Even with this reputation of success, there are always areas of performance that could be improved.
One of the most significant events in Coors history happened in 1985 in the opening of its second brewery in Virginia’s Shenandoah Valley. During a time when domestic beer consumption was low, Coors’ beer volume jumped by 13% to a high of 14.7 million barrels. Even with strong diversification, the brewing division accounted for 84% of their revenues in 1985. However, even though 1985 showed a successful period in Coors history, the previous ten years showed another story. 1975-1985 was a period of downturn for the company when “the volume dropped for the first time in two decades: by 4% to 11.9 million barrels”.
The principal objective of this is to analyze the situation during this period of the company’s life and give an in depth examination of the performance. The following will identify various areas where Coors has struggled and provide recommendations to improve in these. By examining the company’s strengths and weaknesses, they will be able to target these key areas. If Coors is able to improve on them, then they will be able to support other strategic areas more efficiently which will improve their performance.
Organization strategy focuses on four main divisions of brewery: procurement, production, distribution, and marketing. One of the company’s core strengths is the ability to vertically integrate. Coors stresses quality and self-reliance which has led to acquiring water rights, producing their own malt as well as rice-processing facilities and a grain processing facility. Because of this the company is now able to exercise more control over a wider range. This gives them a competitive advantage as they are more self-reliant. The company’s marketing efforts are also very successful. They emphasized their commitment to high-quality through a strong product mix and a concentration on segmentation. They target niches in which the penetration had previously been limited such as African American and Hispanic consumers. This is done by launching new brands and/or products. Coors Light is a perfect example of targeting health-conscious consumers.
While Coors does possess several strengths, there are also several weaknesses. The current strategies cause them to incur a large amount of shipping costs from distribution centers to wholesalers. By neglecting the importance of strong distribution networks, shipping expenses have risen. A large part of the problem is shipping distances. By expanding to other states the median distance of shipping increases. For example, Coors’ median distance increased from 800 miles in 1977 to 1,500 in 1985. If Coors wishes to continue expanding distribution areas, then they need to expand distribution to match it. Another problem with Coors distribution is the fact that the beer is unpasteurized. This causes it to spoil more quickly and requires refrigeration. Because of this Coors beer only had a wholesaler shelf-life of 60 days before it had to be destroyed. The needs that come from monitoring this requirement of their wholesalers are quite extensive.
During this period, Coors also struggled in its relationship with new wholesalers. Instead of using stronger wholesalers who would have carried Coors as a second brand, they chose weaker wholesalers with Coors as their leading brand. Because of this these wholesalers needed to spend $500,000-$2 million on market development. The types of wholesalers also began to change. Wholesalers no longer began to carry just Coors. This causes Coors to change their requirements in relationships with wholesalers as that was previously very important to the company.
Even though this strategic problem has caused issues for Coors in the past, there are several solutions that could possibly improve the situation of distributing nationally.
The key is to improve or create distribution networks in some way. Even though this would be very expensive, in the long run it would be very beneficial for the company. The first option would be to outsource distribution. This would remove a good deal of the distribution expenses from Coors and free up several of their resources for other capacities. Examples of companies that Coors could outsource to are Swift Transportation or J.B. Hunt. Another choice is to build more production plants across the country. Doing this would decrease the median shipping distance which would lower expenses. This option is also positive because the products would be sent to wholesalers more quickly extending the wholesaler shelf-life. Lastly, Coors could build packaging plants which would allow them to ship to the eastern side of the country more efficiently. Each of these have the possibility of increasing …show more content…
successfulness.
Out of these three options, I believe that building packaging plants would be the best. This is because there implementing the first two would prove to be difficult for the company. While outsourcing is normally a positive thing, it may hold negative connotations for a company like Coors. This is because they highly value self-reliance and high standards. The company would rather control all aspects if possible such as in vertical integration. Therefore, outsourcing would not be the best choice because of the company’s values.
Building production plants would also not be the best choice because of what Coors values. If they were to build new production plants then the beer would have a different quality because it would be made with different ingredients. For example Coors uses “pure Rocky Mountain spring water” specifically from Golden, Colorado. By creating new production plants there would be a loss of the brand image that comes from using these unique, quality ingredients.
The last option, building packaging plants, would be the best option for the company.
This would allow for them to distribute nationally in a more efficient manner without diminishing their brand image. This would also decrease distribution costs while still keeping control within the company. By keeping one production plant in Golden, Colorado, the company is able to continue using the resources and processes that give Coors’ beer its unique taste. Building packing plants gives them the opportunity to increase their distribution nationally without increasing their costs. This option would expand their capabilities and improve their success
rates.
In order for this solution to be successful, Coors would need to follow several necessary steps. The first is to ensure that the company has the needed funds to complete the project. In order for this to be done, Coors needs to decide how many packaging plants need to be opened. The second step is to decide both where these plants will be located and then to purchase satisfactory sites.