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Boston Beer Eyes Possible Expansion

Mar 14, 2006 - Boston Beer Co., said it might further expand their Cincinnati brewery or possibly build another one elsewhere.

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The company invested more than $11 million in the former Hudepohl-Schoenling brewery in 2005. The facility is expected to produce about two-thirds of the company's total volume this year.

Almost all of the rest of the company's beer is made under contract by other brewers.

Shipments in through March have increased by 14 percent to 366,000 barrels, according to its year-end financial report. Part of that increase was attributed to higher wholesale inventories that are expected to unwind in the coming months. For all of 2005, shipments rose 7 percent to 1.36 million barrels, following a 2.5 percent rise in 2004.

Boston Beer said in the report that it's evaluating its long-term production strategy and could decide to make all of its own beer. Until it bought the Hudepohl-Schoenling brewery 10 years ago, almost all of its beer had been made under contract since the company's founding in 1984.

Back then, there was idle brewing capacity in the industry from smaller regional breweries. In recent years, many of those regional breweries that had excess capacity have seen increased sales due to the popularity of the craft beer segment, and there's less capacity available for contract brewing.

If Boston Beer decides to make all of its own beer and build a new brewery, it would likely require an investment of $70 million to $90 million and yield improved operating and freight costs, it said. Company officials told analysts during a conference call this week that the evaluation of its production strategy was ongoing and that they hadn't developed full economic estimates yet.

CEO Martin Roper said freight costs, beer freshness, and quality control as some of the factors that they're looking at.


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