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Jim Koch Brews Passion into Sam Adams

The Boston brewer defied the odds in creating the Samuel Adams brand, nurturing the U.S. craft beer industry in the process.
John H. Ostdick

Forty years ago, the legacy of five brewing generations seemed a dead end for Jim Koch.

His father, whose roots reach back to Germany, had been squeezed out of the business as small local breweries throughout
the United States were closing their doors and the industry's largest players focused on mass-produced, light beer. The
future of craft beer appeared bleak. So Koch (pronounced Cook) enrolled in Harvard.

After graduating, he worked for Outward Bound, coaching participants through new challenges, before returning to Harvard
to earn advanced degrees in business and law. Then working as a corporate consultant, he noticed the most successful executives
followed their passions.

SUCCESS: Why do you say beer is the new wine?

Koch: 20-somethings are adopting beer in the same way their boomer parents adopted wine. It's not just something they
slug down.

In 1984, he decided to buck the industry trend and heed his ancestral calling, rescuing a family recipe (Louis Koch Lager)
from his father's attic and brewing beer in his kitchen. He marketed the product by schlepping it in a Styrofoam ice chest
to local Boston bars. Hard work paid off. He exceeded his modest five-year business plan within months.

Today, Boston Beer Co. is the toast of the craft beer industry. Samuel Adams has won more awards in international beer-tasting
competitions in the last 20 years than any other brewery in the world. As the largest U.S.-owned brewery, the company produces
almost 2 million barrels of Samuel Adams brew each year, representing about 1 percent of the U.S. beer market.

At 61, founder and chief officer Koch has delegated most all of Boston Beer's duties not focused on product quality.
He travels annually to Bavaria to select the heirloom hops Sam Adams uses. A bottle from each batch of Sam Adams is sent to
him for tasting. Wherever he goes, he visits retail sites and checks Sam Adams stock for date stamps (a Sam Adams industry
innovation).

Koch recently emerged from a product strategy meeting to talk with SUCCESS about his heady journey.

SUCCESS: What did the years you spent with Outward Bound and Boston Consulting Group teach you?

KOCH: At Outward Bound, you learn self-reliance, how to face challenges, and a lot about teamwork. I also
discovered what I call the "string theory" while I was there. We had alpine cord, basically a very strong string
that we used for everything. At first, I would give my groups plenty. At the end of the 28-day course, people often didn't
have enough because they chopped it up inefficiently or lost it because there was no scarcity ethic. So I tried handing out
less. As a result, team members learned how to use it more efficiently, take greater care of it, and be more resourceful in
how to rig things. Putting that into a business context, I learned that culture and values can be a substitute for money and
resources, and that there is a strength of the weak. As a small business, you can create a culture of scarcity that enables
you to do more with less. It is driven more by mentality and example rather than policy and procedures.

At BCG, I learned the power of a good idea. Great businesses at their core are the build-out of a great idea.

SUCCESS: When you were toting your first product bar to bar in a Styrofoam chest, did you ever in your wildest
dreams think you'd one day be the largest U.S.-owned brewery?

KOCH: Never [laughing]. Looking back is very sobering, if not embarrassing. My original business plan with
which I raised my money and started my business projected that we would reach production of 8,000 barrels of beer in five
years. Turns out I was wildly pessimistic. We got there after five months, and we are currently at about 1.9 million.

SUCCESS: That's certainly the right side to err on.

KOCH: [Laughing] Thank goodness. I'd rather be off by a factor of two hundred in a good way. We didn't
get there by getting big. We were never going to be a big brewery--that just wasn't in the cards. I guess I never would
have believed that foreign-owned companies would make 95 percent of the beer produced in the United States.

SUCCESS: Do you foresee the time when you delegate some of the things you do?

KOCH: No. I think that as you grow, you decide what is most important to you as an entrepreneur, where you
add the most value, and what you most enjoy. As we've grown over the past 25 years, I've constantly shed responsibilities.
My job is to take care of the quality of the beer and the culture of the company. Those are the things that matter the most
to me, and only I can do.

SUCCESS: One writer called you the Johnny Appleseed of good beer. What responsibility do you feel to your craft?

KOCH: That's cool. Johnny Appleseed was from Massachusetts. I've been running my company longer
than anyone else in the craft beer industry. I feel a responsibility to maintain the specialness of this industry. Although
we all compete in many ways, we enjoy each other's company, hang out with each other, drink each others' beers, and
share stories and advice because 1,500 of us make up just 5 percent of the total beer business, and two guys own 95 percent.
We are all so small. I realized from Day One I had to create a new mentality about quality beer in the United States, as well
as grow Sam Adams. I couldn't do one without the other.

SUCCESS: What do you mean when you say beer is the new wine?

KOCH: Fifty years ago, a handful of California winemakers started making great wine and changed the way
Americans think about U.S. wine and wine in general. Now it has a lot of respect and nobility. Beer is going through the same
metamorphosis. Twenty-five years ago, a handful of small American brewers started making world-class beer and changing how
Americans think about beer. The rest of the world is looking to the small American brewers like Sam Adams for creativity and
quality. And 20-somethings are adopting beer in the same way their boomer parents adopted wine. It's not just something
they slug down--hey want to sample it, know about it.

SUCCESS: We constantly hear about the importance of following our passion in our careers. You did. How did that change
you?

KOCH: It certainly made me much more aware of the importance of doing what you love to find business success.
You start a small business and one of two things happens: It isn't successful and it eats up your life because you have
to work your ass off, or it is successful and it eats up your life because you have to work your ass off to keep it growing
and successful. I was lucky enough to have the second one, but either way it is going to consume you. Given that reality,
you are better off doing something you enjoy. The energy to pull it off comes a lot more easily that way.

SUCCESS: What advice do you have for other entrepreneurs just starting out?

KOCH: Have a big idea but start small. We started with two people. No office, no telephone. We used an answering
service. If we needed a meeting, we had it in a bar. We had no overhead. That gave me a chance to succeed because I didn't
blow my seed capital right away. I learned a lot as I went. Business plans almost never survive their first contact with reality,
and you want to have some money when you need it. To me, if Sam Adams had become an 8,000-barrel company, I would have been
just fine. It didn't have to be big for me to consider it a success. Figure out what's the minimum you need to be
happy, and get there. If there is an upside from that, all the better.

Post date: 
May 4, 2010

 

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