<PAGE>
 
                                 UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C.  20549
                                        
                                   FORM 10-K
                                        
(Mark One)
[X]             ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (D)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                                        
For the fiscal year ended       DECEMBER 26, 1998

OR

[_]             TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
                    OF THE SECURITIES EXCHANGE ACT OF 1934
                                        
             For the transition period from ..........to..........

                        Commission file number: 1-14092

                         THE BOSTON BEER COMPANY, INC.
            (Exact name of registrant as specified in its charter)

        MASSACHUSETTS                              04-3284048
(State or other jurisdiction of            (I.R.S. Employer Identification No.)
 incorporation or organization)
                                        
                  75 ARLINGTON STREET, BOSTON, MASSACHUSETTS
                   (Address of principal executive offices)
                                     02116
                                  (Zip Code)
                                        
                                (617) 368-5000
             (Registrant's telephone number, including area code)
                                        
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
 
   TITLE OF EACH CLASS                 NAME OF EACH EXCHANGE ON WHICH REGISTERED
CLASS A COMMON STOCK................. NYSE......................................
                                        

         SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:     NONE

                                        
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.   Yes     X       No___
                                            -----         

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulations S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [_]

The aggregate market value of the Class A Common Stock ($.01 par value) held by
non-affiliates of the Registrant totaled $130,294,142 (based on the closing
price of the Company's Class A Common Stock on the New York Stock Exchange on
March 12, 1999). All of the Registrant's Class B Common Stock ($.01 par value)
is held by an affiliate.
 
As of March 12, 1999 there were 16,415,010 shares outstanding of the Company's
Class A Common Stock ($.01 par value) and 4,107,355 shares outstanding of the
Company's Class B Common Stock ($.01 par value).


                      DOCUMENTS INCORPORATED BY REFERENCE
                                        
Certain parts of the Registrant's definitive Proxy Statement for its 1999 Annual
Meeting to be held on June 1, 1999 are incorporated by reference into Part III
of this report.

                                       1

<PAGE>
 
                         THE BOSTON BEER COMPANY, INC.
               FORM 10-K FOR THE PERIOD ENDED DECEMBER 26, 1998
                                        


<TABLE>
<CAPTION>

PART I.
                                                                                                 PAGE
<S>    <C>        <C>                                                                            <C>

       Item 1.    Business                                                                          3-10

       Item 2.    Properties                                                                          10

       Item 3.    Legal Proceedings                                                                   10

       Item 4.    Submission of Matters to a Vote of Security Holders                                 10
 

PART II.
 

       Item 5.    Market for Registrant's Common Equity and Related Stockholder Matters               11

       Item 6.    Selected Financial Data                                                             12

       Item 7.    Management's Discussion and Analysis of Financial Condition and Results of       13-20
                  Operations

       Item 7a.   Quantitative and Qualitative Disclosures About Market Risk                          21

       Item 8.    Financial Statements and Supplementary Data                                      22-37

       Item 9.    Changes In and Disagreements With Accountants on Accounting and Financial           38
                  Disclosure
 

PART III.
 

       Item 10.   Directors and Executive Officers of the Registrant                                  38

       Item 11.   Executive Compensation                                                              38

       Item 12.   Security Ownership of Certain Beneficial Owners and Management                      38

       Item 13.   Certain Relationships and Related Transactions                                      38
 

PART IV.
 

       Item 14.   Exhibits, Financial Statement Schedules and Reports on Form 8-K                  38-41
 
Signatures                                                                                            42
</TABLE>


                                       2

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                                    PART 1
                                        

ITEM 1.     BUSINESS

GENERAL
 
The Boston Beer Company, Inc. ("Boston Beer" or the "Company") is the largest
craft brewer and the seventh overall largest brewer in the United States. In
fiscal 1998, Boston Beer sold 1,153,000  barrels of its proprietary products and
brewed 74,000 barrels under contract for third parties.
 
The Company produced a total of eighteen beers under the Boston Beer Company
name, four beers under the Oregon Beer and Brewing Company name and three cider
products during 1998. In addition to Samuel Adams Boston Lager(R), the flagship
brand, seventeen beers were produced under the Samuel Adams(R) label: Boston
Ale(R), Lightship(R), Cream Stout, Honey Porter, Scotch Ale, Double Bock, Triple
Bock(R), Octoberfest, Winter Lager(R), Cherry Wheat, Summer Ale, Cranberry
Lambic, Golden Pilsner, White Ale, Boston Cream(TM), Spring Ale and Boston IPA.
The Company produced four beers under the Oregon Original(TM) label: Indian Pale
Ale, Nut Brown Ale, Raspberry Wheat and Honey Ale. Three cider products were
produced under the HardCore(R) label: HardCore(R) Hard Crisp Cider, HardCore(R)
Hard Cranberry Cider and HardCore(R) Black Cider.

Boston Beer brews its beers at five contract breweries and two Company-owned
breweries. The Company-owned breweries are located in Cincinnati, Ohio (the
"Cincinnati Brewery") and Boston, Massachusetts (the "Boston Brewery"). The five
contract breweries are located in Lehigh Valley, Pennsylvania (the "Allentown
Brewery"), Portland, Oregon (the "Portland Brewery"), Rochester, New York (the
"Genesee Brewery"), Pittsburgh, Pennsylvania (the "Pittsburgh Brewery"), and
Lake Oswego, Oregon (the "Saxer Brewery").

The Company's principal executive offices are located at 75 Arlington Street,
5th Floor, Boston, Massachusetts  02116, and its telephone number is (617) 368-
5000.

INDUSTRY BACKGROUND

The Company's products are positioned in the "Better Beer" segment of the beer
industry, which includes craft beers and most imports (excluding imported beers
sold at lower, domestic prices primarily along the Canadian and Mexican border).
Along with imports and other craft beers, the Company's beers are viewed as a
more flavorful, higher priced and a more intriguing alternative to the domestic
beers which make up approximately 90% of beer consumption in the United States.
The Better Beer segment is approximately 10% of United States beer consumption
and has been averaging approximately 5-10% compounded growth per year, over the
last twenty years.

The Company is the largest craft brewer in the United States and Samuel Adams
Boston Lager(R) is the third largest brand in the Better Beer segment of the
United States brewing industry, trailing only Corona and Heineken. The craft
beer segment is a sub-set of the Better Beer segment. The terms craft brewer and
micro-brewer are often used interchangeably by consumers and within the industry
to mean a small, independent brewer whose predominant product is brewed with
only traditional brewing processes and ingredients. Craft brewers include
contract brewers, small regional brewers, and brewpubs. Craft beers are full-
flavored beers brewed by craft brewers with higher quality hops, malted barley,
yeast and water, but without adjuncts such as rice, corn or stabilizers, and
without water dilution used in mass-produced beer. The Company estimates that in
1998 the craft brew segment accounted for approximately 5 million barrels. Over
the five-year period ended December 31, 1998, craft beer shipments have grown at
a compounded annual rate of approximately 30%, while total beer industry
shipments in the United States have remained substantially level. It should be
noted, however, that growth rates experienced in 1993 and 1994 were
significantly higher than recent years. During 1998, craft beer sales were
relatively flat, while the growth of the overall Better Beer category continued
in line with its historic trends.

The primary cause for the growth of Better Beers is consumers' rediscovery of
and demand for more traditional, full-flavored beers. Before Prohibition, the
United States beer industry consisted of hundreds of small breweries that brewed
such full-flavored beers. Since the end of Prohibition, domestic brewers have
shifted production to less flavorful, lighter beers, which use lower cost
ingredients, and can be mass-produced to take advantage of economies of scale in
production and advertising. This shift toward these mass-produced beers has
coincided with consolidation in the beer industry. Today, three major brewers
(Anheuser Busch, Miller Brewing Company, and Coors Brewing Company) control
approximately 80% of all United States beer shipments.

Per capita beer consumption in the United States has declined from its peak in
the early 1980's. Although consumers began to drink less beer, consumption was
focused on more flavorful or otherwise distinctive beers. In the early 1980's,
this demand was met by imported beers from Holland, Germany, Canada, and Mexico.
Beginning in the late 1980's, domestic craft brewers began selling 

                                       3

<PAGE>
 
richer, more full-flavored beers, usually in small, local geographic markets,
and later, through their own brewpubs. When Samuel Adams Boston Lager(R) was
first brewed in 1984, only a handful of craft breweries existed, few of which
distributed outside their immediate geographical areas. In response to increased
consumer demand for more flavorful beers, the number of craft-brewed beers has
increased dramatically. Currently there are more than 500 craft brewers and
approximately 900 brewpubs. In addition to the many independent brewers, the
three major brewers have all entered this craft market, either through
developing their own beers or by acquiring, in whole or part, or forming
partnerships with, existing craft brewers.

BUSINESS STRATEGY

The Company's business goal is to become the leading brewer in the Better Beer
segment by creating and offering a wide variety of the highest quality full-
flavored beers. The Company strives to achieve this goal by increasing brand
awareness through point-of-sale, advertising and promotional programs, supported
by a large, well-trained sales organization.

QUALITY ASSURANCE

As of December 26, 1998 the Company employed nine brewmasters and retained a
world recognized brewing authority as a consulting brewmaster to monitor the
Company's contract brewing operations and control the production of its beers.
Over 125 tests, tastings, and evaluations are typically required to ensure that
each batch of Samuel Adams(R) beer conforms to the Company's standards. For
Samuel Adams(R) products, the Company uses only high quality hops grown in
Europe. In addition to on-site quality control labs, its brewing department is
supported by a quality control lab at the Boston Brewery. In order to ensure
that its customers enjoy only the freshest beer, the Company includes a
"freshness" date on every bottle of its Samuel Adams(R) and Oregon Original(TM)
products. Boston Beer was among the first craft brewers to follow this practice.

PRODUCT INNOVATIONS

The Company is committed to developing new products in order to introduce beer
drinkers to different styles of beer, promote the Samuel Adams(R) product line
and remain the leading innovator. These new products allow the Samuel Adams(R)
drinker to try new styles of beer while remaining loyal to the Samuel Adams(R)
brand. In 1998, Boston Beer added two new styles to the Samuel Adams(R) product
line, Spring Ale, a seasonal brand and Boston IPA, a year-round brand .
Hardcore(R) Black Cider, a new cider product, was also introduced during 1998.
The Company did not add to its Oregon Original(TM) line in 1998.

The Company continuously evaluates the performance of its various beer and cider
brands and the rationalization of its product line, as a whole. Periodically,
the Company discontinues certain styles. Brands discontinued during 1998 include
Oregon Original(TM) Honey Ale, HardCore(R) Hard Cranberry Cider and Samuel Adams
Boston Cream(TM). In 1997, the Company discontinued four beers brewed under the
Longshot(R) label and two seasonal brands and one year-round brand brewed under
the Oregon Original(TM) label.

BREWING

The Company believes that its strategy of contract brewing, which utilizes the
excess capacity of other breweries, gives the Company flexibility as well as
quality and cost advantages over its competitors. The Company carefully selects
breweries with (i) the capability of utilizing traditional brewing methods, and
(ii) first rate quality control capabilities throughout brewing, fermentation,
finishing, and packaging. Furthermore, by brewing in multiple locations, the
Company reduces its distribution costs and is better able to deliver fresher
beer to its customers than other craft brewers with broad distribution from a
single brewery.

While the Company currently plans to continue its contract-brewing strategy,
effective March 1, 1997, the Company acquired all of the equipment and other
brewery related personal property of an independent brewing company located in
Cincinnati, Ohio. The Company believes this acquisition complements the
contract breweries currently utilized by providing greater flexibility for
brewing production . The Cincinnati Brewery is currently managed by the Samuel
Adams Brewery Company, Ltd., a wholly owned affiliate of the Company. The
results of operations of the Cincinnati Brewery, since the date of acquisition
are included in the accompanying consolidated financial statements.  The Company
will periodically evaluate the advantages of acquiring additional breweries.

In addition to the Company's breweries in Boston and Cincinnati, the Company
currently has relationships with four brewers who produce Samuel Adams(R) and
Oregon Original(TM) lines of beers in the United States, each of which is
described in greater detail below. The Company believes that its breweries and
its contract brewers have sufficient capacity to brew anticipated future volume
over the next five years.

THE SAMUEL ADAMS BREWERY COMPANY, LTD.   Since the Company acquired the
equipment and other brewery-related personal property of a brewery in
Cincinnati, Ohio, on March 1, 1997, the Company has been brewing a majority of
its styles in Cincinnati as 

                                       4

<PAGE>
 
well as producing certain products for contract customers. If and when certain
preconditions are met with respect to the land on which the brewery in
Cincinnati is located, the Company will purchase the real property. The Samuel
Adams Brewery Company, Ltd. is a wholly owned affiliate of the Company.

THE STROH BREWERY COMPANY. In November 1998, the Company entered into a new
brewing contract (the "Stroh Contract") with the Stroh Brewing Company ("Stroh")
for the production of Samuel Adams(R) beer products at Stroh's Allentown Brewery
and Portland Brewery (the "Stroh Breweries").

Under the Stroh Contract, the Company paid Stroh a contract fee in consideration
of the capacity levels which Stroh has committed to the Company over an extended
period of time.  For use of the facilities, Stroh charges the Company a per unit
rate for production and the Company bears the costs of raw materials, excise
taxes and deposits for case pallets and kegs.

On February 8, 1999, Stroh announced that it had reached definitive agreements
to sell certain beer brands and the Allentown Brewery to Pabst Brewing Company
("Pabst") and certain brands to Miller Brewing Company ("Miller") (collectively,
the "Stroh Transactions"). See the "Potential Transaction between Stroh Brewing
Company and Pabst Brewing Company" under Item 7 in Management's Discussion and
Analysis for further discussion.

THE GENESEE BREWING COMPANY. In May, 1997, the Company amended and restated its
brewing contract with the Genesee Brewing Company ("Genesee") related to the
production of Samuel Adams(R) beer products at the Genesee Brewery. The Company
is charged a per unit rate for the production of beer, as well as the costs of
raw materials and excise taxes that Genesee is obligated to pay. This agreement
caps the maximum number of barrels that Genesee is obligated to produce for the
Company. This agreement expires in December 2016; however, Genesee has the right
to terminate this agreement if the volume of production during the immediately
preceding 12-month period falls below certain levels. The Company has the right
to terminate immediately with cause and, subject to certain stated notice
periods, also based on the volume of production during the prior 12-months.

PITTSBURGH BREWING COMPANY. The Company has agreed to extend the current brewing
contract with Pittsburgh Brewing Company ("Pittsburgh") through March 31, 1999
and will continue to negotiate a potential on-going brewing relationship for
production at Pittsburgh's facility.  The Company is currently charged a per
unit rate for brewing, fermenting, and packaging, as well as the cost of raw
materials.

THE SAXER BREWING COMPANY.  In July 1994, the Company's subsidiary, Oregon Beer
and Brewing Company, Inc. ("Oregon Beer"), entered into a brewing contract with
Saxer Brewing Company ("Saxer") relating to the production of certain products
specified by Oregon Beer, bearing the Company's "Oregon Original(TM)" trademark.
Oregon Beer is charged a per unit rate for the production of beer, as well as
the costs of raw materials and excise taxes that Saxer is obligated to pay as a
result of products brewed for Oregon Beer. This agreement expires on July 1,
2004; however, Oregon Beer has the right to terminate the agreement immediately
with cause and otherwise upon providing 45 days notice. Saxer has the right to
terminate the contract upon twelve months' notice.

THE BOSTON BEER COMPANY BREWERY.  The Company uses the Boston Brewery to develop
new types of innovative and traditional beers and to supply, in limited
quantities, certain beers for the local market. All of its beers are typically
brewed at the Boston Brewery in the course of a year. Product development
entails researching market needs and competitive products, sample brewing and
market taste testing.

STRONG SALES AND DISTRIBUTION PRESENCE

Boston Beer sells its products through a sales force of approximately 175
people, which the Company believes is the largest of any craft brewer and one of
the largest in the domestic beer industry. The Company sells its beer to a
network of approximately 450 wholesale distributors, who then sell to retailers
such as pubs, restaurants, grocery chains, package stores, and other retail
outlets. The Company's sales force has a high level of product knowledge and is
trained in the details of the brewing process and the sales process. Sales
representatives typically carry hops, barley, and other samples to educate
wholesale and retail buyers as to the quality and taste of the Company's beers.
The Company has developed strong relationships with its distributors and
retailers, many of which have benefited from the Company's premium pricing
strategy and growth.

ADVERTISING AND PROMOTION

The Company has historically invested in advertising and promotional programs in
efforts to build brand equity. The Company uses television, radio, outdoor
advertising and trade print media as means of advertising. The Company works
closely with its distributors and customers to develop and implement promotions
designed to increase consumer awareness and sales. On-premise promotions, where
legal, include beer tastings, promotions, and extensive use of innovative,
customized menu and table-top cards for visibility. Off-premise promotions,
where legal, include sweepstakes, periodic discounts to retailers and other
programs which often combine consumer, distributor, and retailer elements.

                                       5

<PAGE>
 
PRODUCTS MARKETED

The Company's product strategy is to create and offer a world class variety of
traditional beers and to promote the Samuel Adams(R) product line. During 1998,
the Company marketed twelve year-round and six seasonal beers under the Samuel
Adams(R) brand name, four year-round beers under the Oregon Original(TM) brand
name and three ciders under the HardCore(R) brand name. The Company's Samuel
Adams Boston Lager(R) has historically accounted for the majority of the
Company's sales. The following is a list of continuing styles as of December 26,
1998.

 
BEERS                                  YEAR FIRST BREWED OR INTRODUCED
         Year-Round Beers
 
     Samuel Adams Boston Lager(R)                1984
     Samuel Adams Boston Ale(R)                  1987
     Boston Lightship(R)                         1987
     Samuel Adams(R) Cream Stout                 1993
     Samuel Adams(R) Honey Porter                1994
     Samuel Adams Triple Bock(R)                 1994
     Samuel Adams(R) Scotch Ale                  1995
     Samuel Adams Cherry Wheat(R)                1995
     Samuel Adams(R) Golden Pilsner              1996
     Samuel Adams(R) White Ale                   1997
     Samuel Adams(R) Boston I.P.A.               1998
     Oregon Original(TM) India Pale Ale          1994
     Oregon Original(TM) Nut Brown Ale           1994
     Oregon Original(TM) Raspberry Wheat         1995
 
         Seasonal Beers
 
     Samuel Adams(R) Double Bock                 1988
     Samuel Adams(R) Octoberfest                 1989
     Samuel Adams(R) Winter Lager(R)             1989
     Samuel Adams(R) Cranberry Lambic            1989
     Samuel Adams(R) Summer Ale                  1996
     Samuel Adams(R) Spring Ale                  1998
 
CIDERS
 
     HardCore(R) Hard Crisp Cider                1997
     HardCore(R) Black Cider                     1998

The Company continuously evaluates the performance of its various beer and cider
brands and the rationalization of its product line, as a whole. Periodically,
the Company discontinues certain styles. Brands discontinued during 1998 include
Oregon Original(TM) Honey Ale, HardCore(R) Hard Cranberry Cider and Samuel Adams
Boston Cream(TM). Brands discontinued during 1997 included four beers brewed
under the Longshot(R) label and two seasonal brands and one year-round brand
brewed under the Oregon Original(TM) label.

INGREDIENTS AND PACKAGING

The Company has been successful to date in obtaining sufficient quantities of
the ingredients used in the production of its beers. These ingredients include:

MALT. The Company plans to purchase the malt used in the production of its beer
from two suppliers during 1999 as compared to four suppliers during 1998. The
two-row varieties of barley used in the Company's malt are grown in the United
States and Canada.

HOPS. The Company currently buys principally Noble hops for its Samuel Adams(R)
beers. Noble hops are varieties from specific growing areas usually recognized
for superior taste and aroma properties and include Hallertau-Hallertauer,
Tettnang-Hallertauer, Tettnang-Tettnanger, and Spalt-Spalter from Germany, and
Bohemian Saaz from the Czech Republic. Noble hops are rarer and more expensive
than other varieties of hops. Traditional English hops, East Kent Goldings and
English Fuggles, are used in the Company's ales. The Company has yet to find
alternative hops which duplicate the flavor and aroma of the Noble hops and
traditional English ale 

                                       6

<PAGE>
 
hops. As a result, the Company must purchase sufficient quantities of these
Noble hops to continue to meet its sales demands. The Company stores its hops in
multiple cold storage warehouses to minimize the impact of a catastrophe at a
single site.

The Company purchases its hops from hops dealers, the largest of which has
accounted for between 41% and 57% of annual hop purchases over the past three
years. The Company enters into purchase commitments for hops based upon
forecasted future requirements, among other factors. In recent years the
Company's rate of sales growth has declined, resulting in an increase in hops
inventory. As a result, existing purchase commitments may exceed projected
future needs over the life of such commitments. The Company recorded a provision
of $2.8 million in 1998 to reserve for excess purchase commitments. In addition,
in 1998 the Company recorded a $1.2 million charge associated with the
cancellation of purchase commitment contracts. There were no reserves for hops
contract losses required, or contract cancellation costs incurred, in 1997 or
1996. The Company will continue to make efforts to manage excess inventory
levels and commitments.  The computation of the excess purchase commitment
reserve requires management to make certain assumptions regarding future sales
growth, product mix, cancellation costs and supply, among others. Actual results
may differ materially from management's estimates.

The Company's hops contracts are denominated in German marks or English pounds,
depending on the location of the supplier. Prior to late 1996, the Company had,
as a practice, not hedged the foreign currency risk associated with these
contracts. Historically, the Company's gains and losses from exchange rate
volatility were not material. In late 1996 and 1997, the Company hedged some of
its currency risks. However, the Company's recent actions to reduce its excess
hop commitments or defer its obligation to accept the hops resulted in foreign
exchange losses of $471,000 for the year ended December 26, 1998.  The Company
had no foreign currency forward contracts outstanding as of December 26, 1998.

YEAST. The Company maintains a supply of proprietary strains of yeast that it
supplies to its contract brewers. Since these yeasts would be impossible to
duplicate if destroyed, the Company maintains supplies in several locations. In
addition, the Company's contract brewers maintain a supply of yeasts that are
reclaimed from the batches of beer brewed. The contract brewers are obligated by
their brewing contracts to use proprietary strains of yeasts only to brew the
Company's beers and such yeasts cannot be used without the Company's approval to
brew any other beers produced at the respective breweries.

PACKAGING MATERIALS. The Company maintains competitive sources for the supply of
packaging materials, such as shipping cases, six-pack carriers and crowns.
Currently, glass and labels are each supplied by a single source, although the
Company believes that alternative suppliers are available. The Company enters
into limited term supply agreements with certain vendors in order to receive
preferential pricing.

SALES AND MARKETING

The Company's products are sold to independent distributors through a large
field sales force. With few exceptions, the Company's products are not the
primary brands in the distributor's portfolio. Thus, the Company, in addition to
competing with other beers for a share of the consumer's business, competes with
other beers for a share of the distributor's attention, time, and selling
efforts. The Company considers its distributors its primary customers and is
focused on the relationship it has with its distributors.

Late in 1998, Miller Brewing Company introduced a new contract with its
distributors that seeks to impose new requirements on distributors so as to
focus the distributor's attention, time, selling effort and investment on Miller
products. The Company distributes its products through independent distributors
who may also distribute Miller products. These new contracts may affect the way
distributors allocate selling effort and investment to the brands that they
distribute and may adversely affect the distributors' support of the Company's
brands. The effect on the Company of the new Miller contract is uncertain as
Miller distributors represent a significant part of the Company's distribution
network. The Company closely monitors these and other trends in its distributor
network, and develops programs and tactics intended to best position its
products in the market.

In addition to this distributor focus, the Company has set up its sales
organization to include retail account specialists, both on-premise and off-
premise. The sales organization is designed to develop and strengthen relations
at each level of the three tier distribution system by providing educational and
promotional programs encompassing distributors, retailers and consumers.

The Company has also engaged in extensive media campaigns, primarily radio,
television, billboards and trade print. The Company will continue to use radio
extensively due to the Company's historical success with that medium. A new
television campaign was launched during 1998 and the development of a new
campaign for 1999 is currently in process. In addition, its sales force
complements these efforts by engaging in sponsorships of cultural and community
events, local beer festivals, industry-related trade shows, and promotional
events at local establishments for sampling and awareness, where legal. All of
these efforts are designed to stimulate consumer demand by educating consumers,
retailers, and distributors, on the qualities of the Company's beers and ciders.
The Company uses a wide array of point-of-sale items (banners, neons, umbrellas,
glassware, display pieces, signs and menu stands) designed to stimulate impulse
sales and continued awareness.

                                       7

<PAGE>
 
DISTRIBUTION

The Company distributes its beers in every state in the United States, as well
as the District of Columbia, Puerto Rico, the United States Virgin Islands and
Guam. The Company distributes its beer through a network of over 450
distributors. During 1998, the Company's largest distributor accounted for
approximately 5% of the Company's net sales. No other distributor accounted for
more than 3% of the Company's net sales during 1998. In some states, the terms
of the Company's contracts with its distributors may be affected by laws that
restrict enforceability of some contract terms, especially those related to the
Company's right to terminate the services of its distributors. The Company also
distributes its beers to Canada, France, Germany, Hong Kong, Japan, Sweden,
Switzerland, the United Kingdom, Australia and other Caribbean islands. Exports
represented less than 1% of 1998 revenues.

The Company typically receives orders by the fifth of a month with respect to
products to be shipped the following month. Products are shipped within days of
completion and, accordingly, there has historically not been any significant
product order backlog.

COMPETITION

The craft-brewed and Better Beer segments of the United States beer market are
highly competitive due to continuing product proliferation from craft brewers
and the recent gains in market share achieved by imported beers. The Company's
products also compete with other alcoholic beverages, including other segments
of the beer industry and low alcohol products. The Company competes with other
beer and beverage companies not only for consumer acceptance and loyalty but
also for shelf and tap space in retail establishments and for marketing focus by
the Company's distributors and their customers. The principal factors of
competition in the Better Beer segment of the beer industry include product
quality and taste, brand advertising, trade and consumer promotions, pricing,
packaging and the development of new products. The competitive advantage of the
Company is enhanced by its uncompromising product quality, its development of
new beer styles, innovative point of sale materials, a large sales force,
tactical introduction of seasonal beers and pricing strategies generating above-
average profits to distributors and retailers.

Since the Company began in 1984, there has been a dramatic increase of new
entrants to the craft beer segment. The Company anticipates competition among
craft brewers to intensify as existing craft brewers retrench to their key
markets and core brands. While some of the smaller craft brewers have already
left the marketplace, new entrants into the market continue and competition,
overall, is high. In addition, large brewers have developed or are developing
niche brands and are acquiring interests in small brewers to compete in the
craft-brewed segment of the domestic beer market.

Imported beers have recently gained market share and volumes within the growing
Better Beer segment as they continue to compete aggressively in the United
States. These competitors may have substantially greater financial resources,
marketing strength, and distribution networks than the Company. The Company
believes that it may benefit from the success of the imported beers as they
educate beer drinkers about the Better Beer segment and as they increase the
pool of Better Beer drinkers.

The Company competes directly with craft beers, including those trademarked
under Sierra Nevada, Pete's Wicked, Redhook, and Pyramid and import beers such
as Corona, Heineken, Beck's and Guinness, among others. Niche beers produced by
affiliates of certain major domestic brewers such as Anheuser-Busch, Miller
Brewing Company and Coors Brewing Company, also compete with the Company's
products.

Management believes that as the industry consolidates, Boston Beer will be in a
position to leverage its strengths and successfully compete in a maturing
market. The Company has competitive advantages over the regional craft brewers
as a significant portion of the Company's products are produced utilizing a
contract brewing strategy, which provides greater flexibility and lower initial
capital costs. The use of contract brewing frees up capital for other uses and
allows the Company to brew its beer closer to major markets around the country,
while providing fresher beer to customers and affording lower transportation
costs. The Company also believes that its acquisition of the Cincinnati Brewery,
where it previously contract-brewed its beers, complements its strategy of
contract brewing while providing added flexibility of production. The Company
also believes that its products enjoy competitive advantages over imported
beers, including lower transportation costs, no import charges, and superior
product freshness.

ALCOHOLIC BEVERAGE REGULATION AND TAXATION

The manufacture and sale of alcoholic beverages is a highly regulated and taxed
business. The Company's operations are subject to more restrictive regulations
and increased taxation by federal, state, and local governmental entities than
are those of non-alcohol related beverage businesses. Federal, state, and local
laws and regulations govern the production and distribution of beer. These laws
and regulations govern permitting, licensing, trade practices, labeling,
advertising, marketing, distributor relationships, and related matters. Federal,
state, and local governmental entities also levy various taxes, license fees,
and other similar charges and may require bonds to ensure compliance with
applicable laws and regulations. Failure by the Company to comply with
applicable federal, state, or local laws and regulations could result in
penalties, fees, suspension, or revocation of permits, licenses, or approvals.
There can be no assurance that other or more restrictive laws or regulations
will not be enacted in the future.

                                       8

<PAGE>
 
LICENSES AND PERMITS

The Company produces and sells its beers to distributors pursuant to a federal
wholesaler's basic permit. Brewery and wholesale operations require various
federal, state, and local licenses, permits, and approvals. In addition, some
states prohibit wholesalers and/or retailers from holding an interest in any
supplier, such as the Company. Violation of such regulations can result in the
loss or revocation of existing licenses by the wholesaler, retailer, and/or the
supplier. The loss or revocation of any existing licenses, permits, or
approvals, and/or failure to obtain any additional or new licenses, could have a
material adverse effect on the ability of the Company to conduct its business.
On the federal level, brewers are required to file an amended notice with the
Bureau of Alcohol, Tobacco and Firearms ("BATF") in the event of a material
change in the brewing process, brewing equipment, brewery's location, brewery's
management, or a material change in the brewery's ownership. The Company's
operations are subject to audit and inspection by the BATF at any time.

On the state and local level, some jurisdictions merely require notice of any
material change in the operations, management, or ownership of a permittee or
licensee. Some jurisdictions require advance approvals and require that new
licenses, permits, or approvals must be applied for and obtained in the event of
a change in the management or ownership of the permittee or licensee. State and
local laws and regulations governing the sale of beer within a particular state
by an out-of-state brewer or wholesaler vary from locale to locale.

The BATF permits and brewer's registrations can be suspended, revoked, or
otherwise adversely affected for failure to pay tax, keep proper accounts, pay
fees, bond premises, abide by federal alcoholic beverage production and
distribution regulations and to notify the BATF of any change (as described
above), or if holders of 10% or more of the Company's equity securities are
found to be of questionable character. Permits, licenses and approvals from
state regulatory agencies can be revoked for many of the same reasons.

Because of the many and various state and federal licensing and permitting
requirements, there is a risk that one or more regulatory agency could determine
that the Company has not complied with applicable licensing or permitting
regulations or does not maintain the approvals necessary for it to conduct
business within its jurisdiction. There can be no assurance that any such
regulatory action would not have a material adverse effect upon the Company or
its operating results.

TAXATION

The federal government and all of the states levy excise taxes on alcoholic
beverages, including beer. For brewers producing no more than 2.0 million
barrels of beer per calendar year, the federal excise tax is $7.00 per barrel on
the first 60,000 barrels of beer removed for consumption or sale during a
calendar year, and $18.00 per barrel for each barrel in excess of 60,000. For
brewers producing more than 2 million barrels of beer in a calendar year, the
federal excise tax is $18.00 per barrel. As the brewer of record of its beers,
the Company has been able to take advantage of this reduced tax on the first
60,000 barrels of its beers produced. Individual states also impose excise taxes
on alcoholic beverages in varying amounts, which have also been subject to
change. The state excise taxes are usually paid by the Company's distributors.

In addition, the federal government and each of the states levy taxes on hard
cider. Prior to October 1997, hard cider had always been taxed as a wine under
the Federal wine excise tax at the rate of $1.07 per gallon ($33.17 per barrel)
for non-effervescent hard cider, which is the classification in which the
Company's HardCore(R) product was included. However, effective October 1, 1997,
the federal government passed an amendment modifying the tax treatment of hard
cider, by lowering the federal excise tax rate on qualifying hard cider to 22.6
cents per gallon ($7.01 per barrel). Sales of the Company's HardCore(R) products
represented less than 3% of the volume of all of the Company's products during
1998.

Congress and state legislators routinely consider various proposals to impose
additional excise taxes on the production and distribution of alcoholic
beverages, including beer and hard cider. Further increases in excise taxes on
beer and/or hard cider, if enacted, could result in a general reduction of sales
for the affected products.

TRADEMARKS

The Company has obtained United States Trademark Registrations for the marks
Samuel Adams(R), the design logo of Samuel Adams, Samuel Adams Boston Lager(R),
Boston Ale(R), Lightship(R), Winter Lager(R), Triple Bock(R), LongShot(R),
HardCore(R), Oregon Original(TM) and other marks. The Samuel Adams(R) mark and
the Samuel Adams Boston Lager(R) mark (including the design logo of Samuel
Adams) and other Company marks are also registered or registration is pending in
various foreign countries. The Company regards its "Samuel Adams" and other
trademarks as having substantial value and as being an important factor in the
marketing of its products. The Company is not aware of any infringing uses that
could materially affect its current business or any prior claim to the
trademarks that would prevent the Company from using such trademarks in its
business. The Company's policy is to pursue registration of its marks whenever
possible and to oppose vigorously any infringements of its marks.

The Company occasionally grants, where permissible, short-term trademark
licenses to independent retailers of its products.

                                       9

<PAGE>
 
In 1996, the Company entered into a license arrangement with Whitbread PLC, the
fourth largest brewery in the United Kingdom, pursuant to which a new hybrid
brew was developed and marketed under the trademark, "Boston Beer". The recipe
was developed by Whitbread Beer Company, a subsidiary of Whitbread PLC, with
assistance from the Company's brewers. The Company owns the trademarks for the
new product and has granted Whitbread an exclusive license to use that trademark
in Great Britain and Ireland. The Company receives a royalty from the sale of
"Boston Beer".

On March 19, 1996, the Company entered into a Trademark License and Technical
Assistance Agreement (the "Trademark Agreement") with Joseph E. Seagram & Sons,
Inc. ("Seagram"), pursuant to which the Company licensed the "Devil Mountain"
trademarks for use by Seagram on beers which Seagram developed, with technical
assistance from the Company. The Trademark Agreement was canceled during 1998
and the Company does not expect to receive any additional royalty payments
during 1999.

In addition, the Company has licensed its trademark, "Samuel Adams Brew
House(R)", "Sam Adams Brew House(R)" and various related marks to certain
entities for purposes of establishing licensed Brew Houses at airport locations
and elsewhere. The Company does not receive a royalty pursuant to these license
arrangements.

ENVIRONMENTAL REGULATIONS AND OPERATING CONSIDERATIONS

The Company's operations are subject to a variety of extensive and changing
federal, state, and local environmental laws, regulations, and ordinances that
govern activities or operations that may have adverse effects on human health or
the environment. Such laws, regulations or ordinances may impose liability for
the cost of remediating, and for certain damages resulting from, sites of past
releases of hazardous materials. The Company believes that it currently
conducts, and in the past has conducted, its activities and operations in
substantial compliance with applicable environmental laws, and believes that any
costs arising from existing environmental laws will not have a material adverse
effect on the Company's financial condition or results of operations. There can
be no assurance, however, that environmental laws will not become more stringent
in the future or that the Company will not incur costs in the future in order to
comply with such laws.

The Company's operations are subject to certain hazards and liability risks
faced by all brewers, such as potential contamination of ingredients or products
by bacteria or other external agents that may be wrongfully or accidentally
introduced into products or packaging. While the Company has never experienced a
contamination problem in its products, the occurrence of such a problem could
result in a costly product recall and serious damage to the Company's reputation
for product quality, as well as give rise to product liability claims. The
Company and its contract brewers maintain insurance which the Company believes
is sufficient to cover any claims which might result from a contamination
problem in its products.

EMPLOYEES

As of March 12, 1999, the Company employed approximately 335 employees, of which
sixty-seven were covered by collective bargaining agreements at the Cincinnati
Brewery. The representation involves three labor unions, all of whom are under
contracts expiring in 2001 or 2002. The Company believes it maintains a good
working relationship with those labor unions and has no reason to believe that a
good working relationship will not continue. The Company has experienced no work
stoppages and believes that its employee relations are good.


I
TEM 2.   PROPERTIES

The Company maintains its principal corporate offices and a brewery in Boston,
Massachusetts and a brewery in Cincinnati, Ohio. The Company also maintains
sales and administrative offices in California and Tennessee. The Company
currently leases all of its facilities. However, upon satisfaction of certain
pre-conditions, the Company is committed to purchase the brewery-related real
estate in Cincinnati. The Company believes that its facilities are adequate for
its current needs and that suitable additional space will be available on
commercially acceptable terms as required.


ITEM 3.   LEGAL PROCEEDINGS
 
The Company is party to certain claims and litigation in the ordinary course of
business. The Company does not believe any of these proceedings will,
individually or in the aggregate, have a material adverse effect upon its
financial condition or results of operations.


ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF  SECURITY HOLDERS

There were no matters submitted to a vote of security holders during the fourth
quarter ended December 26, 1998.

                                       10

<PAGE>
 

                                    PART II
                                        

ITEM 5.    MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

The Company's Class A Common Stock is listed for trading on the New York Stock
Exchange. The Company's NYSE symbol is SAM. For the fiscal periods indicated,
the high and low per share sales prices for the Class A Common Stock of the
Boston Beer Company, Inc. as reported on the New York Stock Exchange-Composite
Transaction Reporting System were as follows:
 
Fiscal 1998               HIGH                LOW     
- ----------------        --------            --------  
                                                      
First Quarter           $10.0000             $7.6250  
Second Quarter          $12.4380             $8.9380  
Third Quarter           $12.7500             $6.5000  
Fourth Quarter          $ 9.2500             $6.5000  
                                                      
Fiscal 1997             HIGH                LOW       
- ----------------        --------            --------  
First Quarter           $10.8750             $8.0000  
Second Quarter          $10.6250             $8.1250  
Third Quarter           $10.0000             $8.2500  
Fourth Quarter          $11.0000             $7.8125   
 
There were 17,626 holders of record of the Company's Class A Common Stock as of
March 12, 1999. Excluded in the number of stockholders of record are
stockholders who hold shares in "nominee" or "street" name. The closing price
per share of the Company's Class A Common Stock as of March 12, 1999, as
reported under the New York Stock Exchange-Composite Transaction Reporting
System, was $7.94.
 
The Company's Class B Common Stock is not listed for trading. However, each
share of Class B Common Stock is convertible, at any time, at the option of the
holder thereof, into one share of Class A Common Stock. As of March 12, 1999, C.
James Koch was the sole holder of record of all the Company's Class B Common
Stock then issued and outstanding.

The holders of the Class A and Class B Common Stock are entitled to dividends,
on a share-for-share basis, only if and when declared by the Board of Directors
of the Company out of funds legally available for payment thereof. Since its
inception, the Company has not paid dividends and does not currently anticipate
paying dividends on its Class A or Class B Common Stock in the foreseeable
future. It should be further noted that under the terms of the existing credit
agreement dated March 21, 1997, the Company is prohibited from paying dividends.

                                       11

<PAGE>
 

ITEM 6.                 SELECTED FINANCIAL DATA

<TABLE>
<CAPTION>
                                                                              THE BOSTON BEER COMPANY, INC.
                                                                                  SELECTED FINANCIAL DATA
 
                                                                                         Year Ended
                                                               -----------------------------------------------------------
 
                                                                   Dec. 26,      Dec. 27,   Dec. 28,   Dec. 31,   Dec. 31,
                                                                     1998          1997       1996       1995       1994
                                                                     ----          ----       ----       ----       ----  
                                                                           (in thousands, except per share data)
<S>                                                                <C>           <C>        <C>        <C>        <C>
INCOME STATEMENT DATA:
Sales                                                                 $205,020    $209,490   $213,879  $169,362   $128,077
Less excise taxes                                                       21,567      25,703     22,763    18,049     13,244
                                                               -----------------------------------------------------------
Net sales                                                              183,453     183,787    191,116   151,313    114,833
Cost of Sales                                                           89,393      89,998     95,786    73,847     52,851
                                                               -----------------------------------------------------------
Gross Profit                                                            94,060      93,789     95,330    77,466     61,982
 
Advertising, promotional and selling expenses                           66,928      69,537     70,131    60,461     46,503
General and administrative                                              12,528      11,666     12,042     7,585      6,593
                                                               -----------------------------------------------------------
Total operating expenses                                                79,456      81,203     82,173    68,046     53,096
                                                               -----------------------------------------------------------
Operating income                                                        14,604      12,586     13,157     9,420      8,886
Other (expense) income, net                                               (238)        695      1,714       959        199
                                                               -----------------------------------------------------------
Income before provision for income taxes                                14,366      13,281     14,871    10,379      9,085
Provision (benefit) for income taxes (1)                                 6,442       5,723      6,486    (2,195)         -
                                                               -----------------------------------------------------------
 
Net income                                                            $  7,924    $  7,558   $  8,385  $ 12,574   $  9,085
                                                               ===========================================================
 
Pro forma data:
Income before provision for income taxes                                   n/a         n/a        n/a  $ 10,379   $  9,085
Pro forma provision for income taxes (unaudited) (2)                       n/a         n/a        n/a     4,483      3,765
                                                               -----------------------------------------------------------
Pro forma net income (unaudited) (2)                                       n/a         n/a        n/a  $  5,896   $  5,320
                                                               ===========================================================
 
Earnings per share - basic                                            $   0.39    $   0.37   $   0.42         -          -
Earnings per share - diluted                                          $   0.39    $   0.37   $   0.41         -          -
Pro forma earnings per share - basic (unaudited) (2)                         -           -          -  $   0.35   $   0.32
Pro forma earnings per share - diluted (unaudited) (2)                       -           -          -  $   0.33   $   0.29
Weighted average shares outstanding - basic (3)                         20,486      20,324     19,970    16,991     16,642
Weighted average shares outstanding - diluted (3)                       20,565      20,490     20,352    17,906     18,128
 
STATISTICAL DATA:
Barrels sold                                                             1,227       1,352      1,213       961        714
Net sales per barrel (4)                                              $    150    $    136   $    158  $    158   $    161
Employees (4)                                                              349         335        253       196        138
Net sales per employee (4)                                            $    526    $    549   $    755  $    772   $    832
 
BALANCE SHEET DATA:
Working capital                                                       $ 52,049    $ 50,550   $ 47,769  $ 45,266   $  3,996
Total assets                                                          $122,689    $105,399   $ 97,115  $ 76,690   $ 31,776
Total long term obligations                                           $  3,234    $ 10,789   $  1,800  $  1,875   $  1,950
Total partners'/stockholders' equity                                  $ 82,028    $ 71,284   $ 64,831  $ 54,798   $  6,600
Dividends                                                                    -           -          -         -          -
</TABLE>
 
 
 
(1) In 1995, the Company recorded a one-time tax benefit of $2.0 million upon
    change in tax status of the entity, and a tax benefit of $235,000 for the
    period November 21, 1995 to December 31, 1995.

(2) Reflects pro forma provisions for income taxes using statutory federal and
    state corporate income tax rates that would have been applied had the
    Company been required to file income tax returns during the indicated
    period.

(3) Reflects weighted average number of common and common equivalent shares of
    the Class A and Class B Common Stock assumed to be outstanding during the
    respective periods. For the years ended December 31, 1995 and December 31,
    1994, shares reflect pro forma weighted average numbers.

(4) On March 1, 1997, the Company acquired the equipment and other brewery-
    related property of a brewery in Cincinnati, Ohio.

                                       12

<PAGE>
 

ITEM 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
          RESULTS OF OPERATIONS.

BUSINESS ENVIRONMENT

The Boston Beer Company is engaged in the business of brewing and selling beer,
ale and cider products primarily in the domestic market and, to a lesser extent,
in selected international markets.  The alcoholic beverage industry is highly
regulated at the federal, state and local levels.  The Federal Treasury
Department's Bureau of Alcohol, Tobacco, and Firearms ("BATF") enforces laws
under the Federal Alcohol Administration Act.  The BATF is responsible for
enacting excise tax laws which directly affect the Company's results of
operations.  State and regulatory authorities have the ability to suspend or
revoke the Company's licenses and permits or impose substantial fines for
violations.  The Company has established strict guidelines in efforts to ensure
compliance with all state and federal laws. However, the loss or revocation of
any existing license or permit could have a material effect on the Company's
business, results of operations, cash flows and financial position.

Boston Beer competes in what the Company defines as the "Better Beer" category,
also referred to as the Specialty Beer category. The defining factors for
"Better Beer" includes price, quality, image and taste, and are representative
of imports and craft beers. The Company prices its beers at a premium compared
to domestic mass-produced beers but at a level consistent with other beers in
the Better Beer category. The Company believes that this pricing is appropriate
given the quality and reputation of its core brands, while realizing that
economic pricing pressures may affect future pricing levels.

Prior to the acquisition of the Cincinnati Brewery, the Company operated
primarily with the strategy of contract brewing, which utilizes the excess
capacity of other breweries.  During 1998, approximately 70% of the Company's
products were produced by utilizing the excess capacity of non company-owned
breweries.  This strategy provides the Company with flexibility in addition to
quality and cost advantages and increased cash flows.  The Company follows
strict guidelines in selecting the appropriate brewery and monitoring the
production process in order to ensure that quality and control standards are
attained. The on-going ownership and on-going operation of breweries currently
owned by the Stroh Brewing Company, where the Company produces a significant
amount of its beer, are in doubt due to the proposed Stroh Transactions (see
further discussion below under "Potential Transaction between Stroh Brewing
Company and Pabst Brewing Company").  The Company does not believe that its
results of operations, cash flows or financial position will be materially
affected as a result of the Stroh Transactions.  The Company believes that it
will have adequate capacity for the production of its products for at least five
years.

The Company faces competition from considerably larger companies with more
resources, and from many smaller craft brewers that typically operate in
locally-contained markets. The Better Beer category has become increasingly
competitive over the past few years due to two primary factors : 1) a
significant number of new entrants, primarily in locally-contained markets and
2) existing companies, primarily imports, competing more aggressively.  As a
result, the Company has lost share in the Better Beer segment and its revenue
growth rate has become stagnant. As the market matures and the Better Beer
category continues to consolidate, the Company believes that companies that are
well-positioned in terms of brand equity, marketing and distribution will
prosper.  With approximately 450 distributors nationwide and 175 salespeople, a
commitment to maintaining brand equity, and the quality of its beer, the Company
believes it is well-positioned to compete in a maturing market.

The demand for the Company's products is subject to changes in consumers'
tastes.  Since the Company began brewing beer, one trend regarding consumers'
preferences  has been a shift towards more flavorful, higher quality beers,
which has increased the demand for Better Beer products.  The Company's product
strategy is in line with this trend.  However, certain of its styles appear to
be adversely affected by a counter-trend toward more mainstream lighter styles.
A change in consumer tastes or in the demand for Better Beer products may affect
the Company's future results of operations, cash flows and financial position.
The Company cannot predict whether the trend towards full-bodied, more flavorful
beers will continue.

1997 BREWERY ACQUISITION

Effective March 1, 1997, the Company acquired all of the equipment and other
brewery-related personal property of an independent brewing company located in
Cincinnati, Ohio. The Company believes that owning a brewery will complement the
contract brewery arrangements currently in place by providing greater
flexibility for brewing production and adding to the Company's existing brewing
capacity. The Cincinnati Brewery is currently managed by the Samuel Adams
Brewery Company, Ltd., a wholly owned affiliate of the Company. The results of
operations of the Cincinnati Brewery, since the date of acquisition, are
included in the accompanying consolidated financial statements.

RESULTS OF OPERATIONS

Please refer to pages 36 and 37 for quarterly financial results of the Company.

For purposes of this discussion, Boston Beer's "core brands" include all
products sold under the Samuel Adams(R), Oregon Original(TM) or HardCore(R)
trademarks. "Core brands" do not include the products brewed at the Cincinnati
Brewery under contract arrangements
                                       13

<PAGE>
 
for third parties. Volume produced under contract arrangements is referred to
below as "non-core products". Boston Beer's flagship brand is Samuel Adams
Boston Lager ("Boston Lager").

The following table sets forth certain items included in the Company's
consolidated statements of income as a percentage of net sales:


<TABLE>
<CAPTION>  
                                                                                  YEARS ENDED
                                                                                  -----------
                                                             12/26/98              12/27/97             12/28/96
                                                             --------              --------             --------
Barrels Sold (in 000's)                                         1,227                 1,352                1,213
<S>                                                          <C>                   <C>                  <C> 
                                                                             PERCENTAGE OF NET SALES
                                                                            -------------------------
Sales                                                          111.8%                114.0%               111.9%
Less Excise Taxes                                               11.8%                 14.0%                11.9%
                                                             --------              --------             --------      
Net Sales                                                      100.0%                100.0%               100.0%
                                                             
Cost of Sales                                                   48.7%                 49.0%                50.1%
                                                             --------              --------             --------      
     Gross Profit                                               51.3%                 51.0%                49.9%
                                                                                                   
Advertising, promotional, and selling expenses                  36.5%                 37.8%                36.7%
General and administrative expenses                              6.8%                  6.4%                 6.3%
                                                             --------              --------             --------      
Total operating expenses                                        43.3%                 44.2%                43.0%
                                                             --------              --------             --------      
                                                                                                   
Operating income                                                 8.0%                  6.8%                 6.9%
                                                                                                   
Other (expense) income, net                                     (0.1)%                 0.4%                 0.9%
                                                             --------              --------             --------      
Income before provision for income taxes                         7.9%                  7.2%                 7.8%
Provision for income taxes                                       3.5%                  3.1%                 3.4%
                                                             --------              --------             -------- 
Net income                                                       4.4%                  4.1%                 4.4%
                                                             ========              ========             ========       
</TABLE>


YEAR ENDED DECEMBER 26, 1998 COMPARED TO YEAR ENDED DECEMBER 27, 1997

SALES.  Volume. Volume decreased by 125,000 barrels, of which 110,000 barrels
was due to a decline in the production of non-core products.  Total volume
relating to non-core products was 74,000 barrels for the year ended December 26,
1998 as compared to 184,000 barrels for the year ended December 27, 1997.
Management anticipates a continued decline in volume relating to non-core
products.

Volume for Boston Beer's core brands declined by 15,000 barrels to 1,153,000
barrels for the year ended December 26, 1998. This decline was due to continued
sales declines of the Oregon Original(TM) brands and other year-round beer
styles, offset by an increase in the sale of Boston Lager and ciders. Sales for
seasonal brands were flat during 1998 as compared to 1997. The decline in Oregon
Original brands is partially due to the discontinuance of certain styles during
1997 and 1998. The single-digit growth in Boston Lager shipments is encouraging
as this is the flagship brand and represents over 60% of total shipments. The
decline in the year-round styles is indicative of the market continuing to
mature as consumers become less inclined to experiment with new styles.

Selling Price. The selling price per barrel increased by $13.52, or 10.0% to
$149.53 per barrel for the year ended December 26, 1998.  This is partially due
to a decline in sales of non-core products.  Revenue contributed from non-core
products is significantly lower per barrel than revenue contributed from core
brands.  The decline of shipments of non-core products improved average net
sales by $11.51 per barrel, or 7.1%.  The remaining increase in net selling
price per barrel is due to normal price increases and to a lesser extent,
changes in the packaging mix.

Significant changes in the packaging mix would have a material effect on sales.
The Company packages its core brands in bottles and kegs. Assuming the same
level of production, a shift in the mix from kegs to bottles would effectively
increase revenue per barrel, as the price per equivalent barrel is greater for
bottles than for kegs. The ratio of kegs to bottles declined only slightly in
core brands to 28.5% of total shipments relating to kegs during 1998 from 29.3%
in the prior year and therefore did not have a significant effect on revenue per
barrel during 1998.

                                       14




<PAGE>
 
GROSS PROFIT.  Gross profit, as a percentage of net sales, increased to 51.3%
for the year ended December 26, 1998, as compared to 51.0% for the year ended
December 27, 1997. Cost of sales decreased to 48.7% as a percentage of net sales
for the year ended December 26, 1998, as compared to 49.0% for the year ended
December 27, 1997.  This is primarily due to a decline in barrels shipped
related to non-core products, improvements in the production process at the
Cincinnati Brewery, and lower costs of certain raw materials. Increases in hop
inventory-related expenses and depreciation expense partially offset these
declines.

The gross profit margin on non-core products is significantly lower than for
core brands.  Therefore, the decline in the non-core product volume increased
gross profit per barrel for the Company as a whole.  The decline in volume
relating to non-core products resulted in an increase in gross profit as a
percentage of net sales of approximately 1.1%.  The Company anticipates a
continued decline in volume relating to non-core products.

The Company recognized an expense of $2.8 million during 1998 in order to accrue
for anticipated losses from existing hops purchase commitments. Additionally,
the Company incurred expenditures of $1.2 million during 1998 relating to the
cancellation of certain hops contracts. See "Hops Purchase Commitments" below
for further discussion.

Depreciation expense increased by $933,000, or 27.5%, during 1998 as compared to
1997.  This increase results from the depreciation of several capital assets
acquired during 1997 relating to keg purchases and  modifications to kegging and
bottling lines at various breweries. In accordance with the Company's
depreciation policy, one-half of a year's worth of depreciation is recognized
during the year of acquisition.

Additional factors which may affect gross profit include changes in the
packaging and product mix . The Company packages its core brands in bottles and
kegs. While gross profit as a percentage of net sales is higher for kegs than
for bottles, the per equivalent barrel gross profit is higher for bottles than
for kegs, in absolute terms. Therefore, an increase in kegs as a percentage of
physical volume while increasing the overall gross profit margin as a percentage
of net sales, will deliver fewer absolute gross profit dollars with which to run
the business. In 1998 keg sales as a percentage of total equivalent barrels of
core brands declined to 28.5% from 29.3% in 1997. However, the gross profit per
equivalent barrel increased in absolute dollars for both kegs and bottles due to
revenue increases and cost decreases for both types of packages. The net result
of the packaging mix shift and the per unit profit improvement was an increase
in gross profit per equivalent barrel in both absolute and percentage terms in
the core business.

Gross profit was not significantly affected during 1998 due to a change in
product mix from the previous year.  Seasonal and year-round beers can be more
expensive to produce and the additional expenses may not be offset by increased
pricing.

Gross profit is not significantly affected by changes in brewing locations. The
Company attempts to minimize total costs, including freight, by shifting
production between plants.  During 1998, the Company shifted production in order
to maximize utilization in the Cincinnati Brewery, while ensuring cost efficient
production.  During 1999, production may shift between plants as a result of the
pending Stroh Transactions (see discussion below under "Potential Transaction
between Stroh Brewing Company and Pabst Brewing Company"). The Company does not
anticipate a material impact on gross profit as a result of the Stroh
Transactions.

ADVERTISING, PROMOTIONAL, AND SELLING. Advertising, promotional, and selling
expenses decreased as a percentage of net sales to 36.5% for the year ended
December 26, 1998 from 37.8% for the year ended December 27, 1997.  This
decrease is primarily due to a decline in total salaries, other employee-related
expenditures, local marketing and point of sale expenditures, which were
partially offset by an increase in advertising expenditures.

The decline in salaries, other employee-related expenditures and local marketing
expenditures is primarily due to a decline in sales personnel headcount of
approximately 10% from the previous year.  The Company reorganized the sales
division during the first quarter of 1998 in efforts to achieve improved
efficiencies. The Company remains committed to maintaining a strong and
efficient sales force. In addition, improved policies and controls relating to
sales-related expenditures contributed to the decline.  Point of sale
expenditures declined primarily due to increased utilization of internally-
developed promotional and marketing campaigns.  This has served to increase the
quality and efficiency of brand development activities.

In fiscal year 1998, the Company increased its advertising expenditures by
approximately 29.0% over expenditures in the prior year.  Boston Beer launched a
national television advertising campaign during the third quarter of 1998, the
results of which are not yet clear. The Company anticipates launching another
television campaign during 1999.

GENERAL AND ADMINISTRATIVE. General and administrative expenses increased by
$862,000 or 7.4% as compared to the prior year. This increase is primarily due
to a change in bad debt expense from a recovery of $617,000 during fiscal year
1997 to an expense of $246,000 during fiscal year 1998. The cash collections
process was significantly improved during 1997 which resulted in the recovery of
previously written-off amounts. Net of this factor, general and administrative
expenses were flat as compared to the prior year.

                                       15

<PAGE>
 
INTEREST INCOME. Interest income increased by $377,000 due to an increase in
average cash and short-term investments from approximately $36.9 million during
1997 to $43.5 million during 1998.

OTHER EXPENSE, NET.  Other expense increased from $318,000 for the year ended
December 27, 1997 to $1.8 million for the year ended December 26, 1998.  This
increase was primarily due to a $1.4 million loss realized on the sale of a
marketable security in fiscal year 1998.

INCOME TAXES. The effective income tax rate increased to 44.8% for the year
ended December 26, 1998 as compared to 43.1% for the year ended December 27,
1997.  This increase is primarily due to the $1.4 million loss realized on the
sale of a marketable equity security during 1998, as the Company does not expect
to fully realize the tax benefit associated with such loss.

YEAR ENDED DECEMBER 27, 1997 COMPARED TO YEAR ENDED DECEMBER 28, 1996

SALES. Volume increased by 11.5% to 1.4 million barrels in fiscal year 1997 from
1.2 million barrels in fiscal year 1996. This increase in 1997, was due to the
inclusion of 184,000 barrels of non-core products. The Company's core brands
sold 3.7% fewer barrels in 1997 than in 1996; however, sales of Samuel Adams
Boston Lager(R) and seasonal brands, which make up 73% of the Company's core
brand sales, continued to increase. Despite this, net sales decreased by 4% to
$183.8 million in 1997 from $191.1 million in 1996 (core brand sales decreased
to $181.7 million in 1997), as sales of non-core products are at prices much
lower than those of the Company's core brands. Net sales price per barrel
decreased $21.62 due primarily to sales of non-core products.

GROSS PROFIT.   Gross profit decreased to $93.8 million in fiscal year 1997 from
$95.3 million in fiscal year 1996. Cost of sales decreased $12.40 per barrel to
49.0% of net sales in 1997 from 50.1% of net sales in 1996. This decrease was
due principally to the following: a decrease in raw material costs, reduced
packaging costs (due to a shift in the core brands package mix towards kegs,
resulting in decreased packaging material costs), lower packaging obsolescence
expense and lower freight and warehousing costs, offset by an increase in
depreciation (principally on kegs & the Cincinnati Brewery assets) and a
reduction of savings from re-used glass.

ADVERTISING, PROMOTIONAL, AND SELLING.   Advertising, promotional, and selling
expenses decreased by 0.8% to $69.5 million in fiscal year 1997 from $70.1
million in fiscal year 1996. The per barrel expense decreased by $6.39 to $51.43
in 1997 from $57.82 in 1996 primarily as a result of the additional non-promoted
barrels from the Cincinnati Brewery (core brand expenses were $59.35 per barrel
in 1997). As a percentage of net sales, advertising, promotional, and selling
expenses increased to 37.8% in 1997 from 36.7% in 1996. The 0.8% decrease in
expenditures reflected a change in marketing mix with increased emphasis on
selling expenses.

GENERAL AND ADMINISTRATIVE.   General and administrative expenses decreased by
3.1% to $11.7 million in fiscal year 1997 from $12.0 million in fiscal year
1996. This net decrease was primarily caused by a $2.4 million reduction in bad
debt expense. This was partially offset by the inclusion of general and
administrative expense of the Cincinnati Brewery, as well as increases in
personnel, salaries and related employee benefits.

OPERATING INCOME.   Operating income decreased by 4.3% to $12.6 million in
fiscal year 1997 from $13.2 million in fiscal year 1996. This decrease was due
primarily to the inclusion of the Cincinnati Brewery which recorded a loss in
1997. This loss was partially offset by the savings in general and
administrative expense and advertising, promotional and selling expenses as
discussed above.

OTHER INCOME, NET.  Other income, net, decreased by 59.5% to $695,000 in fiscal
year 1997 from $1.7 million in fiscal year 1996. This decrease of $1.0 million
is primarily due to an increase in interest expense due to borrowings against
the revolving line of credit and the Company's long term note and a charge for
the repurchase of an overseas distribution right in Western Europe.

NET INCOME.  Net income decreased by 9.9% to $7.6 million in fiscal year 1997
from $8.4 million in fiscal year 1996. This decrease is due to a reduction in
operating income of $571,000 and other income of $1.0 million, as discussed
above, and is offset by a reduction in income tax expense of 11.8% in 1997 to
$5.7 million from $6.5 million in 1996.

LIQUIDITY AND CAPITAL RESOURCES

The Company's financial condition continued to be strong during 1998.   Cash and
short-term investments increased to $53.9 million for the year ended December
26, 1998 from $35.8 million as of December 27, 1997.  The Company's primary
source of liquidity is net cash provided by operating activities, which was
$22.4 million for the year ended December 26, 1998 as compared to $7.0 million
for the year ended December 27, 1997. The cash provided by operating activities
during 1998 represents net income of $7.9 million adjusted for depreciation and
amortization of $5.2 million, a loss on the sale of a marketable equity security
of $1.4 million, and changes in assets and liabilities of $7.4 million.  The
changes in assets and liabilities are due to a decline in accounts receivable
of 

                                       16

<PAGE>
 
$4.2 million resulting primarily from improved procedures in cash collections
and various timing differences. Contract commitment fees paid and received
substantially offset one another during 1998.

Cash used for capital expenditures declined to $5.2 million during 1998 as
compared to $15.3 million during 1997.  In addition, the Company used $4.4
million of cash in 1997 for the acquisition of certain assets of the Cincinnati
Brewery.  Factors that contributed to the decline primarily include a decrease
in capital expenditures relating primarily to kegs, production line
modifications and leasehold improvements to the Company's corporate office. The
Company initiated a conversion from Hoff-Stevens kegs to Sankey kegs during
1996. The Company spent $249,000 in purchasing Sankey kegs during 1998 as
compared to $6.1 million during 1997. During 1998 and 1997 the Company incurred
$4.6 million and $6.4 million, respectively, in leasehold improvements and
production line modifications at various brewery locations. The decline
primarily relates to decreased expenditures incurred at the Cincinnati Brewery.
During 1997, the Company significantly expanded its corporate office space
located in Boston, Massachusetts. Capital expenditures incurred during 1997
relating to the expansion totaled approximately $1.1 million.

The Company invested $11.5 million of net positive cash flow in government
securities during 1998 as compared to $1.6 million during 1997.  The Company has
historically  invested its excess cash in money market funds, short-term
treasury and agency bills, and more recently, high grade commercial paper.
During 1996, the Company purchased a marketable equity security at a cost of
$4.3 million.  This security was sold during the second quarter of 1998 at a
loss of $1.4 million.

During fiscal year 1997, net cash provided by financing activities was $8.7
million, resulting from net borrowings of $10.0 million and $577,000 of proceeds
received from stock option exercises, offset by $1.9 million of payments on
long-term debt.  This compares to $107,000 of cash provided by financing
activities during fiscal year 1998.  On March 31, 1999, the existing $15.0
million line of credit expires and the balance outstanding under the $30.0
million line of credit converts to a term note. As of December 26, 1998, $10.0
million was outstanding under the $30.0 million line of credit. Principal
payments on the term note are payable either in twenty quarterly installments or
upon expiration of the line. The Company currently expects to repay the
outstanding balance on the line of credit during 1999.

Effective October 15, 1998, the Board authorized management to implement a stock
repurchase, subject to an aggregate expenditure limitation of $10.0 million.
There were no stock repurchases under this program as of December 26, 1998.

With working capital of $52.0 million at December 26, 1998, resources should be
sufficient to meet the Company's short-term and long-term operating, capital and
debt service requirements.

THE POTENTIAL IMPACT OF KNOWN FACTS, COMMITMENTS, EVENTS AND UNCERTAINTIES

YEAR 2000

As has been widely publicized, many computer systems and microprocessors are not
programmed to accommodate dates beyond the year 1999. The Company's exposure to
this year 2000 ("Y2K") problem comes not only from its own internal computer
systems and microprocessors, but also from the systems and microprocessors of
its key vendors, including by way of illustration its contract breweries, raw
material suppliers, utility companies, payroll services and banks, and its
distributors and other customers. A failure of any of these internal or external
systems could adversely affect the Company's ability to brew, package, sell,
ship and bill for products and to collect on invoices and account for
collections. In effect, any significant computer failure could have a material
adverse effect on the Company's operations. With this in mind, the Company
commenced a comprehensive review of potential Y2K issues, both with respect to
the Company's internal systems and those of third parties with which it has
significant relationships.

The Company currently believes that all of its internal systems will be year
2000 compliant by the end of the first quarter of fiscal year 1999, with the
exception of the depletions tracking system which is expected to be compliant by
the end of the second quarter. This belief is based on its own internal
evaluations and testing and on assurances from its systems vendors. Current
estimates are that the total cost to achieve internal year 2000 compliance,
other than at the Cincinnati Brewery, will not exceed $125,000, exclusive of
amounts to be expended on contingency plans. Approximately $12,000 of this
amount was spent on an e-mail system migration during the fourth quarter of
fiscal year 1998. This $125,000 anticipated upgrade cost is in addition to other
planned information technology ("IT") projects. While the intensive effort
expected to achieve Y2K compliance has caused and may continue to cause delays
in other IT projects, the Company does not expect that any of these delays will
have a significant effect on the Company's business or that any of the Company's
other IT projects will be canceled or postponed to pay for the Y2K upgrades.

The Company evaluated all of its microprocessors and control systems at the
Cincinnati Brewery in light of the Y2K problem. As part of this process, the
Company has conducted an inventory of the brewery's automated machinery and
other computerized equipment and has contacted applicable vendors for
information regarding Y2K compliance. The Company has upgraded or modified the
brewery's microprocessors and control systems, to the extent necessary. The
Company is currently developing applicable contingency plans. Testing of all
brewery systems has been completed. Preliminary estimates of the cost to bring
all brewery systems into Y2K compliance at the Cincinnati Brewery do not exceed
$25,000. The Company continues to evaluate and test all brewery equipment.

                                       17

<PAGE>
 
Process controls at the brewery are integral to the brewery's operations. A
failure of any of these controls could adversely affect the Company's ability to
continue brewing operations; however, because many of the brewing processes can
be controlled manually, the actual risk that the Company will be unable to brew
is low. In addition, the Company currently plans to shut the brewery down for
the first several days of January 2000 for testing purposes and will be able to
operate much of the brewery equipment manually, if necessary.

The Company relies extensively on its suppliers and contract breweries. Because
their systems are not directly under the Company's control, the Company is at
risk that all required external Y2K compliance efforts will not be completed on
time and significant business disruptions will result. The Company has formed a
committee to assure that all vendor and other relationship Y2K issues are
analyzed and addressed. Under the direction of this committee, the Company
compiled a list of all of its vendors and, as to each vendor, assessed the
impact that a Y2K failure would likely have on the Company's business and
operations. The Company then sent a Y2K questionnaire to each vendor believed to
present a possible critical risk, in order to ascertain the Y2K compliance
status of each. The Company is currently in the process of compiling and
analyzing the information submitted by these vendors. To date, questionnaires
have been sent to 37 critical vendors. All critical vendors have responded and
all have asserted that they are addressing the Y2K problem or are already in
compliance. The Company intends to continue to identify potential critical
vendors and to monitor the progress toward compliance of those not yet
compliant.  The Company has also issued questionnaires to non-critical vendors
and is conducting the same analysis with them.

In addition to obtaining and assessing information concerning vendor Y2K status,
the Company is requiring all new vendors and all existing vendors entering into
new contracts with the Company to warrant Y2K compliance. Management understands
the potentially serious consequences of a system failure and also understands
that not all vendors may be Y2K compliant prior to January 1, 2000. For this
reason, the Company is developing contingency plans for all critical services
and supplies. As part of this contingency planning, the Company is assessing the
cost of vendor shutdown, understanding that, because of the complex nature of
the Company's supply chain and the lack of clarity as to the effect of multiple
vendor failure, any assessment process is imprecise.

The Company believes that the most significant threats to its ability to operate
are presented by possible disruptions of brewing operations at its contract
breweries, and its supply of glass and malt. Because the Company brews its
products at multiple facilities, management believes that it has significant
operating risk only if more than one of these facilities is unable to produce.
In addition, management expects that, as is the case with the Cincinnati
brewery, in the event of a system failure at a contract brewery, the brewery
would be able to recommence operations fairly rapidly, but on an inefficient,
manual basis.

A systems failure at the Company's glass supplier could significantly affect the
Company's ability to package and ship products. The Company's current supplier
is one of the world's largest and the Company believes that finding alternate
sources of supply would be problematic. Because of the nature of this risk, the
Company has worked closely with its supplier on this issue and has received
assurances that Y2K compliance will be achieved on time. A similar situation
exists with respect to malt. If the Company's supply of malt were interrupted,
the Company's ability to meet production schedules could be affected, although
alternate sources of supply might be available, albeit at a higher cost. The
Company also believes that its current vendors could run the malting process
manually and that, accordingly, the risk of a significant disruption is slight.

In the unlikely event that the Company is unable to produce or ship any product
(the "Worst Case Scenario"), the Company estimates its financial exposure to be
in the range of $3.6 million per week of lost net revenue, over the short term.
Using forward planning ratios, this lost revenue translates into lost variable
gross profit, in the absence of mitigating cost cutting, of $1.9 million per
week. A production disruption for an extended period is likely to affect the
availability of the Company's products to consumers, leading to a decline in
brand equity, the financial consequences of which are not susceptible to
estimation. The Company does not expect to encounter the Worst Case Scenario.
The financial consequences of a less significant disruption are difficult to
predict, as they will depend on the exact circumstances and duration of the
disruption.

It is possible that the conclusions reached by the Company from its analysis to
date will change, with the result that the cost estimates and target completion
dates outlined above will change. The Company will continue to explore
contingency plans, so as to be in a position to mitigate the consequences of any
disruption resulting from the Y2K issue.

POTENTIAL TRANSACTION BETWEEN STROH BREWING COMPANY AND PABST BREWING COMPANY

On February 8, 1999, Stroh Brewing Company ("Stroh") announced that it had
reached definitive agreements to sell a majority of its beer brands and the
Allentown Brewery to Pabst Brewing Company ("Pabst") and certain of its brands
to Miller Brewing Company ("Miller") (collectively, the "Stroh Transactions").
It is anticipated that the Stroh Transactions will be completed during the
second quarter of 1999; however, they are subject to review by the United States
Department of Justice and the Company has been advised by Stroh that it cannot
be sure that the Stroh Transactions will  be completed. The Company brews
approximately 40% of its production at the Stroh Breweries.  Pabst has agreed to
assume Stroh's obligations under the Stroh Contract in the event that the
proposed Stroh Transactions are completed, and Miller has agreed to guarantee
Pabst's contract brewing commitment. The Company's volume brewed at the
Allentown Brewery is anticipated to remain substantially unchanged as a result
of the Stroh 

                                       18

<PAGE>

Transactions. Stroh has indicated that it will continue to operate its remaining
five breweries, including the Portland Brewery after completion of the Stroh
Transactions, until production can be transferred to a Pabst or Miller-owned
brewery. It is anticipated that the Company's production will be transferred
from the Portland Brewery to a Pabst or Miller-owned brewery during the 1999
fiscal year. The Company has completed, to its satisfaction, detailed
inspections of the potential breweries that are likely to assume the volume that
is currently brewed at the Portland Brewery.

The Company does not anticipate any significant problems during the transition
period or thereafter, as a result of the Stroh Transactions, and does not
believe that it will have material effect on its results of operations,
statement of financial position or statement of cash flows during 1999.
However, the exact timing and completion of the Stroh Transactions are dependent
on many external factors, and the Company cannot be certain that the Stroh
Transactions will occur, or proceed as the Company expects.  In the event that
the Stroh Transactions do not occur and the production capacities at the Stroh
Breweries becomes unavailable to the Company, the Company believes that it would
have access to sufficient brewery options to produce the volume that is
currently brewed at the Stroh Breweries. However, a shift in production between
plants may result in incremental costs, primarily freight.

HOPS PURCHASE COMMITMENTS

The Company enters into purchase commitments for hops based upon forecasted
future requirements, among other factors.  In recent years the Company's rate of
sales growth has declined (and was negative during 1997 and 1998), resulting in
an increase in hops inventory.  As a result, existing purchase commitments may
exceed projected future needs over the life of such commitments.  The Company
recorded a provision of $2.8 million in 1998 to reserve for excess purchase
commitments. In addition, in 1998 the Company recorded a $1.2 million charge
associated with the cancellation of purchase commitment contracts. There were no
reserves for hops contract losses required, or contract cancellation costs
incurred, in 1997 or 1996.

The computation of the excess purchase commitment reserve requires management to
make certain assumptions regarding future sales growth, product mix,
cancellation costs and supply, among others.  Actual results may materially
differ from management's estimates.

RECENT ACCOUNTING PRONOUNCEMENTS

In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard No. 133, "Accounting for Derivative Instruments
and Hedging Activities" (SFAS 133). This statement requires that all derivative
financial instruments be reflected on the balance sheet at fair value, with
changes in fair value recognized periodically in earnings or as a component of
equity, depending on the nature of the underlying instrument being hedged. In
the event that an entity does not effectively hedge against the underlying
derivative, changes in the fair market value of the underlying derivative will
be recognized currently in the income statement.

The Company typically enters into commitments to purchase hops that extend six
years with various hop growers. These purchase contracts, which extend through
crop 2004, are denominated in the foreign currency, respective to the location
where the hops are grown. Additionally, the Company enters into commitments to
purchase apple juices which typically extend less than one year and are
denominated in a foreign currency.  In the event that the Company does not
effectively hedge against fluctuations in the respective foreign currency, the
impact of the currency fluctuation on the purchase price will be recognized in
the income statement.  Currently, it is the Company's policy not to hedge
against foreign currency fluctuations. SFAS 133 is required to be adopted no
later than the beginning of fiscal year 2000.  Management is currently
evaluating the effects that this statement is expected to have on the Company's
financial statements.

OTHER RISKS AND UNCERTAINTIES

Changes in general economic conditions could result in numerous events that may
have a material adverse effect on the Company's results of operations, cash
flows and financial position. Numerous factors that could adversely affect the
Company's operating income, cash flows and financial position, include but are
not limited to (1) a slowing of the growth rate of the Better Beer category; (2)
share-of-market erosion of Boston Lager and seasonal beers due to increased
competition; (3) more rapid decline than experienced recently in Oregon
Original(TM) beers and other Samuel Adams(R) year-round styles (4) an unexpected
decline in the brewing capacity available to the Company; (5) increased
advertising and promotional expenditures that are not followed by higher sales
volume; (6) higher-than-planned costs of operating the Cincinnati Brewery; (7)
adverse fluctuations in raw material or packaging costs which cannot be passed
along through increased prices; (8) world hop market conditions affecting the
Company's ability to buy or sell hops or cancel existing excess hop commitments;
(9) poor weather conditions, resulting in an inadequate supply of raw materials
that are agriculturally grown; (10) adverse fluctuations in foreign currency
exchange rates; (11) changes in control or ownership of the current distribution
network which leads to less support of the Company's products; (12) increases in
the costs of distribution; and (13) slower-than-planned market acceptance of
HardCore(R) cider.

The Company continues to brew its Samuel Adams Boston Lager(R) at each of its
brewing sites but does not brew all of its other products at each site, except
for the Boston Brewery. Therefore, at any particular time, the Company may be
relying on only one 

                                       19

<PAGE>
 
supplier for its products other than Samuel Adams Boston Lager(R). The Company
believes that it has sufficient capacity options that would allow for a shift in
production locations if necessary.

In the event of a labor dispute, governmental action or other events that would
prevent either the Cincinnati Brewery or any of the contract breweries from
producing the Company's beer, management believes that it would be able to shift
production between breweries so as to meet demand for its beer. In such event,
however, the Company may experience temporary shortfalls in production and/or
increased production or distribution costs, the combination of which could have
a material adverse effect on the Company's results of operations, cash flows and
financial position.

Historically, the Company has not experienced material difficulties in obtaining
timely delivery from its suppliers. Although the Company believes that there are
alternate sources available for the ingredients and packaging materials, there
can be no assurance that the Company would be able to acquire such ingredients
or packaging materials from substitute sources on a timely or cost effective
basis in the event that current suppliers could not adequately fulfill orders.
The loss of a supplier could, in the short-term, adversely affect the Company's
results of operations, cash flows and financial position until alternative
supply arrangements were secured. Hops and malt are agricultural products and
therefore many outside factors, including weather conditions, crop production,
government regulations and legislation affecting agriculture, could effect both
price and supply.

As previously discussed, Miller introduced a new contract with its distributors
that seeks to impose new requirements on distributors so as to focus the
distributor's attention, time, selling effort and investment on Miller products.
These new contracts may affect the way distributors allocate selling effort and
investment to the brands that they distribute and may adversely affect the
distributors' support of the Company's brands. The Company is uncertain of the
effect this may have on its results of operations, cash flows and financial
position as Miller distributors represent a significant part of the Company's 
distribution network.

FORWARD-LOOKING STATEMENTS

In this Form 10-K and in other documents incorporated herein, as well as in oral
statements made by the Company, statements that are prefaced with the words
"may," "will," "expect," "anticipate," "continue," "estimate," "project,"
"intend," "designed" and similar expressions, are intended to identify forward-
looking statements regarding events, conditions, and financial trends that may
affect the Company's future plans of operations, business strategy, results of
operations and financial position. These statements are based on the Company's
current expectations and estimates as to prospective events and circumstances
about which the Company can give no firm assurance. Further, any forward-looking
statement speaks only as of the date on which such statement is made, and the
Company undertakes no obligation to update any forward-looking statement to
reflect events or circumstances after the date factor that may emerge, forward-
looking statements should not be relied upon as a prediction of actual future
financial condition or results. These forward-looking statements, like any
forward-looking statements, involve risks and uncertainties that could cause
actual results to differ materially from those projected or unanticipated. Such
risks and uncertainties include the factors set forth below in addition to the
other information set forth in this Form 10-K.


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                                       20

<PAGE>
 

I
TEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

In the ordinary course of business, the Company is exposed to the impact of
fluctuations in foreign exchange rates and interest rates. The Company does not
enter into derivatives or other market risk sensitive instruments for the
purpose of speculation or for trading purposes. Market risk sensitive
instruments include derivative financial instruments, other financial
instruments and derivative commodity instruments. Such instruments that are
exposed to rate or price changes should be included in the sensitivity analysis
disclosure. The only purchased ingredient or material which the Company would
consider a commodity for the purpose of measuring market risk is two-row malt,
which is made from two-row barley. The Company has entered into a contract which
guarantees a fixed price for the purchase of two-row malt based upon need and
therefore is not at risk to potential short-term market fluctuations. The
Company does not enter into derivative commodity instruments (i.e. futures,
forwards, swaps, options, etc.).

The Company enters into hops purchase contracts in foreign denominated
currencies, as described above under "Hops Purchase Commitments".  The purchase
price changes as foreign exchange rates fluctuate. During 1997 and 1998, the
Company used foreign currency forward contracts to hedge against the impact of
such foreign exchange rate fluctuations. As of December 26, 1998, the Company
had no foreign currency forward contracts outstanding.

As of December 26, 1998, the Company had $10.0 million of debt outstanding under
a $30.0 million line of credit. On March 31, 1999, the line of credit expires
and the balance outstanding is payable either upon expiration of the line or in
twenty quarterly installments. In the latter case, interest will accrue at the
Prime Rate or the applicable Adjusted LIBOR plus .75%, after March 31, 1999.
For financial statement purposes, the value of our debt approximates fair value
as interest rates are variable.

SENSITIVITY ANALYSIS

The Company applies a sensitivity analysis to reflect the impact of a 10%
hypothetical adverse change in the foreign currency rates and interest rates.
The estimated potential one-day loss in fair value of the Company's debt and the
estimated potential loss in pretax earnings from a potential one-day adverse
fluctuation in foreign currency exchange rates as of December 26, 1998 is as
follows:

                                      Earnings               Fair Value 
                                       Impact                  Impact
                                                (in thousands)

Instruments sensitive to:        
     Foreign currency rates        $        (3,497)          $          -
     Interest rates                $             -           $       (177)

It should be noted that the potential earnings impact from fluctuations in
foreign currency exchange rates relates to contracts that extend six years.
Therefore, the above reflects the maximum potential pretax earnings impact over
a six year period, under current accounting principles.

There are many economic factors that can affect volatility in foreign exchange
rates and interest rates.  As such factors cannot be predicted, the actual
impact on earnings and fair value due to an adverse change in the respective
rates and prices could vary substantially from the amounts calculated above.


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                                       21

<PAGE>
 

ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA


REPORT OF INDEPENDENT ACCOUNTANTS


To the Board of Directors and Stockholders of
The Boston Beer Company, Inc.

We have audited the accompanying consolidated balance sheets of The Boston Beer
Company, Inc. as of December 26, 1998, and the related consolidated statements
of income, stockholders' equity and cash flows for the year then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of The Boston Beer Company, Inc.
as of December 26, 1998, and the results of its operations and its cash flows
for the year then ended, in conformity with generally accepted accounting
principles.



                                   /s/ Arthur Andersen LLP
Boston, Massachusetts
February 5, 1999


                                       22

<PAGE>
 

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders of
The Boston Beer Company, Inc.


In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of income, shareholders' equity and cash flows present
fairly, in all material respects, the financial position of The Boston Beer
Company, Inc. at December 27, 1997, and the results of their operations and
their cash flows for each of the two fiscal years in the period ended December
27, 1997, in conformity with generally accepted accounting principles.  These
financial statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation.  We
believe that our audits provide a reasonable basis for the opinion expressed
above.



                                     /s/ PricewaterhouseCoopers LLP

Boston, Massachusetts
February 13, 1998


                                       23

<PAGE>
 
                         THE BOSTON BEER COMPANY, INC.
                          CONSOLIDATED BALANCE SHEETS
                       (IN THOUSANDS, EXCEPT SHARE DATA)
 

<TABLE> 
<CAPTION> 
                                                                        December 26,              December 27, 
                                                                           1998                        1997
<S>                                                                 <C>                      <C> 
ASSETS
  Current Assets:
    Cash and cash equivalents                                              $     8,650               $         13
    Short-term investments                                                      45,256                     35,787
    Accounts receivable, net of the allowance for doubtful
     accounts of $1,309 and $1,153, respectively                                12,062                     16,483
    Inventories                                                                 15,835                     13,675
    Prepaid expenses                                                             1,125                      4,344
    Deferred income taxes                                                        4,511                      2,266
    Other current assets                                                         2,037                      1,308
                                                                    ------------------       --------------------
       Total current assets                                                     89,476                     73,876
 
  Property, plant and equipment, net of accumulated
   depreciation of $15,460 and $10,871, respectively                            28,165                     28,781
  Other assets                                                                   5,048                      2,742
                                                                    ------------------       --------------------
       Total assets                                                        $   122,689               $    105,399
                                                                    ==================       ====================
 
LIABILITIES AND STOCKHOLDERS' EQUITY
  Current Liabilities:
    Accounts payable                                                       $    13,194               $      9,556
    Accrued expenses                                                            14,233                     13,770
    Current maturities of long-term debt                                        10,000                          -
                                                                    ------------------       --------------------
       Total current liabilities                                                37,427                     23,326
 
  Long-term debt, less current maturities                                            -                     10,000
  Long-term deferred income taxes                                                1,116                        789
  Other long-term liabilities                                                    2,118                          -
 
  Commitments and Contingencies (Note I)                                             -                          -
 
  Stockholders' Equity: 
    Class A Common Stock, $.01 par value;
      22,700,000 and 20,300,000 shares authorized as of      
      December 26, 1998 and December 27, 1997, respectively; 
      16,394,245 and 16,337,744 issued and outstanding as of 
      December 26, 1998 and December 27, 1997, respectively                        164                        163
    Class B Common Stock, $.01 par value;
      4,200,000 shares authorized; 4,107,355 issued and        
      outstanding as of December 26, 1998 and December 27,     
      1997, respectively                                                            41                         41
    Additional paid-in-capital                                                  56,548                     56,445
    Unearned compensation                                                         (219)                      (423)
    Unrealized loss on investments in marketable securities                         (1)                    (2,223)
    Unrealized loss on forward exchange contracts                                    -                       (290)
    Retained earnings                                                           25,495                     17,571
                                                                    ------------------       --------------------
       Total stockholders' equity                                               82,028                     71,284
                                                                    ------------------       --------------------
       Total liabilities and stockholders' equity                          $   122,689               $    105,399
                                                                    ==================       ====================
</TABLE>
 
 
  The accompanying notes are an integral part of the consolidated financial 
                                  statements.

                                       24

<PAGE>
 
                         THE BOSTON BEER COMPANY, INC.
                       CONSOLIDATED STATEMENTS OF INCOME
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)
 

<TABLE> 
<CAPTION> 
                                                                                      For the Years Ended
                                                       ------------------------------------------------------------------------
                                                          December 26,              December 27,                 December 28,
                                                               1998                    1997                          1996
<S>                                                    <C>                       <C>                           <C>
Sales                                                            $205,020                    $209,490                  $213,879
Less excise taxes                                                  21,567                      25,703                    22,763
                                                       ------------------        --------------------          ----------------
          Net sales                                               183,453                     183,787                   191,116
Cost of sales                                                      89,393                      89,998                    95,786
                                                       ------------------        --------------------          ----------------
          Gross profit                                             94,060                      93,789                    95,330
                                                       ------------------        --------------------          ----------------
                                                                                                         
Operating expenses:                                                                                      
Advertising, promotional and selling expenses                      66,928                      69,537                    70,131
General and administrative expenses                                12,528                      11,666                    12,042
                                                       ------------------        --------------------          ----------------
          Total operating expenses                                 79,456                      81,203                    82,173
                                                       ------------------        --------------------          ----------------
Operating income                                                   14,604                      12,586                    13,157
                                                       ------------------        --------------------          ----------------
                                                                                                         
Other (expense) income:                                                                                  
Interest income                                                     2,149                       1,772                     1,932
Interest expense                                                     (633)                       (759)                     (236)
Other (expense) income, net                                        (1,754)                       (318)                       18
                                                       ------------------        --------------------          ----------------
          Total other (expense) income                               (238)                        695                     1,714
                                                       ------------------        --------------------          ----------------
                                                                                                         
Income before provision for income taxes                           14,366                      13,281                    14,871
Provision for income taxes                                          6,442                       5,723                     6,486
                                                       ------------------        --------------------          ----------------
Net income                                                       $  7,924                    $  7,558                  $  8,385
                                                       ==================        ====================          ================
                                                                                                         
                                                                                                         
Net income per common share - basic                              $   0.39                    $   0.37                  $   0.42
                                                       ==================        ====================          ================
Net income per common share - diluted                            $   0.39                    $   0.37                  $   0.41
                                                       ==================        ====================          ================
                                                                                                         
Weighted average number of common shares - basic                   20,486                      20,324                    19,970
                                                       ==================        ====================          ================
Weighted average number of common shares - diluted                 20,565                      20,490                    20,352
                                                       ==================        ====================          ================
</TABLE>
 
 
  The accompanying notes are an integral part of the consolidated financial 
                                  statements.

                                       25

<PAGE>
 
                         THE BOSTON BEER COMPANY, INC.
                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
       For the three years ended December 26, 1998, December 27, 1997, 
                             and December 28, 1996
                                (in thousands)
                                                     

<TABLE> 
<CAPTION> 
                                                      Class A     Class B    Class A      Class B    Additional                     
                                                      Common      Common     Common        Common      Paid in      Unearned 
                                                      Shares      Shares      Stock        Stock       Capital    Compensation
                                                      ------      ------      -----        -----       -------    ------------
<S>                                                   <C>         <C>        <C>          <C>        <C>          <C>               

Balance December 31, 1995                             15,644       4,107       $156         $  41      $53,482      $     (509)
                                                                                                                                    

Net income                                                                                                                          

Unearned compensation                                                                                      197            (157)
Forfeiture of unvested stock options                                                                      (144)            144 
Stock options exercised                                  328                      4                        556                 
Tax benefit related to exercise of stock options                                                         1,376                 
Repurchase of Investment Shares                                                                           (103)                
Amortization of unearned compensation                                                                       27             159 
Unrealized loss on short-term investments                                                                                      
Unrealized gain on forward exchange contract                                                                                   
Total fiscal 1996 comprehensive income                                                                                         
                                                                                                                               
                                                      ------------------------------------------------------------------------
Balance December 28, 1996                             15,972       4,107        160            41       55,391            (363)
                                                                                                                               
Net income                                                                                                                     
Unearned compensation                                                                                      430            (430)
Stock options exercised                                  366                      3                        574                 
Amortization of unearned compensation                                                                       50             370 
Unrealized loss on short-term investments                                                                                      
Unrealized loss on forward exchange contract                                                                                   
Total fiscal 1997 comprehensive income                                                                                         
                                                                                                                               
                                                      ------------------------------------------------------------------------
Balance December 27, 1997                             16,338       4,107        163            41       56,445            (423)     

                                                                                                                               
Net income                                                                                                                     
Unearned compensation                                                                                      117             (41)
Forfeiture of unvested stock options                                                                       (40)             40 
Stock options exercised                                   56                      1                         37                 
Repurchase of Investment Shares                                                                            (11)              4 
Amortization of unearned compensation                                                                                      201 
Realized loss on short-term investments                                                                                        
Realized loss on forward exchange contract                                                                                     
                                                                                                                                 
Total fiscal 1998 comprehensive income                                                                                           
                                                                                                                                 
                                                      ------------------------------------------------------------------------
Balance December 26, 1998                             16,394       4,107       $164         $  41      $56,548      $     (219)
                                                      ======================================================================== 

<CAPTION> 
                                                          Accumulated
                                                             Other                              Total
                                                         Comprehensive        Retained       Stockholders'   Comprehensive
                                                             Income           Earnings          Equity           Income
                                                             ------           --------          ------           ------
                                                         <C>                  <C>            <C>             <C> 
<S>                                                        
Balance December 31, 1995                                     $    -          $  1,628          $ 54,798         $      -
                                                      
Net income                                                                       8,385             8,385            8,385
Unearned compensation                                                                                 40
Forfeiture of unvested stock options                                                                   -
Stock options exercised                                                                              560
Tax benefit related to exercise of stock options                                                   1,376
Repurchase of Investment Shares                                                                     (103)
Amortization of unearned compensation                                                                186
Unrealized loss on short-term investments                       (442)                               (442)            (442)
Unrealized gain on forward exchange contract                      31                                  31               31
                                                                                                            ------------- 
Total fiscal 1996 comprehensive income                                                                              7,974
                                                                                                            -------------

                                                         ----------------------------------------------- 
Balance December 28, 1996                                       (411)           10,013            64,831
                                                      
Net income                                                                       7,558             7,558            7,558
Unearned compensation                                                                                  -
Stock options exercised                                                                              577
Amortization of unearned compensation                                                                420
Unrealized loss on short-term investments                     (1,781)                             (1,781)          (1,781)
Unrealized loss on forward exchange contract                    (321)                               (321)            (321)
                                                                                                            -------------
Total fiscal 1997 comprehensive income                                                                              5,456
                                                                                                            ------------- 

                                                         -----------------------------------------------
Balance December 27, 1997                                     (2,513)           17,571            71,284
                                                      
Net income                                                                       7,924             7,924            7,924
Unearned compensation                                                                                 76
Forfeiture of unvested stock options                                                                   -
Stock options exercised                                                                               38
Repurchase of Investment Shares                                                                       (7)
Amortization of unearned compensation                                                                201
Realized loss on short-term investments                        2,222                               2,222            2,222
Realized loss on forward exchange contract                       290                                 290              290
                                                                                                            -------------
Total fiscal 1998 comprehensive income                                                                           $ 10,436
                                                                                                            =============

                                                         -----------------------------------------------
Balance December 26, 1998                                   $     (1)         $ 25,495          $ 82,028
                                                         ===============================================
</TABLE>
 

  The accompanying notes are an integral part of the consolidated financial 
                                  statements.

                                       26

<PAGE>

                         THE BOSTON BEER COMPANY, INC.
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                (IN THOUSANDS)


<TABLE> 
<CAPTION> 
                                                                                                     Years ended
                                                                                 -------------------------------------------------
                                                                                 December 26,     December 27,      December 28,
                                                                                     1998             1997              1996
                                                                                     ----             ----              ----
<S>                                                                              <C>              <C>               <C> 
Cash flows from operating activities:                                            
    Net income                                                                   $      7,924     $     7,558       $      8,385
    Adjustments to reconcile net income to net cash provided by operating                         
    activities:                                                                                   
      Depreciation and amortization                                                     5,232           4,501              3,030
      Loss on sale of marketable equity security                                        1,435               -                  -
      Gain on disposal of fixed assets                                                    (67)            (23)                (4)
      Bad debt expense (recovery)                                                         246            (617)             1,832
      Stock option compensation expense                                                   201             420                186
    Changes in assets and liabilities:                                                            
      Accounts receivable                                                               4,246             313             (1,921)
      Inventories                                                                      (2,160)            287             (3,722)
      Prepaid expenses                                                                  3,219          (2,995)              (799)
      Other current assets                                                               (439)          2,253             (1,993)
      Deferred income taxes                                                            (1,919)          1,642               (331)
      Other assets                                                                     (2,115)            727               (743)
      Accounts payable                                                                  3,638          (8,227)             7,990
      Accrued expenses                                                                    462           1,144              3,853
      Other long-term  liabilities                                                      2,471               -                  -
                                                                                 ------------     -----------       ------------
                Total adjustments                                                      14,450            (575)             7,378
                                                                                 ------------     -----------       ------------
                                                                                                  
                Net cash provided by operating activities                              22,374           6,983             15,763
                                                                                 ------------     -----------       ------------
                                                                                                  
Cash flows for investing activities:                                                              
    Acquisition of certain assets of the Cincinnati Brewery                                 -          (4,438)      
    Purchases of property, plant and equipment                                         (5,169)        (15,286)           (11,359)
    Proceeds on disposal of fixed assets                                                   14              23                  4 
    Net (purchases) maturities of government securities                               (11,540)         (1,642)             2,648 
    Proceeds on sale of marketable securities                                           2,851               -                  -
    Purchase of marketable securities                                                       -               -             (4,286)
    Purchases of restricted investments                                                     -            (625)            (1,225) 
    Maturities of restricted investments                                                    -           1,236              1,216 
                                                                                 ------------     -----------       ------------
                Net cash used in investing activities                                 (13,844)        (20,732)           (13,002)
                                                                                 ------------     -----------       ------------
                                                                                                  
Cash flows from financing activities:                                                             
    Proceeds from exercise of stock options                                                38             577                560  
    Proceeds from sale of stock under stock purchase plan                                  76               -                 40
    Repurchase of shares under employee investment and incentive share plans               (7)              -               (103)
    Principal payments on long-term debt                                                    -          (1,875)               (75)
    Net borrowings of long-term debt                                                        -          10,000                  -
                                                                                 ------------     -----------       ------------
                Net cash provided by financing activities                                 107           8,702                422
                                                                                 ------------     -----------       ------------
                                                                                                  
Net increase (decrease) in cash and cash equivalents                                    8,637          (5,047)             3,183
                                                                                                  
Cash and cash equivalents at beginning of year                                             13           5,060              1,877
                                                                                 ------------     -----------       ------------
                                                                                                  
Cash and cash equivalents at end of year                                         $      8,650     $        13       $      5,060
                                                                                 ============     ===========       ============
                                                                                                  
Supplemental disclosure of cash flow information:                                                 
    Interest paid                                                                $        671     $       687       $        224
                                                                                 ============     ===========       ============
    Taxes paid                                                                   $      3,390     $     7,243       $      5,992
                                                                                 ============     ===========       ============
</TABLE>
 

   The accompanying notes are an integral part of the consolidated financial
                                  statements.

                                      27

<PAGE>
 
                         THE BOSTON BEER COMPANY, INC.

                NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                        
A.   ORGANIZATION AND BASIS OF PRESENTATION

The Boston Beer Company, Inc. (the "Company") is engaged in the business of
brewing and selling beer, ale and cider products throughout the United States
and in selected international markets.

The Company conducts its operations principally through Boston Beer Company
Limited Partnership, a Massachusetts limited partnership (the "Partnership") and
certain affiliates of the Partnership. On November 20, 1995, in connection with
the initial public offering of the Company's Class A Common Stock effected that
date, the Company acquired certain limited partner interests in the Partnership
and all of the outstanding capital stock of certain corporate partners,
including the general partner, in exchange for 12,534,385 shares of the
Company's Class A Common Stock and 4,107,355 shares of the Company's Class B
Common Stock. All of the Class B shares were issued to C. James Koch, the sole
stockholder of the Partnership's general partner. As a result of this exchange,
the Company holds, directly and indirectly, all of the outstanding partner
interests in the Partnership. These November 20, 1995 transactions are sometimes
collectively referred to as the "Recapitalization."

Effective March 1, 1997, the Company acquired all of the equipment and other
brewery related personal property of an independent brewing company located in
Cincinnati, Ohio (the "Cincinnati Brewery") at a purchase price of approximately
$4.4 million, which approximates the fair value of the assets acquired.
Substantially all of the acquired assets were brewing, bottling and other fixed
assets. The Cincinnati Brewery is currently managed by the Samuel Adams Brewery
Company, Ltd., a wholly owned subsidiary of the Company. The results of
operations of the Cincinnati Brewery, since the date of acquisition, are
included in the accompanying consolidated financial statements. The pro forma
effect of this acquisition was immaterial.

B.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company, its
subsidiaries and the Partnership. All intercompany accounts and transactions
have been eliminated.

REVENUE RECOGNITION
Revenue is recognized when goods are shipped to customers.

CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash on-hand and short-term, highly liquid
investments with original maturities of three months or less at the time of
purchase.

CONCENTRATIONS OF CREDIT RISK
Financial instruments that potentially subject the Company to concentrations of
credit risk consist principally of short-term investments and trade receivables.
The Company places its short-term investments with high credit quality financial
institutions. The Company sells primarily to independent beer and ale
distributors across the United States. Receivables arising from these sales are
not collateralized; however, credit risk is minimized as a result of the large
and diverse nature of the Company's customer base. The Company establishes an
allowance for doubtful accounts based upon factors surrounding the credit risk
of specific customers, historical trends and other information.

INVENTORIES
Inventories, which consist principally of hops, bottles and packaging, are
stated at the lower of cost, determined on the first-in, first-out (FIFO) basis,
or market.

USE OF ESTIMATES
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenue and
expenses during the reporting period. Actual results could differ from those
estimates.

PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are recorded at cost. Expenditures for
maintenance, repairs and renewals are charged to expense and major improvements
are capitalized. Upon retirement or sale, the cost of the assets disposed of and
the related accumulated depreciation are removed from the accounts and any
resulting gain or loss is included in the determination of net income. Certain
of the Company's equipment is used by other brewing companies to produce the
Company's products under contract (see Note I). The Company considers the life
of such assets to be ten years or the life of the contract, whichever is
shorter. Provision for depreciation is

                                       28

<PAGE>
 
                         THE BOSTON BEER COMPANY, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

B.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

computed on the straight-line method based upon the estimated useful lives of
the underlying assets as follows:

Kegs                               3 to 5 years
Plant and machinery                10 years, or the life of the production
                                   agreement, whichever is shorter
Office equipment and furniture     3 to 5 years
Leasehold improvements             5 years, or the life of the lease, whichever
                                   is shorter

DEPOSITS
The Company recognizes a liability for estimated refundable deposits in kegs and
for unclaimed deposits on bottles which are subject to state regulations. Total
redemptions associated with reusable bottles during the years ended December 26,
1998, December 27, 1997 and December 28, 1996 were $2.1 million, $2.3 million
and $3.1 million, respectively.

FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount of the Company's long-term debt, including current
maturities, approximates fair value because the interest rates on these
instruments change with market interest rates. The carrying amounts for accounts
receivable and accounts payable approximate their fair values due to the short-
term maturity of these instruments.

ADVERTISING AND SALES PROMOTIONS
Advertising and sales promotional programs are charged to expense during the
period in which they are incurred. Total advertising and sales promotional
expense for the years ended December 26, 1998, December 27, 1997 and December
28, 1996, were $35.0 million, $33.4 million and $35.7 million, respectively.

FORWARD EXCHANGE CONTRACTS
The hops purchase commitments described in Note I and the apple juice purchase
commitments are typically denominated in a foreign currency. The Company
previously entered into foreign currency forward exchange contracts to mitigate
the risks associated with adverse currency rate fluctuations on foreign currency
commitments entered into in the ordinary course of business. These commitments
were for terms of less than one year. The foreign currency forward exchange
contracts were executed with creditworthy banks and denominated in German marks,
English pounds and French francs. The gains and losses relating to these foreign
currency exchange contracts were deferred and included in the measurement of the
foreign currency transaction subject to the hedge.

Unrealized gains and losses on contracts designated as hedges of existing
purchase commitments were recorded as exchange rates fluctuate and included as a
component of stockholders' equity. Realized gains and losses were recognized
when the contracts were exercised or upon expiration.  Losses recorded during
fiscal years 1998, 1997 and 1996 totaled $471,000, $0 and $0, respectively.
There were no forward exchange contracts outstanding as of December 26, 1998.

INCOME TAXES
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to the differences between the financial statement
carrying value of existing assets and liabilities and their respective tax
bases.  Deferred tax assets and liabilities are measured by applying enacted tax
rates that are applicable to the future years in which deferred tax assets or
liabilities are expected to be realized or settled (see Note H).

EARNINGS PER SHARE
The Company follows Statement of Financial Accounting Standards No. 128,
"Earnings Per Share" ("SFAS 128"). In accordance with this statement basic
earnings per share (EPS) is calculated by dividing net income by the weighted
average common shares outstanding.  Dilutive EPS is calculated by dividing net
income by the weighted average common shares and potentially dilutive securities
outstanding during the period (see Note N).

COMPREHENSIVE INCOME
The Company adopted Statement of Financial Accounting Standards No. 130 ("SFAS
130"), "Reporting Comprehensive Income" for the year ended December 26, 1998.
This statement established standards for reporting and displaying comprehensive
income and its components. The components of comprehensive income include
revenues, expenses, gains and losses that are excluded from net income under
current accounting standards, including foreign currency translation items and
unrealized gains and losses on certain investments in debt and equity
securities. Amounts have been reclassified for prior periods in order to conform
with this statement. The Company has presented the information required by SFAS
130 in the accompanying consolidated statement of stockholders' equity.

                                       29

<PAGE>
 
                         THE BOSTON BEER COMPANY, INC.
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                        
B.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

SEGMENT REPORTING
The Company adopted Statement of Financial Accounting Standard No. 131 ("SFAS
131"), "Disclosures about Segments of an Enterprise and Related Information" for
the year ended December 26, 1998.  SFAS 131 established standards for reporting
certain information about operating segments of an enterprise.  Operating
segments are defined based upon the way that management organizes financial
information within the enterprise for making operating decisions and assessing
performance.

Management organizes financial information by metropolitan market and by product
line for purposes of making operating decisions and assessing performance.  A
key unit of measure used to assess performance and determine the appropriate
allocation of resources is distributors' sales volume, or depletions.  With the
exception of the volume produced at the Cincinnati Brewery under contract
arrangement with third parties, the Company has determined that the metropolitan
market and product line operating segments share similar long-term financial
performance and other economic characteristics.  Accordingly, these operating
segments have been aggregated as a single operating segment.  The volume
produced at the Cincinnati Brewery under contract arrangement falls below the
quantitative thresholds of SFAS 131 and accordingly the disclosure requirements
of SFAS 131 do not apply to this segment. Substantially all of the Company's
sales and assets are within the United States.

NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS 133"). This statement requires that all
derivative financial instruments be reflected on the balance sheet at fair
value, with changes in fair value recognized periodically in earnings or as a
component of equity, depending on the nature of the underlying instrument being
hedged. In the event that an entity does not effectively hedge against the
underlying derivative, changes in the fair market value of the underlying
derivative will be recognized currently in the income statement.

The Company typically enters into commitments to purchase hops that extend six
years with various hop growers. These purchase contracts are denominated in a
foreign currency, respective to the location where the hops are grown.
Additionally, the Company enters into commitments to purchase apple juice which
typically extends less than one year and are denominated in a foreign currency.
In the event that the Company does not effectively hedge against fluctuations in
the respective foreign currency, the impact of the currency fluctuation on the
hops purchase price will be recognized in the income statement.  It is the
Company's current policy not to hedge against foreign currency fluctuations.
SFAS 133 is required to be adopted no later than the beginning of fiscal year
2000.  Management is currently evaluating the effects that this statement is
expected to have on the Company's financial statements.

RECLASSIFICATIONS
Certain prior period amounts have been reclassified to conform with the current
year's presentation.

C.   SHORT-TERM INVESTMENTS

All short-term investments are classified as available-for-sale with unrealized
gains and losses included in stockholders' equity as of the respective balance
sheet date.  At December 26, 1998, short-term investments consist of
investments in money market funds backed by United States government securities
and investments in United States government bonds having a cost of $43.7 million
and $1.6 million, respectively, which approximates fair value.  At December 27,
1997, short-term investments consisted of investments in money market funds
backed by United States government securities having a cost of $33.7 million,
which approximates fair value, and a marketable security having a cost of $4.3
million and a market value of $2.1 million.   The Company realized a loss of
$1.4 million upon the sale of the marketable equity security during 1998.

D.   INVENTORIES

Inventories consist of the following:


<TABLE>
<CAPTION>
                                      December 26, 1998              December 27, 1997
                                  -----------------------        -----------------------
<S>                               <C>                            <C>
Raw materials, principally hops                   $14,464                        $12,481
Work in process                                       778                            511
Finished goods                                        593                            683
                                  -----------------------        -----------------------
                                                  $15,835                        $13,675
                                  =======================        =======================
</TABLE>


                                       30

<PAGE>
 
                         THE BOSTON BEER COMPANY, INC.
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

E.   PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consist of the following:


<TABLE>
<CAPTION>
                                     December 26, 1998              December 27, 1997
                                 -----------------------        -----------------------
<S>                              <C>                            <C>
Kegs                                             $18,553                        $18,606
Plant and machinery                               18,120                         14,323
Office equipment and furniture                     4,209                          4,257
Leasehold improvements                             2,743                          2,466
                                 -----------------------        -----------------------
                                                 $43,625                        $39,652
Less accumulated depreciation                     15,460                         10,871
                                 -----------------------        -----------------------
                                                 $28,165                        $28,781
                                 =======================        =======================
</TABLE>


The Company recorded depreciation expense related to these assets of $5.5
million, $4.5 million and $2.9 million for the years ended December 26, 1998,
December 27, 1997 and December 28, 1996, respectively.

 
F.   ACCRUED EXPENSES

Accrued expenses consist of the following:


<TABLE>
<CAPTION>
                                              December 26, 1998              December 27, 1997
                                          -----------------------        -----------------------
<S>                                       <C>                            <C>
Advertising, promotional and selling
 expenses                                                 $ 3,187                        $ 6,334
Hops purchase commitments (see Note I)                      2,800                              -
Keg deposits                                                2,505                          2,245
Employee wages and reimbursements                           2,449                          2,506
Other accrued liabilities                                   3,292                          2,685
                                          -----------------------        -----------------------
                                                          $14,233                        $13,770
                                          =======================        =======================
</TABLE>


G.   LONG-TERM DEBT AND LINE OF CREDIT

On March 21, 1997, the Company entered into a credit agreement to increase its
existing $14.0 million line of credit to $15.0 million ("the $15.0 million
line") and to establish an additional $30.0 million line of credit ("the $30.0
million line"). On March 31, 1999, the $15.0 million line expires and the
balance outstanding under the $30.0 million line converts to a term note.
Principal payments on the term note are payable in twenty quarterly
installments, with the final payment due at maturity, December 31, 2003. Through
March 31, 1999, interest is payable either quarterly or upon expiration of the
original loan at the Prime Rate (7.75% and 8.50% at December 26, 1998 and
December 27, 1997, respectively) or the applicable Adjusted LIBOR plus .50%,
respectively.  After March 31, 1999, interest on the term note is payable
quarterly at either the Prime Rate or the applicable Adjusted LIBOR plus .75%.
The Company has evaluated its options and expects to repay the outstanding
balance of $10.0 million on the line during 1999.

As of December 26, 1998 and December 27, 1997, $0 was outstanding under the
$15.0 million line and $10.0 million was outstanding under the $30.0 million
line. The Company must pay a commitment fee of .15% per annum on the average
daily unused portion of the total $45.0 million commitment. Additionally, the
Company is obligated to meet certain financial covenants, including the
maintenance of specified levels of tangible net worth and net income. The
Company was in compliance with such covenants as of December 26, 1998.

H.   INCOME TAXES

INCOME TAXES
Significant components of the Company's deferred tax assets and liabilities as
of December 26, 1998 and December 27, 1997 are as follows:

                                       31

<PAGE>
 
                         THE BOSTON BEER COMPANY, INC.
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

H.     INCOME TAXES (CONTINUED)


<TABLE>
<CAPTION>
                                                                                        (In thousands)
                                                                            1998                              1997
                                                      ----------------------------------------   ------------------------------
                                                             Current      Long-Term    Total      Current   Long-Term    Total
<S>                                                   <C>                 <C>          <C>        <C>       <C>         <C>
Total                                                                                           
- -----                                                                                            
                                                                                                 
DEFERRED TAX ASSETS:                                                                             
  Incentive/investment unit and option plan                      $   11     $   471   $   482      $   11     $   892   $   903
  Accrued expenses not currently deductible                       2,309           -     2,309       1,160           -     1,160
  Reserves                                                        2,100           -     2,100       1,253           -     1,253
  Deferred compensation                                               -         145       145           -         117       117
  Long-term contracts                                                 -       1,122     1,122           -           -         -
  Capital loss carryforward                                           -         263       263           -           -         -
  Other                                                             216          74       290         (94)          8       (86)
                                                      ----------------------------------------   ------------------------------
  Deferred tax assets                                             4,636       2,075     6,711       2,330       1,017     3,347
  Less: Valuation allowance                                           -        (263)     (263)          -           -         -
                                                      ----------------------------------------   ------------------------------
                                                                                                 
         Total deferred tax assets                                4,636       1,812     6,448       2,330       1,017     3,347
                                                                                                 
DEFERRED TAX LIABILITIES:                                                                        
  Depreciation                                                        -      (2,928)   (2,928)          -      (1,693)   (1,693)
  Tax installment sale                                                -           -         -         (64)       (113)     (177)
  Other                                                            (125)          -      (125)          -           -         -
                                                      ----------------------------------------   ------------------------------
                                                                                                 
         Net deferred tax assets (liabilities)                   $4,511     $(1,116)  $ 3,395      $2,266     $  (789)  $ 1,477
                                                      ========================================   ==============================
</TABLE>
    
            
Based upon prior earnings history and expected future taxable income, the
Company does not believe that a valuation allowance is required for the net
deferred tax asset, except for the asset pertaining to the capital loss
carryforward.
               
Significant components of the income tax provision (benefit) for income taxes
for the years ended December 26, 1998, December 27, 1997 and December 28, 1996
are as follows:


<TABLE>
<CAPTION> 
                                                                              (In thousands)
                                                           1998                   1997                    1996
                                                   -----------------          --------------      -----------------
<S>                                                <C>                        <C>                 <C> 
Current:                                                                                        
   Federal                                                   $ 6,367                  $3,096                 $5,261
   State                                                       1,994                     985                  1,556
                                                   -----------------          --------------      -----------------
Total current                                                  8,361                   4,081                  6,817
                                                                                                
Deferred:                                                                                       
   Federal                                                    (1,464)                  1,286                   (251)
   State                                                        (455)                    356                    (80)
                                                   -----------------          --------------      -----------------
Total deferred                                               $(1,919)                 $1,642                 $ (331)
                                                   -----------------          --------------      -----------------
Total income tax provision                                   $ 6,442                  $5,723                 $6,486
                                                   =================          ==============      =================
</TABLE>

        

<TABLE> 
<CAPTION>
                                                           1998                    1997                     1996
                                                   -----------------       -----------------        -----------------
<S>                                                <C>                     <C>                      <C>
Statutory rate                                                 35.00%                  35.00%                   35.00%
State income tax, net of federal benefit                        6.96%                   6.57%                    6.50%
Meals & entertainment                                           1.30%                   2.62%                    1.83%
Valuation allowance on capital loss carryforward                1.55%                      -                        -
Other                                                            .04%                  (1.10%)                    .27%
                                                   -----------------       -----------------        -----------------
                                                               44.85%                  43.09%                   43.60%
                                                   =================       =================        =================
</TABLE>


                                       32

<PAGE>
 
                         THE BOSTON BEER COMPANY, INC.
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

I.   COMMITMENTS AND CONTINGENCIES:

PURCHASE COMMITMENTS
In the normal course of business, the Company enters into various supply
agreements with brewing companies. These agreements are cancelable by the
Company and by the brewing companies with advanced written notice. Title to beer
products brewed under these arrangements remains with the brewing company until
shipped by it and accordingly, the liquid is not reflected as inventory by the
Company in the accompanying financial statements. The Company is required to
reimburse the supplier for all unused material and beer products on termination
of the agreements and under certain conditions to purchase excess materials. At
December 26, 1998 and December 27, 1997, there was approximately $2.0 million
and $3.2 million of material and beer products in process at the brewing
companies which had not yet been transferred to the Company. Purchases under
these agreements for the years ended December 26, 1998, December 27, 1997 and
December 28, 1996 were approximately $32.6 million, $43.1 million and $57.8
million, respectively. The reduction of purchases under the agreements are
attributed to production being done at the Cincinnati Brewery.
 
The Company has entered into contracts for the supply of a portion of its hops
requirements. These purchase contracts, which extend through crop 2004, specify
both the quantities and prices to which the Company is committed. The prices are
denominated in German marks and English pounds sterling. Hop purchase
commitments outstanding at December 26, 1998 totaled $34.9 million. Purchases
under these contracts for the years ended December 26, 1998, December 27, 1997
and December 28, 1996 were approximately $8.3 million, $8.9 million and $10.0
million, respectively. The performance of the dealers under such contracts may
be materially affected by factors such as adverse weather, crop conditions, the
imposition of export restrictions and unfavorable fluctuations in foreign
currency exchange rates.

The Company enters into purchase commitments for hops based upon forecasted
future requirements, among other factors.  In recent years the Company's rate of
sales growth has declined, resulting in an increase in hops inventory.  As a
result, existing purchase commitments may exceed projected future needs over the
life of such commitments. The Company recorded a provision of $2.8 million in
1998 to reserve for excess purchase commitments. In addition, in 1998 the
Company recorded a $1.2 million charge associated with the cancellation of
purchase commitment contracts. There were no reserves for hops contract losses
required, or contract cancellation costs incurred, in 1997 or 1996. The
computation of the excess purchase commitment reserve requires management to
make certain assumptions regarding future sales growth, product mix,
cancellation costs and supply, among others. Actual results may differ
materially from management's estimates.

At December 26, 1998, the Company had outstanding purchase commitments of
approximately $2.9 million principally related to advertising contracts.  The
Company's contracts with its supplying breweries periodically requires it to
make capital contributions in support of brewery operations. Capital
contributions at certain brewery locations during the next 12 months are
anticipated to be $2.3 million. Additionally, the Company is committed to
purchase the land that is occupied by the Cincinnati Brewery, contingent upon
the completion of certain events.   The estimated net purchase price for the
land is $3.0 million of which $1.8 million has been paid as of December 26,
1998.
 
LEASE COMMITMENTS
The Company has various operating lease agreements primarily involving real
estate. Terms of the leases include purchase options, renewals and maintenance
costs, and vary by lease. These lease obligations expire at various dates
through 2009.

Minimum annual rental payments under these agreements are as follows:

                                                    (in thousands)
 
  1999.............................................   $    811
  2000.............................................        805
  2001.............................................        657
  2002.............................................        234
  2003 ............................................        234
  Thereafter.......................................        971
                                                       -------
                                                      $  3,712
                                                       =======

Rent expense for the years ended December 26, 1998, December 27, 1997 and
December 28, 1996 was approximately $870,000, $760,000 and $512,000,
respectively.

                                       33

<PAGE>
 
                         THE BOSTON BEER COMPANY, INC.
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                        
I.      COMMITMENTS AND CONTINGENCIES (CONTINUED)

LITIGATION
The Company is subject to legal proceedings and claims which arise in the
ordinary course of business. In the opinion of management, the amount of
ultimate liability with respect to these actions will not materially affect the
financial position or results of operations of the Company.

J.   COMMON STOCK

STOCK COMPENSATION PLAN
On November 20, 1995, the Company adopted the Employee Equity Incentive Plan
(the "Equity Plan") which provided for the grant of Management Options,
Discretionary Options and Investment Shares. The Equity Plan was, in part, the
successor to the Partnership's 1995 Management Option Plan, which was, in turn,
the successor to a series of the Partnership's Incentive Share Plans. In
connection with the Recapitalization, the grants under the Partnership's
Incentive Share Plans, as adjusted for the one and one half conversion of
partnerships' units, became grants to acquire Class A Common Stock. The Equity
Plan was amended effective December 19, 1997 to delete the provision which had
permitted the grant of Management Options which had been granted at $.01 per
share and to provide for an additional 1.0 million authorized shares.  The Plan
is administered by the Board of Directors, based on recommendations received
from the Compensation Committee of the Board of Directors, including with
respect to grants of Discretionary Options. The Compensation Committee consists
of nonemployee directors.

The Investment Shares feature of the Equity Plan permits employees who have been
with the Company for at least one year to purchase shares of Class A Common
Stock at a discount from current market value of 0% to 40%, based on the
employee's tenure with the Company. Investment Shares vest ratably over a five-
year period. Participants may pay for these shares either up front or through
payroll deductions over an eleven-month period.

Information related to the Management Options and Discretionary Options granted
under the Equity Plan is as follows:


<TABLE>
<CAPTION>
                                                                                                         Weighted Average
                                                Shares                       Option Price                 Exercise Price
                                     --------------------------      --------------------------     -------------------------
<S>                                  <C>                             <C>                            <C>
Outstanding at December 28, 1996                      1,131,127                $.01   -  $25.56                        $ 8.00
Granted                                                 267,857                $.01   -   $9.53                        $ 9.25
Canceled                                                (61,314)               $.01   -  $25.56                        $15.31
Exercised                                              (369,958)               $.01   -   $2.00                        $ 1.65
                                     --------------------------      --------------------------     -------------------------
Outstanding at December 27, 1997                        967,712                $.01   -  $25.56                        $10.32
Granted                                                  94,366               $7.91   -  $11.19                        $ 8.34
Canceled                                                (49,298)               $.01   -  $20.00                        $10.92
Exercised                                               (42,012)               $.01   -   $2.00                        $  .88
                                     --------------------------      --------------------------     -------------------------
Outstanding at December 26, 1998                        970,768                $.01   -  $20.69                        $10.58
                                     ==========================      ==========================     =========================
</TABLE>


Under the Equity Plan, Investment Shares purchased and vested were as follows:


<TABLE>
<CAPTION>
                                       As of December 26, 1998        As of December 27, 1997
                                     --------------------------     --------------------------
<S>                                  <C>                            <C>
Purchased                                            57,332                         42,539
Vested                                               35,823                         31,100
</TABLE>


The Company has reserved 1.0 million and 1.1 million shares of Class A Common
Stock for issuance pursuant to the Equity Plan at December 26, 1998 and December
27, 1997, respectively.

In October 1995, the FASB issued SFAS 123, "Accounting for Stock-Based
Compensation." SFAS 123 was effective for periods beginning after December 15,
1995. The Company adopted the disclosure provisions of SFAS 123 in 1996 and has
applied APB Opinion 25 and related interpretations for the Equity Plan. Had
compensation cost for the Company's stock-based compensation plans been
determined based on the fair value at the grant dates as calculated in
accordance with SFAS 123, the Company's net income and earnings per share for
the years ended December 26, 1998, December 27, 1997 and December 28, 1996 would
have been reduced to the pro forma amounts indicated below:

                                       34

<PAGE>
 
                         THE BOSTON BEER COMPANY, INC.
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                        
J.   COMMON STOCK (CONTINUED)

                    (in thousands, except per share amounts)

<TABLE>
<CAPTION>
                                        1998                                     1997                                     1996
                        ----------------------------------    --------------------------------     --------------------------------
                                                  Earnings                          Earnings                         Earnings    
                            Net Income            Per Share     Net Income          Per Share        Net Income      Per Share   
                            ----------            ---------     ----------          ---------        ----------      ---------
<S>                         <C>                   <C>           <C>                 <C>              <C>             <C>
As Reported - Basic                $7,924            $0.39             $7,558            $0.37              $8,385            $0.42
As Reported - Diluted              $7,924            $0.39             $7,558            $0.37              $8,385            $0.41
                                                                                               
Pro forma - Basic                  $7,492            $0.37             $7,117            $0.35              $8,305            $0.42
Pro forma - Diluted                $7,492            $0.36             $7,117            $0.35              $8,305            $0.41
</TABLE>


The fair value of each stock option is estimated on the date of grant using the
Black-Scholes option-pricing model with the following weighted average
assumptions:


<TABLE>
<CAPTION>
                                       1998                                1997                                     1996
                        -------------------------------     -------------------------------          -------------------------------
<S>                     <C>                                 <C>                                      <C>
Volatility                                   39.0%                               45.0%                                    45.0%
Expected life of option                 6.5 years              5.5 years to 6.5 years                   5.5 years to 6.5 years
Risk free interest rate                      4.80%                      5.43% to 7.79%                           5.43% to 7.79%
Dividend yield                                  0%                                  0%                                       0%
</TABLE>


The weighted average fair value of stock options granted and investment shares
purchased in 1998, 1997 and 1996 was $3.94, $5.46 and $7.06, respectively.

Because some options vest over several years and additional awards may be made
each year, the pro-forma amounts above may not be representative of the effects
on net income for future years.

The following table summarizes information about stock options outstanding at
December 26, 1998:


<TABLE>
<CAPTION>
                              Options Outstanding                                                  Options Exercisable
- -------------------------------------------------------------------------------------   ------------------------------------------
                                           Weighted Average         Weighted                                     Weighted 
    Range of               Number             Remaining             Average                    Number             Average 
 Exercise Prices        Outstanding        Contractual Life       Exercise Price             Exercisable      Exercise Price        

<S>                     <C>                <C>                    <C>                   <C>                   <C>
$ 0.01  -  $ 0.01          71,719              4.14 years               $ 0.01                  60,731                $ 0.01
$ 7.91  -  $11.19         410,386              9.13 years               $ 9.19                 128,720                $ 9.46
$12.06 -   $14.00         453,663              8.92 years               $12.78                 239,111                $12.97
$18.56 -   $20.69          35,000              7.61 years               $20.08                  23,500                $19.78
- -------------------------------------------------------------------------------------   -------------------------------------------
$0.01   -   $20.69        970,768              8.61 years               $10.58                 452,062                $10.59
=====================================================================================   ===========================================
</TABLE>


The Company recognized compensation expense of $201,000, $420,000 and $186,000
under the described programs for the years ending December 26, 1998, December
27, 1997 and December 28, 1996, respectively.

STOCK REPURCHASE PROGRAM
Effective October 15, 1998, the Board authorized management to implement a stock
repurchase program, subject to an aggregate expenditure limitation of $10.0
million.  There were no stock repurchases under this program as of December 26,
1998.

K.   FINANCIAL INSTRUMENTS

The Company has entered into forward exchange contracts to reduce exposure
relating to currency fluctuations affecting existing foreign currency
denominated firm commitments. The future value of the contracts and the related
currency position were subject to offsetting market risk resulting from foreign
currency exchange rate volatility. There were no forward exchange contracts
outstanding at December 26, 1998.  The carrying amounts of the contracts and the
unrealized loss recognized as a component of Stockholders' Equity totaled $9.3
million and $290,000, respectively, at December 27, 1997.

                                       35

<PAGE>
 
                         THE BOSTON BEER COMPANY, INC.
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                        
L.   RELATED PARTY TRANSACTIONS

The Company has a deferred compensation agreement with its Chief Financial
Officer that calls for specific payments upon retirement on or after April 1,
2000 with prorated annual payments called for upon early retirement. The Company
recorded as an expense approximately $70,000, $61,000, and $59,000 for the three
years ended December 26, 1998, December 27, 1997 and December 28, 1996,
respectively, in connection with such a deferred compensation agreement.
 
M.   401 (K) SAVINGS PLAN AND MULTI EMPLOYER BENEFIT PLANS

During 1993, the Company established the Boston Beer Company 401(k) Savings Plan
(the "Plan"). The Plan is a defined contribution plan that covers a majority of
the Company's employees. Participants may make voluntary contributions of their
annual compensation. The Company made contributions to the Plan in each of the
three years ended December 26, 1998, December 27, 1997, and December 28,1996 of
$363,000, $356,000, and $280,000, respectively.

Certain hourly paid workers in Cincinnati are covered by the Samuel Adams Local
Union #1199 Defined Benefit Pension Plan. The Company contributes approximately
$50,000 per year to this plan. Certain hourly paid workers in Cincinnati are
also covered by two Multi-Employer Retirement Plans. The Company contributes
approximately $20,000 per year to these plans.

N.   NET INCOME PER SHARE

The following table sets forth the computation of basic and diluted earnings per
share in accordance with SFAS 128:


<TABLE>
<CAPTION>
                                                                                      (in thousands)
                                                                1998                       1997                       1996
                                                          -----------------          -----------------          -----------------
<S>                                                       <C>                        <C>                        <C>
Net income                                                          $ 7,924                    $ 7,558                    $ 8,385
                                                          -----------------          -----------------          -----------------
 
Shares used in net income per common share - basic                   20,486                     20,324                     19,970
Dilutive effect of common equivalent shares                              79                        166                        382
                                                          -----------------          -----------------          -----------------
Shares used in net income per common share - diluted                 20,565                     20,490                     20,352
 
Net income per common share - basic                                 $  0.39                    $  0.37                    $  0.42
                                                          =================          =================          =================
Net income per common share - diluted                               $  0.39                    $  0.37                    $  0.41
                                                          =================          =================          =================
</TABLE>


O.   VALUATION AND QUALIFYING ACCOUNTS

The information required to be included in Schedule II, Valuation and Qualifying
Accounts, for the years ended December 26, 1998, December 27, 1997 and December
28, 1996 is as follows:


<TABLE>
<CAPTION>
                                                                        (in thousands)
 
                                              Balance at        Additions 
                                              Beginning      Charged to Costs         Net Additions       Balance at End 
                                              of Period        and Expenses           (Deductions)           of Period
                                              ---------        ------------           ------------           ---------
<S>                                           <C>            <C>                      <C>                 <C>
Allowance for Doubtful Accounts
                 1996                              175             1,832                    (77)                 1,930
                 1997                            1,930              (617)                  (160)                 1,153
                 1998                            1,153               246                    (90)                 1,309
</TABLE>

                                                                               
Deductions from allowance for doubtful accounts represent the write-off of
uncollectable balances.
 
P.   QUARTERLY RESULTS (UNAUDITED)

In management's opinion, this unaudited information includes all adjustments
(consisting only of normal recurring adjustments) necessary for a fair
presentation of the information for the quarters presented. The operating
results for any quarter are not necessarily indicative of results for any future
quarters.

                                       36

<PAGE>
 
                         THE BOSTON BEER COMPANY, INC.
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

P.   QUARTERLY RESULTS (UNAUDITED)  (CONTINUED)


<TABLE>
<CAPTION>
                                                                      For Quarters Ended (in 000s)
                                    ------------------------------------------------------------------------------------------
 
                                    December     September     June       March       December    September     June       March 
                                    26, 1998     26, 1998    27, 1998    28, 1998     27, 1997    27, 1997    28, 1997    29, 1997
                                    --------     --------    --------    --------     --------    --------    --------    --------
<S>                                 <C>         <C>         <C>        <C>          <C>        <C>         <C>        <C>   
Barrels Sold                              282        310        324        311           327        357          387         281
                                                                                                                         
Sales                                 $47,347    $52,205    $53,808    $51,660       $49,869    $55,664    $  57,158     $46,799
Less excise taxes                       5,044      5,341      5,848      5,334         6,392      7,047        7,320       4,944
                                    ------------------------------------------     ---------------------------------------------
Net sales                              42,303     46,864     47,960     46,326        43,477     48,617       49,838      41,855
Cost of sales                          20,540     22,686     23,661     22,506        21,420     22,000       24,671      21,907
                                    ------------------------------------------     --------------------------------------------- 
Gross profit                           21,763     24,178     24,299     23,820        22,057     26,617       25,167      19,948
                                    ------------------------------------------     --------------------------------------------- 
Advertising, promotional and                                                                                             
selling expenses                       17,613     17,382     18,393     13,540        17,735     17,415       19,829      14,558
General and administrative                                                                                               
expenses                                3,248      2,842      3,214      3,224         2,449      3,190        3,097       2,930
                                    ------------------------------------------     --------------------------------------------- 
Total operating expenses               20,861     20,224     21,607     16,764        20,184     20,605       22,926      17,488
                                    ------------------------------------------     ---------------------------------------------
Operating income                          902      3,954      2,692      7,056         1,873      6,012        2,241       2,460
Other income (expenses), net              430        426      1,166     (2,260)          284       (243)         304         350
                                    ------------------------------------------     ---------------------------------------------
Income before provision for taxes       1,332      4,380      3,858      4,796         2,157      5,769        2,545       2,810
Provision for income taxes                453      1,743      1,526      2,720           862      2,521        1,110       1,230
                                    ------------------------------------------     --------------------------------------------- 
Net income                            $   879    $ 2,637    $ 2,332    $ 2,076       $ 1,295    $ 3,248    $   1,435    $  1,580
                                    ==========================================     =============================================
                                                                                                                         
Earnings per share - basic            $  0.05    $  0.13    $  0.11    $  0.10       $  0.06    $  0.16    $    0.07    $   0.08
                                    ==========================================     ============================================= 
Earnings per share - diluted          $  0.05    $  0.13    $  0.11    $  0.10       $  0.06    $  0.16    $    0.07    $   0.08
                                    ==========================================     ============================================= 
                                                                                   
Weighted average shares - basic        20,501     20,495     20,489     20,459        20,445     20,425       20,325      20,099
                                    ==========================================     ============================================= 
Weighted average shares - diluted      20,580     20,573     20,612     20,551        20,574     20,557       20,475      20,356
                                    ==========================================     =============================================
</TABLE>


Q.   SUBSEQUENT EVENT

On February 8, 1999, Stroh Brewing Company ("Stroh") announced that it had
reached definitive agreements to sell a majority of its beer brands and
Allentown Brewery to Pabst Brewing Company ("Pabst") and certain of its brands
to Miller Brewing Company ("Miller") (collectively, the "Stroh Transactions").
It is anticipated that the Stroh Transactions will be completed during the
second quarter of 1999; however, they are subject to review by the United States
Department of Justice and the Company has been advised by Stroh that it cannot
be sure that the Stroh Transactions will  be completed. The Company brews
approximately 40% of its production at the Stroh Breweries.  Pabst has agreed to
assume Stroh's obligations under the Stroh Contract in the event that the
proposed Stroh Transactions are completed, and Miller has agreed to guarantee
Pabst's contract brewing commitment. The Company's volume brewed at the
Allentown Brewery is anticipated to remain substantially unchanged as a result
of the Stroh Transactions. Stroh has indicated that it will continue to operate
its remaining five breweries, including the Portland Brewery after completion of
the Stroh Transactions, until production can be transferred to a Pabst or
Miller-owned brewery.  It is anticipated that the Company's production will be
transferred from the Portland Brewery to a Pabst or Miller-owned brewery during
the 1999 fiscal year.  The Company has completed, to its satisfaction, detailed
inspections of the potential breweries that are likely to assume the volume that
is currently brewed at the Portland Brewery.  The Company does not anticipate
any significant problems during the transition period or thereafter, as a result
of the Stroh Transactions, and does not believe that it will have material
effect on its results of operations, statement of financial position or
statement of cash flows during 1999.  However, the exact timing and completion
of the Stroh Transactions are dependent on many external factors, and the
Company cannot be certain that the Stroh Transactions will occur, or proceed as
the Company expects.

                                       37

<PAGE>
 

I
TEM 9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON FINANCIAL
          DISCLOSURES
 
            Effective June 15, 1998, the Company appointed Arthur Andersen LLP
            as the independent auditors for the fiscal year ending December 26,
            1998 and disengaged Coopers & Lybrand LLP as its independent
            auditors. Such change was not the result of any disagreement between
            the Company and Coopers & Lybrand LLP relating to any accounting,
            financial reporting, or disclosure issue.



                                   PART III
                                        

ITEM 10.  DIRECTOR AND EXECUTIVE OFFICERS OF THE REGISTRANT
 
            The information required by Item 10 is hereby incorporated by
            reference from the Registrant's definitive Proxy Statement for the
            1998 Annual Meeting to be held on June 1, 1999.


ITEM 11.  EXECUTIVE COMPENSATION

            The Information required by Item 11 is hereby incorporated by
            reference from the Registrant's definitive Proxy Statement for the
            1998 Annual Meeting to be held on June 1, 1999.


ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

            The information required by Item 12 is hereby incorporated by
            reference from the Registrant's definitive Proxy Statement for the
            1998 Annual Meeting to be held on June 1, 1999.


ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

            The information required by Item 13 is hereby incorporated by
            reference from the Registrant's definitive Proxy Statement for the
            1998 Annual Meeting to be held on June 1, 1999.



                                    PART IV
                                        

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

        (a) The financial statements and financial statement schedules are
            contained in Item 8 of Part II to this report on Form 10-K.

        (b) During the fourth quarter of the fiscal year ended December 26,
            1998, the Registrant filed no Current Reports on Form 8-K.

        (c) Exhibits

        The following is a list of exhibits filed as part of this Form 10-K:

            EXHIBIT NO.        TITLE
            ----------         -----

               3.1       Amended and Restated By-Laws of the Company, dated June
                         2, 1998 (incorporated by reference to Exhibit 3.5 to
                         the Company's Form 10-Q filed on August 10, 1998).

               3.2       Restated Articles of Organization of the Company, dated
                         July 21, 1998 (incorporated by reference to Exhibit 3.6
                         to the Company's Form 10-Q filed on August 10, 1998).

               4.1       Form of Class A Common Stock Certificate (incorporated
                         by reference to Exhibit 4.1 to the Company's
                         Registration Statement No. 33-96164).
 
               10.1      Revolving Credit Agreement between Fleet Bank of
                         Massachusetts, N.A. and Boston Beer Company Limited
                         Partnership (the "Partnership"), dated as of May 2,
                         1995 (incorporated by reference to Exhibit 10.1 to the
                         Company's Registration Statement No. 33-96162).

                                       38

<PAGE>
 
            EXHIBIT NO.        TITLE
            ----------         -----

            10.2         Loan Security and Trust Agreement, dated October 1,
                         1987, among Massachusetts Industrial Finance Agency,
                         the Partnership and The First National Bank of Boston,
                         as Trustee, as amended (incorporated by reference to
                         Exhibit 10.2 to the Company's Registration Statement
                         No. 33-96164).

            10.3         Deferred Compensation Agreement between the Partnership
                         and Alfred W. Rossow, Jr., effective December 1, 1992
                         (incorporated by reference to Exhibit 10.3 to the
                         Company's Registration Statement No. 33-96162).

            10.4         The Boston Beer Company, Inc. Employee Equity Incentive
                         Plan, as adopted effective November 20, 1995 and
                         amended effective February 23, 1996 (incorporated by
                         reference to Exhibit 4.1 to the Company's Registration
                         Statement No. 333-1798).

            10.5         Form of Employment Agreement between the Partnership
                         and employees (incorporated by reference to Exhibit
                         10.5 to the Company's Registration Statement No. 33-
                         96162).

            10.6         Services Agreement between The Boston Beer Company,
                         Inc. and Chemical Mellon Shareholder Services, dated as
                         of October 27, 1995 (incorporated by reference to the
                         Company's Form 10-K, filed on April 1, 1996).

            10.7         Form of Indemnification Agreement between the
                         Partnership and certain employees and Advisory
                         Committee members (incorporated by reference to Exhibit
                         10.7 to the Company's Registration Statement No. 33-
                         96162).
 
            10.8         Stockholder Rights Agreement, dated as of December,
                         1995, among The Boston Beer Company, Inc. and the
                         initial Stockholders (incorporated by reference to the
                         Company's Form 10-K, filed on April 1, 1996).
           
            +10.10       Agreement between Boston Brewing Company, Inc. and The
                         Stroh Brewery Company, dated as of January 31, 1994
                         (incorporated by reference to Exhibit 10.9 to the
                         Company's Registration Statement No. 33-96164).

            +10.11       Agreement between Boston Brewing Company, Inc. and the
                         Genesee Brewing Company, dated as of July 25, 1995
                         (incorporated by reference to Exhibit 10.10 to the
                         Company's Registration Statement No. 33-96164).

            +10.12       Amended and Restated Agreement between Pittsburgh
                         Brewing Company and Boston Brewing Company, Inc. dated
                         as of February 28, 1989 (incorporated by reference to
                         Exhibit 10.11 to the Company's Registration Statement
                         No. 33-96164).

            10.13        Amendment to Amended and Restated Agreement between
                         Pittsburgh Brewing Company, Boston Brewing Company,
                         Inc., and G. Heileman Brewing Company, Inc., dated
                         December 13, 1989 (incorporated by reference to Exhibit
                         10.12 to the Company's Registration Statement No. 33-
                         96162).

            +10.14       Second Amendment to Amended and Restated Agreement
                         between Pittsburgh Brewing Company and Boston Brewing
                         Company, Inc. dated as of August 3, 1992 (incorporated
                         by reference to Exhibit 10.13 to the Company's
                         Registration Statement No. 33-96164).

            +10.15       Third Amendment to Amended and Restated Agreement
                         between Pittsburgh Brewing Company and Boston Brewing
                         Company, Inc. dated December 1,1994 (incorporated by
                         reference to Exhibit 10.14 to the Company's
                         Registration Statement No. 33-96164).

            10.16        Fourth Amendment to Amended and Restated Agreement
                         between Pittsburgh Brewing Company and Boston Brewing
                         Company, Inc. dated as of April 7,1995 (incorporated by
                         reference to Exhibit 10.15 to the Company's
                         Registration Statement No. 33-96162).

            +10.17       Letter Agreement between Boston Beer Company Limited
                         Partnership and Joseph E. Seagram & Sons, Inc.
                         (incorporated by reference to Exhibit 10.16 to the
                         Company's Registration Statement No. 33-96162).

                                       39

<PAGE>
 
            EXHIBIT NO.          TITLE
            ----------           -----

            10.18        Services Agreement and Fee Schedule of Mellon Bank,
                         N.A. Escrow Agent Services for The Boston Beer Company,
                         Inc. dated as of October 27, 1995 (incorporated by
                         reference to Exhibit 10.17 to the Company's
                         Registration Statement No. 33-96164).

            10.19        Amendment to Revolving Credit Agreement between Fleet
                         Bank of Massachusetts, N.A. and the Partnership
                         (incorporated by reference to Exhibit 10.18 to the
                         Company's Registration Statement No. 33-96164).

            10.20        1996 Stock Option Plan for Non-Employee Directors
                         (incorporated by reference to the Company's Form 10-K,
                         filed on March 27, 1998).

            +10.21       Production Agreement between The Stroh Brewery Company
                         and Boston Beer Company Limited Partnership, dated
                         January 14, 1997 (incorporated by reference to the
                         Company's Form 10-K, filed on March 27, 1998).

            +10.22       Letter Agreement between The Stroh Brewery Company and
                         Boston Beer Company Limited Partnership, dated January
                         14, 1997 (incorporated by reference to the Company's
                         Form 10-K, filed on March 27, 1998).

            +10.23       Agreement between Boston Beer Company Limited
                         Partnership and The Schoenling Brewing Company, dated
                         May 22, 1996 (incorporated by reference to the
                         Company's Form 10-K, filed on March 27, 1998).

            10.24        Revolving Credit Agreement between Fleet Bank of
                         Massachusetts, N.A. and The Boston Beer Company, Inc.,
                         dated as of March 21, 1997 (incorporated by reference
                         to the Company's Form 10-Q, filed on May 12, 1997).

            +10.25       Amended and Restated Agreement between Boston Brewing
                         Company, Inc. and the Genesee Brewing Company, Inc.
                         dated April 30, 1997 (incorporated by reference to the
                         Company's Form 10-Q, filed on August 11, 1997).

            +10.26       Fifth Amendment, dated December 31, 1997, to Amended
                         and Restated Agreement between Pittsburgh Brewing
                         Company and Boston Brewing Company, Inc. (incorporated
                         by reference to the Company's Form 10-K, filed on March
                         27, 1998).

            10.27        Extension letters, dated August 19, 1997, November 19,
                         1997, December 19, 1997, January 22, 1998, February 25,
                         1998 and March 11, 1998 between The Stroh Brewery
                         Company and Boston Brewing Company, Inc. (incorporated
                         by reference to the Company's Form 10-K, filed on March
                         27, 1998).

            +10.28       Employee Equity Incentive Plan, as amended and
                         effective on December 19, 1997 (incorporated by
                         reference to the Company's Form 10-K, filed on March
                         27, 1998).

            +10.29       1996 Stock Option Plan for Non-Employee Directors, as
                         amended and effective on December 19, 1997
                         (incorporated by reference to the Company's Form 10-K,
                         filed March 27, 1998).

            +10.30       Glass Supply Agreement between The Boston Beer Company
                         and Owens' Brockway Glass Container Inc., dated April
                         30, 1998 (incorporated by reference to the Company's
                         Form 10-Q, filed on August 10, 1998).

            10.31        Extension letters, dated April 13, 1998, April 27,
                         1998, June 11, 1998, June 25, 1998 and July 20, 1998
                         between The Stroh Brewery Company and Boston Brewing
                         Company, Inc. (incorporated by reference to the
                         Company's Form 10-Q, filed on August 10, 1998).
 
            10.32        Extension letters, dated July 31, 1998, August 28,
                         1998, September 28, 1998, October 13, 1998, October 20,
                         1998 and October 23, 1998 between The Stroh Brewery
                         Company and Boston Brewing Company, Inc. (incorporated
                         by reference to the Company's Form 10-Q, filed on
                         November 4, 1998).

                                       40

<PAGE>
 
            EXHIBIT NO.           TITLE
            ----------            -----

            *10.33       Amended and Restated Production Agreement between The
                         Stroh Brewery Company and Boston Beer Company Limited
                         Partnership, dated November 1, 1998.

            *10.34       Agreement between Boston Beer Company Limited
                         Partnership, Pabst Brewing Company and Miller Brewing
                         Company, dated February 5, 1999.

            *11.1        The information required by exhibit 11 has been
                         included in Note N of the notes to the consolidated
                         financial statements.

            21.1         List of subsidiaries of The Boston Beer Company, Inc.
                         (incorporated by reference to the Company's Form 10-K,
                         filed on March 28, 1997).

            *23.1        Consent of Arthur Andersen LLP, independent accountants
                         with respect to the Company.

            *23.2        Consent of Pricewaterhouse Coopers LLP, former
                         independent accountants with respect to the Company.

            *27.1        Financial Data Schedule (electronic filing only).

 
* Filed with this report.

+ Portions of this Exhibit have been omitted pursuant to an application for an
  order declaring confidential treatment filed with the Securities and Exchange
  Commission.

                                       41

<PAGE>
 

SIGNATURES
 

Pursuant to the requirements of Section 13 or 15(d) of the Securities and
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on this 25th of March,
1999.



                    THE BOSTON BEER COMPANY, INC.
 
 
                    /s/ C. James Koch
                    President, Chief Executive Officer, Clerk and Director
                    (principal executive officer)


Pursuant to the requirements of the Securities and Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.


   SIGNATURE                     TITLE


   /s/ C. JAMES KOCH             President, Chief Executive Officer, Clerk and 
                                 Director (principal   executive officer)      
                                                                               
   /s/ ALFRED W. ROSSOW, JR      Treasurer, Chief Financial Officer (principal 
                                 financial officer and Director)               
                                                                               
                                                                               
   /s/ RICHARD P. LINDSAY        Vice President - Finance (principal accounting
                                 officer)                                      
                                                                               
                                                                               
   /s/ PEARSON C. CUMMIN, III    Director                                      
                                                                               
                                                                               
   /s/ ROBERT N. HIATT           Director                                      
                                                                               
                                                                               
   /s/ RHONDA L. KALLMAN         Director                                     
                                                                               
                                                                               
   /s/ JAMES C. KAUTZ            Director                                      
 

   /s/ CHARLES JOSEPH KOCH       Director
 
 
   /s/ JOHN B. WING              Director

                                       42





<PAGE>
 
Exhibit 10.33
- -------------

                             AMENDED AND RESTATED
                             PRODUCTION AGREEMENT
                                    BETWEEN
                           THE STROH BREWERY COMPANY
                                      AND
                    BOSTON BEER COMPANY LIMITED PARTNERSHIP


AGREEMENT entered into effective as of the 1st day of November, 1998 (the
"Effective Date"), by and between THE STROH BREWERY COMPANY, an Arizona
corporation ("Stroh", which term shall also include each Permitted Assignee, as
hereinafter defined, as the context admits), and BOSTON BEER COMPANY LIMITED
PARTNERSHIP, a Massachusetts limited partnership ("Boston Beer").  Boston Beer
and Stroh are sometimes referred to herein individually as a "Party" and
collectively as the "Parties".

          Stroh and Boston Beer are currently parties to an Agreement dated as
of January 14, 1997, as amended, pursuant to which Stroh agreed to brew, package
and sell certain Boston Beer products to Boston Beer ("1997 Production
Agreement") at Stroh's Allentown (Lehigh Valley), Pennsylvania brewery.  Stroh
also produces products for Boston Beer at the Portland, Oregon brewery
(formerly, the "Heileman Brewery"), sometimes referred to hereinafter as the
"Portland" brewery.  When Stroh acquired the Heileman Brewery, it assumed
certain production arrangements contained in an Agreement between Boston Beer
and G. Heileman
 Brewing Company, Inc., dated as of November 29, 1995 (the
"Heileman Agreement"), as well as the terms and conditions of each of the Sankey
Project agreement, dated July 5, 1995, (the "Sankey Agreement") and the Wort
Clarifier Project agreement, dated July 6, 1995 (the "Wort Clarifier
Agreement").  Copies of the Sankey Agreement and the Wort Clarifier Agreement
are attached hereto as Exhibits A and B, respectively.  Stroh and Boston Beer
are also parties to a certain Letter Agreement dated January 14, 1997, as
amended, which related to certain potential investments ("Letter Agreement").
Stroh and Boston Beer now desire to enter into a new production agreement,
effective as of the Effective Date, to supersede the existing arrangements, and
which will govern the production of products by Stroh for Boston Beer, provide
Boston Beer with greater control over the production process, and give Boston
Beer access to greater brewing capacity through the inclusion of other Stroh
breweries.

ACCORDINGLY, in consideration of the mutual agreements contained in this
Agreement, the Parties, intending to be legally bound, hereby agree, as follows:

1.        Scope of Agreement.
          ------------------ 

          a.   During the Term, as defined in Section 7, and in accordance with
the terms and conditions set forth herein, Stroh shall give Boston Beer access
to the Stroh production facilities identified in subsection (c), below, and make
available to Boston Beer Stroh's production personnel to allow Boston Beer to
produce Boston Beer's proprietary Beer Products.

          b.   For purposes of this Agreement, Boston Beer's "Beer Products"
shall include those products set forth in Exhibit C attached hereto, together
with certain specially ordered and seasonal malt beverage products identified as
such by Boston Beer ("Special Orders and Seasonals") and such other beer
products as Boston Beer may introduce from time to time. Boston Beer shall
periodically provide to Stroh an updated schedule of all Boston Beer products
which Boston Beer deems to be Beer Products, subject to this Agreement. Boston
Beer agrees, however, that Stroh need not permit in excess of * or in excess of
* . The Parties agree that they may subsequently mutually agree in writing to
amend the foregoing specifications with respect to the maximum number of *.

 
          c.   The breweries that are subject to this Agreement (individually a
"Brewery" and collectively the "Breweries") are as set forth in the following
chart. *
 
          *:          *             *
                      -        
 
Allowed Locations
- -----------------
 
Initial Allowed Location:    Lehigh Valley, PA       Portland, OR
 
      *             *             *
      -             -             -
The foregoing Breweries are sometimes hereinafter referred to simply as "Lehigh
Valley", "Portland", *, * and * respectively. For purposes hereof, the terms
"Brewery" and "Breweries" shall include (i) other breweries owned by Stroh at
which it may be proposed 

<PAGE>
 
by Stroh that Beer Products be produced pursuant to this Agreement and (ii)
except as otherwise agreed between Boston Beer and a Permitted Assignee at the
time a Permitted Assignee takes on production responsibilities for Boston Beer,
all breweries owned by a Permitted Assignee (all of which shall be deemed to be
Allowed Locations), whether or not acquired from Stroh.

2.   Control of Production of Beer Products: Public Statements.
     --------------------------------------------------------- 

     a.   All Beer Products shall be brewed and packaged according to Boston
Beer's specifications, including the maintenance of standards and quality
control programs. Boston Beer shall have ultimate responsibility and authority
over every detail of the production process for Beer Products at each of the
Breweries, with such responsibility and authority as to those parameters
affecting beer taste and quality to be the same as if Boston Beer were the owner
of the Brewery. Boston Beer shall have the right, at any time, to monitor and
review the practices and procedures of Stroh in the production and packaging of
Beer Products and to inspect each of the Breweries and any other Brewery at
which it is proposed by Stroh that Beer Products be produced. If a decision made
by Boston Beer in the exercise of its authority under this Section 2(a) results
in additional costs over and above the costs of the then current operations,
Stroh shall be entitled to be reimbursed by Boston Beer for such costs. In
addition, in the exercise of its authority under this Section 2(a), Boston Beer
shall not interfere with Stroh's production processes for its own proprietary
brands.

     b.   Consistent with the provisions of paragraph (a), Stroh and Boston Beer
will, in any and all public statements or comments, recognize that Boston Beer
controls the ingredients, recipe, brewing processes and procedures and quality
and taste parameters for all Beer Products produced at Breweries and that Boston
Beer is the brewer of all such Beer Products. Neither party will make any public
statements inconsistent with the foregoing.

3.   Committed Capacity: Commitment Fee.
     ---------------------------------- 

     a.   During the Term, Stroh shall, except as otherwise provided herein,
make the following minimum production capacities available to Boston Beer for
the production of Beer Products:

          Brewery                  Committed Capacity
          --------------------------------------------

          *                        *

          *                        *

     The Committed Capacity at each Initial Location or at subsequent Allowed
Locations is based on anticipated tank usage and availability and shall be
increased or decreased in inverse proportion to the extent that actual average
tank usage varies from *. Boston Beer will, however, endeavor, to the extent
reasonably possible, to provide Stroh with * advance written notice of any
expected increase or decrease in its expected production requirements which
varies more than * from any previously submitted monthly forecasts for the
period in question, in order to allow Stroh to plan its capacity utilization at
any Brewery. Beer Products shall primarily be produced in units consisting of
(i) twenty-four 12-ounce bottles, whether packaged as a 24 bottle loose case, a
four 6-pack case or a two 12-pack case (each a "12-oz. Case Unit"), (ii) twelve
22-ounce bottles (a "22 oz. Case Unit"), (iii) 7.75 U.S. gallons (a "Half-Keg"),
and (iv) 15.50 U.S. gallons (a "Keg").

     b.   Commitment Fee.  In consideration of Stroh's willingness to
          --------------                                             
(i) enter into this Agreement, (ii) waive its rights under the Letter Agreement,
and (iii) commit the Committed Capacity to Boston Beer, Boston Beer shall pay to
Stroh, *, which shall be non-refundable except in the event of a Stroh
Production Default (as defined in Section 8(b)), and assign to Stroh Boston
Beer's ownership interest in the Wort Clarifier, as set forth in and subject to
the provisions of Section 14 hereof.

     c.   Packaging. * Stroh agrees to comply with such specifications mutually 
          ---------                                      
agreed to between Stroh and Boston Beer regarding the sterilization process for
use of used glass and inspection of used glass to insure, to the maximum extent
possible, that no foreign objects remain following the sterilization of such
used glass. The Parties agree that a copy of such specifications shall be
attached hereto as Exhibit D.

4.   Closure or Sale of Breweries.
     ---------------------------- 

     a.   Non-Final Closure.  In the event that Stroh proposes to
          -----------------                                      
close ("Close" or a "Closure", which terms shall include a sale of a Brewery to
a party not intending to continue brewing operations at the location in
question) a Brewery at which Beer Products are then being produced (the "Closed
Brewery"), at a time when Stroh continues to operate a Brewery or Breweries *
Stroh shall:

                    (i)   provide written notice to Boston Beer (the "Closure
               Notice") at least * prior to the effective date of any such
               proposed Closure and shall advise Boston Beer in its Closure
               Notice of the Incremental Costs (hereinafter defined), if any,
               arising out of a relocation to each potential Allowed Location;

<PAGE>
 
                    (ii)  offer to make all arrangements necessary to relocate
               Boston Beer's displaced business to an Allowed Location, which,
               if there is more than one remaining Allowed Location, shall be
               the Allowed Location that represents the closest geographic
               location * that is a Brewery which can meet the quality, taste
               and service requirements of this Agreement; and

                    (iii) if such offer is accepted, insure that the
               displaced production of Beer Products shall continue to be
               supplied without disruption.

     b.   Final Closure.  In the event that Stroh proposes a Closure at a time
          -------------                                             
when Stroh no longer operates another Brewery *, but does operate another
Brewery, Stroh shall:

                    (i)   provide written notice to Boston Beer (the "Final
               Closure Notice") of Stroh's intent to close the current location;
               and

                    (ii)  offer replacement production at any other brewery
               owned or operated by Stroh during the Final Closure Period, which
               is defined as the longest of * or * after the date of the actual
               Closure of the Closed Brewery or through *, such production to be
               provided by Stroh in a manner which is economically equivalent to
               the then economic arrangements for production of Beer Products at
               the Brewery then subject to Closure (i.e., Stroh shall pay any
               capital or Incremental Costs, including any increase in freight
               costs to Boston Beer associated with Stroh continuing to supply
               Boston Beer with Beer Products during the Final Closure Period,
               over and above those amounts already being paid by Boston Beer
               prior to and as of the date of the Final Closure Notice), and in
               a manner that, in the reasonable judgement of Boston Beer,
               provides the same level of quality, taste and service as was
               enjoyed by Boston Beer at the Closed Brewery; provided that if
               Boston Beer accepts such replacement production for periods
               beyond the Final Closure Period, Boston Beer shall pay any
               Incremental Costs (defined below) and the brewery at which such
               replacement production shall occur shall then be deemed to be an
               "Allowed Location" *

If Stroh proceeds with the actions contemplated by this subsection (b), Stroh
would have the right to move the production of Boston Beer's Beer Products from
the Initial Location subject to Closure to any other Stroh location approved by
Boston Beer, such approval not to be unreasonably withheld or delayed, provided,
however, that there shall be no disruption in the supply of Beer Products to
Boston Beer during the Final Closure Period.

     c.   Continuing Option.  In the event that Boston Beer elects not to accept
          -----------------                                           
an offer of replacement production capacity for Beer Products made by Stroh in
connection with a Closure, then, in such event, Stroh agrees that its offer of
replacement production capacity to Boston Beer (the "Option for Replacement
Production") shall remain open until the expiration of *. In the event that
Boston Beer fails to elect, during such *, to have Beer Products produced in
accordance with the Option for Replacement Production made by Stroh, then such
failure shall be deemed to be a termination of this Agreement solely with
respect to production of Beer Products *, and as referred to in the Closure
Notice pursuant to which Stroh has offered the replacement production capacity.
If, on the other hand, Boston Beer should elect, subsequent to Closure but prior
to expiration of the Option for Replacement Production, to have Stroh produce
Beer Products in accordance with the replacement production capacity outlined in
the Option for Replacement Production, then, in such event, Boston Beer shall be
responsible for all Incremental Costs with no Contribution Allocation (as
hereinafter defined) to be credited against Incremental Costs. Nothing contained
in this subsection (c) shall require Stroh to refrain from Closing a Brewery.

     d.   Partial Sale.  In the event that Stroh proposes to sell
          ------------                                           
("Sell" or a "Sale") a Brewery at which Beer Products are then being produced
(the "Sold Brewery"), in a transaction not involving all Breweries owned by
Stroh, Stroh shall:

                    (i)   provide written notice to Boston Beer (the "Sale
               Notice") at least * prior to the effective date of any such
               proposed Sale;

                    (ii)  cause the proposed purchaser of the Sold Brewery to
               offer in writing to assume all of Stroh's obligations to Boston
               Beer at the Sold Brewery; and

                    (iii) offer to relocate production from the Sold Brewery
               to another Allowed Location or another Brewery then owned by
               Stroh, in accordance with and subject to the provisions of
               subsections (a) and (b), above, as applicable.

<PAGE>
 
Boston Beer shall have the right, in its reasonable discretion, to approve an
assignment of Stroh's obligations at the Sold Brewery, so that production
remains at the Sold Brewery, or permit relocation of such production to another
Stroh Brewery, in accordance with subsections (a) and (b), above.

     e.   Sale of All Breweries.  In the event that Stroh proposes a Sale of 
          ---------------------                                     
its Breweries or a planned combination of Sales and/or Closures involving all
Breweries owned by Stroh, Stroh shall:

                    (i)   provide written notice to Boston Beer (the "Sale
               Notice") at least * prior to the effective date of any such
               proposed Sale or Closure; and

                    (ii)  cause all of Stroh's obligations to Boston Beer to be
               assumed by one or more Permitted Assignees for the balance of the
               Term (as defined in Section 7).

     f.   Approval of Assignees.  Notwithstanding any implication to the 
          ---------------------                                     
contrary arising out of Stroh's obligations under subsections (d)(ii) and
(e)(ii) of this Section 4, Stroh may not assign any of its rights and
obligations hereunder other than to a Permitted Assignee. For all purposes of
this Agreement, a "Permitted Assignee" is an entity that:

                    (i)   is actively engaged in the business of producing beer
               or other malt beverages at one or more breweries owned by it;

                    (ii)  conducts its brewing operations generally in
               accordance with service and quality standards reasonably
               acceptable to Boston Beer, which in any event shall be consistent
               with the levels of service and quality and product taste enjoyed
               by Boston Beer in its relationship with Stroh, as discussed in
               Section 27 hereof;

                    (iii) is, in the reasonable judgment of Boston Beer, able to
               meet those of Stroh's obligations hereunder to be assigned to it,
               including producing Beer Products to Boston Beer's product
               specifications, including quality and product taste;

                    (iv)  is also, in the reasonable judgment of Boston Beer,
               financially able to meet those of Stroh's obligations hereunder
               to be assigned to it, it being understood that Boston Beer
               reserves the right to reasonably request a performance bond or
               other assurances of such financial ability; and

                    (v)   executes a written instrument, in form and substance
               reasonably acceptable to Boston Beer, pursuant to which it
               formally undertakes to carry out and perform all of Stroh's
               obligations hereunder with respect to those Stroh obligations
               being assigned to it (except to the extent otherwise provided in
               this Agreement).

     g.   Lehigh Valley Equipment.  In the event of the Closure of Lehigh 
          -----------------------                                 
Valley, unless the equipment identified on Exhibit E attached hereto, all of
which was originally purchased for Lehigh Valley by Boston Beer, is then
relocated to another Brewery at which Beer Products are to be produced, Boston
Beer shall have the option, exercisable at any time within * after receipt of
the Closure Notice with respect to Lehigh Valley, to purchase any or all of such
equipment for the aggregate price of * provided that Boston Beer shall bear all
dismantling and moving costs.

     h.   Timing of * Closures.  Stroh agrees that, if it Closes * and
          --------------------                                        
production of Beer Products is relocated to *, and it subsequently determines to
* prior to the expiration of at least * after the relocation from Portland,
Stroh shall pay any incremental freight costs incurred by Boston Beer during the
balance of said *, as a result of the second relocation. This subsection (h)
shall not apply to a Permitted Assignee that purchases * Portland * from Stroh.

      i.   Effect of Contract Brewing.  A decision by Stroh to Close a
           --------------------------                                 
Brewery and enter into a contract to produce its products at a brewery owned by
a third party shall be deemed to be a Sale to the third party, subject to
subsections (d) and (e), and the brewery at which the Stroh products are to be
contract brewed shall be deemed to be a Sold Brewery for purposes of the
application of such subsections.

5.   Incremental Costs.
     ----------------- 

     a.   For purposes hereof, Incremental Costs shall include those incremental
capital and operating costs incurred by Stroh specifically to accommodate Boston
Beer's production at a facility other than *. Incremental operating costs
("Incremental Operating Costs") shall include any incremental freight costs
("Incremental Freight") incurred by Stroh due to displaced Stroh product volume
caused by Boston Beer's volume at the new location, and shall also include
variable costs incurred by Stroh over and above the normal 

<PAGE>
 
operating costs associated with the direct production of Beer Products (where
normal operating costs are equivalent to those operating costs under the current
arrangements and processes at *). Incremental capital costs shall include any
specific equipment needed in order to meet Boston Beer's liquid process
specifications or package configurations, and any reasonable capacity expansions
of the brewery tankage required to economically accommodate Boston Beer's
production. Incremental capital costs must be approved by Boston Beer in writing
prior to commencement of the capital project, and shall in no event exceed * and
*, each in the aggregate, during the period *. Boston Beer and Stroh shall make
all reasonable efforts to minimize Incremental Costs to Boston Beer.

     b.   Incremental Costs arising as a result of each Closure by Stroh shall
be estimated and presented to Boston Beer and included in the Closure Notice. In
connection with such Incremental Costs, Stroh shall contribute the following in
reduction of such Incremental Costs to be borne by Boston Beer: * of the Price
for actual displaced production for the * after each Closure, and * of actual
displaced production for the * of such actual displaced production following the
Closure (hereinafter collectively referred to as the "Contribution Allocation").
The Contribution Allocation shall be credited against the Incremental Operating
Costs on a * basis, and the balance of the Incremental Costs, subject to
approval by Boston Beer as set forth in subparagraph 4(a) above, shall be
invoiced by Stroh to Boston Beer * with a full reconciliation prepared by Stroh
and submitted to Boston Beer within * following the close of each * in which
Incremental Costs have been incurred. If Boston Beer continues to have Beer
Products produced at the Allowed Location where Incremental Costs are required
in order to meet the production requirements for the Beer Products, then Boston
Beer shall continue to pay the Incremental Costs, less the Contribution
Allocation of Stroh. If, however, the normal operating costs of producing the
Beer Products of Boston Beer at the replacement or Allowed Location shall be
less than those normal operating costs of producing the Beer Products at *, the
amount of the reduction (the "Reduction in Cost") will be added to the
Contribution Allocation to be credited against Incremental Costs, and the
Reduction in Cost shall remain in effect as a credit by Stroh to Boston Beer
during the first * following the Closure described above.

     c.   In no event shall Boston Beer be obligated to pay a Permitted Assignee
more than * in Incremental Freight with respect to the Permitted Assignee's own
displaced volume.

     d.   In no event shall Incremental Costs to be borne by Boston Beer with
respect to * relocation exceed the costs that would have arisen (whether or not
passed through) out of a relocation from * to *

     e.   In the event of the Sale or Closure of a Brewery, or termination by a
Permitted Assignee pursuant to Sections 8(h) and (i) that terminates production
at a Brewery, in which Boston Beer previously made a capital investment from and
after the Effective Date, upon such Sale or Closure, the owner of such Brewery
shall pay to Boston Beer an amount equal to the unamortized portion of its
investment, based on an amortization period of * from the date on which the
equipment purchased with each investment was first placed in service.

     f.   If, as a result of a proposed Closure or Sale, production of Beer
Products is relocated to another Brewery, but the Closure or Sale that was the
subject of the Closure Notice or Sale Notice is not consummated within * after
the date on which it was to have been consummated, Boston Beer shall be entitled
to an immediate repayment of any Incremental Costs it may have paid as a result
of the relocation and production at the successor Brewery shall continue but on
the same cost basis, including Boston Beer's own freight costs, as Boston Beer
enjoyed at the predecessor Brewery for so long as the predecessor Brewery
remains in operation and for a further period of * thereafter.

6.   Price and Manner of Payment.
     --------------------------- 

     a.   Boston Beer shall pay Stroh for Beer Products an amount (the
"Price") equal to the sum of *.    The Fixed Charge for other packaging units
shall be set by the Parties based on proportionate volume and packaging
efficiencies relative to the units described above.  Stroh shall be entitled to
increase each Fixed Charge applicable to each Brewery, effective as of * in each
year while the Agreement remains in effect, with the first such increase
pursuant to this Agreement to be effective as of * at a rate equal to *.

     b.   The Price is F.O.B. the carrier's trucks at Stroh's dock
(i.e., the Price includes the cost and risk of loading trucks at Stroh's dock)
and includes labor, overhead, profit, and other costs incurred in the production
of packaged Beer Products suitable for shipment by truck.

     c.    The Price excludes any federal and state excise taxes, which
Stroh may pass along to Boston Beer, if Stroh pays such taxes in compliance with
Federal and state laws.

           In those instances where there is an alternating proprietorship
between Boston Beer and Stroh with Boston Beer being the brewer of record,
Boston Beer is required to submit reports to the Federal Alcohol, Tobacco and
Firearms Department ("ATF") on Form 5000.24 (or any substitute form hereafter
adopted by ATF) and to pay the required excise tax, which such tax is based upon
the number of barrels, or fraction thereof, that leave the Brewery premises. In
order to complete Form 5000.24 and to timely pay the excise taxes on such
production, Stroh agrees to provide Boston Beer, to the Attention of its Tax
Manager, with the following number 

<PAGE>
 
of barrels of Beer Products so produced by Stroh and which have left the Brewery
("Production/Tax Data"), on or before the following dates: (i) With respect to
Production/Tax Data during each calendar month, except for September, Stroh
shall provide such information within no more than five calendar days following
the fifteenth and last day of each month in order that Boston Beer may submit
and pay the applicable excise taxes which are due within fourteen days following
the 15th and last day of each month (or which is due on the preceding business
day if the fourteenth day, as aforesaid, should fall on a Saturday, Sunday or
legal holiday); (ii) With respect to Production/Tax Data for the month of
September in each year, Stroh agrees to provide Boston Beer with Production/Tax
Data for the following periods within the time frames hereinafter set forth: For
the period from September 1 through September 15, such Production/Tax Data must
be received by Boston Beer no later than September 20; for the period from
September 16 through September 26, Production/Tax Data must be received by
Boston Beer no later than September 28; and for the period from September 27
through September 30, Stroh agrees to provide the Production/Tax Data no later
than October 5. In the event that the provisions of 27 CFR, Subpart K are
amended, Boston Beer shall supply Stroh with written notice of any changes
required in the reporting schedule set forth above.

     d.   Assuming Boston Beer uses pallets interchangeable with Stroh, the
Price also excludes any charge for Boston Beer's use of pallets owed by Stroh.
Stroh shall invoice Boston Beer on * for Boston Beer's proportionate share
(based on pallets shipped) of the cost of pallets incurred at each Brewery
during *. Such invoices shall be paid by Boston Beer promptly in the ordinary
course.

     e.   Stroh will invoice Boston Beer electronically * for the Price of Beer
Products shipped * and Boston Beer shall pay such invoices * by wire or other
mutually agreed upon method. All other amounts otherwise chargeable to Boston
Beer hereunder shall be invoiced by Stroh reasonably promptly in accordance with
normal business *. Such timely invoices shall similarly be paid by Boston Beer
promptly in the ordinary course in accordance with normal business practices.
Neither party shall be liable for any liability if such notification and invoice
is issued more than * following the date on which such expense is incurred.

     f.   Stroh shall have the right to increase the Price to reflect Stroh's
actual incremental cost for any Special Orders or Seasonals which use a more
expensive brewing process or longer time frames or which have more expensive
packaging processes than used to produce Samuel Adams Boston Lager. Other
pricing and payment terms for Special Orders or Seasonals shall be in accordance
with the foregoing provisions of this Section 5, including the timely invoicing
requirements of paragraph (e), above.

     g.   Boston Beer shall also be entitled to a proportional reduction in the
Fixed Charge to the extent that Stroh is able to achieve variable cost savings
through changes in production *

7.   Term.
     ---- 

     The term of this Agreement (the "Term") shall commence as of * and shall
continue until terminated pursuant to Section 8 hereof. The Parties acknowledge
that either Party's obligations pursuant to this Agreement to make payments to
the other Party and the Parties' respective obligations under Sections 8(g), 18
and 19, and Stroh's obligations under Sections 14, 17 and 31 shall survive the
termination of this Agreement.

8.   Termination.
     ----------- 

     a.   Either Party may terminate this Agreement for any reason whatsoever on
not less than * prior written notice to the other Party, effective at any time
on or after *

     b.   Boston Beer may also terminate this Agreement effectively immediately
upon written notice in the event that Stroh is in default of any of its
obligations to brew, package and ship any Beer Products, which default continues
for a period of * following receipt by Stroh of written notice from Boston Beer
regarding such default or if Stroh is the subject of an acquisition of
substantially all of its business or assets by an acquirer who Boston Beer
reasonably believes will not be a Permitted Assignee [each such event is
hereinafter referred to as a "Stroh Production Default".] Stroh shall not be
deemed to be in default of its obligations for purposes of this Section 8(b), if
it is in good faith both seeking to correct the circumstances giving rise to its
failure to brew, package and ship Beer Products and honoring its obligations
under Section 16 hereof, to the extent applicable.

     c.   Stroh may terminate this Agreement on * prior written notice to Boston
Beer, in the event that Boston Beer is in arrears in payment of undisputed
amounts representing * and such arrearage has remained outstanding for in excess
of * after written demand for payment was made by Stroh. Normal credit terms are
as defined in Section 5(e).

     d.   Stroh may also terminate this Agreement on * prior written notice
provided to Boston Beer not later than * following the effective date of the
following described event, *.
 

<PAGE>
 
     e.   In the event that Stroh should fail to become Year 2000 Compliant, as
set forth in Section 15 hereof, and such failure shall disrupt the production of
the Beer Products by Stroh, then, in such event, Boston Beer shall provide *
written notice of its intention to so terminate this Agreement, unless within *
Stroh cures or demonstrates to Boston Beer's reasonable satisfaction that Stroh
is using its best efforts to cure the problems arising from its failure to be
Year 2000 Complaint.

     f.   In the event of bankruptcy by either party, the non-bankruptcy party
shall have the right to terminate this Agreement.

     g.   Upon termination of this Agreement, Boston Beer shall (i) promptly pay
to Stroh all unpaid invoices in full and all unpaid costs incurred by Stroh
pursuant to this Agreement in the brewing, packaging, shipping and storage of
Beer Products, and (ii) purchase from Stroh at Stroh's cost all Stroh's
inventory of (i) work in process of Beer Products, (ii) ingredients and raw
materials unique to the Beer Products, and (iii) Packaging Materials. Stroh will
use all reasonable efforts to minimize such costs upon termination, and Boston
Beer will have the right to review documentation evidencing such costs.

     h.   A Permitted Assignee * obligations may terminate such obligations on
not less * notice, effective at any time after the expiration of * from the date
of the first assignment of such obligations to a Permitted Assignee; provided
that Boston Beer shall be relieved of any obligation to pay Incremental Costs
during the notice period.

     i.   A Permitted Assignee * obligations may terminate such obligations on
not less *, effective at any time after the expiration of * from the date of the
first assignment of such obligations to a Permitted Assignee; provided that
Boston Beer shall be relieved of any obligation to pay Incremental Costs during
the notice period.

     j.   In the event of a Stroh Production Default, whether or not Boston Beer
then terminates this Agreement pursuant to subsection (b), or termination by
Boston Beer pursuant to subsection (e) or (f), in addition to such other rights
and remedies it may have at law or in equity, Boston Beer shall be entitled to
repayment of the Commitment Fee, *.

9.   Packaging, Deposits and Minimum Orders.
     -------------------------------------- 

     a.   Packaging of Beer Products shall consist of twelve ounce (12 oz.)
bottles, twenty-two ounce (22 oz.) bottles, Half-Kegs and Kegs, and such other
units as Boston Beer may from time to time require, exclusive of any units which
are proprietary to Stroh and which are not then being produced for Boston Beer
by Boston Beer or any third party. Except for one way pallets paid for by Boston
Beer, a deposit per pallet and per keg as set forth in Section 6(a) hereof shall
be charged to Boston Beer with corresponding credit applied upon the safe return
in good working order of the pallets or kegs to Stroh. *

     b.   Boston Beer shall order at any given time not less than *. Boston Beer
acknowledges and agrees that the minimum order applies to each beer style,
individually, rather than in combination; provided, however, that orders for the
bottling line may consist of * of the Beer Products in combination and any
bottling line order shall not be less than * of each beer style, except that for
twenty-two ounce (22 oz.) bottles, an order may be comprised of as many as * of
at least * each.

10.  Packaging Materials and Hops.
     ---------------------------- 

     Crowns, bottles, labels, six-packs, cases, partitions and other packing
materials for Beer products (collectively, "Packaging Materials"), or any
applicable federal or state taxes (but specifically excluding any taxes in the
nature of a tax on income or profits) are not included in the Fixed Charge and
shall be borne directly by Boston Beer. All Packaging Materials and all hops to
be used in the brewing of Beer Products ("Hops") shall be (i) purchased directly
by Boston Beer at its cost for delivery to Stroh, (ii) the property solely and
exclusively of Boston Beer, and (iii) segregated and identified as such. Boston
Beer shall be responsible for the storage of Hops and shall release Hops to
Stroh for production on a bi-weekly basis. Stroh acknowledges that Boston Beer
shall be afforded unrestricted 24-hour access to all Packaging Materials and
Hops when under Stroh control for purposes of removal or otherwise. Delivery of
Packaging Materials and Hops (on such bi-weekly basis) to Stroh shall be
coordinated between Stroh and Boston Beer, provided that Stroh shall be
ultimately responsible for coordinating the timely delivery of Packaging
Materials and Hops to the appropriate Breweries and other Breweries. *. All
vendors shall be selected by Boston Beer, in its discretion, subject only to
meeting Stroh's customary quality and performance requirements.

11.  Risk of Loss.
     ------------ 

     Stroh and Boston Beer acknowledge and agree that, consistent with the
F.O.B. pricing terms, the risk of loss in loading the carrier's trucks shall be
borne by Stroh. However, the carrier's driver shall have the right to inspect
each shipment for damage prior to leaving the loading dock and, accordingly,
Boston Beer shall bear the risk of loss on any shipment of Beer Products, once
the carrier's truck leaves Stroh's loading dock.

<PAGE>
 
12.  Brewery of Record.
     ----------------- 

     a.   To the extent requested by Boston Beer and consistent with applicable
laws and regulations, Stroh shall provide all Beer Products brewed hereunder
under the name of "The Boston Beer Company" as the Brewer of Record. Stroh
shall, to the fullest extent permissible, secure any permits, licenses,
approvals and the like related to the production of beer, required by any
federal, state or local governmental agency on behalf of Boston Beer. Boston
Beer agrees to reimburse Stroh promptly for any reasonable out-of-pocket costs,
including, without limitation, legal expenses and increased clerical costs,
incurred in connection therewith.

     b.   To the extent requested by Boston Beer, Stroh shall use all
commercially reasonable efforts to establish and maintain an alternating
proprietorship at each of the Initial Allowed Locations and at such other
Breweries to which production of Beer Products has been transferred, if
necessary, and, subject to and in compliance with all applicable federal, state
or local laws, rules and regulations, to identify Boston, Massachusetts, as the
sole label source for Beer Products. Boston Beer agrees to reimburse Stroh
promptly for its reasonable out-of-pocket costs, including, without limitation,
legal expenses and increased clerical costs, incurred in connection therewith.

     c.   Boston Beer's obligation to reimburse Stroh for its reasonable out-of-
pocket costs shall not apply to costs incurred by Stroh with respect to
establishing an alternating proprietorship at a brewery to which production
hereunder is relocated because of Stroh's decision to Sell or Close a Brewery.

13.  Storage.
     ------- 

     The Price shall include storage of reasonable quantities of packaged Beer
Products for up to thirty (30) days. Stroh shall be entitled to charge Boston
Beer a reasonable fee for the storage of Beer Products beyond thirty (30) days.

14.  The Wort Clarifier Project.
     -------------------------- 

     Stroh's obligations under the Wort Clarifier Agreement are hereby
terminated, except that Boston Beer shall continue to enjoy the benefit of
material yield savings for its own beers resulting from the Wort Clarifier
Project. In addition, Boston Beer hereby assigns to Stroh all of Boston Beer's
right, title and interest in and to the Wort Clarifier, subject to the
following:

     (i)  for so long as this Agreement remains in effect, in the absence of a
          Stroh Production Default, the Wort Clarifier shall remain in the
          possession of Stroh at Portland or such other Brewery as Stroh and
          Boston Beer shall jointly agree; and

     (ii) in the event of a Stroh Production Default, if so instructed by Boston
          Beer, Stroh shall reassign ownership of the Wort Clarifier to Boston
          Beer and shall deliver the Wort Clarifier to Boston Beer, in
          accordance with Boston Beer's instructions, the dismantling and
          transportation costs of which would be borne by Stroh.

15.  Year 2000 Compliance.
     -------------------- 

     a.   Stroh has heretofore advised Boston Beer that its software, firmware,
equipment and systems (collectively, hereinafter referred to as "Systems") is
not as yet Year 2000 Compliant and that the System is not designed to be used
immediately prior to, during and after the calendar year 2000 and thus cannot
warrant that the Systems will operate consistently, predictably and accurately,
without interruption or manual intervention, and in accordance with all
requirements to facilitate the production of the Beer Products under the terms
of this Agreement, including, without limitation, all specifications and/or
functionality and performance requirements, during each such time period, and
the transitions between them, in relation to dates it encounters or processes.
Stroh hereby represents that it is taking and shall continue to take steps to
become Year 2000 Compliant.

     b.   Boston Beer is in the process of reviewing all of its internal
Systems, with a view to assuring that such Systems are or will in a timely
fashion be Year 2000 Compliant, and Boston Beer currently has no reason to
believe that Year 2000 Compliance will not be achieved.

     c.   Stroh and Boston Beer agree to communicate periodically regarding
their respective Year 2000 Compliance status.

16.  Force Majeure.
     ------------- 

     a.   If Stroh is unable, by reason of a labor dispute, governmental action,
act of God or the like, to produce Beer Products at any Brewery to the extent
contemplated by this Agreement, it shall, in any event, to the extent it is
still able to maintain production at such Brewery, continue to produce Beer
Products at such Brewery in proportion to the capacity at such Brewery dedicated
to Beer Products prior to the occurrence of the event in question. For purposes
hereof, disruptions caused by the failure of Stroh to be Year 2000

                                       8

<PAGE>
 
Compliant (as further discussed in Section 15 hereof) shall not be deemed to be
an event of force majeure. In addition, Stroh shall advise Boston Beer of the
terms on which Stroh is then willing to produce Beer Products at other Breweries
while the reduction in capacity at the affected Brewery continues.

     b.   If Boston Beer is unable, by reason of a labor dispute, governmental
action, act of God or the like, to produce Beer Products at any brewery not
owned by Stroh but at which from time to time Boston Beer produces Beer
Products, and at that time Stroh has available production capacity at any of its
Breweries, Stroh shall make such production capacity available to Boston Beer at
a price equal to Stroh's variable out-of-pocket cost plus standard margin under
this Agreement for such production.

17.  Change Parts and Brewery Modifications.
     -------------------------------------- 

     Except as otherwise provided in Section 4 and 5 of this Agreement in
connection with a Closure, Boston Beer will pay for all change parts and Brewery
modifications that are unique to running Boston Beer's package Beer Products,
provided that (i) Stroh does not have such parts existing at the Brewery in
question, and (ii) Stroh notifies Boston Beer in advance of making any such
expenditures. Boston Beer shall be entitled to be reasonably compensated for any
such investment, whether made prior to or after the date hereof, to the extent
that any change parts and/or modifications are used in the production of
products other than Beer Products, such compensation to be as agreed from time
to time to time by Stroh and Boston Beer. Boston Beer shall be entitled to a
refund of any investment made pursuant to this Section 17, if the Brewery in
which the investment was made is Closed or Sold prior to the expiration of *
after the change parts or Brewery modifications were placed in service.

18.  Product Liability.
     ----------------- 

     a.   Stroh and Boston Beer shall each maintain product liability insurance
of not less than */* and in the amount of * combined single limit in the
aggregate relating to the Beer Products produced by Stroh for Boston Beer.

     b.   Stroh shall indemnify and hold harmless Boston Beer and all of its
affiliates from and against any and all loss, liability, cost or expense of any
nature whatsoever, including reasonable attorneys' fees (collectively, "Product
Liability Damages"), arising out of or associated with all claims made against
Boston Beer by any party or parties for personal injury or property damage
caused by impurities, defects, or adulteration of any kind in the Beer Products
manufactured and packaged by Stroh, regardless of when manufactured or packaged;
except that Stroh shall have no such indemnification obligations with respect to
(i) Product Liability Damages when caused by (i) Boston Beer's improper storage,
handling, or alteration of the Beer Products in question or (ii) Packaging
Materials or ingredients purchased, specified or otherwise approved by Boston
Beer subsequent to written notice from Stroh reasonably advising that such
Packaging Materials or ingredients should not be used in the Beer Products for
health and safety reasons, it being understood that Stroh's sole obligation with
respect to providing any such notice shall be to inform Boston Beer of matters
which come to Stroh's attention and Stroh shall have no independent duty to
analyze any Boston Beer Packaging Materials, ingredients or specifications, and
(iii) Product Liability Damages resulting from inherent properties and/or
characteristics of the Beer Products, including, by way of example and not of
limitation, health and intoxicating effects of the Beer Products.

     c.   Boston Beer shall indemnify and hold Stroh and all of its affiliates
harmless from and against any and all Product Liability Damages to the extent
arising out of the courses excepted from Stroh's indemnification obligations
under paragraph (b), above.

     d.   Notwithstanding the provisions of subparagraphs (b) and (c) of this
Paragraph 18, in no event shall either Party be liable to indemnify the other
Party for consequential damages other than consequential damages arising out of
willful managerial misconduct (including an arbitrary refusal by a Party to
honor its obligations hereunder) suffered by the other Party or through material
default by reason of the failure of either Party to be Year 2000 Compliant, and
even in such events, the Party so liable shall not be liable in an amount
greater than *.

19.  Trademarks.
     ---------- 

     a.   Stroh acknowledges that no trademark or trade name rights in any of
the trademarks, trade names, service marks, or logos owned by Boston Beer,
including specifically but without limitation those identified on the Trademark
Schedule attached hereto as Exhibit G (collectively, the "Trademarks") are
granted by this Agreement.

     b.   Boston Beer hereby represents, warrants and covenants that it has and
will maintain the right to use the Trademarks and will indemnify and hold
harmless Stroh from any claim of alleged infringement brought by any party
against Stroh, including, but not limited to, Stroh's reasonable costs of legal
expenses.

20.  Successors and Assigns: Future Potential Acquisitions.
     ----------------------------------------------------- 

                                       9

<PAGE>
 
     a.   The Agreement shall be binding upon and insure to the benefit of the
Parties and their respective successors and assigns, but shall not be assigned
by Boston Beer without the prior written consent of Stroh, which consent will
not be unreasonably withheld, and shall not be assigned by Stroh or any
successor-in-interest to Stroh, in whole or in part, except to a Permitted
Assignee.

     b.   A transaction or series of transactions, as a result of which a
majority voting control of Stroh is acquired by a person or persons not
currently holding an equity interest in Stroh shall be deemed to be an
assignment requiring that, after such transaction or series of transactions,
Stroh meets the requirements of a Permitted Assignee.

     c.   Except in the case of an assignment by Stroh of all of its rights and
obligations hereunder in connection with this Agreement to a Permitted Assignee
in connection with a sale of all or substantially all of its business and
assets, no assignment of this Agreement by Stroh shall relieve it of its
financial obligations hereunder, including its indemnification obligations, if
an assignee defaults in the performance of its assigned obligations.

     d.   In the event that Boston Beer shall acquire substantially all of the
business and assets of another company which produces and/or distributes beer,
or, shall acquire all right, title and interest in and to the brands and
trademarks of another company (hereinafter the "Acquired"), then, in such event,
if the Acquired has products already being produced by Stroh, then Stroh agrees
to make available to Boston Beer, for the same period of time that Stroh has 
pre-existing commitments for the Acquired, such additional capacity which is
equivalent to that with the Acquired; provided, *.

     e.   If Stroh acquires substantially all of the business and assets of
another company which produces beer or acquires an additional brewery facility
(hereinafter a "Stroh Acquired Brewery"), then, in such event, if the Stroh
Acquired Brewery has a pre-existing agreement with Boston Beer for the
production of Beer Products, Stroh agrees to continue to make available to
Boston Beer, for the same period of time which existed under the pre-existing
agreement between Boston Beer and the Stroh Acquired Brewery, the same capacity
as had been committed to Boston Beer by the Stroh Acquired Brewery; provided, *.

21.  Governing Law.
     ------------- 

     This Agreement shall be interpreted and construed in accordance with the
laws of the State of New York.

22.  Arbitration.
     ----------- 

     Any disagreement, dispute, controversy or claim with respect to the
validity of this Agreement or arising out of or in relation to the Agreement, or
breach hereof, shall be finally settled by arbitration in New York, New York, in
accordance with the articles of the American Arbitration Association for
Commercial Arbitration. The arbitrators shall have the right to assess costs,
including legal expenses, in favor of the prevailing Party, including, if
applicable, Stroh travel costs. Notwithstanding the foregoing, the Parties may
have recourse to the courts of the United States of America for the purpose of
obtaining preliminary injunctive relief.

23.  Execution in Counterparts.
     ------------------------- 

     This Agreement may be executed in one or more counterparts, each of which
shall be deemed to be an original but all of which together shall constitute one
and the same document.

24.  Amendments.
     ---------- 

     No amendment, change, or modification of any of the terms, provisions or
conditions of this Agreement shall be effective unless made in writing and
signed or initialed on behalf of the parties hereto by their duly authorized
representatives.

25.  No Third Party Beneficiaries.
     ---------------------------- 

     Stroh and Boston Beer agree that this Agreement is solely for their benefit
and does not nor is it intended to create any rights in favor of, or obligations
owing to, any person not a party to this Agreement.

26.  Merger: Separability.
     -------------------- 

     Subject to the provisions of Section 27(a) below, this Agreement terminates
and supersedes all prior formal or informal understandings among the parties
with respect to the subject matter contained herein, except that the provisions
in the Heileman Agreement, entitling Boston Beer to indemnification for product
liability claims and the Sankey Agreement shall remain in full force and effect.
Should any provision or provisions of this Agreement be deemed ineffective or
void for any reason whatsoever, such provision or provisions shall be deemed
separable and shall not effect the validity of any other provision.

                                       10

<PAGE>
 
27.  Current Practice: Cooperation.
     ----------------------------- 

     a.   Except as set forth in this Agreement, the Parties agree to continue
their current business practices with respect to the Beer Products produced by
Stroh for Boston Beer, subject to modification from time to time as the parties,
exercising reasonable business judgment, shall mutually agree in writing. The
Parties agree to use all commercially reasonable efforts to maintain the current
service standards enjoyed by Boston Beer in the various service factors
described on Exhibit H attached hereto.

     b.   Stroh agrees to provide consulting and technical services to Boston
Beer, as reasonably requested by Boston Beer, with respect to projects in which
Boston Beer may from time to time be engaged at non-Stroh facilities, for which
services Stroh shall be compensated on a reasonable direct time, out-of-pocket
expenses and materials basis.

     c.   The Parties also agree to cooperate with one another, consulting on a
regular basis, with a view to achieving further financial economies, e.g.,
through joint purchasing efforts for the purchase of raw materials and supplies
to be used by either of the Parties, whether at Lehigh Valley, Portland or any
of the other Allowed Locations, or otherwise.

     d.   Stroh shall advise Boston Beer of opportunities that may from time to
time become available to purchase from Stroh any breweries or any brewing,
bottling or packaging equipment. In addition, if Stroh embarks on a strategy to
Close or Sell Breweries , Stroh shall, to the extent not inconsistent with
Stroh's own prudent business management practices or confidentiality agreements
with third parties, afford Boston Beer an opportunity to purchase any such
equipment.

     e.   All publicity concerning this Agreement shall be subject to the
restrictions contained in Section 2(b) of this Agreement and otherwise as
approved by the Parties.

28.  Lab Tests.
     --------- 

     Stroh will perform at its expense all lab tests currently performed by
Stroh for Boston Beer on all Beer Products.

29.  Non-Exclusive Nature of Agreement.
     --------------------------------- 

     Nothing contained in this Agreement shall require Boston Beer to avail
itself of the Committed Capacity or preclude Boston Beer from engaging any other
brewer for the purpose of producing and distributing Beer Products.

30.  Competing Products.
     ------------------ 

     a.   Except as hereinafter set forth, for so long as this Agreement remains
in effect, without the prior written consent of Boston Beer, Stroh shall not, on
behalf of any unaffiliated person, produce at * a beer or other "micro-brewery"
or "craft" beer brand malt beverage product, which is substantially similar in
taste, color, and marketing position to any of the Beer Products at any of the
Breweries, except for products brewed by Stroh at either of such Breweries as of
the Effective Date of this Agreement. In the event that * undergoes an event of
Closure, and product on the *, is moved to a new facility, Boston Beer agrees to
waive the exclusivity provision set forth above as it applies to any competing
brand produced at the new facility at the time that production of Beer Products
of Boston Beer is so moved. In addition, Boston Beer agrees to waive the
exclusivity provision set forth above in connection with any competing brand to
be produced on * and for which Stroh obtains export licensing rights; provided,
however, that the foregoing waiver shall only apply to export shipments for such
competing brand, with such exports to be made pursuant to Stroh's export license
and conditioned further upon such exports being in the Canadian returnable
bottle (also known as the T-bottle). *, and the production at the Brewery so
subject to Closure is moved to *, then, in such event, Boston Beer agrees to
waive the exclusivity clause set forth above, but only to the extent of any
competing brands produced at * at the time on which the Closure Notice is
issued. Stroh's obligations under this Section 30(a) shall not apply to a
Permitted Assignee.

     b.   Boston Beer acknowledges that Stroh's business includes brewing craft
and specialty malt beverage products, including products that may compete
directly with, use the same brewing ingredients and formulae as, and/or are of
the same style as one or more of the Beer Products. Boston Beer agrees that
nothing contained in this Section 30 shall in any manner prevent, limit,
restrict or otherwise affect Stroh's right to continue and expand such aspect of
its business, including by introducing new products that compete directly with
existing Beer Products, so long as Stroh does not intentionally (i) copy the
identical brewing formulae and ingredients of any Beer Product, (ii) use any
proprietary yeast specifically supplied to Stroh by Boston Beer solely for use
in producing Beer Products; or (iii) use labeling or other packaging which
infringes any of Boston Beer's Trademarks or copies Boston Beer's marketing
position and strategy.

31.  Yeast Strains.
     ------------- 

                                       11

<PAGE>
 
     Stroh will not use yeast strains supplied by Boston Beer to brew any beers
other than the Beer Products. The obligations of Stroh under this Section 31
shall survive any termination of this Agreement.

32.  Confidentiality.
     --------------- 

     The Parties agree that, except as they shall otherwise mutually determine
from time to time, the terms of this Agreement and any notices given hereunder
or other communications with respect to the substance of the relationship
between them shall be maintained in confidence; provided that each Party shall
be permitted to make such disclosures of confidential information to such courts
and other public or governmental agencies as their counsel shall deem necessary
to maintain compliance with and to prevent violation of applicable federal or
state laws.

33.  Notices.
     ------- 

     All notices required herein shall be given by registered airmail, return
receipt requested, or by overnight courier service, to the following addresses
(unless change thereof - has previously been given to the party giving notice)
and shall be deemed effective when received:

          If to Boston Beer:

                C. James Koch, President
                Martin F. Roper, Chief Operating Officer
                The Boston Beer Company, Inc.
                75 Arlington Street, 5th Floor
                Boston, MA 02116

          with a copy to:

                Frederick H. Grein, Jr., Esq.
                Hutchins, Wheeler & Dittmar
                101 Federal Street
                Boston, MA 02110

          If to Stroh:

                James R. Avery, Executive Vice President-Operations
                and Christopher T. Sortwell, Executive Vice President
                and Chief Financial Officer
                The Stroh Brewery Company 100 River Place
                Detroit, MI  48207

          with a copy to:

                George E. Kuehn, Executive Vice President and General
                Counsel
                The Stroh Brewery Company
                100 River Place
                Detroit, MI 48207

34.  Rights of Offset.
     ---------------- 

     Stroh and Boston Beer agree that, to the extent that either of them is at
any time owed money by the other Party, including on regular invoices sent as
provided herein, such Party may set off such amount against any undisputed
monies owed by it to such Party from time to time, any such set-off to be
accomplished by written notice to the owing Party, effective upon being sent.

35.  Deliveries to joint Wholesalers.
     ------------------------------- 

     To the extent permitted by applicable law, if so requested by Boston Beer,
Stroh will combine Beer Products with Stroh products in single truckloads for
delivery to joint Wholesalers, in which case freight costs shall be
appropriately pro-rated. For this purpose, a "Joint Wholesaler" is a licensed
beer wholesaler that has been duly authorized by both Boston Beer and Stroh to
distribute their 

                                       12

<PAGE>
 
respective products. Stroh and Boston Beer will cooperate with each other in the
coordination of order entry so as to facilitate such single truckload
deliveries.

36.  Adverse Product Statements.
     -------------------------- 

     Each Party agrees to take all commercially reasonable steps to prevent any
of its personnel from making disparaging or otherwise adverse remarks about the
products of the other Party.

37.  Limitation on Period of Claims.
     ------------------------------ 

     Except as otherwise provided in this Agreement with respect to specific
issues, all claims hereunder must be brought no later than one year after such
claim arose or the Party having such claim shall be deemed to have waived or
forever released it; provided that, for purposes of this Section 37, a claim
based on a claim by a third party shall be deemed to have arisen at the time
that the Party asserting a claim first became aware of it.

     IN WITNESS WHEREOF, Stroh and Boston Beer have executed this Agreement as
of the date first above written.

BOSTON BEER COMPANY LIMITED PARTNERSHIP
By:  Boston Brewing Company, Inc., its General Partner


By: /s/ James Koch
    President


THE STROH BREWERY COMPANY


By: /s/ Christopher T. Sortwell,
    Executive Vice President and Chief
    Financial Officer

                                       13

<PAGE>
 
                                   EXHIBIT A
                                   ---------
                                        

                            THE BOSTON BEER COMPANY
                         The Brewery, 30 Germania St.
                               Boston, MA  02130
                                 617-522-3400
                          617-338-0765 - Martins fax


TO     RANDY HULL

FROM   JIM KOCH

DATE   7/5/95

RE     SANKEY PROJECT



This memo confirms Boston Beer Company's interest in proceeding immediately with
the installation of a Sankey line at the Blitz facility in Portland.

We propose the following financial arrangements.

1.   Boston Beer will pay up to * of the capital and installation costs of the
     project on the following timetable -

I)   Upon commencement of project *
II)  Upon evidence of project being *
III) Upon evidence of project being *
IV)  Upon completion and successful operation of project - final installment of
     balance of projects cost not to exceed *

Before payment of final installment, Heileman to provide documentation of
project expenses if requested by Boston Beer.

2.   a). In return for Boston Beer financing the project, Heileman agrees to
rebate Boston Beer * at the rate of $*for the first *.

     b). Therefore, Heileman agrees to rebate Boston Beer * of the operational
savings, up to a maximum of *, generated in running Sankey's versus Hoff-
Stevens.

3.   In the event that Heileman cancels the contract between Heileman and Boston
Beer, then Heileman will pay to Boston Beer * less all amounts theretofore paid
to Boston Beer under paragraph 2(a).

4.   To secure its obligation to make rebates to Boston Beer under Section 2 and
to make payments to Boston Beer upon cancellation under Section 3, Heileman
grants Boston Beer a security interest in the Sankey equipment installed at
Blitz, Portland, and in the event that Heileman defaults on any of such
obligations, Boston Beer, in addition to any other rights it might have, shall
be entitled to take physical possession of the Sankey equipment.


If this is acceptable, please sign and return this to us.



Accepted by:



Jim Koch                         G. Heileman Brewing Company
Boston Beer Company

                                       14

<PAGE>
 
                                   EXHIBIT B
                                   ---------
                                        
                            THE BOSTON BEER COMPANY
                         The Brewery, 30 Germania St.
                               Boston, MA  02130
                                 617-522-3400
                          617-338-0765 - Martins fax


TO     RANDY HULL

FROM   JIM KOCH

DATE   7/6/95

RE     WORT CLARIFIER PROJECT



This memo confirms Boston Beer Company's interest in proceeding immediately with
the installation of a Wort Clarifier (Trub Handling Equipment) at the Blitz
facility in Portland.

We propose the following financial arrangements.

1.   Boston Beer will pay up to * of the capital and installation costs of the
     project on the following timetable -

I)   * upon receipt of equipment invoice
II)  Upon completion and successful operation of project - final installment of
     balance of projects, total cost not to exceed*

Before payment of final installment, Heileman to provide documentation of
project expenses if requested by Boston Beer.

2.   In return for Boston Beer financing the project, Heileman agrees to rebate
Boston Beer an amount representing Heileman's verified ongoing operational
savings incurred through use of the Wort Clarifier to brew Boston Beer's
products.

     These savings are designed to represent the operational savings reflected
in reduced sewer costs, increased output from brewhouse per brew, increased
capacity of the brewery etc.....

3.   In the event Heileman cancels the contract between Heileman and Boston
Beer, then Heileman will pay to Boston Beer * less all amounts theretofore paid
to Boston Beer under paragraph 2.

4.   To secure its obligation to make rebates to Boston Beer under Section 2 and
to make payments to Boston Beer upon cancellation under Section 3, Heileman
grants Boston Beer a security interest in the Wort Clarifier installed at Blitz,
Portland, and in the event that Heileman defaults on any of such obligations,
Boston Beer, in addition to any other rights it might have, shall be entitled to
take physical possession of the Wort Clarifier equipment.

If this is acceptable, please sign and return this to us.



Accepted by:



Jim Koch                          G. Heileman Brewing Company
Boston Beer Company


<PAGE>
 
                                   EXHIBIT C
                                   ---------
                                        
                             List of Beer Products


Samuel Adams(R) Products      Oregon Ale & Beer -- Oregon Originals(R) Products
- -------------------------------------------------------------------------------

Boston Lager                             IPA
Boston Ale                               NBA
Cream Stout                              ESB
Scotch Ale                               Raspberry Wheat
Honey Porter                             Honey Red
Cherry Wheat                             Honey Ale
White Ale
Double Bock
Summer Ale
Octoberfest
Winter Lager
Old Fezziwig
Golden Pilsner


<PAGE>
 
                                   EXHIBIT D
                                   ---------

               Specifications for Cleaning and Use of Used Glass


  To be mutually agreed upon by Stroh and Boston Beer and to be consistent with
current specifications adhered to by Stroh in its facilities.


<PAGE>
 
                                   EXHIBIT E
                                   ---------


<TABLE>
<CAPTION> 
                                                           ------------------------------------
        THE STROH BREWERY COMPANY                          NO.                   DATE
MAJOR EXPENDITURE AUTHORIZATION - SCHEDULE A               04-5425               1-24-96
- -----------------------------------------------------------------------------------------------
<S>                                                        <C>                   <C>
PROJECT TITLE                                              PLANT
AUTOMATE BOSTON BEER'S 2/12/12 PACK PRODUCTION             LEHIGH
- -----------------------------------------------------------------------------------------------
DEPARTMENT OR COST CENTER                                  BUILDING              FLOOR
PACKAGING
- -----------------------------------------------------------------------------------------------
</TABLE>


DESCRIPTION AND ALTERNATIVES CONSIDERED
- ---------------------------------------

The Lehigh plant will automate BBC's 2/12/12 oz. production by receiving and
installing existing equipment from *.

JUSTIFICATION
- -------------

Senior Management direction.  Boston Beer Company has requested these
modifications and has agreed to reimburse Stroh for the cost of this project *.

ALTERNATIVES
- ------------

Continue producing this package with the current system and cost structure. *.



- -------------------------------------------------------------------------------
PREPARED BY                                     DATE
F.R. Toporowski                                 1/17/96
- -------------------------------------------------------------------------------


<PAGE>
 

<TABLE>
<CAPTION> 
- -----------------------------------------------------------------------------------------------
   THE STROH BREWERY COMPANY                                 NO.          DATE
MAJOR EXPENDITURE AUTHORIZATION - SCHEDULE B                 04-5425      1-24-96
- -----------------------------------------------------------------------------------------------
<S>                                                          <C>          <C> 
PROJECT TITLE                                                PLANT
AUTOMATE BOSTON BEER'S 2/12/12 PACK PRODUCTION               LEHIGH
- -----------------------------------------------------------------------------------------------
DEPARTMENT OR COST CENTER                                    BUILDING     FLOOR
PACKAGING
- -----------------------------------------------------------------------------------------------
CALCULATION OF EXPENDITURE REQUIRED

- -----------------------------------------------------------------------------------------------
             EQUIPMENT     LABOR     SPARE       MATERIAL    LABOR
 ITEM        COSTS         COSTS     PARTS       COSTS       COSTS     RUN-IN     TOTALS
 -----------------------------------------------------------------------------------------------
 
- -----------------------------------------------------------------------------------------------

- ----------------------------------------------------------------------------------------------- 

- ----------------------------------------------------------------------------------------------- 

- ----------------------------------------------------------------------------------------------- 

- ----------------------------------------------------------------------------------------------- 

- ----------------------------------------------------------------------------------------------- 

- ----------------------------------------------------------------------------------------------- 

- ----------------------------------------------------------------------------------------------- 

- ----------------------------------------------------------------------------------------------- 

- ----------------------------------------------------------------------------------------------- 

- ----------------------------------------------------------------------------------------------- 

- -----------------------------------------------------------------------------------------------


- -----------------------------------------------------------------------------------------------
PREPARED BY                                                  DATE
F.R. Toporowski                                              1/17/96
- -----------------------------------------------------------------------------------------------
</TABLE>



<PAGE>
 
                                   EXHIBIT F
                                   ---------
                                        
                               Pricing Schedule
                 [SUBJECT TO INCREASE BASED ON * PER (S)6(A)]
                                        
PRICING SCHEDULE 1
- ------------------
in effect for * or in event termination notice is given
 
                                       *                         *
                                       ---------------------------
 
BULK GLASS, PER 12 OZ CASE UNIT
     Loose, 4/6 packs, 2/12 packs      *                         *
     2/12 packs in tray                *                         *
 
PACKAGED GLASS, PER 12 OZ CASE UNIT    *                         *
*    *                                 *                         *

BULK GLASS, PER 22 OZ CASE UNIT        *                         *
PACKAGED GLASS, PER 22 OZ CASE UNIT    *                         *
 
KEGS  per 1/4 keg                      *                         *
      per 1/2 keg                      *                         *

NOTE           12 oz Case Unit = 24 bottles 12 oz
- ---------------
               22 oz Case Unit = 12 bottles 22 oz

               Above pricing does not include Sankey Keg Rebate at Portland
               - Pricing net of Sankey Keg Rebate at Portland is  *


<PAGE>
 
                             Exhibit F (continued)
                             ---------------------

PRICING SCHEDULE 2
- ------------------
takes effect * but is not in effect during termination notice
 
                                       *                           *
                                       -----------------------------
 
BULK GLASS, PER 12 OZ CASE UNIT
     Loose, 4/6 packs, 2/12 packs      *                           *
     2/12 packs in tray                *                           *
 
PACKAGED GLASS, PER 12 OZ CASE UNIT    *                           *
                                                                   
*    *                                 *                           *
 
BULK GLASS, PER 22 OZ CASE UNIT        *                           *
PACKAGED GLASS, PER 22 OZ CASE UNIT    *                           *
 
KEGS  per 1/4 keg                      *                           *
     per 1/2 keg                       *                           *

NOTE           12 oz Case Unit = 24 bottles 12 oz
- ---------------                                  
               22 oz Case Unit = 12 bottles 22 oz

               Above pricing does not include Sankey Keg Rebate at Portland
               - Pricing net of Sankey Keg Rebate at Portland is  *


<PAGE>
 
                                   Exhibit G
                                   ---------


<TABLE> 
<CAPTION> 
                                                    SCHEDULE OF TRADEMARKS
                                                    ----------------------
Trademark                                                Reg./App.No.                  Date Issued
- ---------                                                ------------                  -----------
<S>                                                 <C>                                <C>
Samuel Adams Boston Lager(R)                             Reg. #1,522,026               01/24/89
Samuel Adams Boston Ale(R)                               Reg. #1,610,302               08/14/92
Lightship(R)                                             Reg. #1,639,234               03/26/91
Samuel Adams(R) Cream Stout
Samuel Adams(R) Cherry Wheat
Samuel Adams(R) Cranberry Lambic
Samuel Adams(R) Double Bock
Samuel Adams(R) Honey Porter
Samuel Adams(R) Golden Pilsner
Samuel Adams(R) Octoberfest
Samuel Adams(R) Scotch Ale
Samuel Adams(R) Spring Ale
Samuel Adams(R) Summer Ale
Samuel Adams(R) White Ale
Samuel Adams Winter Lager(R)                             Reg. #1,623,925               11/20/90
Samuel Adams Triple Bock(R)                              Reg. #2,052,984               04/15/97
Oregon Original(TM)                                      App. #74/730,463              09/18/95
Oregon Original(TM) India Pale Ale
Oregon Original(TM) Raspberry Wheat
Hardcore(R)                                              Reg. #2,109,887               10/28/97
Hardcore(R) Crisp Hard Cider
Hardcore(R) Apple Cranberry Cider
Hardcore(R) Black Cider
Novemberfest(TM)                                         App. #75/007,625              10/19/95
Samuel Adams Portrait Logo                               App. #75/478,992              05/04/98
</TABLE>



<PAGE>
 
                                   Exhibit H
                                   ---------

                               SERVICE STANDARDS
                                        
The following factors are illustrative but not necessarily exhaustive of the
factors that define "service": brewing frequency, frequency of packaging,
shipping hours, carrier selection, customer service, warehouse space, multi-
stop loads, arrangements for order submission and changes and order fulfillment,
electronic access to order status, billing and shipment information,
pallets/cooperage handling, material release to Boston Beer suppliers, inventory
reports and physical inventory frequency, analysis of in process and finished
Beer Products, and production to Boston Beer quality specifications and
consistent taste matches with other production locations of the same style.




<PAGE>
 
Exhibit 10.34
- -------------

            AGREEMENT TO ASSUME AND PERFORM CONTRACTUAL OBLIGATIONS
                                        
     Agreement entered into by and among Boston Beer Company Limited Partnership
("Boston Beer"), Pabst Brewing Company ("Pabst") and Miller Brewing Company
("Miller").

     Effective as of November 1, 1998, Boston Beer entered into an Amended and
Restated Production Agreement (the "Production Agreement") with The Stroh
Brewery Company, an Arizona corporation ("Stroh"). In connection with a proposed
transaction or transactions among Stroh, Pabst and Miller, Stroh, Pabst and
Miller have requested that Boston Beer confirm that each of Pabst and Miller is
a Permitted Assignee. Boston Beer has agreed to provide such confirmation, on
and subject to the terms and conditions set forth in this Agreement.

     Accordingly, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and intending to be legally bound, Boston Beer, Pabst and Miller
agree as follows:
 
     1.   Pabst hereby agrees to assume and agree to carry out and perform such
of  Stroh's obligations under the Production Agreement as Boston Beer may
request, subject to the Sale and Closure provisions of Section 4 of the
Production
 Agreement, excepting only such obligations of Stroh under the
Production Agreement that, by their specific terms, apply only to Stroh.

     2.   Miller hereby guarantees to Boston Beer the performance by Pabst in
all material respects of the obligations assumed by Pabst under the Production
Agreement and agrees to assume and perform such obligations if so requested by
Boston Beer.

     3.   In specific reliance on the foregoing representations, warranties and
covenants of Pabst and Miller, Boston Beer hereby consents to the assignment of
Stroh's obligations under the Production Agreement by Stroh to Pabst and,
conditionally, to Miller and agrees that each of Pabst and Miller is a
"Permitted Assignee."

     Executed effective as of the 5th day of February, 1999.

                              BOSTON BEER COMPANY LIMITED PARTNERSHIP
                              By: Boston Brewing Company, Inc.,
                                  its sole general partner

                              By:   /s/ C. James Koch
                                  ----------------------------------------
                                    PRESIDENT

                              PABST BREWING COMPANY


                              By:   /s/ Dan Campbell
                                  ----------------------------------------
                                    CHIEF FINANCIAL OFFICER

                              MILLER BREWING COMPANY


                              By:   /s/ Paul Napieralski
                                  ----------------------------------------
                                    VICE PRESIDENT-FINANCE



<PAGE>
 
Exhibit 23.1
- ------------

                      CONSENT OF INDEPENDENT ACCOUNTANTS

As independent public accountants, we hereby consent to the incorporation of our
report included in this Form 10-K, into the Company's previously filed
Registration Statements on Form S-8 (File No.333-12221 and File No. 333-68531).


                                           /s/ Arthur Andersen LLP

Boston, Massachusetts
March 22, 1999





<PAGE>
 
Exhibit 23.2
- ------------

                      CONSENT OF INDEPENDENT ACCOUNTANTS

We consent to the incorporation by reference in the Registration Statements of
The Boston Beer Company, Inc. on Form S-8 (File No.333-12221 and File No. 333-
68531) of our report dated February 13, 1998, on our audits of the consolidated
financial statements of The Boston Beer Company, Inc. as of December 27, 1997,
and for each of the two years in the period ended December 27, 1997, which
report is included in this Annual report on Form
10-K.


/s/ PricewaterhouseCoopers LLP

Boston, Massachusetts
March 24, 1999





<TABLE> <S> <C>


<PAGE>
<ARTICLE> 5
<LEGEND>
SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BOSTON BEER COMPANY, INC.'S
CONSOLIDATED BALANCE SHEET AND CONSOLIDATED STATEMENTS OF OPERATIONS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
       
<S>                             <C>
<PERIOD-TYPE>                   12-MOS
<FISCAL-YEAR-END>                          DEC-26-1998
<PERIOD-START>                             DEC-28-1997
<PERIOD-END>                               DEC-26-1998
<CASH>                                           8,650
<SECURITIES>                                    45,256
<RECEIVABLES>                                   13,371
<ALLOWANCES>                                   (1,309)
<INVENTORY>                                     15,835
<CURRENT-ASSETS>                                89,476
<PP&E>                                          43,625
<DEPRECIATION>                                (15,460)
<TOTAL-ASSETS>                                 122,689
<CURRENT-LIABILITIES>                           37,427
<BONDS>                                              0
<PREFERRED-MANDATORY>                                0
<PREFERRED>                                          0
<COMMON>                                           205<F1>
<OTHER-SE>                                      81,823
<TOTAL-LIABILITY-AND-EQUITY>                   122,689
<SALES>                                        205,020
<TOTAL-REVENUES>                               183,453
<CGS>                                           89,393
<TOTAL-COSTS>                                  168,849
<OTHER-EXPENSES>                                   238
<LOSS-PROVISION>                                   246
<INTEREST-EXPENSE>                                 633
<INCOME-PRETAX>                                 14,366
<INCOME-TAX>                                     6,442
<INCOME-CONTINUING>                              7,924
<DISCONTINUED>                                       0
<EXTRAORDINARY>                                      0
<CHANGES>                                            0
<NET-INCOME>                                     7,924
<EPS-PRIMARY>                                     0.39
<EPS-DILUTED>                                     0.39
<FN>
<F1>THIS NUMBER INCLUDES 16,394,245 SHARES OF CLASS A COMMON STOCK WITH A PAR VALUE
OF $164,000 AND 4,107,355 SHARES OF CLASS B STOCK WITH A PAR VALUE OF $41,000.
</FN>
        

</TABLE>