As we look at cost leadership as a company that seeks to gain an advantage in their market(s) by lowering their economic costs below its competitors, Sam Adams (BBC) has a unique strategy.
To explain this situation we need to look at the way the brewing industry is segmented. In the brewing industry there are 6 (5 of which are craft related) segments that are differentiated by: barrels produced, who produces the beer, where it is sold and the ingredients that they use as a majority of their beer production volume. Broken down the segments are: microbrewery, brewpub, contract brewing company, regional brewery, regional craft brewery, and large brewery.
The way that these segments are broken down can get confusing and have a lot of grey area that, honestly, is hard to decipher. So to make things simple, lets look at volume as the key indicator. As defined, a craft brewery, whether it be a small, independent, or traditional, is a brewer that produces less than 6 million barrels of beer annually. Anything above that is a large brewery.
In Sam Adams situation, they are considered a independent craft brewery by producing 1.8 million barrels in 2010 (the nearest craft brewer is Sierra Nevada with 700,000 barrels.) With this, they carry a 20% market share of the craft brewing industry with the nearest competitor (Sierra Nevada Brewing Company) at 8%. In the industry, as a whole, they own somewhere just below 1% market share. This is a stark difference when it comes to the level of brewing segments.
To apply the cost differentiation strategy to this subject, Sam Adams would be considered a titan in the craft brewery industry. With this they can leverage their brewing operations to lower their economic costs and sell their beers at a lower prices compared to other craft brewers but not lower than larger companies. This unique position because Sam Adams is the pacesetter in the pricing of craft beers in the United States not having to compete with the larger breweries.
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