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Citigroup analyst reportedly suggests Boston Beer could slash prices to “undercut” competition

The Boston Beer Co Inc (NYSE:SAM), which makes the famous Sam Adams beer and ranks as America’s largest craft beer brewer, is on track for “robust growth,” according to a Citigroup Inc research note. The company could also slash beer prices to undercut its competition and gain market share and could boost its advertising budget in coming months, wrote Citi analyst Vivien Azer.

More >> International Business Times.

 

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5 thoughts on “Citigroup analyst reportedly suggests Boston Beer could slash prices to “undercut” competition

  1. A beer company? Cutting prices? Sounds too good to be true.

    Would love to see this, though. Many of us are getting squeezed or priced out of the craft beer market as prices rise above inflation and real income declines. I’d also venture to guess that there is some significant percentage of the market- maybe 5% or 10%, which would represent exponential growth for Sam Adams, that wants to drink more flavorful beer and can’t or won’t spend the money.

    There’s always sort of been this thought that if you could get something like Boston Lager and price it like Budweiser and throw massive advertising behind it, it could go mainstream. A basic, but legitimate, craft beer, at the price point of Budweiser or something, people would see the value in. I think you’d get everyone to come over who ever will come over to drinking that type of beer at that point.

    The latest surveys are showing that people are abandoning light beers because they lack flavor. If someone could get something that’s flavorful, and not fruity or somehow unbeer or a pale imitation of craft, and really compete with those beers, I see good things happening. And it’d be downwards price pressure on the craft beer market as a whole, which needs to happen.

    This could be a taste-bud saver for those who want to drink decent beer on a budget. And we could finally see the sort of brand loyalty that craft beer has had difficulty in developing- people who are as loyal to Boston Lager as their fathers were to Budweiser, because it’s the one good craft drink they can regularly afford.

    But the Boston Beer Company needs to make to this happen.

  2. John doesn’t seem to understand the costs behind running a brewery. Breweries don’t generally take large margins on the products they sell – thanks in part to the three-tier system, the most common margin is somewhere around 20%. That’s nowhere near your standard retail margin of 50%. The other things he’s talking about make very little sense in the world of craft beer, which isn’t about making money first and foremost.

    Re: the article – this is just speculative filler put out by someone with very little insight in the brewing business.

    Re: the potential for slashing prices – highly unlikely.

  3. More likely than slashing prices, we will see brewers continue to push larger packages with bulk discounts for lack of a better word. Think more bang for your buck. Not that we will see a Samuel Adams 30-rack but I can’t help but think they will go with a 24-pack of cans or bottles if they haven’t already (packaged in such a way that is marketed to the consumer, not just the plain mother cartons sold to retailers to unpack).

  4. I own a retail store and we have margins no where near 50% If we get a 6-pk wholesaled around 7-8 bucks, we are usually selling it for $9.99. We also incur additional fees like Credit card processing which takes another 2-4% off our bottom line margin. Vaughn are you a brewery? in so what state? I would love some 50% margins!

  5. @patal: I think what Vaughn was saying was that standard retail margin for most consumer products is 50% or even higher (things like t-shirts) and that liquor stores have a much lower margin to with which to work.

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