Jim Koch is a sixth-generation beer maker. But in 1984 when he told his father he was leaving his high-flying consulting job to start his own beer business, his dad said it was the dumbest thing he’d ever done.
Why was Koch’s (pronounced Cook) father so down on his taking up the family trade? At the time, the beer industry in the U.S. was consolidating into the hands of a few mega-corporations. And to the elder Koch’s mind, industry giants like Budweiser were simply too big to compete with.
“When he was a brewer, you know, the big brewers were grinding up all the small and regional breweries that used to exist in this country and he thought that they would do that to me,” the younger Koch said in an interview with CNBC.
Koch’s father wasn’t wrong about the state of the market. When the elder Koch got his start in brewing in the 1940s, there were more than 1,000 breweries in the U.S. Three decades later when son Jim Koch created Sam Adams, that number had shrunk to 50. And at the time, the term “craft brewery” hadn’t even been coined yet.
There were also more personal reasons for the elder Koch’s reservations about his son’s decision to take up brewing. He was proud of the education his son had achieved and the kind of career it could lead to.
The younger Koch got his bachelor’s degree from Harvard, and after graduation he stayed at the university and enrolled a joint MBA-JD program. But, perhaps revealing the iconoclastic streak that would later drive him in business, Koch dropped out of grad school and got a job as an instructor with Outward Bound. After spending three years teaching wilderness travel, mountaineering, and whitewater rafting, Koch returned to Harvard and finished the degrees.
After graduating in 1978, he got a job as a consultant for Boston Consulting Group, advising paper and steel mills. He was making $250,000 a year (equal to $665,517 today when adjusted for inflation) in a job with plenty of room for advancement, when he decided to walk away from it all to get into the family business of crafting beer.
Koch knew from the beginning that he wasn’t going to compete with the giant brewers, instead he was going to create his own category in the brewing industry.
He wrote the business plan for his new company, Boston Beer Co., with a goal of selling $1 million worth of beer in the first six years.
Despite his reservations about his son’s career shift, Koch’s father gave him a family recipe for beer that dated back to the 1860s and had been developed by Jim’s great-great-grandfather Louis Koch. The recipe had been gathering dust in an attic for decades. The entrepreneur began to tinker with the recipe at his kitchen table and eventually, it became the basis for his company’s signature Boston Lager.
When it came time to name the beer, Koch thought about Boston-born, Harvard-educated, founding father Samuel Adams. Adams was a Revolutionary War hero who assisted in the writing of the Declaration of Independence and eventually signed the document. Coincidentally, Adams was also a brewer.
In the early days, Koch went bar-to-bar with his beer samples convincing bar owners and restaurants to carry Sam Adams Boston Lager. He was paying himself an annual salary of $60,000 and had eight employees to assist him in brewing his beer.
Despite the dominance of the major beer companies, the upstart beer became a hit quickly. Within a year of its launch, Sam Adams was named the best beer in the U.S. at the Great American Beer Festival.
The company surged past Koch’s original goal of selling $1 million worth of beer by the end of his sixth year in business, selling $21.2 million worth of beer by 1990. By the 10 year mark, that figure grew to $128 million.
Along the way, in addition to making Sam Adams one of the most recognizable beer brands in the U.S., Koch helped spawn a craft beer renaissance. When Koch founded Boston Beer Co. there were only roughly 12 craft brewers in the entire U.S. Today, the country boasts more than 8,700 craft brewers.
And the business savvy Koch learned in becoming a Harvard MBA didn’t go to waste. He led Boston Beer Co. to an IPO on the New York Stock Exchange in 1995 with a share price of $20. The company even ran a promotion where some lucky six pack purchasers found an offer in their beer to buy stock for $15 a share. As of today, SAM is trading at $501.97 per share.
Even with all this growth, Koch remains highly involved with the business and with the brewing (he claims to personally sample each batch of beer brewed). Perhaps because even back when the beer market looked grim and his own family doubted his vision, Koch went after what he really wanted. In his memoir, Quench Your Own Thirst: Business Lessons Learned Over a Beer or Two, he wrote, "Do what you think is going to make you happy rather than what's going to make you rich.”
Boston Beer Co. is now the second largest American-owned craft brewery and the ninth largest brewery overall by sales volume.
And as for Koch? Forbes estimates his current net worth, which includes some 26% of his company’s stock, at $2.6 billion. Not bad for a brewer after all.