Adolph Coors

Team Pirates

Spring 2008

Competitive Advantage in 1970s

Five Forces of Five Forces of CompetitionCompetition

High entry barriers - Economies of scale - Differentiation and Customer relations

Suppliers and buyers have weak positions - Good wholesalers and retailers relations - Vertical integration

Few threats from substitute products - Few categories - Differentiation

Moderate rivalry- Competitors

- High growing industry

What went wrong ?

I. Operating Performance

II. Slow growth

Major Brewers’ Operating Income (per Barrel)

For 1977

  A&B Miller Heilman Coors

Barrels Sold 36.6 Millions 24.2 Millions 6.2 Millions 12.8 Millions

         

Revenue $46.01 $45.87 $34.84 $41.56

COGS $36.61 N/A $24.52 $28.98

Advertising $1.99 $2.48 $2.10 $1.09

Other SG&A $2.79 N/A $4.35 $2.97

Total Operating Cost $41.39 N/A $30.97 $33.04

         

Operating Income $4.62 $4.38 $4.03 $8.52

  A&B Miller Heilman Coors

Barrel Sold 68 Millions 37.1 Millions 16.2 Millions 14.7 Millions

         

Revenue $43.32 $39.11 $29.73 $41.10

COGS $29.02 N/A $21.33 $27.70

Advertising $3.88 $4.53 $3.56 $6.28

Other SG&A $4.04 N/A $2.56 $3.58

Total Operating Cost $36.95 N/A $27.45 $37.56

         

Operating Income $6.37 $2.06 $2.28 $3.55

For 1985 in $’s of 1977

I. Low RevenueII. Operating Cost too high

• Production Cost• Transportation Cost• Advertizing Cost

Slow growth compare to Competitor

I. Method of production• Only one facility• Not able to produce in advance

II. Exposition on U.S TerritoryIII. Diversity of products available

Factors to Coors Stagnation

Unfocused strategyFrom one brand to the fallThe “cult” of CoorsThe Water Mystique

Coors’ image problemAFL-CIO Strike and boycottCoors’ and the minoritiesCoors’ family views

Coors Banquet

One brewery

Only distributed in the West (11 states)

Product Differentiation Strategy Only in draft Uniqueness of ingredients

“Rocky Mountain Springwater”

Coors’ Mystique

Burt Reynolds in the movie “Smokey and the Bandit”

Gerald Ford and Henry Kissinger

The In n’ Out effect

Coors’ ExpansionGeographic Expansion

Roll out in the fifty states

Product ExpansionKillian, Greystone, and Shulers

Line ExpansionLight beer, ice beer, dry beer, red beer, …

Production ExpansionOpening of a new packaging plant in Virginia

The Water Mystique

Expanding nationally actually hurt Coors’ image.

Cross-brewing

Too much availability led to Coors’ commonness

The original Coors’ can

AFL-CIO Boycott Lasted from 1977 to 1987

Market share dropped in California from 40% to 10%.

AFL-CIO represents 13 million workers

Union representative reached out to minorities organizations, universities, stadiums, and entertainment parks.

Wanted to show that Adolph Coors is “antilabor, and therefore antipeople”

N.E.A and N.O.W joined the boycott with more than 5 million people.

Unfounded accusationsAnti gay, anti minorities, anti woman

employment practices

Not eco-friendly

Comments taken out of context viewed as racists

Coors’ family contribution to conservative political group

Boycott Coors

Recommendations

Diversification

Multipoint competition Synergy

•More value

•Risk reduction

•Create a new market

•Miller & Coors vs. Anheuser Busch

•Create a stronger brand

Focus Strategy

Focus more on consumer needs

Wholesalers Buyers

• Change production method

• “Freshness Policy”

• More accessible

• On-premise

• Off-premise

Focus Strategy• Create new advertising campaigns

• Focus on other segments of beer

• Regionalize in terms of marketing and sales activities

• Create a low cost strategy

• Create more facilities

Coors Current strategyEngaged in a 3-part strategy in 2004

(1) "Drive growth on Coors Light and Coors Original via a full line of support, including over 20 television spots, promotions, radio, out of home and print.”

(2) "Support Keystone Light, Killian's, Zima, Blue Moon and Mexicali with local programming.”

(3) "Respond aggressively to low-carb opportunities."

Merged with Molson in 2005

Merged with SABMiller in 2007

Coors’ Current strategyDirect competitor to Anheuser-Busch after the

merger with SABMiller.

Expansion in developing market, such as Asia and Africa

Goes up against the heavy marketing strategy of Anheuser-Busch, which spends twice the advertising expense of Coors, $2.5 billion and 50.6% of the market share.

Thank you!