Free Essay Company Analysis of Coors Brewing Company

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Company Analysis of Coors Brewing Company

The brewing industry makes a drink known from the most ancient of times. Through advances in time and technology the brewing industry has changed essentially into one of the largest modern multinational industries that exist today. It was not until the early nineteen hundreds that the beer industry initialized through the creation of lager beers. The technological advances created at the same time were, �Mechanical refrigeration greatly aided in the production as well as the storage of beer. Pasteurization was also adopted during this period, which opened the way for wide-scale bottling and off-premise consumption of beer. In addition, developments in transportation allowed brewers to ship beer long distances in refrigerated rail cars, increasing both marketing volume and area� (Goldhammer, 1). The beer industry has remained generally stable in our economy since the prohibition era. A strong economy, diversity, and foreign trade rates are several factors that maintain the success and growth of such a mature product.

The brewing industry is part of the second largest industry in the nation. Beer has given the definition of alcohol seeing that, �The alcoholic beverages industry is a $95 billion dollar a year business in the United States�beer held a 57% market share against other alcohols� (www.activemediaguide.com). The industry requires a continuous update in knowledge of the history and current standings of the beer market, market trends, and competition that exist throughout.

The market perspective of the brewing industry is incredible. The wholesale volume in the beer industry approximated $13.7 billion. In domestic brands, from 1983 to 1984 there has been a decline in consumption of -1.2%. In the imported section there has been an increase of 14.3%. The total industry as a whole declined .7% from 1983 to 1984. As a result of the decline in consumption of beer a similar result in production occurred with a decline of 1.2%. The estimated forecast for 1985 will continue along the same trend as did 1984. The long term outlook for the industry is that sales will remain flat for the next 10 to 20 years. (Goldhammer 1-7). Yet, through the development and market of light beer and targeted market segments, the last five years have shown an increase in market awareness and revenue.

Within the last several months, the industry has not had the continual success as recent years. �As the second year of the new millennium comes to a close, the United States brewing industry likely will see a pause in their recent growth trend. After five consecutive years of growth, shipments from brewers and importers to their beer wholesalers are expected to hold near 2000's record level of 197.6 million barrels. This pause is primarily due to the national economic slowdown and the aftereffects of the September 11 attacks� (www.beerinstitute.org). A strong economy represents an important contribution for the beer industry because the fall of the economy an increase in sales are not going to happen unless the economy is in strong, stable conditions. The development of the industries annual production has created a profile of three levels in terms of �high-volume, regional, and small breweries�and is organized into a so-called �three-tier� distribution system: 1) brewers and importers, 2) wholesalers, 3) retailers.� (Goldhammer 1). The beer industry is segmented among the three market coverage types; federal, state, and local. Because each state obtains different laws, beer is regulated in 50 different ways in the United States. �The brewing industry is subject to extensive government regulations at both the federal and state levels and sometimes at the local level as well, concerning distribution, labeling, advertising, credit, container characteristics, alcohol content, tax rates, and litter assessments� (Goldhammer, 1). Large capital requirements and distribution networks make it hard to enter the national market. Even if stable, each state requires a different set of laws and regulations pertained to the industry, making the governmental aspect very difficult.

Although the market is one that is both difficult and competitive, it appeals to a large consumer demand. �On the national marketing front, makers and sellers of beer are paying more attention to the increasingly diverse drinking population, the groundswell of first-time legal-age drinkers, and the nations overwhelming preference for light beer� (Estes 1). The US Census Bureau predicted that 3.76 million consumers will turn 21 next year; therefore 3.76 million more consumers will be of market value to the industry. The industry is also focusing on areas of diversification for market segmentation. The customer segments that exist are of several. Taylor of Coors stated, �The American consumer is certainly becoming more diverse, many mediums are available to reach diverse or specific markets. The fact that we�re in an overall flat industry makes it important for any beer maker to look at places where they can bolster sales� (www.beveragebusiness.com). An example of diversity among consumers is the fact that more consumers are changing to imported or specialty beers; although the largest new segment that exists currently is the transition to light beer due to a more health conscious economy.

In terms of demographics the beer market consists of mostly males, with a newer focus on women and other cultures. �Beer consumption is overwhelmingly male-dominated, with men accounting for more than 80% of the volume consumed. A large number of these beer drinkers are white and favor domestic light beer, followed by domestic draft beer. African American drinkers make up about 10% of the beer market overall, and they are the biggest consumers of malt liquors...of all the beer types, light beer has the strongest following among women consumers. Women beer drinkers are more attracted to specialty micro-brewed beers than they are to big brands� (www.beer-brewing.com).

The pricing of beers is also determined based on the target market of the particular product. �Value-priced beers are intended to capture certain demographic groups based on income and age. While premium beers serve the �upper echelon� of the market� (US Business Reports, 5).

The competitive rivalry is broken up into three segments, National, Regional, and Microbrewers. National competitors have wide market coverage and generally a large company. National competitors have wide market coverage and generally a large company. Regional competitors are smaller than National in the fact that they only distribute in certain regions. Microbrewers are the smallest of the three because their size and capacity limit them to only distribute to small geographic areas.

The rivalry among existing competitors is strong. Demand for the product is slowing. In order for a company to increase market share, another company has to lose it. Switching costs are low for consumers. Because switching costs are low, Competition is very intense to gain new market share. The beer industry is a cut throat business with extreme competition. There are many companies that exist within the industry. Through the years the industry has slimmed down quite a bit. The National market consists of ten major competitors. The Competitors in this market are Anheuser-Busch, Miller, Stroh, G. Heileman, Adolph�s Coors, Pabst, Genesee, C. Schmidt, Falstaff, and Pittsburgh. The National companies have 51 plant locations across the United States. Market share in the Domestic market ranges from a low of .5% to a high of 34%. The Import market consists mainly of ten major brands also. They are Heineken(Netherlands), Molson(Canada), Beck's(Germany), Moosehead(Canada), Labatt(Canada), St. Pauli Girl(Germany), Dos Equis(Mexico), Foster's Lager(Australia), Amstel Light(Netherlands), and Corona(Mexico). These ten brands hold about 87% of the imported market share. The individual companies range in market share from 34% on down. A few regional companies, and many small microbrewers make up the rest of the companies in the industry.

The brewing industry consists of many different issues facing a variety of markets. Through current trends and issues, market segmentation, and competition analysis, the beer industry can be understood. Yet, to maintain a high standing position within all aspects is of great difficulty. The company of Coors Brewing is one that has obtained a strong position within the industry, maintaining third in the country for sales.

Coors

The Adolph Coors Company is a company that particularly stands out in the brewing industry. With almost two hundred and thirty years of business, the Coors Brewing Company is the nation�s third largest brewer. Obtaining the Coors Golden Brewery, which is the largest single site brewery in the world, Coors produces, markets, and sells high-quality malt-based alcoholic beverages. �Coors concentrates on distinctive premium and above-premium brands that provide higher-than-average margins� (US Business Reports). The time and experience have led Coors to produce a desired product for a marketable consumer. �Coors currently has 18 brands in its portfolio, of which five are premium products�Coors also owns and operates The Sandlot Brewery at Coors Field ballpark in Denver, Colorado.� (US Business Reports). Coors has shown a great overall success within the industry, yet as with any company, where strengths and opportunities exist, weaknesses and threats follow.

Involvement with the community is a beneficial strength that Coors prides itself on. Because alcoholic consumption can lead too many negative results, and is an illegal beverage if consumed before the age of twenty-one, the programs and policies it supports are crucial in terms of social responsibility. Coors has a statement pertaining to its responsibility, �At Coors Brewing Company, we measure our success not only in terms of our financial performance, but also in terms of our social performance. Being a good neighbor is a company tradition. In fact, since we were founded in 1873, Coors has been committed to improving the quality of life of the people who buy our products, the employees who make them and the communities where we do business. This responsibility has never been taken lightly and will continue to be a cornerstone of the company's dedication to integrity and respect in the way we treat people, our neighbors, our business associates and our environment� (coors.com). Because Coors is aware that their product has a history and can easily be abused they guide themselves on five policies in which to obtain a helping hand in keeping it a responsible drink in the hands of the right consumers. Their five principles include; a community prevention, education and intervention involvement, an advertising and marketing focus to those only of responsible consumption, work within the marketplace to ensure responsible practices, work by side of our legislation to keep drunk driving at a falling rate, and finally follow these guidelines and base them off of the �scientific evidence� in which they obtain. Another strength that Coors stands upon is the history of the makers of the first all-aluminum can ever produced. Coors had much pride in making a high-quality product; the idea of making a quality package was finally administered. By November 12, 1971, Coors was making and packaging their quality products in a package that was deemed as both for its quality and environmental benefits, creating a successful boost for the company.

Coors also maintains a high standing because of the time and effort it still puts in to brew its products. �Coors takes 55 days to brew, age, finish, and package its lagers-about twice as long as its major competitors.� (coors.com). Because Coors uses only the most �kosher� ingredients, and ensures a quality product all the way to hands of the distributors, the freshness and quality obtained are of highest value to the company.

In terms of weak qualities within a company Coors has plenty of room for advancement through a financial and competitive environment. The success of Coors is dependent greatly upon the sales of the Coors Light product. Although this product was the turning point from the last five years, it should be used as an opportunity to market other new products. Coors gained financially and brought more market awareness into the company through the creation of Coors Light. Yet, rather than just continuing to promote their most successful product, they should use these advantages to gain market awareness for new or upcoming products.

Another weakness considered is the Coors position in terms of its competitors. Coors production and assembly is of limited facilitation. Although they obtain the world�s largest single-site brewery, they do not have the transportation of its two leading competitors, and also are more susceptible to an event that could cause major losses for the company. Coors is currently the third leading company in the nation mostly due to its creation of their light beer. This is an overall weakness because the market is continually changing and becoming more diverse. The risk of market awareness and consumption is high due to the dependency of their one out of eighteen successors. The gap that remains in terms of net sales in its two leading competitors make it difficult for Coors to maintain a strong standing within the industry. �We are vulnerable to the pricing actions of our primary competitors (Anneuser-Busch and Miller Brewing Co.), which we do not control� (coors.com). Because the brewing industry is dependent on market conditions, it is a weakness for a company to success to be dependent of the economies standing.

Because of the image and involvement Coors has created over time, the advancement and options for opportunities has increased greatly. One opportunity available to Coors is the availability of expansion. Because Coors has made such a stable standing within the economy from its Coors Light product, the market awareness has allocated an opportunity for expansion on an international level. Also due to the continual growth of Coors over the recent years, the opportunity for improvement of its top-line growth potential is at good standing. �Despite the progress we have made, Coors has considerable room to improve performance balance--there is still significant top-line growth potential in untapped domestic and international markets, while plenty of opportunities remain to reduce costs and increase efficiencies in our operations.� (coors.com).

Another opportunity that Coors obtains is the opportunity to get more in depth with its market segments. �Supplier Diversity is an integral part of Coors' overall commitment to diversity. Our Supplier Diversity process is inclusive and seeks to broaden the pool of suppliers that want to do business with Coors. Businesses from the following groups are part of the Supplier Diversity process: African Americans, Asian Pacific and Asian Indian Americans, Hispanic, Native Americans and Women� (coors.com). By creating and focusing on these market segments Coors is leading to an expansion in the loyalty of different cultural and economic groups. Through this opportunity of expansion, Coors is also given the opportunity to further social responsibility once their product is in the hands of consumers. Coors has put much of its generated income into the community and awareness. This has helped the company greatly in terms of showing company responsibility. The opportunities for advancement in the brewing industry are never ending, and will continually improve the success and views of Coors Brewing Co. �The Coors family, beneficiaries of the Adolph Coors brewing company and family fortune, has been instrumental in funding conservative causes through individual foundation and corporate donations.� (www.pfaw.org). Through its experience and success Coors is knowledgeable and financially stable in its opportunities to expand this particular segment of the company.

Several threats exist for the Coors Brewing Co. both internally and externally. From the management�s discussion and analysis of Financial Condition and Results or Operation, several threats exist in compliance of generating future successes. �To improve our financial performance, we must grow premium beverage volume, achieve modest price increases for our products and control costs. The most important factors that could influence the achievement of these goals - and cause actual results to differ materially from those expressed in the forward-looking statements - include, but are not limited to, the following:

�Our success depends largely on the success of one product, the failure of which would materially adversely affect our financial results. Because our primary production facilities are located at a single site, we are more vulnerable than our competitors to transportation disruptions and natural disasters. We are smaller than our two primary competitors, and we are more vulnerable than our competitors to cost and price fluctuations. We are vulnerable to the pricing actions of our primary competitors, which we do not control. If demand for our products continues to grow at current rates, we may lack the capacity needed to meet demand or we may be required to increase our capital spending significantly. If any of our suppliers are unable or unwilling to meet our requirements, we may be unable to promptly obtain the materials we need to operate our business. The government may adopt regulations that could conceivably increase our costs or our liabilities or could limit our business activities. If the social acceptability of our products declines, or if litigation is directed at the alcoholic beverage industry, our sales volumes could decrease and our business could be materially adversely affected. Any significant shift in packaging preferences in the beer industry could increase our costs disproportionately and could limit our ability to meet consumer demand. We depend on independent distributors to sell our products, and we cannot provide any assurance that these distributors will sell our products effectively. Because our sales volume is more concentrated in fewer geographic areas in the United States than our competition, any loss of market share in the states where we are concentrated could have a material adverse effect on our results of operations. Because we lack a significant presence in international markets, we are dependent on the U.S. market. We are subject to environmental regulation by federal, state and local agencies, including laws that impose liability without regard to fault.� (coors.com).

Although factors exist that are or may be threatening, the company of Coors has proven its knowledge in all areas. Although several factors exist for the continual growth of the company, with the knowledge and forecasted factoring threats that exist, Coors� knowledge will help in terms of handling both internal and external threats that may come up. Coors notes themselves as a business that makes and sells beer. Although they take such a basic concept the foundation in which they have created is intricate and extensive in terms of past, current and future business. Future business for the company of Coors has an outlook of productive growth and/or stabilization. Although much of its revenue is dependent upon the company, as long as Coors follows its commitment in terms of the �basic goal of growing our unit volume more than twice as fast as the industry�and increase sales of value-packs or in price discounting� Coors will show a continual growth among its competitors, market, and industry standards. As long as the economy stands in good enough health, government policy does not get more intrinsically involved, and capitol investments are applied with logic and preparation, the company of Coors Brewing will remain one of corporate success. It shows a history of achievement through technology, production, and marketing; allowing a victorious future as well.