The Boston Beer Company Essay Example for Free

The capital of Massachu ensnarets Beer companionship EssayJim Koch began exchange surface-to-air missile Adams beer from bar to bar out of a brief involvement in April 1985. He sold unlabeled bottles kept cold with chill packs from his briefcase. His gross r til nowue tactic was the interest simply 10-second pitch Try this sassy(a) beer. Its hand fashioned in sm from each one batches. Youll like the taste. (Hyatt, 2010) At the time, the craft beer fabrication in America was virtually non-existent. By 1989, sales of surface-to-air missile Adams had promoten to 63,000 barrels. In 1996, Sam Adams sales had reached 1. 2 gazillion barrels. (Wikipedia, 2012). The supremacy of the scratch served as the catalyst for what many another(prenominal) a(prenominal) call the micro brewage revolution.By 1995, there were approximately 600 small, local and regional breweries throughout the United States. Today, the capital of Massachusetts Beer Company ( erectr of Sam Adams) empl oys oer 800 workers and brews everywhere 2 million barrels of Sam Adams beer annually. It is the greatheartedst of the craft breweries in the United States. (Boston Beer Company) The craft brew intentness accounts for about 1 percent of the domestic beer market, which is dominated by giants millerCoors and Anheuser-Busch InBev. This is has required a remarkable level of result since the early 1990s.In 2011, the industry grew 13 percent by volume (barrels) and 15 percent by retail dollars. Domestic craft beer sales reached 11,468,152 barrels in 2011, up from 10,133,571 in 2010. This developing has occurred despite the overall $96 billion domestic beer market contracting in the past few years ( trim back 1 percent in 2011 to 199,937,239 barrels). (Brewers connexion, 2012) The craft brew industry is comprised of several types of breweries which range in annual production from a few barrels up to 6 million barrels. The Brewers Association lately revised the upper limit from a p revious point of 2 million barrels in 2011. (Nason, 2011).The industry classifications argon the fol griming * Nanobreweries Breweries which produce less than 30 barrels per year. * Microbreweries Breweries classified by their annual production volume, which is up to 15,000 barrels per year. In addition, 75 percent of the beer produced is sold outside of the brewery. at that place ar no set guidelines on the inputs or techniques utilize to produce the beer in order to be classified as a microbrewery. (Kleban Nickerson, 2011) While the conside proportionalityn is often used interchangeably with the term craft beer, they are actually not synonyms.A craft beer essential contain at least 50 percent traditional malt. (Brown, 2012) * Brewpubs Restaurant- ground breweries in which more than than 25 percent of the beer produced is sold onsite, often directly from the brewerys storage tanks. A majority of these are hardened in the northeast. * Contract brew troupe Breweries which out source their production to other breweries subject to exact brewing specifications. The contract brewing ships fede ration handles all merchandise, distribution, and selling responsibilities. (Brewers Association, 2012) Boston Beer Company used to be classified as a contract brewing troupe.However, from 2007 to 2009 the companys production at company-owned breweries increased from approximately 35 percent to over 95 percent. (Datamonitor, 2011) * Regional craft brewery Brewers which produce from 15,000 to 6 million barrels of beer per year. Less than 25 percent of the brewery is owned or compriseled by a non-craft alcoholic beverage industry member. In addition, at least 50 percent of its production volume essential be in all-malt beers. (Brewers Association, 2012) The Boston Beer Company is now a regional craft brewery.The total number of U. S.craft breweries passed 2,000 in 2012, with solid growth since 2009 Breweries () 2009 2010 2011 Regional Craft Bwr. 71 81 88 Microbrew eries 505 615 789 Brew Pubs 1,020 1,053 1,063 Total 1,596 1,749 1,938 (Brewers Association, 2012) The industry is based on a three-tiered system of distribution in which the producers partner with wholesale distributors who provide transportation and refrigerate storage to retailers. There are hundreds of distributors in the industry, and over 630,000 retailers. There are over 220 million potential customers (over the age of 21 yrs.) domestically. (Beaudette, 2011).States control the regulation of the industry, and typically collect taxes through the distributors, instead than attempting to work with hundreds of thousands of retail outlets. (Beer Distributors of Oklahoma, 2010) Companys Dominant Features The Sam Adams brand was named for the Boston revolutionary who was similarly a brewer. Samuel Adams Boston Lager made its debut in April 1985, when it was served in approximately 25 Boston bars and restaurants. At this point, the company had two employees Jim Koch (founder) and hi s partner Rhonda Kallman.Sales reached calciferol barrels by the end of the year, and the company expanded rapidly from there. (Samuel Adams, 2012) The company went public as the Boston Beer Company in 1995, selling shares of Class A common stock on the New York Stock Exchange using the ticker symbol SAM. Jim Koch owns 100 percent of the companys class B stock, which grants him control over all decision-making responsibilities of Boston Beer Company. They have three breweries located in Cincinnati, Boston and Breinigsville (Pennsylvania), and produce over 30 styles of beer.(Boston Beer Company) This includes its seasonal brands Alpine flinch (January-March), Summer Ale (April-August), Octoberfest (August-October), and Winter Lager (November-January). (Wikipedia, 2012) The company currently produces over 2 million barrels of beer annually, and is the largest craft brewery in the industry. It is the second largest American brewery by sales volume (to D. G. Yuengling and male child) . The company has been a pi hotshoter at bottom a growing differentiated niche market within the alcohol beverage industry. The Boston Beer company builds its competitive advantage by focusing on foundation and prime(a) (freshness).The company (and craft beer industry as a whole) cannot fence with Anheuser-Busch InBev and MillerCoors based on expenditure due to lack of scale (though Sam Adams is more widely distributed than any of its craft industry members). The company began freshness dating back in 1987. It soon followed this with an amnesty program for its wholesalers which allowed beer that was three months past its expiration date to be rejoined for a partial refund. In more recent years, the company has enacted its Freshest Beer in Town initiative.This is a just-in-time distribution model in which wholesale partners result keep only one week of inventory (down from 3-4 weeks worth before), and the Boston Beer Co. will replenish supply based on consumer demand. The compa ny also has begun the Draft Quality Audit Program, in which trained employees make in-market visits to test the freshness of the companys product on tap at various retailers. Over 20,000 such audits are now conducted on an annual basis. The company also plans to concern pursuit of joint collaborations with other breweries and expansion of its own operations.It currently has an accordance with Moosehead Brewery for distribution of Sam Adams products in Canada. It has also teamed with Germanys Weihenstephan Brewery to create Infinium, the first new beer style created under the Reinheitsgebot principle of beer purity (only four allowed ingredients water, malt, hops and yeast). The Weihenstephan Brewery has a credible claim as being the worlds oldest brewery, and enjoys a noticeable reputation among beer enthusiasts. (Zegler, 2012) Regarding potential future growth, founder Jim Koch is excited for both his company and the craft beer industry.In 2011, he verbalise the following I do conceive that craft beer has a solid foundation for continued growth. Because in 2011, craft beer has become the new wine and the 20-somethings are adopting craft beer in the same vogue that their boomer parents adopted wine. When that happened in the 80s it led to decades of steady, healthy growth, and Im optimistic that craft beer can have many years of steady, health growth. I also conceptualize that we (Boston Beer Co. ) have a really bright future. Were also very small. Sam Adams can double. We can maybe even triple in size in the next 20 years. (Zegler, 2012).Places where it competes As stated above, the Boston Beer Company operates three breweries in Cincinnati, Boston and Lehigh Valley of Pennsylvania. Over 95 percent of the companys products are now produced in its own breweries. It is distributed throughout the United States, in parts of Europe including Germany, and now in Canada through an balance with the Canadian brewery Moosehead. Standing in the Industry (Rivals) Boston Beer Co. has been the craft brewing industry leader since its beginning. It was the number one craft brewer in 2011 based on beer sales volume.It was followed by Sierra Nevada Brewing Co.and New Belgium Brewing Co. In the overall industry, Boston Beer Co. is number five dollar bill in beer sales volume, potty Anheuser-Busch InBev, MillerCoors, Pabst Brewing Co. and D. G. Yuengling and Son Inc.The craft beer share accounts for approximately one percent of the overall alcoholic beverage category (includes wine and spirits, imported beer, craft and large breweries). (Brewers Association, 2012) Anheuser-Busch InBev and MillerCoors dominate the industry, though business dipped last year. Interestingly, there run acrossms to be a great amount of cooperation and collaboration amongst the members of the craft brewing segment.Building the segment is a common concern with many of the regional craft breweries. For example, in 2008 Boston Beer Co. responded to an industry-wide hops shortage by sharing 20,000 pounds of its own hops at cost with 108 selected craft breweries. (Samuel Adams, 2008) There are many other notable craft breweries that have emerged as industry leaders in the past decade, including the following * Sierra Nevada Brewing Co. The nations second largest craft brewer, they are based Chico, California. The company was founded by Ken Grossman and Paul Camusi in 1980.Production is approach 1 million barrels annually. The most popular product is the Sierra Nevada Pale Ale. * New Belgium Brewing Co. Headquartered in Ft. Collins, Colorado and founded in 1991 by Jeff Lebesch. The companys flagship beer is the popular Fat Tire. It is the nations third largest craft brewery. The companys distribution network had reached 19 states by 2009, and is growing. * Deschutes Brewery Based in Bend, Oregon. The companys products include its Black Butte Porter, Mirror Pond Pale Ale and the award-winning The Abyss (11% alcohol by volume released in 2007).* Harpo on Brewery Headquartered in Boston, Mass. Products include its India Pale Ale, Munich Dark, 1636 Brew and four seasonal varieties. * Boulevard Brewing Co. Located in Kansas City, Missouri. The companys products are available in over twenty states in the Midwest region. (CNBC, 2012) * Dogfish Heah Craft Brewery Founded by Sam Calagione and based out of Delaware. Calagione is acknowledgen for pushing the boundaries of brewing varieties, and actually collaborating with Jim Koch in creating 2009s SAVOR Flowers brew (it was a one-time experiment). Competitive CapabilitiesBoston Beer is the craft beer industry leader by production and sales volume. Its focus is on freshness and innovation (variety). The company started early with its freshness dating, followed by its amnesty program for its distributors, and now the Freshest Beer in Town and Draft Quality Audit Program. Regarding his companys tension on beer freshness, Koch stated the following If my beer isnt fresh, I want the consume r to buy something else. And I want to make it as easy as possible for them to know because if they have a bad experience with my beer, they may not buy it again.To me, its not about trying to get consumers that are trying one beer afterward another and they never buy again. Im very focused on giving consumers a great taste in all(prenominal) bottle so I can build brand loyalty based on a reliably rewarding experience. (Zegler, 2012) Boston Beer innovation is exhibit in its wide variety of seasonal and specialty brews, as well as its recent notable collaborations. It teamed with Weihenstephan Brewery to create Infinium, which sold out domestically within a few weeks, and apparently had similar success in Germany.The company added Noble Pils in 2010 (winner of its 2009 Beer Lovers survival of the fittest election brewed with all five Noble hops). Latitude 48 is an India pale ale with hops from producers along the 48-degree latitude sources. The company also released its Samuel Ad ams Revolutionary Rye Ale in 2011 (winner of 2010 Beer Lovers Choice election). The company also intends to expand its drum Room collection of beers, which until recently were only distributed in Denver and Boston. The Barrel Room beers are aged in the Boston Beer Companys brewery supply of barrels, and include American Kriek, New World Tripel, and Stony Brook Red varieties.Jim Koch stated the following concerning his companys push for new varieties Were not the new kid on the block. Were not the newest beer out there. Were not the most local. We dont have the best marketing or a cute brand name. People have tried Sam Adams, its not a new experience the reason that weve become the leading craft brewery is because we have always given the consumer the best possible experience and they have rewarded us with their loyalty. Thats wherefore we keep pushing on those things. . (Zegler, 2012) Forces Driving Industry Change.Aside from the continued expansion efforts of many industrys regio nal craft breweries, there has also been a current lobbying push on behalf of the craft beer industry for the passage of Congressional bills H. R. 1236 and S. 534, which would stamp down federal excise taxes applicable to the craft breweries. Specifically, if passed the bill would reduce the small brewer rate on the first 60,000 barrels by 50 percent, from $7. 00 to $3. 50 per barrel. The rate on production amid 60,000 and 2 million barrels would also be reduced from $18. 00 to $16. 00 per barrel. The two bills were introduced in March 2011.(Brewers Association, 2012) (Buchman Law Firm, LLP) Sources of Competitive Advantage Arenas Boston Beer Company operates in the craft brewing industry, which accounts for approximately 1 percent of the overall beer industry, which is dominated by Anheuser-Busch InBev and MillerCoors. Sam Adams and the companys other products are distributed throughout the United States and Canada (via the recent agreement with Moosehead Brewery of Canada). The companys target customer is one who is willing to pay a premium price for a quality beer, and will display brand loyalty.The companys standing as a catalyst for the microbrew revolution has given it considerable brand recognition among beer enthusiasts. Vehicles The company has grown considerably in twenty years, employing over 800 employees with three breweries which now produce 95 percent of the companys products. Jim Koch plans to continue company expansion, with visions of tripling in size in the next twenty years. Based on the companys history, expansion will most likely occur through internal development rather than via any mergers or acquisitions.Each beer style must registered by requests for certificates of label approval (COLA). State registration usually requires a state application pair with the federal COLA for a given label. (Buchman Law Firm, LLP) Excise taxes are typically collected through a companys wholesalers. Boston Beer Co. has embarked on some notable recent joint ventures, including its creation of Infinium in collaboration with the Weihenstephan Brewery and its Canadian distribution agreement with Moosehead Brewery. On the supply side, the company must continually replenish its inventory of barley and hops.Monthly barley prices from February 2007 to January 2012 had a standard deviation of $37. 76 per metric ton. This low amount of variation has led many breweries to simply purchase the crop on an annual basis. Conversely, many breweries will contract to acquire hops years into the future. The Boston Beer Company has over $33 million in hops contract commitments through 2015. (Craft Beer Analytics, 2011) Differentiators Boston Beer Company has significant brand impartiality within the craft beer industry due to its significant role in creating it.They attempt to further differentiate their products based on freshness and product innovation. Its Freshest Beer in Town initiative is a just-in-time supply order of battle with the compan ys wholesalers (it was intended to include 50 percent of Boston Beers distributors by the end of 2011). (Craft Beer Restaurant Times, 2011) The program reduced suppliers inventories of Sam Adams down from an average of 3-4 weeks to just one week (which is to be kept chilled). Boston Beer ships more based on what the distributors have sold as opposed to claim orders. concord to Koch Refrigeration of the beer virtually eliminates all of the product degradation that happens through the supply chain. The temperature control also makes it as if the retail account is getting its beer sequential from the brewery. The Draft Quality Audit Program is one in which company salespeople have been trained to taste the defects and track the cause of low quality Sam Adams on tap at various retailers. Boston Beer Co. now conducts approximately 20,000 audits each year, which has resulted in a drop in the incidence of low quality company beer from 15 to just 3 percent, according to Koch.(Zegler, 201 2) The company has also continued to expand its beer varieties. From its seasonal brews and collaborations with breweries such as Dogfish Head and Weihenstephan, to its Barrel Room collection and updates such as Noble Pils, Latitude 48 and Revolutionary Rye Ale, the company is always looking to test the boundaries of craft brewing. integrated Strategies Boston Beer Company has successfully built on Sam Adams strong brand equity, differentiating its products based on quality, variety, and freshness.The company has continued to expand its operations with no plans to discontinue such efforts. It has also hedged against future increases in hops prices with over $33 million in hops contracts already signed applications programme the company through December of 2015. Economic Logic The craft beer industry is based on the idea that consumers will pay a premium price for a quality beer which is different from the industry norms offered by companies such as Anheuser-Busch InBev and MillerC oors. Sam Adams also benefits from considerable brand equity. Staging and Pacing.Jim Koch has stated that he believes that the craft beer industry will continue to trend upward in sales relative the rest of the alcoholic beverage industry, and that the Boston Beer Company could triple in size within the next 20 years. His opinion on this matter is important, because Koch owns all of the companys Class B common stock and with it, retains all decision-making authority for the company. Financial Analysis sure Financial Standing The 2011 fiscal year provided the Boston Beer Company with multiple opportunities to raise their glasses.Undoubtedly, the major achievement of 2011 was officially obtaining just over 1% of the United States beer market. This increased market share enabled the company to release some very impressive numbers in their recent 10-K. Earnings Snapshot Revenue $558. 282M Net income $66. 059M Return on assets 24. 24% Return on equity 35. 76% Profit circumference 11. 83% Current ratio 1. 88 Quick ratio 1. 37 Quite possibly the most staggering ratios from the 2011 filing are the companys return on assets ( investment) and return on equity.These tools measure how profitable a firm is relative to their total assets and total equity, respectively. In 2011, the Boston Beer Company reported a return on assets of 24. 24% and a return on equity of 35. 76%. Both of these ratios have a high level of volatility depending on the industry. These measures are remarkable within the alcoholic beverage industry, as well as the general beverage industry. In comparison, Coca-Cola (KO) posted a return on assets of 10. 72% and a return on equity of 27. 10% in 2011, while the winemaking company Constellation Brands (STZ) posted a return on assets of 6.25% and a return on equity of 16. 75%. Furthermore, the company performed well regarding profit margin. Differing from other measures, profit margin should rarely be used to equalise different firms. The reasoning behi nd this is that firms have varying levels of setups, so comparing profit margins could lead to confusion and misdiagnosis. The best way to use profit margin is against prior years. When weighed against its prior years, the company has seen a constant uptick over the past several years, insinuateing it is doing a good job of controlling costs and setting set at a reasonable level.The Boston Beer Company excelled in their liquidity and leverage ratios as well, not just in the three major advantageousness ratios return on assets, return on equity, and profit margin. The most common ratios for measuring liquidity are the current ratio, quick ratio, and cash ratio. The current ratio (liquidity ratio) is an easy way to measure whether a firm is able to pay its short-term debts. A ratio of 1. 0 or above is likely and expected, and the Boston Beer Companys 2011 current ratio of 1. 88 leaves it with plenty of leeway to pay all of its short-term obligations.Much like the current ratio, the quick ratio is a slightly more conservative measure that takes into account current levels of inventory, which can be difficult to liquidate. The companys quick ratio is 1. 37, after taking out inventories. This even leaves plenty of room for the company to repay its short-term obligations. The last liquidity ratio is the cash ratio, which is the least commonly used of the three measures mentioned previously. The cash ratio is the ultimate ratio of liquidity because it only compares cash and marketable securities to current liabilities.An extremely high cash ratio could signify that a firm is stockpiling cash and not investing its assets wisely. The companys cash ratio of 0. 74 is less than 1. 0 but still reasonable considering the other amounts of short-term assets. While the company does not have the ability to pay its short-term obligations with cash, it is still operating within a cook level of liquidity. The last group of ratios is the leverage ratios. These ratios measure h ow much debt a company is carrying. The total debt ratio divides total liabilities by total assets, giving an affection of how leveraged a company is at a given time.In 2011, the Boston Beer Companys total debt ratio was 0. 32, which would signify a generally low level of risk to potential investors. Much like the total debt ratio, the debt to equity ratio is a leverage ratio that has total debt in the numerator. The difference is the debt to equity ratio divides the total debt by stockholders equity. This ratio shows how a company finances its activities, whether through debt or equity. The Boston Beer Companys debt to equity ratio of 0. 47 indicates it has very little debt compared to its equity.This shows how the company has been conservative in using debt to finance its operations. The last leverage ratio is interest coverage, a tool used to see how easily a company can pay its interest expenses. Since the company has interest income instead of interest expense, the interest co verage ratio is not invaluable when evaluating the companys 2011 financials. Recent Financial Trends During the past three years, the Boston Beer Company has seen steady gains from almost all of their major financial indicators.The company, undoubtedly, has improved on their prior year results across the board since 2009. When the financial crisis struck the United States and the world in late 2008, most firms encountered lesseningd earnings and in many instances, losses. Many of these companies are just now returning to their pre-recession profitability. The majority of the damage was incurred to these companies in the fourth quarter of 2008 and well into 2009. As seen by their year-over-year net income growth of 284. 74% in 2009, the recession did little to hurt the companys financial situation.One potential explanation for its recession success comes from the relationship between economic recession and increased consumption of alcohol and that heavy drinking behavior is unambig uously associated with unhappy feelings or dissatisfaction (Anderson Moro, 2008). The widespread theory is that a sudden decrease in income has little affect or possibly a negative correlation with beer consumption. Quite possibly, this could explain why most vice companies trade with a beta less than 1. 0, indicating a negative relationship with the market.The Boston Beer Company is currently trading with a beta of 0. 85. In their most recent 10K, the company posted a year-over-year net income growth of 31. 74%. While this number appears very positive on the surface, it does not fully take into account a settlement the company received from its glass bottle supplier when the company had to issue a recall after routine inspections found glass particles in certain bottles. The recall affected approximately 25% of the companys bottles and was completed by the fourth quarter. Nevertheless, the end result was the company received a cash payment of $20.5 million, which was recorded as a n offset to operating expenses, and all parties have released each other of any claims as they relate to this matter (The Boston Beer Company, Inc. , 2011). Comparison with Market Leaders While the Boston Beer Company has been experienced significant gains the past few years, it is still a minor histrion in the beer industry compared to the two leaders Anheuser-Busch InBev and MillerCoors. These two companies combine for a total market share of just over 35%. The Boston Beer Companys 2011 revenue of $558. 282 million is 1. 43% and 10. 80% of Anheuser-Busch InBevs $39.046 billion and SABMillers $5. 170 billion, respectively. While it cannot compete on revenue, the company can compete on productivity. The productivity ratio is computed as employees divided by revenue. The companys productivity ratio of $664,620 per employee tops Anheuser-Busch InBevs $336,600 per employee and MillerCoors $277,260 per employee. The company has repeatedly stated that its goal has never been to be on th e same level as the market leaders. Instead, its goal is to be the leader in the better beer category, which includes Yuengling, Corona, and Heineken. In 2011, D. G.Yuengling and Son passed the company as the largest American beer-maker in sales, a title long held by Anheuser-Busch. The Boston Beer Companys objective is to regain that title and grow with the better beer category. Stock Trends The Boston Beer Company has a very unique setup for their common stock. The company has 8,714,931 shares of Class A Common Stock superior and 4,107,355 shares of Class B Common Stock outstanding. Where the setup gets unique is that the Class A Common Stock only have voting power to wonder certain mergers and elect a minority to the board of directors.The Class B Common Stock is held entirely by C. James Koch, Chairman of the Board of Directors, who has control over the majority of the board of directors and most other matters regarding shareholder approval. This gives Mr. Koch substantial con trol over his company and takes a large amount of power from the stay shareholders. After reaching its lowest point in close to a decade at $19. 02 in May 2009, the Boston Beer Company (SAM) has rebounded to new levels. In fact, the stock reached its all time high of $119. 84 on June 19, 2012.Except for a decline of close to 25% of the stocks value in early 2011, the increase has been steady and balanced since the low in 2009. One interesting note is the volume of shares traded in late 2007. Traders saw the stock climb quickly from $30 to $50 and felt it had a lot of volatility. This led to a sharp increase in trading activity that pushed the volume over 1. 5 million shares. Stock Performance Outlook As of late, stock analysts have conveyed mixed feelings about the companys future stock outlook. According to Morningstars survey of four analysts, one rates the stock a buy, one rates it underperform, and two rate it a hold.This shows exactly how divided analysts are on the future of the stock. Since 2008, earnings per share has increased from $0. 56 to $4. 81, although the $4. 81 does take into account the settlement. Excluding the settlement, earnings per share in 2011 was $3. 73, still a 5. 97% increase over 2010. For 2012, analysts are looking for full-year earnings of $4. 14, a projected 10% increase from last year. The next-year estimate is pegged at $4. 80, a solid 16% earnings growth projection (Vodicka, 2012). If the company meets or exceeds these earnings projections, there is little doubt that it could continue climbing.Traders who are bullish on the stock believe it should continue growing with the craft brewery sector. They point toward the companys recent run of hitting estimates, its healthy price to earnings ratio of 22. 57, and its recent investment in their brewing facilities to keep up with increased demand. On the other hand, bearish traders point toward the companys high valuation premiums that are integrated into the prices. If the company were to miss their upcoming quarterly earnings, it could ignite some traders to short the stock, potentially sending it spiraling. Key Success Factors.For firms to be successful over a long period of time, they must be aware of the divulge success factors that drive profitability in their industries. Key success factors are a set of issues that all companies operating in the industry must pay attention to in order to be successful. Quite simply, key success factors are something each company must have to accomplish long-term success. In his 2004 journal article, Richard A. Caralli explains that every organization inherits a particular set of operating conditions and challenges that are constituent(a) to the industry (or a segment of the industry) in which it chooses to do business.This results in a unique set of key success factors that organizations in a particular industry must achieve to maintain or increase their competitive positions, achieve their goals, and accomplish thei r missions (Caralli, 2004). The beer industry in particular has three main key success factors. First, firms must have an advertising campaign that effectively reaches their target audience. For years, Anheuser-Busch has been the market leader by segmenting the way it advertises its different brands.Budweiser is marketed as the King of Beers and is known for its signature Clydesdale horses and time of origin bottle design. On the other hand, Bud Light is marketed as The Sure Sign of a Good Time. Its commercials are designed for a much junior audience and are regularly voted as some of the most humorous on television. The other major beer makers seem to follow the same strategy of marketing their core brand as legendary and historic, while marketing the light varieties in a more humorous tone. A second key success factor in the beer industry is obtaining and maintaining a network of wholesale distributors.These distributors act as middlemen to transport the beer from brewers and im porters to stores, bars, and restaurants. The approximately 3,300 distributors in the United States allow companies to focus more on brewing and marketing and less on delivery to the end user. The beer wholesaler industry is a very large industry in itself. The largest distributor, Reyes crapulence Group, delivers 93 million cases per year and has revenues of $1. 9 billion. Firms must keep in constant contact with these distributors to ensure timely and cost-effective delivery.The last major key success factor affecting the beer industry is knowledge of the consumer. To be able to effectively advertise for their brands, firms must have deep knowledge of their target audience. The beer industry is segmented into a variety of different divisions. Marketing a specific product incorrectly could be extremely costly. Miller is effectively targeting their target audiences with Miller 64 and Miller High Life. Miller 64, with only 64 calories, is intended for males and females age 35 and un der, while Miller High Life is intende.