Boston Beer Co Inc Case Solution

Case Solution

Capital areas may have overcapitalized the craft brewing industry within a flurry of latest IPOs. Poor this hot IPO market every person company's valuation may seem reasonable. However, after careful of each and every company's financial statement and upon deliberation over analysts' forecasts in the industry's growth prospects, it's unclear when the craft brewing marketplace is overcapitalized. This might be another hot then crash IPO industry, like biotech or perhaps the computer disk drive industry.

Excel Calculations

·         Excerpts from the Boston Beer Company’s Offering Prospectus (cont.)

·         Summary Financial Data (in thousands, except per share, per barrel and employees data)

·         Balance Sheet

·         Income Statement

·         Statement of Cash Flows

·         Financial Ratios 31-Dec-94 to 30-Sep-95

·         Pete's Brewing Company                                            

·         Redhook Ale Brewery                                   

·         BBC

·         WACC & Assumptions

·         WACC Calculation

·         Rf

·         Risk Premium

·         Beta

·         Cost of equity

·         Semi annual Interest Cost

·         Cost of debt

·         Tax Rate

·         Total Equity

·         Debt

·         Total Value

·         WACC

·         DCF Valuation

·         Free Cash Flow

·         Terminal Value

·         Total Cash Flow

·         Enterprise Value

·         Debt

·         Total Value of Equity

·         New Shares

·         Diluted Shares

·         Total number of shares outstanding

·         IPO Stock Price

·         Earnings per share

·         P/E ratio

Questions Covered

1.       What do you think of Boston Beer’s business model relative to the traditional beer companies’ business model, relative to Redhook and Pete’s? Hint: consider their brewing, production, distribution, marketing strategies. How is each firm attempting to achieve its own sustainable comparative advantage in the market place?)

2.       Evaluate Boston Beer’s performance relative to its peers (Compare BBC's ratios to the ratios of its peers in exhibit 4). (Hint: how do differences in operating strategies translate into differences in financial ratios? Are there any downside risks to BBC's contract brewing strategy?)

3.       What is your assessment of the intrinsic value of Boston Beer’s stock at the time of the case? What should be its IPO price?

4.       Do you think the total market value of Redhook, Pete’s and Boston Beer makes sense given the total size and profitability of the beer industry and the craft-brewing segment?