE TRENDS

Big industrial brewers wanted a piece of the craft beer business and took different approaches

to make inroads in the category. MillerCoors launched Blue Moon wheat beer in 1995,

positioning it as a craft brewery despite their full ownership; in 2010 they opened a separate

subsidiary named Tenth and Blake Beer Company to support the launch of additional craft-

like brands. Chicago’s Goose Island Brewery had ties to Anheuser-Busch since 2006, when it

sold a stake in the company to the Craft Brewers Alliance, which included Redhook, Widmer

and Kona; Anheuser-Busch owned 32% of the Craft Brewers Alliance at the time. In 2011,

Anheuser-Busch parent company AB InBev bought a controlling interest in Goose Island. AB

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InBev also acquired Elysian Brewing, Blue Point Brewing, and 10 Barrel Brewing soon after

closing the Goose Island deal.76

The craft beer industry association labeled these companies’ products crafty beers, since most

labels failed to mention the big corporation behind the local name. But crafty beers were

gaining traction with consumers. Powered by an $18.9 million annual advertising budget from

MillerCoors, Blue Moon sold more than two million barrels in 2013, equal to 15 % of the entire

craft segment. 77 AB InBev spent $3 million to advertise Shock Top, its competing crafty

Belgian-style wheat beer, and expanded its seasonal and limited edition offerings in 2013.78

On the local level, an abundance of smaller startups were entering the craft market, too. In

2014, 456 new microbreweries opened in the US, a 27.8% rise over the year before. Meanwhile,

159 new brew pubs were launched, representing an annual increase of 10.3%.79 California had

the largest number of craft breweries of any state with 431. Vermont had the highest per capita,

with 8.6 craft breweries per 100,000 adults.80 All competed to offer fresh, flavorful beers to

discerning craft consumers.

Brooklyn Brewery in 2015

From 2010 onward Brooklyn Brewery’s sales rose steadily. By 2014 the firm was recognized as

one of the top 10 craft breweries in the US, producing 260,000 barrels with $60 million in sales.

PRODUCTION AND COSTS

The company expanded its Brooklyn brewhouse in 2011 with new equipment that could brew

close to 100,000 barrels a year. Still, 20% of volume was produced in Williamsburg and 80% in

Utica. Matt Gordon explained: “Utica’s batch size is about 500 barrels at a time….For products

like Brooklyn Lager, where we’re running thousands of cases…it creates a lot of efficiencies….

Brooklyn is a much smaller facility, designed for specialty batch production.… It’s great for

the higher-end products.” 81 But there were challenges to this model, too. Gordon noted,

“When we produce in Utica, we have much less control over the timing of production. We can

request a certain number of brews per month, try to suggest they be brewed on certain

days.…but in the end that facility is worried about other production, including their own beers

[Saranac brands].”82

See Exhibit 13 for all cost components of producing a typical craft beer.

Shipping costs were worrisome, too. As Gordon explained, “Managing the supply chain from

upstate New York, especially during the winter, has at times been a challenge…it’s costly….In

NYC we are able to compete, but as we get further away, trying to ship to states like Texas or

Tennessee, where sales prices are lower and shipping costs are higher, we can’t really discount

the way that [Sam Adams and Sierra Nevada] can and that hurts our business.”83 (See Exhibit

14 for Brooklyn Brewery shipping costs.)

BRAND MARKETING

Brooklyn Brewery continued to tie its brand closely to its native borough. By 2015

Williamsburg was considered “the home of a global youth quake of fashion, music and

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culture.” 84 The brewery was both a driver and a beneficiary of this revitalization. It had

sponsored local events—such as the Celebrate Brooklyn! concert series and Brooklyn Lager’s

Best Indie Bandsearch—and by 2015 was donating beer to over 100 local non-profits per

month, mainly small grass roots organizations. They also took Brooklyn “on the road,”

sponsoring a multi-city Brooklyn Brewery Mash festival each summer.

Some pundits claimed that the Brooklyn brand was starting to suffer from its own success,

becoming expensive and increasingly corporate. Local headlines exclaimed “So much for that:

Brooklyn is now officially over”85 But the brewery’s leaders felt a strong foundation remained.

Steve Hindy commented “Brooklyn is known all over the world….it’s become a by-word for

young, entrepreneurial kinds of neighborhoods…When you go to any city they will show you

the ‘Brooklyn’ neighborhood in their town….‘Brooklyn’ has been a big win for us.”86

PRODUCT MIX AND PRICING

About half of Brooklyn Brewery’s total sales volume was Brooklyn Lager, with its seasonal

ales the second best selling product. Customer preferences varied by geography, with New

York City drinkers preferring Brooklyn Lager while Midwest customers favored seasonal ales.

Among the firm’s export customers, UK beer drinkers showed a strong preference for Lager

while Swedish and Norwegian consumers were more adventurous, drinking Brooklyn

Brewery’s core and specialty beers in large amounts. (See Exhibit 15 for the product mix by

geographic region.)

Off-premise sales accounted for 47% of the company’s US volume in 2014. (See Exhibit 16 for

product mix on- versus off-premise.) In terms of the prices consumers found in stores,

Brooklyn Brewery averaged a dollar or two higher than other crafts, depending on packaging.

(See Exhibit 17 for Brooklyn Brewery costs and prices versus competitors’ beers.) When

Consumer Reports did a comparison of average US prices for six-pack bottles of beer, Brooklyn

Lager was $9.81 versus Sierra Nevada at $9.49, Sam Adams Boston Lager at $8.60, and Blue

Moon Belgian White Ale at $8.25.87 However Brooklyn Lager ranked #1 as “best tasting”

among 69 craft beers, when Consumer Reports experts ranked the category in 2013.88

On-premise sales accounted for 53% of Brooklyn Brewery’s volume in 2014 and were highly

profitable. “Just selling draft beer locally—those are really high margins,” recalled Potter.89

The opportunity to expand this area of the business remained strong. A 2015 study of 6,000

bars and restaurants found “when consumers go out, they’re trading up to more expensive

drinks.”90 Craft beers represented 31% of on-premise beer sales volume in the US despite its

significant price differential: craft beers averaged $6 per glass versus $4.25 for domestic

mainstream beer.91

NEW PRODUCT DEVELOPMENT

Brooklyn Brewery came up with new products by testing novel beers directly with consumers.

“We don’t do any market research,” explained Hindy. “We look to Garrett Oliver to lead our

brewing team and come up with ideas….it’s kind of trial and error.”92 Oliver clarified this

further: “I am the ‘chef’ of the brewery…What we’re trying to do is to create something which

is actually beautiful.…rather than engineering something from the point of view of ‘what do

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we think is going to sell?’…It’s a completely different [approach], which is why we don’t really

do focus groups. It’s up to the consumer whether or not we’ve succeeded.”93

This development method led to many successful product launches such as Brooklyn Black

Chocolate Stout (a 2009 and 2011 World Beer Cup gold medal winner) and Brooklyn Pilsner

(a 2010 and 2011 Silver medalist at the World Beer Championships). Other new beers that

made it into production included Brown Ale, American Ale, East IPA, Greenmarket Wheat,

and Sorachi Ace (named for its rare Japanese hops). However, not all experiments were

winners. “We made [a beer] called the Concoction…kind of like a scotch whiskey sour with

ginger and then you float some really peaty single malt on top,” recalled Hindy, “some people

loved it. But most people said ‘what the hell did you put in this?’ so it doesn’t always work

but that’s the game we play.”94

The company took note of new non-beer products launched by competitors, particularly hard

ciders, a category with nearly $400 million of sales by 2014. 95 Eric Ottaway said, “We’ve

debated the cider thing. [This] is New York State, the Big Apple, etc…. it would seem kind of

like a natural…I’m sure we could sell some cider, but it seems like a bit of a distraction.”

At the end of 2014 Brooklyn Brewery’s product line, as noted on its website, included 11

perennial (year-round) beers, six rotating seasonal ales, three specialty brews in distinctive 750

ml bottles, five “quarterly experiments” and 18 limited-issue Brewmaster Reserve offerings.

(See Exhibit 18 for all Brooklyn Brewery beer products.)

RETAIL OPPORTUNITIES

Brooklyn Brewery had experimented with direct-to-consumer retail efforts with mixed

success. They tested web sales with a site called totalbeer.com, which folded in 2000. A 2008

partnership to launch ‘Brooklyn Beer Garden’ restaurants in NYC’s airports did well initially,

but then floundered. As Hindy recalled “it was all great until the owner of the restaurants sold

to Host Marriott…[and] they go for the lowest common denominator.…We entrusted a retailer

with our brand and the place became kind of shabby. We insisted they close it down.” 96

Yet senior management remained interested in exploring retail options. As Eric Ottaway

explained “there’s a tremendous opportunity to do retail …We think that Brooklyn can have

a really strong and effective presence…At this point we’re actually leaving a huge opportunity

on the table.” Finding the right partner would be the key to success. Robin Ottaway concurred,

“We’re not in the bar and restaurant business…What we have to do is figure out who we are,

because we can’t do Brooklyn Brewery Night Club in one market, Brooklyn Brewery Sushi in

another, and Brooklyn Brewery Pizza in another.”97

GLOBAL REACH

Among the 80 US craft brewers exporting beers in 2014, Brooklyn Brewery was the largest.

Nearly one-third of the firm’s volume was shipped overseas each year. 98 After New York City,

Brooklyn Lager’s second largest geographic sales market was Sweden. 99 The average

consumer price for a bottle of Brooklyn Lager in Europe was €5-€7, same as an imported

Budweiser, but twice the charge for a local European brew.100

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The brewery worked with diverse partners to tap different international markets. When Oliver

went to Copenhagen to receive Carlsberg’s Semper Ardens Award, the two companies

developed a collaborative partnership. Carlsberg distributed Brooklyn Brewery beers across

Scandinavia. The firms opened the new Nya Carnegiebryggeriet or New Carnegie Brewery

together in Sweden—the first European craft brewery to be operated by an American firm.101

Garrett Oliver also collaborated with Birra Amarcord (Amarcord Brewery) in Italy on new

beers to compliment Italian cuisine. He worked with Belgium’s Brasserie d’Achouffe

(Achouffe Brewery) to develop Brooklyn Cuvée d’Achouffe. Some of the new beers were

brewed and sold only in Europe; others were distributed in Europe and the US, too.

Brooklyn Brewery’s European business required careful attention to succeed. The continent

was home to 4,000 breweries and competition was fierce. Consumer beer-drinking habits

varied widely from nation to nation. For example, only 15% of Poles drank beer off premise,

while 55% of Portuguese did so. Consumer prices varied widely too—a pint of beer in Porto,

Portugal, could cost as little as US$2 while a similar pint in Bergen, Norway cost US$11. The

difference was explained by cost and tax variations between particular countries, but vigilance

was needed to track changing markets. 102 Robin Ottaway described the firm’s approach:

“You’ve got to look at each market [separately]…In certain countries our beer is just going to

be way too expensive to sell any volume… Sometimes the market’s just not big enough…We

look at two criteria: is there a market for our brand and do we have a good partner?”103

Looking Ahead

By 2018, Brooklyn Brewery had reaped the rewards of the strong Brooklyn brand and the

thriving craft beer industry it had helped to build. However, in 2016-2017, many craft brewers

begain reporting declines in sales, reflecting an overall deceleration in growth.104 Moreover,

with the success came an influx of competitors, both large and small. Finally, Brooklyn

Brewery’s lease on its iconic Williamsburg location was set to expire in 2025, with no obvious

location for a new facility. Actions taken relating to the following issues would determine

Brooklyn Brewery’s success the years to come:

 Adding a new production facility to increase capacity, consolidate brewing in-house, and eliminate F.X. Matt Brewing costs as a contractor

 Selecting the next geographic markets to enter, either in the US or overseas  Determining whether to launch a retail presence and, if so, how  Choosing to invest in traditional TV advertising, to emulate the success of Sam Adams  Finding new products to test and launch

Brooklyn Brewery: Setting the Course for Growth | Page 14

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Exhibits

Exhibit 1

Brooklyn Brewery Logo

Logo Tap Handle

Bottle and Six Pack Bar Glass

Source: Company documents.

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Exhibit 2

Top US Craft Breweries (based on sales volume)

Rank Brewing Company City State Rank Change

1 Boston Beer Co. Boston MA 0 2 Sierra Nevada Brewing Co. Chico CA 0 3 New Belgium Brewing Co. Fort Collins CO 0 4 Gambrinus San Antonio TX 0 5 Lagunitas Brewing Co. Petaluma CA +1 6 Deschutes Brewery Bend OR -1 7 Bell's Brewery, Inc. Galesburg MI 0 8 Duvel Moortgat USA Kansas City & Cooperstown MO/NY N/A 9 Brooklyn Brewery Brooklyn NY +2 10 Stone Brewing Co. Escondido CA 0

Note: Rank change indicates whether a brewery moved up (positive) or down (negative) the rankings versus the firm’s position a year ago.

Source: Brewer’s Association List of Top 50 Brewers of 2013, based on 2013 beer sales volume, http://beerstreetjournal.com/top-50-craft-breweries-2013-sales; https://www.brewersassociation.org/attachments/0001/4525/CBP13_Top_50.pdf.

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Exhibit 3

Brooklyn Brewery Annual Sales (by volume and in dollars)

Brooklyn Brewery Sales 2009 2010 2011 2012 2013 2014

Volume Shipped Bbls (000)

90 108 140 176 216 260

Annual Revenues In $ Millions

18 NA 35 50 NA 60

Note: Bbls means barrels; in the US each barrel is equal to 31 gallons.

Sources: www.beerinsights.com, “Small, Specialty Brewer and Brewpub Shipments 2009-2013,” accessed February, 1, 2015; Columbia CaseWorks interview with Eric Ottaway, April 2015; “Top Entrepreneurs of 2009,” Crain’s New York, http://www.crainsnewyork.com/gallery/20090501/FEATURES/501009996/1; http://www.nytimes.com/2013/02/14/business/global/a-brooklyn-specialty-brewer-dares-the-french- market.html; Slide 21 in http://www.slideshare.net/gustavopereira5/brooklyn-brewery-and-beer-market- in-sweden.

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Exhibit 4

Top Countries for Total Beer Consumption (ranked by beer volume

consumed in 2013 in kiloliters)

2013 2012

Consumption Global Consumption Global 2013 2012 Volume Market Growth Rate Volume Market Rank Rank Country (thousand kl) Share (%) 2012-2013 (%) (thousand kl) Share (%)

1 1 China 4.631.3 24.5 4.8 4,420.0 23.5

2 2 United States 2,408.2 12.8 -1.3 2,441.9 13.0

3 3 Brazil 1,252.0 6.6 -2.0 1,277.6 6.8

4 4 Russia 1,005.6 5.3 -8.0 1,093.0 5.8

5 5 Germany 841.0 4.5 -2.2 859.8 4.6

6 6 Mexico 673.0 3.6 -1.9 685.7 3.7

7 7 Japan 548.9 2.9 -1.0 554.4 3.0

8 8 United Kingdom 424.2 2.2 -1.3 429.8 2.3

9 9 Spain 364.8 1.9 -0.6 367.0 2.0

10 11 Vietnam 360.1 1.9 7.3 335.8 1.8

11 10 Poland 351.1 1.9 -3.6 364.3 1.9

12 12 South Africa 315.0 1.7 0.0 315.0 1.7

13 13 Ukraine 276.0 1.5 -8.2 300.5 1.6

14 15 India 243.6 1.3 14.1 213.4 1.1

15 18 South Korea 227.7 1.2 15.2 197.6 1.1

16 17 Venezuela 212.6 1.1 3.2 206.0 1.1

17 14 Canada 212.0 1.1 -2.6 217.6 1.2

18 16 Colombia 210.7 1.1 0.9 208.9 1.1

19 20 Czech Republic 190.9 1.0 0.2 190.5 1.0

20 19 France 186.3 1.0 -3.2 192.5 1.0

21 23 Thailand 183.7 1.0 0.3 183.2 1.0

22 21 Argentina 182.8 1.0 -1.4 185.3 1.0

23 24 Australia 174.3 0.9 -0.3 174.8 0.9

24 22 Romania 173.5 0.9 -6.1 184.8 1.0

25 25 Italy 166.4 0.9 -1.0 168.1 0.9

Source: Kirin Beer University Report Global Beer Consumption by Country in 2013, “Global Beer Consumption Reached a Record High in 2013, Marking 28 Consecutive Years of Growth. Asia and Africa's Strong Consumption Acted as the Driving Force.,” December 24, 2014, http://www.kirinholdings.co.jp/english/news/2014/1224_01.html; Kirin Beer University Report Global Beer Consumption by Country in 2012, “Global Beer Consumption Marks a Record High for the 27th Consecutive Year,” January 8, 2014, http://www.kirinholdings.co.jp/english/news/2014/0108_01.html.

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Exhibit 5

Top Countries for Per Capita Beer Consumption (ranked by liters

consumed per person in 2013)

Per-capita Beer Consumption Total 633-ml Bottle

Consumption Consumption Bottle difference Volume 2013 2012 Volume Volume Equivalent 2012-2013 Ratio Rank Rank Country (thousand kl) (liters) (bottles) (bottles) (Japan = 1)

1 1 Czech Republic 147.1 232.4 -2.3 3.4 190.9 2 2 Namibia 108.6 171.6 -3.3 2.5 25.0 3 3 Austria 105.9 167.3 -3.4 2.5 89.8 4 4 Germany 101.7 160.7 -3.4 2.4 841.0 5 5 Belize 99.4 157.0 1.0 2.3 3.3 6 8 Estonia 93.6 147.9 -1.5 2.2 12.0 7 6 Poland 91.9 145.2 -5.4 2.1 351.1 8 7 Lithuania 89.5 141.4 -8.9 2.1 27.0 9 10 Romania 79.9 126.2 -7.9 1.9 173.5 10 11 Finland 79.6 125.8 -1.3 1.8 43.2 11 9 Ireland 79.2 125.1 -10.1 1.8 43.3 12 12 Spain 77.7 122.7 -1.2 1.8 364.8 13 13 United States 76.2 120.4 -2.5 1.8 2408.2 14 21 Gabon 74.8 118.2 2.1 1.7 12.5 15 14 Australia 74.7 118.0 -1.8 1.7 174.3 16 19 Slovenia 74.3 117.4 -0.3 1.7 15.4 17 16 Croatia 74.3 117.4 -1.1 1.7 31.9 18 18 Bulgaria 73.5 116.1 -1.5 1.7 53.1 19 15 Slovakia 73.0 115.3 -3.3 1.7 39.8 20 22 Netherlands 72.6 114.7 -0.1 1.7 121.6 21 20 Belgium 72.0 113.7 -3.2 1.7 80.2 22 23 Panama 70.8 111.8 -1.0 1.6 27.3 23 25 Venezuela 69.9 110.4 1.8 1.6 212.6 24 17 Latvia 69.8 110.3 -7.8 1.6 14.3 25 31 Congo 67.4 106.5 4.5 1.6 30.0 26 26 United Kingdom 67.4 106.5 -2.0 1.6 424.2 27 27 Brazil 66.9 105.7 -2.2 1.6 1252.0 28 34 New Zealand 64.1 101.3 2.1 1.5 28.9 29 24 Montenegro 64.1 101.3 -10.4 1.5 4.0 30 30 Hungary 63.2 99.8 -2.3 1.5 63.0 31 28 Ukraine 61.0 96.4 -7.9 1.4 276.0 32 36 Denmark 60.4 95.4 -1.5 1.4 34.0 33 33 Serbia 60.3 95.3 -5.2 1.4 43.2 34 35 Canada 60.3 95.3 -3.4 1.4 212.0 35 37 South Africa 59.7 94.3 -0.7 1.4 315.0

Reference 47 54 South Korea 46.2 73.0 9.3 1.1 227.7 52 50 Japan 43.1 68.1 -0.6 1.0 548.9

Source: Kirin Beer University Report Global Beer Consumption by Country in 2013, “Global Beer Consumption Reached a Record High in 2013, marking 28 Consecutive Years of Growth. Asia and Africa's Strong Consumption Acted as the Driving Force.,” December 24, 2014,

http://www.kirinholdings.co.jp/english/news/2014/1224_01.html.

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Exhibit 6

Industry Consolidation Trends

NUMBER OF US MACRO BREWERS

INDUSTRY CONCENTRATION MEASURES

Notes: CR4 indicates the Four-Firm Concentration Ratio, which is the proportion of total output in an industry produced by the four largest firms; HHI denotes the Herfindahl-Hirschman Index, another commonly accepted measure of market concentration.

Source: Jayendra Gokhale and Victor J. Tremblay, “Competition and Price Wars in the US Brewing Industry,” Beeronomics Conference at UC Davis, November 3, 2011, http://aic.ucdavis.edu/cwe/Tremblay.pdf

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Exhibit 7

Top Global Beer Firms’ Production Capabilities

Company Countries with

Brewery Operations # Breweries Total

Worldwide # Breweries Operating in the

US

AB InBev 23 160 11

SAB MillerCoors 33 104 10

Heineken 70 171 --

Carlsberg S/A 40 77 Imported to the US by St. Killian

Importing, MA

Sources: AB InBev and Heineken data from MarketLine Industry Profile: Beer in the United States, August, 2014, www.marketline.com ; SABMiller data from http://www.statista.com/statistics/269564/sabmillrs-number-of-breweries-worldwide-by-region/; Carlsberg S/A data from http://www.carlsberggroup.com/investor/downloadcentre/Documents/Annual%20Report/Carlsberg_AS

_Annual_Report_2014_WEB.pdf.

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Exhibit 8

Number of US Breweries by Produ ction Size in 2014

Production Size Based on Barrels Produced in 2014 Brewery Count % of Firms in this

Category

1 - 1,000 Barrels 2,628 71.8 1,001 - 7,500 711 19.4 7,501 - 15,000 100 2.7 15,001 - 60,000 122 3.3 60,001 - 100,000 21 0.6 100,001 - 1,999,999 55 2.5 2,000,000 - plus 21 0.6 Total Number of Breweries 3,658 100.0

Note: % of Total refers to the percentage e of beer producing entities this size in the United States.

Source: National Beer Wholesalers’ Association, May 10, 2015,

https://www.nbwa.org/resources/industry-fast-facts.

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Exhibit 9

Number of US Craft Brewers, by Category

Note: Categories are defined as: Brewpub—A restaurant-brewery that sells 25% or more of its beer on site, often dispensed directly from the brewery’s storage tanks; where allowed by law a brewpub can sell beer “to- go” and /or distribute to off-site accounts (Note: The Brewers Association re-categorizes a company as a microbrewery if its off-site-distributed beer sales exceed 75 percent.); Microbrewery—A brewery that produced less than 15,000 barrels (17,600 hectoliters) of beer per year with 75% or more of its beer sold off-site; Regional Craft Brewery—A brewery with an annual beer production anywhere between 15,000 and 6,000,000 barrels; over 50% or more of their volume focuses on all-malt beers.

Source: Brewers Association, http://www.brewersassociation.org/statistics/number-of-breweries, accessed May 8, 2105.

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Exhibit 10

The 20 Most Popular Beers in America (ranked by USD sales)

Annual Sales Annual Price Per ABV BA Beer ($) Cases Sold Case ($) Owner (%)1 Score2 Style

Bud Light 5,946,766,000 294,749,300 20.18 AB InBev 4.2 47 Light Lager Coors Light 2,360,430,000 118,469,600 19.92 MillerCoors 4.2 50 Light Lager Budweiser 2,110,352,000 104,390,500 20.22 AB InBev 5.0 57 American Adjunct Lager3

Miller Lite 1,868,866,000 94,262,870 19.83 MillerCoors 4.17 53 Light Lager Corona Extra 1,221,351,000 41,170,180 29.67 Constellation* 4.6 56 American Adjunct Lager Natural Light 1,122,770,000 72,203,900 15.55 AB InBev 4.2 43 Light Lager Busch Light 844,276,000 56,008,580 15.07 AB InBev 4.1 46 Light Lager Michelob Ultra (Light) 777,196,700 31,626,370 24.57 AB InBev 4.2 47 Light Lager Busch 673,394,400 43,374,170 15.53 AB InBev 4.3 49 American Adjunct Lager Heineken 669,337,000 22,449,080 29.82 Heineken N.V. 5.0 64 Euro Pale Lager Modelo Especial 574,636,000 21,648,650 26.54 Constellation* 4.4 65 American Adjunct Lager Keystone Light 493,993,600 33,586,780 14.71 MillerCoors 4.2 46 Light Lager Miller High Life 476,895,100 30,259,841 15.76 MillerCoors 4.6 63 American Adjunct Lager Natural Ice 335,392,900 21,708,278 15.45 AB InBev 5.9 45 American Adjunct Lager Bud Light Platinum 321,408,700 12,202,304 26.34 AB InBev 6.0 54 Light Lager Pabst Blue Ribbon 288,487,900 17,807,895 16.20 TSG/E.K. 4.74 68 American Adjunct Lager Bud Light Lime 285,037,200 10,870,984 26.22 AB InBev 4.2 53 Light Lager Bud Ice 248,717,600 14,410,058 17.26 AB InBev 5.5 47 American Adjunct Lager Yuengling Lager 248,673,600 11,370,535 21.87 Yuengling 4.4 78 American Amber Bud Light Lime Straw 246,550,800 7,107,259 34.69 AB InBev 8.0 56 American Malt Liquor Ber Rita

Notes: 1 ABV is alcohol by volume as a percent 2 BA Score indicates the Beer Advocate rating, an average of millions of consumer reviews; ratings are as follows: 95-100 = world-class; 90-94 = outstanding; 85-89 = very good; 80-84 = good; 70-79 = okay; 60-69 = poor; less than 60 = awful. 3 The definition of ‘American adjunct lager’ is “light bodied, pale, fizzy lagers featuring low bitterness, thin malts, and moderate alcohol; … mass-production cuts flavor, and sometimes costs, with adjunct cereal grains such as rice and corn.

Sources: Kate Bratskeir, “The 20 Most Popular Beers Indicate That, Deep Down, Americans Are Frat Boys,” The Huffington Post, March 4, 2015, http://www.huffingtonpost.com/2015/03/04/popular-beers-in-america- _n_6787494.html; chart was originally created by Joshua Malin, Feb. 20, 2015, for Vine Pair at http://vinepair.com/wine-blog/20-most-popular-beers-america; http://www.beeradvocate.com/community/threads/beeradvocate-ratings-explained.184726.

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Exhibit 11

Minimum Efficiency Scale Estimates for National Brewers

Market Share of

National MES-Output Brewers (million MES-MS

Year (percent) barrels) (percent) N N* K

1950 16 0.1 0.1 350 840 0 1960 21 1.0 1.5 175 87 88 1970 45 8.0 6.4 82 16 66 1980 59 16.0 9.0 40 11 29 1990 79 16.0 8.4 29 12 17 2000 89 23.0 14.0 24 7 17 2009 93 23.0 14.0 19 7 12

Notes: MES-Output measures minimum efficient scale measured in millions of (31-gallon) barrels. MES-MS represents the market share needed to reach minimum efficient scale. N is the number of macro brewers. N* represents the cost-minimizing industry structure (i.e., the number of firms that the industry can support if all firms produce at minimum efficient scale). MES - MS = (Industry Output)/MES. N* = 100/MES-MS; rounding errors explain the discrepancy in calculations. K = N - N* when (N - N*) >0 and 0 otherwise.

Sources: Steinberg (1980), the Statistical Abstract of the United States, Tremblay et al. (2005), and Tremblay and Tremblay (2005); Jayendra Gokhale and Victor J. Tremblay, “Competition and Price Wars in the US Brewing Industry,” Journal of Wine Economics 7, no. 2 (2012): 228.

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Exhibit 12

Comparison of 2014 Key Financials: Industrial Brewer AB InBev vs.

Craft Brewer Boston Beer Company

KEY STATISTICS

Anheuser-Busch InBev Boston Beer Company

For the Fiscal Period Ending 12 months 12 months Dec-31-2014A Dec-27-2014A

Total Revenue $47,063.00 $903.0 Growth Over Prior Year 8.95% 22.2%

Gross Profit $28,307.00 $465.0 Margin % 60.15% 51.5%

EBITDA $17,997.00 $183.5 Margin % 38.24% 20.3%

EBIT $14,984.00 $148.3 Margin % 31.84% 16.4%

Earnings from Cont. Ops. $11,302.00 $90.7 Margin % 24.01% 10.0%

Net Income $9,216.00 $90.7 Margin % 19.58% 10.0%

Diluted EPS Excl. Extra Items 5.54 6.69 Growth Over Prior Year -36.47% 29.3%

Source: S&P Capital IQ. Financials posted June 9, 2015.

Brooklyn Brewery: Setting the Course for Growth | Page 26

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Exhibit 12 (continued)

INCOME STATEMENTS

Anheuser- Boston Beer Busch InBev Company Reclassified 12 months 12 months Dec-27-2014

For the Fiscal Period Ending Dec-31-2014

Total Revenue 47,063.0 903.0

Cost Of Goods Sold 18,756.0 438.0

Gross Profit 28,307.0 465.0

Selling General & Admin Exp. 14,509.0 316.7

- - Depreciation & Amortization

Other Operating Expense/(Income) (1,186.0) -

Other Operating Exp., Total 13,323.0 316.7

Operating Income 14,984.0 148.3

Interest Expense (2,333.0) -

Interest and Invest. Income 335.0 0.0

Net Interest Exp. (1,998.0) 0.0

Income/(Loss) from Affiliates 9.0

Currency Exchange Gains (Loss) 255.0

Other Non-Operating Inc. (Exp.) 11.0 (1.0)

EBT Excl. Unusual Items 13,261.0 147.4

Restructuring Charges (277.0)

Merger & Related Restructuring Charges (77.0)

Asset Write down - (1.8)

Gain (Loss) On Sale Of Assets 162.0 -

Other Unusual Items 732.0 -

EBT Incl. Unusual Items 13,801.0 145.6

Income Tax Expense 2,499.0 54.9

Earnings from Cont. Ops. 11,302.0 90.7

Net Income to Company 11,302.0 90.7

Minority Int. in Earnings (2,086.0) -

Net Income 9,216.0 90.7

Source: S&P Capital IQ. Financials posted June 9, 2015.

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Exhibit 13

Cost % Breakdown of Components in a Typical Bottle of Craft Beer

Note: Loss indicates the amount of beer that was lost due to spills and production transfer between machines; if loss is minimized the Brewer’s Margin will be higher.

Source: Joe Satran, “Here’s How a Six Pack of Craft Beer Ends Up Costing $12,” HuffingtonPost.com, September 12, 2014, http://www.huffingtonpost.com/2014/09/12/craft-beer-expensive- cost_n_5670015.html.

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Exhibit 14

Brooklyn Brewery Shipping Costs, from Utica to Key Destinations

Cost Per Container / Region Destination Trailer from Utica ($)

EXPORT UK 3,000 EXPORT Sweden 3,000 EXPORT Australia 3,500 EXPORT Brazil 3,500 DOMESTIC NYC 775 DOMESTIC Northeast 875 DOMESTIC Midwest 1,100 DOMESTIC Southeast 1,850

Note: Brooklyn Brewery did not have distribution in western states, so cost data unavailable for that region.

Source: Brooklyn Brewery data averages, provided to Columbia CaseWorks, May 19, 2015.

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Exhibit 15

Brooklyn Brewery product sales mix by geographic region 2014

BB Product Total US Northeast Sweden Group NYC excluding NYC excluding NYC Midwest South UK and Norway

Lager 56% 31% 30% 25% 40% 92% 67% Seasonal 19% 37% 38% 46% 30% 4% 1% Beers Legacy Core 18% 23% 24% 21% 17% 4% 27% Other Beers 7% 9% 8% 8% 13% -- 5%

Note: Definition of Product Groups: Lager is Brooklyn Lager; Seasonal beers include Winter Ale, Summer Ale, Pumpkin Ale, Oktoberfest, Dry Irish Stout, and Black Chocolate Stout; Legacy Core includes Pilsner, Brown Ale, Pennant 55, East IPA, Variety Packs, Brooklyner Weisse; Other Beers include Greenmarket Wheat, Sorachi Ace, ½ Ale, BLAST!, Shackmeister Ale, Local 1, Local 2, quarterly draft and 750ml bottle releases, specialty and one-off beers.

Source: Brooklyn Brewery company documents.

Exhibit 16

Brooklyn Brewery 2014 US Sales Mix

Package Size Total % Mix by Volume On-Premise % Mix Off-Premise % Mix

1/2 barrel 36 68 5 1/6 barrel 7 12 2 1-6 pack Bottles 37 12 62 1-4 pack Bottles 3 1 4 1-12 pack Bottles 6 0 12 1-4 pack 16oz Cans 2 3 1 1-12 pack Cans 7 4 10 1-750 ml Bottle 2 1 3

Note: For 2014 total sales breakdown was 53% on-premise and 47% off-premise

Source: Brooklyn Brewery domestic-only data averages provided to Columbia CaseWorks, May 19, 2015.

Brooklyn Brewery: Setting the Course for Growth | Page 30

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Exhibit 17

Brooklyn Brewery Costs and Prices (by package size)

BB BB Average BB Average SUPER PREMIUM CRAFT COMPETITOR Average Price To Price To Average Price to Average Price to

Package Size Cost ($) Retail ($) Consumer ($) Consumer ($) Consumer ($)

1/2 barrel 40 150 -- -- -- 1/6 barrel 20 70 -- -- -- 1-6 pack Bottles 3 -- 10 8 9 1-4 pack Bottles 3 -- 10 -- 10 1-12 pack Bottles 6 -- 16 13 15 1-4 pack 16oz Cans 3 -- 9 7 9 1-12 pack Cans 6 -- 17 13 15 1-750 ml Bottle 3 -- 12 -- 11

Note: Examples of Super Premium brands include Michelob Ultra (Light), Bud Light Platinum Lager, Bud Light Lime, and Blue Moon Belgium Ale; examples of craft competitor brands include Sierra Nevada Pale Ale, Sam Adams Lager, and Sam Adams Summer Ale.

Sources: Brooklyn Brewery domestic-only data averages provided to Columbia CaseWorks, May 19, 2015.

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Exhibit 18

Brooklyn Brewery Product List

Perennials Seasonals 750ML

Bottles

Quarterly

Experiments*

Brewmaster

Reserve*

Brooklyn Lager

Brooklyn Sorachi Ace

Brooklyn Blast!

Brooklyn ½ Ale

Brooklyn Pilsner

Brooklyn Greenmarket Wheat

Brooklyn Brown Ale

Black Chocolate Stout

Brooklyn Dry Irish Stout

Brooklyn Summer Ale

Brooklyn Oktoberfest

Post Road Pumpkin Ale

Brooklyn Winter Ale

Brooklyn Local 1

Brooklyn Local 2

Brooklyn Sorachi Ace

Quintaceratops

K is for Kriek

Hand & Seal

Cuvée Noire

Wild Streak

I Wanna Rye-It

Wild Horse Porter

Quadraceratops

Weizenhammer

Ridgy-Didge

Hammarby Syndrome

Fire & Ice

Brooklyn Cuvée la Boîte

Brooklyn East IPA

American Ale

Brooklyn Shackmeister

Brooklyn Best Bitter

Scorcher #366

There Will Be Black

Cuvée Noire

Fiat Lux

Brooklyn Gold Standard Export

Mary’s Maple Porter

The Companion

The Concoction

Main Engine Start

Buzz Bomb Ale

Note: Quarterly Experiments and Brewmaster Reserve are all one-time releases that are not repeated.

Source: Brooklyn Brewery, www.brooklynbrewery.com as of July 9, 2015.

Brooklyn Brewery: Setting the Course for Growth | Page 32

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Appendices

Appendix 1

The beer brewing process

Milling – Dried, malted grain is milled down into smaller particles to better facilitate mashing. Mashing – Milled grains and hot water are mixed and cooked together. The starches of the grains are converted into sugars and begin to flavor the mixture, called mash. Lautering – The mash is separated into two parts: “spent” grain and sugary water, called wort. Boiling – The wort is moved into a kettle and boiled with hops and other ingredients to add flavor/aroma. Whirlpooling – Solids are removed from the wort through centrifugal force. Cooling – The wort is cooled quickly to a temperature (20-26° Celsius), so live yeast can be added. Fermenting –Yeast is added and converts the sugars into alcohol. As the wort ferments it becomes beer. Fermentation can last two days or several weeks, depending on the beer style in production. Maturing – Beer is put in conditioning tanks. Hops, fruits, or other ingredients are added for more flavor. Filtering – Filtering removes remaining solids and stabilizes the flavor and carbonization of the beer. Packaging – Beer is put in cans, bottles, or kegs under pressure to remove oxygen, which alters flavor.

Note: Some loss/waste of ingredients occurs during the production process, due to transition between machines, spills, etc. Amounts can vary from 5% in new breweries to 15%-20% in older facilities.

Sources: Illustration from The Institute of Brewing and Distilling, Asia-Pacific Division, May 5, 2015, Education page, http://www.ibdasiapac.com.au/brewing; text from the High Desert Museum exhibition “Brewing Culture: The Craft of Beer,” February-May 2015, http://www.highdesertmuseum.org/brewing- culture-craft-beer ; wikipedia.com, http://en.wikipedia.org/wiki/Brewing, accessed May 6, 2015; Scott Metzger, “What does your beer really cost?” The New Brewer, January/February 2012, https://www.brewersassociation.org/attachments/0000/8424/JF_TNB12_Beer_Costing-1.pdf; Brooklyn Brewery executive interviews April 2, 2015.

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Appendix 2

Beer Industry Conversion Calculations

1 Barrel = 31 gallons

1 Barrel = 3,968 ounces

1 Barrel = 13.778 cases

1 Liter = 0.26418 gallons

1 Hectoliter = 0.852 barrel

1 Case = 24 12-ounce bottles or cans of beer

Source: Beer Institute, Beer Resource Center, Brewer’s Almanac, http://www.beerinstitute.org/br/beer- statistics/brewers-almanac, Standard Beer Industry Calculations per Excel spreadsheet accessed June 3, 2015.

Brooklyn Brewery: Setting the Course for Growth | Page 34

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Endnotes

1 Tom Potter, Brooklyn Brewery interviews, Columbia Business School CaseWorks, April 2,

2015. This statement, and all others by Tom Potter unless otherwise noted, are from an

interview with case writers on April 2, 2015 in New York, NY. 2 Potter interview. 3 Steve Hindy and Tom Potter, Beer School: Bottling Success at the Brooklyn Brewery (New

Jersey: John Wiley & Sons, 2005), 75. 4 Eric Ottaway, Brooklyn Brewery interviews, Columbia Business School CaseWorks, April 2,

2015. This statement, and all others by Eric Ottaway unless otherwise noted, are from an

interview with case writers on April 2, 2015 in New York, NY. 5 Hindy and Potter, Beer School, 26. 6 Steve Hindy, Brooklyn Brewery interviews, Columbia Business School CaseWorks, April

21, 2015. This statement, and all others by Steve Hindy unless otherwise noted, are from an

interview with case writers on April 21, 2015 in New York, NY. 7 Hindy and Potter, Beer School, 183. 8 Potter interview. 9 Hindy and Potter, Beer School, 159. 10 Brooklyn Brewery, Garrett Oliver biography, http://brooklynbrewery.com/about/about-

the-brewery#the-brewmaster-link, accessed May 15, 2015. 11 Potter interview. 12 Hindy and Potter, Beer School, 99. 13 Alan J. Wax, “Beer Sales are Brewing at Site,” Newsday, December 6, 2000. 14 Hindy and Potter, Beer School, 281. 15 Lisa Fickenscher, “From Print to Pint: Newspaper Scions Hop On at Brooklyn Brewery,”

Crain’s New York Business, May 13, 2012. 16 Employment figure as of 2015. 17 Eric Ottaway interview. 18 MarketLine Industry Profile: Global Beer, 2014, April 24, 2015, www.marketline.com. 19 National Beer Wholesalers Association Industry Fast Facts, May 10, 2015,

https://www.nbwa.org/resources/industry-fast-facts. 20 https://www.congress.gov/bill/95th-congress/house-bill/1337 21 MarketLine Industry Profile: US Beer , April 24, 2015, www.marketline.com. 22 John Tierney, “The State of American Beer,” The Atlantic, April 15, 2014. 23 Advertising Age, Marketing Fact Pack 2015, Beer measured media spending 2013, December

29, 2014, 12, http://www.slideshare.net/aidelisagutierrez/ad-age-marketingfact-

pack2015?qid=eb6bb6da-a294-4193-a9c1-215f551b80c2&v=qf1&b=&from_search=3. 24 Brewers Association, “Craft Brewer Defined,”

https://www.brewersassociation.org/statistics/craft-brewer-defined, accessed May 8, 2015.

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25 Brewers Association, “National Beer Sales and Production Data: US Beer Sales Volume

Growth 2014,” https://www.brewersassociation.org/statistics/national-beer-sales-production-

data. 26 Lydia Saad, “Beer is Americans’ Adult Beverage of Choice This Year,” July 23, 2014, Gallup

Inc., http://www.gallup.com/poll/174074/beer-americans-adult-beverage-choice-year.aspx. 27 Fred Tasker, “What to drink: Americans Want More Craft Beer and Wine,” Pittsburgh Post-

Gazette, January 2, 2014, http://www.post-gazette.com/life/libations/2014/01/02/More-wine-

craft-beer/stories/201401020076. 28 Brewers Association, “National Beer Sales and Production Data: US Beer Sales Volume

Growth 2014,” https://www.brewersassociation.org/statistics/national-beer-sales-production-

data. 29 Julie Johnson, “Don’t Count Beer Out Yet,” Beverage Dynamics, September/October 2014. 30 www.wikipedia.org citing Andrew Smith, The Oxford Encyclopedia of Food and Drink in

America 1 (New York: Oxford University Press, 2013), 646, ISBN 9780199734962. 31 Brewers Association, “National Beer Sales and Production Data: US Beer Sales Volume

Growth 2014,” https://www.brewersassociation.org/statistics/national-beer-sales-production-

data. 32 Beer Institute Annual Report 2013/2014,

http://www.beerinstitute.org/assets/uploads/BEER_4167_AR_2013_For_Web-Final.pdf. 33 Joe Satran, “Here’s How a Six-Pack of Craft Beer Ends Up Costing $12,”

HuffingtonPost.com, September 12, 2014, http://www.huffingtonpost.com/2014/09/12/craft-

beer-expensive-cost_n_5670015.html. 34 Satran, “Here’s How a Six Pack of Craft Beer Ends Up Costing $12.” 35 Matt Gordon, Brooklyn Brewery interviews, Columbia Business School, CaseWorks, April

2, 2015. This statement, and all others by Matt Gordon unless otherwise noted, are from an

interview with case writers on April 2, 2015 in New York, NY. 36 Jimmy Valm, Brooklyn Brewery interviews, Columbia Business School, CaseWorks, April

2, 2015. This statement, and all others by Jimmy Valm unless otherwise noted, are from an

interview with case writers on April 2, 2015 in New York, NY. 37 Steve Hindy, “Free Craft Beer!,” The New York Times, March 29, 2014,

http://www.nytimes.com/2014/03/30/opinion/sunday/free-craft-beer.html?_r=0. 38 First Research, “Beer, Wine& Distilled Spirits Wholesalers Industry Profile,” November 12,

2012, http://www.firstresearch.com/Industry-Research/Beer-Wine-and-Distilled-Spirits-

Wholesalers.html. 39 Steve Hindy, “Don’t Let Big Brewers Win Beer Wars,” CNN, December 12, 2012,

http://www.cnn.com/2012/12/12/opinion/hindy-beer-wars. 40 Tim Logan, “Beer Battle between Wholesales, Brewers,” St. Louis Post Dispatch, May 6,

2012, http://www.stltoday.com/business/local/beer-battle-between-wholesalers-

brewers/article_d7985f04-96d5-11e1-920a-001a4bcf6878.html. 41 “The US Beverage Alcohol Industry: Navigating Brand Entry,” US Drinks Conference 2010

presentation, http://slideplayer.com/slide/3930398.

Brooklyn Brewery: Setting the Course for Growth | Page 36

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42 Logan, “Beer Battle.” 43 Bethany Wall, “On-Premise Alcohol Consumption Trends,” May 2014, Executive

Summary, Mintel Group. 44 Richard Feloni, “Food Network Chef Robert Irvine Shares The Top 5 Reasons Restaurants

Fail,” Business Insider, Feb. 25, 2014, http://www.businessinsider.com/why-restaurants-fail-

so-often-2014-2. 45 Brewers Association, Craft Brewers Off-Premise Sell Sheet, December 2014,

https://www.brewersassociation.org/wp-content/uploads/2015/04/Off-Premise-Sell-

Sheet.pdf. 46 Hindy interview. 47 Priya Anand, “10 Things the Beer Industry Won’t Tell You,” MarketWatch, December 13,

2014, http://www.marketwatch.com/story/10-things-the-beer-industry-wont-tell-you-2014-

11-28. 48 Advertising Age, Marketing Fact Pack 2015, Beer Measured Media Spending 2013,

December 29, 2014, 12, http://www.slideshare.net/aidelisagutierrez/ad-age-marketingfact-

pack2015. 49 Boston Beer Company, “Boston Beer Reports Fourth Quarter 2013 Results,” press release,

February 25, 2014, http://www.bostonbeer.com/phoenix.zhtml?c=69432&p=irol-

newsArticle&ID=1903459. 50 Hindy and Potter, Beer School, 12. 51 Brewers Association, “Number of Breweries: Historic US Brewery Count,”

https://www.brewersassociation.org/statistics/number-of-breweries. 52 Jennifer Haderspeck, “Tis the season for craft beer,” Beverage Industry 104 no. 12,

(December 2013): 20, http://connection.ebscohost.com/c/articles/92734398/tis-season-craft-

beer. 53 Brewers Association, “Number of Breweries: Historic US Brewery Count,”

,https://www.brewersassociation.org/statistics/number-of-breweries. 54 Brewers Association, “Craft Brewer Defined.” 55 Andy Crouch, “Wasted: How the Craft Beer Movement Abandoned Jim Koch (and His

Beloved Sam Adams),” Boston Magazine, January 2015,

http://www.bostonmagazine.com/restaurants/article/2015/01/05/jim-koch-sam-adams-beer/. 56 Tripp Mickle, “Bud Crowded Out by Craft Beer Craze,” Wall Street Journal, Nov. 23, 2014,

http://www.wsj.com/articles/budweiser-ditches-the-clydesdales-for-jay-z-1416784086. 57 Glenn Carroll and Anand Swaminathan, “Why the Microbrewery Movement?

Organizational Dynamics of Resource Partitioning in the US Brewing Industry,” American

Journal of Sociology, (November 2000): 729, http://faculty-

gsb.stanford.edu/carroll/documents/Carroll-SwaminathanAJS2000.pdf. 58 Hindy and Potter, Beer School, 183. 59 Brewers Association, “The Year in Beer: 2014 Craft Beer in Review from the Brewers

Association,” press release, December 9, 2014, https://www.brewersassociation.org/press-

releases/year-beer-2014-craft-beer-review-brewers-association.

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60 Chris Funari, “Mintel: Sales of Craft Beer Could Eclipse $20 Billion in 2014,” Brewbound,

August 13, 2014,

http://www.brewbound.com/news/mintel-sales-of-craft-beer-could-eclipse-20-

billion-in-2014. 61 Mintel Group, “Craft Beer Sales Surge 110 Percent as Americans Embrace Sense of

Individual Style,” July 25, 2014, http://www.mintel.com/press-centre/food-and-drink/craft-

beer-trends. 62 “Craft Beer Sales Surge 110 Percent, Mintel Reports,” Beverage Industry, July 28, 2014,

http://www.bevindustry.com/articles/87688-craft-beer-sales-surge-110-percent-mintel-

reports. 63 Evan Benn, “Craft Breweries Lean On Social Media for Free Advertising,” St. Louis Post-

Dispatch, October 27, 2011, http://www.stltoday.com/entertainment/dining/bars-and-clubs-

other/hip-hops/craft-breweries-lean-on-social-media-for-free-advertising/article_b0fbcc77-

29f1-56a1-a8b3-3d08132145f5.html. 64 Data from “Beer Festival Calendar” on http://www.beerfestivals.org/tools/faqs.html,

accessed June 10, 2015. 65 Ben Steverman, “Americans are Drinking Less but Spending More on Fancy Booze,”

Bloomberg Business, May 8, 2015, http://www.bloomberg.com/news/articles/2015-05-

08/americans-are-drinking-less-but-spending-more-on-fancy-booze. 66 Steverman, “Fancy Booze.” 67 Mickle, “Craft Beer Craze.” 68 Crouch, “Wasted.” 69 Brewers Association, Craft Brewers On-Premise Sell Sheet, 2014,

https://www.brewersassociation.org/wp-content/uploads/2015/04/On-Premise-Sell-

Sheet.pdf. 70 Brewers Association Off-Premise Sell Sheet, December 2014,

https://www.brewersassociation.org/wp-content/uploads/2015/04/Off-Premise-Sell-

Sheet.pdf. 71 Brewers Association, “The Year in Beer: 2014 Craft Beer in Review from the Brewers

Association,” press release, December 9, 2014, https://www.brewersassociation.org/press-

releases/year-beer-2014-craft-beer-review-brewers-association. 72 MarketLine Research, Company Profile: The Boston Beer Company, Inc., July 10, 2014. 73 Brian Solomon, “King of Craft Beer: How Sierra Nevada Rules the Hops World,” Forbes,

February 12, 2014, http://www.forbes.com/sites/briansolomon/2014/02/12/king-of-craft-beer-

how-sierra-nevada-is-winning-the-hops-war. 74 Tony Kiss, “Area Breweries Investing Millions, Adding Staff,” Asheville Citizen-Times,

September 10, 2014, http://www.citizen-times.com/story/news/local/2014/09/10/area-

breweries-investing-millions-adding-staff/15392497/ 75 Chris Furnari, “All 50 By 2018: New Belgium CEO Shares Expansion Schedule,”

Brewbound, July 11, 2013, http://www.brewbound.com/news/all-50-by-2018-new-belgium-

ceo-shares-expansion-schedule.

Brooklyn Brewery: Setting the Course for Growth | Page 38

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76 Emily Bryson York and Josh Noel, “Goose Island Sold to Anheuser-Busch for $38.8 Million:

Chicago-born brewery's Move Follows Trend among Craft-Style Beers,” Chicago Tribune,

March 28, 2011. 77 Duane Stanford, “Blue Moon vs. Craft Beer Rivals: MillerCoors Strikes Back,” Bloomberg

Business, August 8, 2013, http://www.bloomberg.com/bw/articles/2013-08-08/blue-moon-vs-

dot-craft-beer-rivals-millercoors-strikes-back. 78 E.J. Schultz, “Shock Top Beer Debuts National Campaign as it Battles Blue Moon,”

Advertising Age, March 14, 2014, http://adage.com/article/news/shock-top-debuts-national-

campaign-battles-blue-moon/292157. 79 Brewers Association, https://www.brewersassociation.org/statistics/number-of-breweries. 80 Brewers Association, “State Craft Beer Sales & Production Statistics, 2014,”

https://www.brewersassociation.org/statistics/by-state. 81 Gordon interview 82 Gordon interview 83 Gordon interview 84 Anne Szustek, “Hipster Brooklyn has Peaked,” Business Insider, March 11, 2015,

http://www.businessinsider.com/brooklyn-has-peaked-2015-3. 85 Kim Velsey, “Brooklyn is Now Officially Over: The Ascendance of Brooklyn, the Lifestyle,

Above All Else,” New York Observer, http://observer.com/2014/03/so-much-for-that-brooklyn-

is-now-officially-over. 86 Hindy interview. 87 Consumer Reports, “23 Best Craft Beers,” August 2013,

http://www.consumerreports.org/cro/magazine/2013/08/best-craft-beers/index.html. 88 Stuart Pfiefer, “Consumer Reports Rates Top Craft Beers; Suds Snobs Indignant,” Seattle

Times, July 2, 2013, http://www.seattletimes.com/business/consumer-reports-rates-top-craft-

beers-suds-snobs-indignant. 89 Potter interview. 90 Ben Steverman, “Americans are Drinking Less but Spending More on Fancy Booze,”

Bloomberg Business, May 8, 2015, http://www.bloomberg.com/news/articles/2015-05-

08/americans-are-drinking-less-but-spending-more-on-fancy-booze. 91 Steverman, “Americans are Drinking Less.” 92 Hindy interview. 93 Garrett Oliver, Brooklyn Brewery executive interviews, Columbia CaseWorks, April 2,

2015. This statement, and all others by Garrett Oliver unless otherwise noted, are from an

interview with case writers on April 2, 2015 in New York, NY. 94 Hindy interview. 95 Jonah Keri, “Hard Cider Is Having a Moment,” FiveThirtyEight blog, Jan. 9 2015,

http://fivethirtyeight.com/features/hard-cider-is-having-a-moment. 96 Hindy interview. 97 Robin Ottaway, Brooklyn Brewery executive interviews, April 2, 2015, Columbia

CaseWorks. This statement, and all others by Eric Ottaway unless otherwise noted, are from

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an interview with case writers on April 2, 2015 in New York, NY 98 Hindy interview. 99 Hindy interview. 100 Linda Hervieux, “Brooklynite Hits France, with Plans to Seduce,” New York Times, Feb. 13,

2013, http://www.nytimes.com/2013/02/14/business/global/a-brooklyn-specialty-brewer-

dares-the-french-market.html. 101 Steve Hindy, “Ottaway Brothers Assume Leadership Roles at Brooklyn Brewery,”

Brooklyn Brewery blog, October 28, 2014,

http://brooklynbrewery.com/blog/uncategorized/ottaway-brothers-assume-leadership-roles-

at-brooklyn-7brewery, accessed May 18, 2015. 102 MarketLine, “Regional Beer Market: A Changing Landscape,” April 2014, 12. 103 Robin Ottaway interview. 104 https://www.inside.beer/news/detail/usa-nearly-one-third-of-all-craft-beer-breweries-saw-

declining-sales-in-2017.html

Brooklyn Brewery: Setting the Course for Growth | Page 40

BY STEPHAN MEIER* AND DAN J. WANG†

For the exclusive use of R. SINGH, 2021.

This document is authorized for use only by RENU SINGH in 2021.