Its history has been as rocky as the head on a great brown ale. And Bloomberg’s recent minting of Boston Beer Co.‘s Jim Koch as the American craft beer movement’s first billionaire (on paper, at least) should remind us of that. Like most mountains he’s scaled, Koch, often smiling and usually gregarious, trim in his vegetarian-cultivated frame, a beer never far from his lithe Ohioan fingers, has made it look easy, whatever the work involved behind the scenes. His company’s initial public offering in November 1995 was no different, and the seeming ease of it had a tremendous effect on the craft industry beer in the U.S.
Boston Beer’s wasn’t the first craft-beer IPO, though it was perhaps the largest and the most anticipated, along with that of archrival Pete’s Brewing Co., which launched its IPO the same month. The first IPO by an existing American craft-brewing operation came four months before either, however, when, on Aug. 16, 1995, a Wednesday, Redhook started trading on the NASDAQ under the symbol “HOOK.” Its initial share price was $17, though it climbed to nearly $30 within the first six months of trading.
At least five more craft-beer IPOs, including Boston Beer’s, launched within seven months of Redhook’s offering (which, ironically enough, Koch attacked publicly, labeling the brewery that had been started out of an old transmission shop in Seattle as “Budhook,” because it had Anheuser-Busch, make of Budweiser, as a major investor).
Whatever Koch’s feelings about Redhook—or about going public in general—his company’s IPO was a carefully planned blockbuster. Again, though, from the outside it seemed like just another chummy move by everyone’s favorite avuncular craft-beer pitchman. For one thing, Koch arranged for consumers who were at least 21 years old to buy 33 shares each at $15 a share ($495 total) through a toll-free number on the beer’s packaging. The move was meant to inspire further brand loyalty in what was already (and still is) America’s best-selling craft-beer brand. Of the 4 million Boston Beer shares available, 990,000 were set aside for callers, who snapped them up.
Koch himself, along with his father Charles, retained 3 million shares, including enough Class B ones that enabled him to keep control of the company. These shares were initially worth $189 million, which was a lot of money back then, enough to render Koch worth more on paper than August Busch III, whose stock in his family’s brewery was valued at the time at a paltry $108 million.
People were watching from inside and outside the craft-beer industry. As one Wall Street analyst put it around the time of this wave of IPOs in late 1995, craft beer had “become the ‘in’ thing” and all against the backdrop of the most bullish financial markets since the 1920s. What could possibly go wrong?
A lot. Several other craft-brewing operations jumped on the IPO bandwagon in the closing years of the 1990s. Often, the stocks did well early on, only to dwindle quickly, sometimes to a handful of dollars per share, sometimes to under a buck. More than a couple of operations traded so low that exchanges like the NASDAQ delisted them (central Maryland’s Frederick Brewing, which was then the biggest craft brewery in the Mid-Atlantic, jumps to mind). Even Boston Beer and Pete’s saw their share prices drop below $10 by the end of the decade, a time, recall, when the larger craft beer movement was undergoing a massive shakeout that would see roughly one-third of existing companies close.
Koch and Boston Beer had made an IPO look so alluring, so simple (much in the same way that Koch made contract-brewing look so alluring, so simple 10 years before, with similarly clumsy results for many of his imitators, who should’ve known better). One wonders if he’s unintentionally made becoming America’s first craft-beer billionaire look too easy as well.
· Sam Adams Creator Becomes Billionaire as Craft Beer Rises [Bloomberg]
· There Will Be No Craft-Beer Shakeout Like There Was in the Late 1990s [TomAcitelli.com]