Part 1:
Coors Brewery Pre-1975
| Knowledge Base | Manufacturing | Procurement | Sales and Marketing |
| Differences from Competitors | They manufactured a single brand of beer, used faster packaging and did not use pasteurization | They used backward integration unlike their peer by having a hand in most of the manufacturing instead of outsourcing | Marketing majorly depended on the quality of the beer. The sales were only in 11 states |
| Rare and difficult to copy or imitate | It would not be difficult but required certain conditions for it to be profitable. | It would be difficult to imitate since self-reliance is expensive and not all may be able to imitate it | This was rare since their operations were not in many states and would be difficult to imitate. |
Coors Brewery Post-1975
| Knowledge Base | Manufacturing | Procurement | Sales and Marketing |
| Differences from Competitors | They had relatively better plant utilization and maintained their use of refrigeration | It began a can recycling program, acquired a glass bottle supplier and its coalfield. | There was more investment in advertising, expansion into new states and more dealings with wholesalers |
| Rare and difficult to copy or imitate | This was rare since others still used pasteurization | This was very difficult to imitate since it required a lot of capital | Not rare or difficult because it was common practice in the brewery industry |
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Part 2: Excel attached
Part 3: Explain the changes in Coors performance 1975 vs. 1985
The year 1975 to 1985 proved to be tough years for Coors in the brewing industry. During this period, they experienced a drop in the sales volume, their stocks had a dip in value, and their income dropped in comparison to their peers in the industry. Also, the demand had been a bit stagnant during this period, and the costs of production and other indirect costs had risen significantly. Several things may have happened that can explain the changes in Coors’ performance.
The procurement strategy of Coors involved using backward integration. They prided themselves on self-reliance, hoped to get the best quality and to protect their company form changes in prices. They began focusing on recycling in the year 1984 thus establishing their plant that had some teething problems. Their glass bottles were also made by a company that they had acquired. Their packaging and production equipment were all done in-house. Coors also invested in coal to take care of their energy needs and were heavily involved in the production of their raw materials. The self-sufficiency was desirable, but it came at a cost to the company. Their direct costs of production ballooned over this period when compared to the stagnant demand that was in the market. This situation meant that the drop in the volume of sales combined with the huge cost of production would make the profits to become smaller.
Their method of production was distinctive in the sense that they took 70 days whereas other brewers did it in 20 -30 days. Therefore, it would increase the cost of production because of the additional operating expenses incurred in those extra 40-50 days. The effect of this was evident in the change of the cost of goods per barrel. Among the companies listed in the exhibits, Coors had the highest rise in the cost of production per barrel ($21). As a result, the overall cost of production reduced the net income over the years.
The period between 1975 and 1985 was marked by an expansion of Coors operations in the states. Coors expanded its operations to 44 states in 1985 up from 11 in 1975. The problem was that the distance of distribution had increased. Furthermore, the refrigeration of beer during transportation made the costs of distribution to increase. The company was also playing catch-up in the advertising arena. They had depended on the products to advertise themselves, but now they were spending the most amount of money per barrel on advertising in 1985. This rise in costs could be traced to their expansion in new areas and the slacking of beer demand.
Part 4. Explain changes that could have been made earlier (1973-1977)
Coors could have made several changes during this period to solve some of the problems they were having. The company should have handed over the reins to the fourth generation during this period. The new generation would be in charge of active management under the guidance of the outgoing leaders to infuse fresh ideas into Coors and spruce up the public image of the company.
The company should have started creating a network of new breweries before expansion to ensure they distributed the raw materials instead of the final product. They should also have outsourced some of their functions such as buying machines for production and acquiring the glass bottle company. These actions would help reduce the cost of production significantly and increase the economies of scale. Improving the relationship between itself and the wholesalers to avoid constant battles would also be conducive since they were gearing for expansion during that period.
References
Harvard Business School. (1992). Adolph Coors in the Brewing Industry .
