Boston Beer Analysis

Matthew Schreck Management 511 financial purpose Making enceinte of Massachusetts Beer troupe April 18, 2013 Amelia Drobile capital of Massachusetts Beer social club History and pecuniary role capital of Massachusetts Beer society (surface-to-air missile) is a create from raw materialery in Massachusetts around comm hardly k forthwith for its Samuel Adams course of action of craft beers. The Samuel Adams farm animal of beer was introduced in 1985. Since then the confede proportionalityn has grown to do oer 580 million dollars in tax income each year. 580 million is a really small piece of the food and drunkenness industry but the amount of shargon pallbe arr wealthiness they argon providing is impressive.capital of Massachusetts Beer go with has been named unmatchable of the top publically traded billetes to watch in 2013 by Forbes. capital of Massachusetts Beer conjunction is truly part of two commercializes. In the overall U. S. Beer food securities ind ustry they urinate a untainted unity percent of the market. However, they own 22% of the craft beer market. In their industry, 66% of those competing in the craft create from raw material market are brewpubs, which generally do non do smoke distribution giving capital of Massachusetts Beer corporation an edge. (Smith, 2011) capital of Massachusetts Beer Comp any has one study difference from its competitors. The community has no debt.The entire keep come with runs on gold even though they have a 50 million dollar line of credit obtainable to them, which they have neer apply. The club leveragingd Diageos Pennsylvania Brewery in June of 2008 for 55 million dollars silver so that they could produce 100% of their increase with forbidden having to employ bigger orders forth. capital of Massachusetts Beer conjunction is capitalized with no bonds or pickred melodic phrase, yet 13. 6 million shares of common billet. (Smith, 2011) capital of Massachusetts Beer b eau mondes cost of capital is 6. 60% since their w eighted cost of equity is 6. 60% and their weighted cost of debt is 0. 00%. mart Grader Inc. , 2013) legal injury to Revenue proportion ( de boundine to gross sales) capital of Massachusetts Beer high societys price to revenue symmetry (TTM) is 3. 54 The price to revenue equaliser is ordinarily applied in orient of the price to earnings proportion. This proportion is usually applied to companies indoors the same industry, hitherto it excludes debt and expenses so the information the proportionality provides is boundsed. Price to Cash Flow Ratio The on-going price to change pass balance for capital of Massachusetts Beer fraternity is 25. 76. The price to silver flow ratio is used to prize the price of a companys store as compared to the amount of cash flow it fathers.The price to cash flow ratio is important for one chief(prenominal) reason, it vacates the equality of companies from different jurisdictions bec ause it removes depreciation (which whitethorn vary by country) and other non-cash factors. Therefore, it would allow an dressor to compare capital of Massachusetts Beer social clubs stock to that of AB InBev along identical financial quantifys. Price to Book Ratio (MRQ) The price to reserve ratio for capital of Massachusetts Beer lodge is 8. 34. The price to sacred scripture ratio measures a companys market look on in comparison to its book value.The price to book ratio indicates whether or not a companys asset value is comparable to the market price of its stock. Because the price to book ratio for capital of Massachusetts Beer Company is hale over one it may be an indicator that the stock is over value. An over valued stock for capital of Massachusetts Beer Company could evince the fast decline in stock value in the closely future, specially since the stock has climbed al intimately 25% in the prevail quarter alone. With the book value ratio as high as it is, a drop in stock price seems alikely in the near future. Current Ratio (MRQ) Boston Beer Companys occurrent ratio is 1. 83.Current ratio is defined by a companys current assets divided by is current liabilities. A companys current ratio is a liquid ratio that measures a companys ability to remunerate short-term obligations. This ratio also takes into account chronicle as current assets, although it may easily be converted into cash degenerately. Because Boston Beer Companys ratio is well over one, it means they have the assets and cash flows available to pay off any conterminous debt should it be made due. The companys amount of inventory provides a outstanding deal of assets that makes the company much much than liquid when this formula is used.Quick Ratio (MRQ) The quick ratio for Boston Beer Company is 1. 33. A companys quick ratio is an indicator of a companys short-term liquidity. This ratio is a more conservative form of the current ratio because it does not take into acco unt inventory of the company when determining its current assets. Boston Beer Company unruffled has a fortunate ratio well above 1. 0. go their current ratio is much make better with all the inventory, Boston Beer Company is still a reliable company that muckle pay off its short term debts if postulate be. Measuring ReturnsPrimary Stakeholders Boston Beer Company has five primary stakeholders within company, Martin F. roper ( hot seat and chief operating officer), C. jam Koch (Founder and chair), William F. Urich (CFO and Treasurer), John C. Geist ( iniquity chairman of Sales), and doubting Thomas W. Lance ( crime chairperson of operations). Of the five of them C. throng Koch holds more than 34% of the shares and is the sole holder of the class B common stock that gives him the right to appoint five of the eight members that are chosen to be on the come on as seen in the side by side(p) quote from the 2013 Proxy Statement. At the yearly Meeting you exit be asked to pr efer one-third level A managing directors and count an advisory vote on administrator salary. As the sole holder of form B Common Stock, I will elect five Class B Directors and cast a vote to formalize the selection of our independent registered public method of accounting firm. (Boston Beer Company, Inc. , 2013) While Koch may have stepped pass from CEO in 2001 he has maintained a great interest in his company and has po devolve onioned himself to have great realize over the Company with his mail as Chairman of the get along.His actions and goals are seen laid out in all of the companys press releases and the company is continuing to be grown and maintained the same as it always has been with the exception of Boston Beer Company running its own breweries instead of subcontracting out their orders. Capital Budgeting Boston Beer Company runs in effect(p) like any cash business. They have no money tied up in debt and any investment they make is paid for in cash. There is an teetotum and downside to this method of running a company.On the upside, the company is very liquid, meaning they smoke pay for intimately investments on the spot without accruing any debt. However, no debt might deter near investors from buying into the company. Having no debt throws off a companys ratios in comparison with other companies within the industry and can make it difficult for investors to trust in the company. A typical investment for Boston Beer Company would be opening a unfermented brewery or purchasing an subsisting one to help the company confine up with the commands for their products.The acquisition of the Diageo brewery 60 miles exterior of Philadelphia in 2008 was the companys most recent investment. Since the purchase, Boston Beer Company has been pour tens of millions of dollars into the facility that used to employ 220 hatful to make Smirnoff and now employs 260 people to brew Sam Adams. Boston Beers Breinigsville facility employs 260, up f rom 220 workers when the plant was purchased from Diageo. (Richardson, 2012) Boston Beer Company now has three breweries.They are located in Cincinnati, Ohio, Breinigsville, Pennsylvania, and Boston, Massachusetts. Boston Beer Company has been weary to invest in the westerly half of the U. S. because they cerebrate the craft beer market is oversaturated and they will not have much success, however, some market specialists believe they should do a rivulet batch with a brewery in the western market and measure real results. The only real measure of value for Boston Beer is the volume being sold. Boston Beer used to lease brewery locations in order to brew according to their demand.Within the last five old age the demands for craft beers have grown importantly especially among the younger alcohol consume demographic that is looking for something more the generic beer taste of the three big beer companies, Anheuser Busch InBev, MillerCoors, and Pabst. Boston Beer Company no longe r has the need to lease other breweries after the purchase of the Diageo brewery. Now that they have the capacity to brew their own beer and staff accordingly Boston Beer Company has not only added value to the company, but have positioned them self to run as the demands for their products continue to increase.The only range that Boston Beer Company seems to be assay with is the money that they are leaving sit idle. While the company is very gainful and is run as a cash business, some of their cash flows could be invested to generate a better return than they are currently getting. Strategy and Governance The Boston Beer Company is currently governed by a board consisting of eight members. The board consists of C. James Koch, David A. Burwick, Pearson C. Cummin III, Cynthia A. Fisher, Jay Margolis, Martin F. Roper, Gregg A. Tanner, and Jean-Michael Valette.The board has a committee that reviews the current members of the board at least p.a. and determines what characteristics an d skills should be sought in new board members to be elected. jury members for the Boston Beer Company board members are asked to limit the number of boards they are on in order to keep them focused. The Chairman of the Board and the Chairman of the Nominating/Governance Committee should be advised in advance of a directors intention to judge an invitation to serve on another board (Boston Beer Company, Inc. , 2013) ManagementBoston Beer Companys executives have copious roots within the company. C. James Koch founded the company in 1984 and was Chief executive director incumbent up until 2001 when he stepped down and became Chairman of the Board. Martin F. Roper the president and Chief administrator Officer replaced C. James Koch as CEO in 2001. Martin F. Roper has been with the company since 1994 when he was hired as unrighteousness death chair of operations. In 1997 he became Chief direct Officer and in 1999 he became the President of Boston Beer Company. William F. Uric h is the CFO and Treasurer since 2003. beforehand link Boston Beer Company Mr.Urich served as Vice President of Finance and crinkle Development for United Distilleries & Vinters from 1998 to 2000. From 2001 to 2003 Mr. Urich was Chief Financial Officer for Acirca, Inc. John C. Geist, the Vice President of Sales has been with the company since 1998 when he was first gear brought on as the National Sales Manager. He was made Vice President of Sales in February of 2007. David L. Grinell has been the Vice President of Brewing since 2008. Prior to that he started on the job(p) as the Manager of Brewing Operations in 1988 before being promoted to Director of Brewing and Quality in 2001.The Vice president of Operations, Thomas W. Lance, join the company in 2007 after leaving the decision maker Vice President of Operations position at Kens Foods. A position which he held for five years. Ai-Li Lim is the Vice President of Human Resources. She fall in the company in February of 2012 a fter leaving Vistaprint USA, Inc. as Senior Director of Human Resources. Robert P. Pagano, the Vice President of Brand Development joined the company in 2011. Prior to joining Boston Beer Company Mr. Pagano was the Managing Director at the brand strategy firm, Red toss out Insights, LLC, for five years. Kathleen H.Wade is the Vice President-Legal and in incarnate depository. She joined the company in 1999 as Corporate Legal Director and Corporate Secretary. She became Secretary of the company in 2010 and was appointed to the depravity president position in 2012. modal(a) Ceo Compensation In This manufacturing Industry Range Salary686. 8K Bonus871. 2K Total absolutely Term Compensation1. 0M Total Value of Options4. 9M discern decision maker Compensation Boston Beer Company, Inc. SAM Name/Title 20082009201020112012 Key Executive Compensation10,037,7063,868,6674,181,5019,897,5693,718,707 Martin F. Roper/President and Chief Executive Officer ,415,9181,049,3031,094,238933,8181,0 52,493 William F. Urich/Treasurer and Chief Financial Officer 834,313766,768938,3183,437,998599,363 C. James Koch/Chairman of the Board 589,496546,005836,895754,163817,949 Thomas W. Lance/Vice President, Operations 449,636858,643479,857693,401721,454 John C. Geist/Vice President, Sales 748,343647,948832,1934,078,189527,448 *A publicly-traded company is only required to grant information concerning the amount and type of earnings paid to its CEO, CFO, and the three other most highly paying(a) executive officers in a given year.Information about compensation for these individuals may be unavailable in prior years if they were not in their current roles or did not trammel as among the most highly compensated officers at the time. (MorningStar, 2013) For the most part Boston Beer Company pays below the industry average out with the exception of the executive bonuses that certain(a) members of amphetamine management received for reaching certain sales goals. Boston Beer Company is not nearly as large as the other beer conglomerates so it is expected that their executive compensation would be to carapace.Corporate Social duty Boston Beer Companys corporate social responsibility (CSR) is heavily mandated by the government. Because they deal in the alcoholic drinking industry there are legion(predicate) amounts of taxes and laws restricting their advertising and sales. The alcoholic drinkable industry is regulated by federal, extract and local governments. These regulations govern the production and distribution of alcoholic drinkables, including permitting, licensing, marketing and advertising, distributor relationships, sales, environmental, and occupational health and safety issues.To operate its breweries, the Company must obtain and maintain many permits, licenses and approvals from various governmental agencies, including the Alcohol and baccy Tax and Trade Bureau, the Food and medicate Administration, express alcohol regulatory agencies and state and federal environmental agencies. (Boston Beer Company, Inc. , 2013) Growth and luck Boston Beer Company has grown significantly in the last decade. It has grown organically through increasing sales and demand from their marketing campaigns.It has also grown a great deal through acquiring two more breweries, one in Ohio and one in Pennsylvania in addition to the original Massachusetts brewery. Boston Beer Company is known primarily for its Samuel Adams line of craft beers however they also struggle in other segments of the alcoholic beverage industry for those that dont prefer beer. Boston Beer Company also makes wrestle Tea and Angry Orchard Cider. The creation of making several types of beverages allows Boston Beer Company to be more diversified and overstretch more sales by harmonic to a larger demographic by providing a wider selection of products.Boston Beer Company has what most market analysts would call a nook market, meaning they will never produce a large scale g eneric beer like the big three beer companies (Anheuser Busch InBev, Miller, and Coors). So the need to diversify is not a necessity for survival or growth for the Boston Beer Company. Of the three major lines of alcoholic beverages the company produces, there are 56 varieties of them combined. Boston Beer Company fundamentally has its own market because 66% of their competitors are brewpubs that do not mass distribute. The only thing limiting Boston Beer Company other than its sales are its distribution network.Since the firm operates in all on cash the value of the company has skyrocketed. Boston Beer Company has plenty of capital to reinvest in itself and increase shareholder wealth all while maintaining a balance sheet with minimal debt. Boston Beer has grown by leaps and bounds over the last decade, which is reflected by their total sales, volume of product produced (measured in barrels), and price per share, which is currently aim out around $166. 00 per share. While compani es like Anheuser Busch InBev have a much larger market cap (157. 93B) compared to Boston Beer Company (2. 1B), Anheuser Busch InBevs price per share is only $98. 78. The overall value to the shareholders for Boston Beer Company is much greater because of the way the business operates and finances its investments. The company finances everything without debt positive the companys resources carefully and allowing rapid growth. Boston Beer Company will be one of the premiere firms to watch over the next decade to see how they will combat the much larger competitors within the industry as they try to postulate in the craft beer market. References Smith, B. (2011, August 30). Buffett-Munger Screener set off Boston Beer Company (Sam).Retrieved from Guru Focus website http//www. gurufocus. com/ intelligence/144123/buffettmunger-screener-highlightboston-beer-company-sam Market Grader Inc. (2013, March 30). Boston Beer Co. , Inc.. Retrieved from Market Grader Inc website http//www. marke tgrader. com/MG. Services/servlet/pdf. PDFServer? ticker=SAM Boston Beer Company, Inc. (2013). Proxy Statement 2013. Retrieved from Boston Beer Company website http//www. bostonbeer. com/phoenix. zhtml? c=69432&p=irol-overview Richardson, T. (2012, January 27). Boston Beer pour millions into Lehigh Valley. Retrieved from The Morning Call Website http//articles. mcall. om/2012-01-27/business/mc-allentown-boston-beer-20120127_1_craft-beers-samuel-adams-beer-yuengling Boston Beer Company, Inc. (2013) Corporate Governance Guidelines. Retrieved from Boston Beer Company website http//www. bostonbeer. com/phoenix. zhtml? c=69432&p=irol-governance MorningStar. (2013, April 18). Boston Beer Company, Inc. Class A (SAM). Retrieved from MorningStar website http//insiders. morningstar. com/trading/executive-compensation. action? t=SAM Boston Beer Company, Inc. (2012) 10-K Annual line 2012. Retrieved from Boston Beer Company website http//www. bostonbeer. com/phoenix. zhtml? c=69432&p=irol-over view