Coors Beer

un 13, 2006

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