Coors Case
A1. There are several factors that made Coors extremely successful. Using value chain analysis, it is clear Coors has attempted to differentiate itself in key activities as a source of competitive advantage.
Under procurement, Coors was focusing on quality and self-reliance, having its own high quality raw materials rather than procuring. This helped them market the quality of their product as a differentiation. Coors vertically integrated into machinery, packaging and brewing equipment, reducing supplier power and helping Coors become more efficient and cost effective than competitors. Additionally, Coors canned more beer than its competition despite its cost, further emphasising it premium quality.
In production, Coors made use of unique brewing processes. Coors decided not to pasteurise beer and aged its beer for 70 days rather than the industry standard of 20-30, furthering Coors quality image. Coors single production facility was serving 11 states and expanding to become the largest brewery in the world, helping gain economies of scale. This helped compensate the high costs of raw material and process differentiation. By locating its production facilities in Golden, Coors was able to exploit the underserved 10 states west of Colorado. By producing only one beer, Coors gained specialisation advantages becoming more efficient with the fastest packaging lines in the industry.
In distribution, Coors had a high bargaining power over its distribution channels, being exclusively provided in bars. It also would not allow wholesalers to cut prices on its products and implemented the strict ‘freshness policy.
In Marketing, Coors felt the product was premium enough to sell itself through its production and procurement differentiation, reflecting its advertising costs being among the lowest in the industry at the time. Moreover, Coors scarce availability in comparison to its competition made it exclusive and highly sought out for, adding to the profitability margin and explaining the success of the company.
As a result, according to Porters Generic Strategys Model, prior to 1978, Coors followed a niche-differentiation strategy in the beer industry. It is important to mention that Coorss strategy was a combination of differentiation and focus strategies, by having geographical focus and differentiating itself by making beer using unique raw material and different fermentation processes.
A2. Coors operating performance was estimated to be 14.7 % lower in 1985 compared to 1977 (Exhibit 9). Competitors Anheuser-Busch (A.B), Miller and Heileman appear to have performed much better (358%, 28%, 168% better respectively). Coors Barrels sales in the period showed the smallest increase in the industry of 14.8% while most competitors managed to almost double their sales (A.B – 85.6%, Miller – 53.3%, Heileman – 161%, Stroh – 303.4% as a result of acquisition of Schiltz).
Coors Net Revenues increased by 102.9%, high in comparison to Stroh (41.8%) and Pabst (-44.4%). However, Coors net revenue increase is much lower than A.B (212.4%) and Miller (133.4%).
There are various reasons which could explain low performance. First, market share could help explain higher profitability levels of competition (Schoeffler, et al., 1974, pp. 137 – 145). Coors not being present in all 50 states unlike competition such as A.B and Miller might have impacted this.
One of the major concerns for Coors in the period is the relative increase in costs versus the industry, with a 20% less decrease in costs for Coors than its competitors. Another major factor in the operating performance analysis is advertisement. Coors expenditure on this factor has increased dramatically by 1078% in this period, becoming one of the major advertisers in the industry. First of all, the advertisement cost per barrel and the advertisement to sales ratio was the highest in the industry. Secondly, advertisement did not focus on the differentiation factors mentioned in part 1. It was not until 1985 when the first advertising campaign ‘Coors is the one became successful.
Before 1977 Coors was focused on the unique high quality product and was operating in some areas where there was no competition. However, after 1977 the strategy of the company changed, with Coors becoming more reactive to the market it was operating in. Instead of strengthening its existing markets, Coors focused on niches