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Boston Beer Company Presentation
- 1. The Boston Beer Company Group 2 Samantha Zalaznick, Ben Minter, Tyler Gleysteen, Sumiran Das, Madeline Zingle, Sumant Shendye
- 2. Our recommendation is not to acquire the Boston Beer Company. Equity Value/Share: $31.62 Market Value/Share: ~$39
- 3. Agenda
- 4. Agenda
- 8. Growth is stagnating in the U.S. beer industry
- 10. The Boston Beer Company faces competition from several fronts Large Players Imported Wine & Spirits Domestic Craft
- 12. Agenda
- 14. Historical practice of collecting cash and using it to invest in PP&E Year Cash Net PP&E
- 16. Agenda
- 17. Continued investment in PP&E to capitalize on growth opportunities Year Projected Capital Investment 2009-2018
- 18. Free Cash Flow increases significantly in 2012 after cost efficiencies from brewery acquisitions are realized Year Projected Free Cash Flows 2009-2018 Market Price Predicted Price
- 19. Gross Margins will improve but will remain below historical levels Historical Margins 2002 - 2008 Projected Margins 2009 - 2018 2002 2003 2004 2005 2006 2007 2008 Net Revenue 100% 100% 100% 100% 100% 100% 100% COGS 41% 41% 41% 41% 42% 45% 54% Gross Margin 59% 59% 59% 59% 58% 55% 46% 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Net Revenue 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% COGS 51% 50% 49% 49% 48% 47% 47% 46% 45% 45% Gross Margin 49% 50% 51% 51% 52% 53% 53% 54% 55% 55%
- 20. The value per share of the firm is $31.62 Weighted Average Cost of Capital Equity Value: 447,434,512 Shares Outstanding: 14,150,000 Equity Value/Share: $31.62 Market Value/Share: ~$39 Risk-Free Rate 3.79% Risk Premium 5% Beta 0.8 Cost of Capital 7.79%
- 21. 3-month Stock Price Performance Projected Price
- 22. Equity Value Sensitivity to WACC WACC (%)
- 23. Equity Value Sensitivity to Revenue Growth Revenue Growth Rate (%) Market Value Predicted Value
- 24. Equity Value Sensitivity to COGS COGS (% of Gross Revenue) Market Value Predicted Value
- 25. Our recommendation is not to acquire the Boston Beer Company. Equity Value/Share: $31.62 Market Value/Share: ~$39
- 27. Questions
- 29. Gallery of Products Core Products: Samuel Adams Boston Lager and Sam Adams Light Seasonal Beers: White Ale, Summer Ale, Octoberfest, Winter Lager, Old Fezziwig Ale, Cranberry Lambic, Holiday Porter Brewmaster’s Collection: Boston Ale, Cherry Wheat, Cream Stout, Hefeweizen, Pale Ale, Scotch Ale, Black Lager, Brown Ale, Honey Porter, Irish Red, Blackberry Witbier Imperial Series: Double Bock, Imperial White, Imperial Stout Extremes Beers: Utopias, Chocolate Bock, Millenium, Triple Bock, Imperial Pilsner, Hallertau 24
- 30. Key Employees Name Job Title Board Martin F. Roper President and Chief Executive Officer Executive Board C. James Koch Chairman and Clerk Executive Board David A. Burwick Director Non Executive Board Pearson C. Cummin Director Non Executive Board Charles Joseph Koch Director Non Executive Board Jay Margolis Director Non Executive Board Gregg A. Tanner Director Non Executive Board Jean-Michel Valette Director Non Executive Board William F. Ulrich Chief Financial Officer and Treasurer Senior Management Robert H. Hall Vice President, Brand Development Senior Management Thomas W. Lance Vice President, Operations Senior Management John C. Geist Vice President, Sales Senior Management David L. Grinnell Vice President, Brewing Senior Management
- 32. Total Beer Market Demographics Source: 2006 Behavioral Tracking Study by Miller Brewing Company
- 33. Major Players by Market Share
- 34. Five Forces Analysis Rivalry in the beer industry is high: differentiated products, strong brand loyalty Substitutes include wine and spirits, cheaper beers Highly concentrated; entry only feasible on small scale (microbreweries) Buyer power is moderate with low-cost switching the driving force in the industry Sellers have low power due to many producers and few alternative markets
- 35. The Product Chain Pubs and Restaurants Grocery Chains and Package Stores Stadiums and Other Outlets
- 39. Pro-Forma Income Statement Projected Income Statement 2008 - 2019
- 40. Pro-Forma Balance Sheet Projected Balance Sheet 2008 - 2019
- 41. Pro-Forma Free Cash Flows Projected Free Cash Flows 2008 - 2019
Notas del editor
- Sam
- Recommendation: While the Boston Beer Company IS a strong company, Based on current price market price, We believe that Boston Beer Company is not a good acquisition Spell out Price distinctions (Our Valuation and current market price)
- We will begin by painting a full picture of the company, including highlighting its strategic strengths and weaknesses I will now begin by giving you a background of the company
- Ben: “ Better Beer” is the category of beer production that brews super-premium beer at higher cost to the customer. Currently Better Beer holds roughly 20% of the overall beer market in the USA and it is expected to rise to 33% within the next 5 years. Analyst reports suggest that the craft beer sector is still in the middle stages of growth. Craft beer looks to expand in line with the overall Better Beer sector growth We expect that Boston Beer Co. will retain the big lead it has over other craft breweries because of the forward-thinking initiatives and high growth motivation it has historically shown.
- Domestic Craft, Imported, Large players, Substitutes
- Sam
- Yellow cash White Net PPE
- Sumi
- Sam
- Firm has made a commitment to continue to look for growth opportunities Our model assumes that their capital investment will continue to be strong over the next 10 years We differ significantly from many wall-street analysts because they assume capital investment will decrease significantly following 2010 -Company says in 10K they will puruse opps whereas analysts look at historical levels We think company is accurate in its estimate because in order to maintain margins and growth rates it will have to pursue increased volume because margins arent’ going to come from price increases anymore
- Based on projections FCF starts to increase significantly in 2010 Because of significant cost reductions in COGS Lower input prices and cost efficiencies coming from the acquired breweries (specifically PA brewery) Increased production of core brands by company owned breweries The reason market price is below is because they are making investments in growth/PPE and their costs are higher while this is happening but then as you can see, eventually the revenue growth leads to a higher cash flow
- Maddy
- Sumant
- Sumant
- Recommendation: While the Boston Beer Company IS a strong company, Based on current price market price, We believe that Boston Beer Company is not a good acquisition Spell out Price distinctions (Our Valuation and current market price)
- We think value is $33.50. Current value is around $38.
- We think value is $33.50. Current value is around $38.
- Company breweries: company owned ones in cincinnati and boston. Partnertships with Miller Brewing Company, High Falls Brewing Company, and City Brewing Company in Eden NC, Rochester NY, Latrobe PA, and La Crosse, WI
- Datamonitor Company Profile Strengths: -Strong recent financial performance—huge revenue growth past three years. Strong balance sheet in that there’s no long term debt -Robust network of breweries—two company owned breweries and three partnerships with breweries to make distribution easier; closer to end markets helping to preserve freshness Threats: -Counterfeit Alcohol– 700 million business annually—for the market as a whole though -Europe is the most important market but only grew .05% last year -Health concern trends affecting taste preferences