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The beer industry manufactures beer and similar beverages such as malts. Prohibition greatly affected the beer industry, when alcohol was illegal in the United States from 1920-1933. The industry recovered rapidly after the prohibition was lifted. The industry in the United States is controlled by two major companies. Anheuser-Busch InBev. has the largest market share with 50.1%, followed by the joint venture between SABMiller and Molson Coors (MillerCoors LLC) with 29.1% market share. Boston Beer Co., Pabst Blue Ribbon, and Yuengling and Son also are companies with popular beverages even though they each comprise of less than 1% per company. The beer industries major products are barrel and keg beer, bottled beer, canned beer, and other malt beverages. Their primary activities include ale production, beer production, and malt liquor production. ("Beer Production in the US," 2010).
The beer industry has five primary segments. Standard lager represents the largest segment with 35.7% share followed closely by premium lager with 34.2%, and specialty beer with 26.5%. The other two segments are ales, stouts and bitters (2.8%) and low/no alcohol (0.7%) ("Beer in the US," 2009). The brewing industry is controlled by only two companies in the US and they focus primarily on the mass market products such as the standard lagers. For a company to remain competitive it is important for them to focus on all segments of the US industry, especially with the premium lagers that are gaining popularity when consumers have more disposable income.
Information concerning management information systems was limited and hard to find.
Socioâ€Economic: PEST Analysis
Political and Economic Factors
While Prohibition was over 80 years ago, there are still many laws affecting the brewing industry that have been around since the prohibition era. The Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF), a branch of the US Department of the Treasury, is responsible to upholding the laws and regulations concerning alcohol ("Beer Production in the US," 2010). The United States Alcohol and Tobacco Tax and Trade Bureau (TTB) is responsible for collecting the taxes related to alcohol, developing regulations, and conduct product analysis (TTBGov.gov). State regulation varies, for example in Indiana, stores are not allowed to sell alcohol on Sundays; restaurants are the exception. Taxes range from state to state but the US average is 19 cents per gallon. Prior to the recession, consumers disposable income was rising, which allowed them to purchase premium brands which led the beer industry to slow, however due to the recession, consumers are returning to the cheaper standard beers since their income has reduced ("Beer Production in the US," 2010).
Consumer beer consumption has decreased during the economic recession however due to the belief that beer is more affordable than wine and hard liquor consumption did not decrease dramatically. In the recent past, beer purchases have moved from consumers buying cheaper beer to gradually buying more premium beer with the increases in their disposable income prior to the recession that started in 2008 ("Beer Production in the US," 2010).
Brew master Axel Heiligir has developed a new process for fermenting beer in Germany. This process, known as the Aubras fermenting system, is currently only is use in Europe (Clothier, 2004). In the United Kingdom, it is possible to study brewing science that is constantly studying and researching new technology for the brewing industry. SABMiller offers their support in the form of grants to the University of Nottingham where the degree is available (Mercer, 2006). While the process of making beer has not changed dramatically there have been improvements in the pasteurization methods, cleaning systems and the bottling processes. There have also been changes to reduce energy consumption ("Beer Production in the US," 2010).
Porter's Five Forces
Threat of New Entrants
Threat of new entrants is low due to the high barriers to entry
Economies of scale
Large economies of scale exist within this industry. Large brewers strive for significant economies of scale to reduce production costs and with the large revenues are able to market and advertise their products efficiently. However this is reversed for small craft brewers who can achieve economies of scale at a dramatically reduced amount of liters. New entrants may be hesitant to enter the market competing with large-scale brewers but entrants may be more eager to enter the small-scale brewers who focus more on specialty brands in times of economic booms ("Beer Production in the US," 2010).
Working capital requirements
The working capital requirements are large due to the long fermenting process. To maintain economies of scale, large brewers have to put in a lot of time and money to produce the amount of beer sold in the US market. In addition to large working capital, large amounts of investment are needed to enter the market effectively and efficiently ("Beer in the United States," 2009). MolsonCoors Brewing Company (Coors) had a large amount of working capital at the end of the 2009 fiscal year of $181.9 million which rose approximately $60 million from the previous year, which is on the lower end of the beer industry. Many of the large brewing companies are able to offset the effects of large working capital required with the management of their receivables and inventory turnovers ("MolsonCoors Brewing Company Annual Report," 2009) ("Anheuser Busch Annual Report," 2009).
Proprietary product differences
The beer industry has many patents on beer formulas. Coors has trademarks on all of their products, as do the other major companies. Beer has four main ingredients that are used in each product, however there are different components added to the beer to make it distinct. Many brewing companies also have patented processes to produce their beer therefore making it difficult to imitate already existing products ("MolsonCoors Annual Report," 2009).
Absolute cost advantages
Patents and copyrights are very prevalent in the beer industry with each company having many patents. The US government also has regulations on the percentage of alcohol that each product can have that is made in the US ("Beer Production in the US," 2010).
Brand identity is a key driver for the beer industry. Companies in the brewing industry are some of the largest advertisers in the whole US economy. Due to the large economies of scale, companies are able to use the money they save on marketing their products. Consumers tend to be selective in the brands they follow, many times preferring products from the same company ("Beer Production in the US," 2010).
Access to distribution
Access to distribution is a major barrier to entry for new companies since many of the existing companies have exclusive rights to distribution agreements. US government federal and state regulations limit the number of licensed wholesalers. Wholesalers generally do not take on more than one brewing company because of the cost associated with distributing beer, making it difficult for new entrants to find a wholesaler willing to distribute their product that is not as well known as existing products ("Beer Production in the US," 2010).
Consolidation of the brewing industry has been occurring not only in the US but also worldwide. Larger companies tend to purchase smaller companies and companies that focus on premium lagers rather than the standard lagers, making it difficult for new entrants to stand on their own ("Beer Production in the US," 2010).
There are four main ingredients to beer: water, yeast, malted grains, and hops. The power of suppliers is moderate
While there is a large amount of independent hop growers, brewing companies are starting to grow their own hops. Growing their own hops limits the power of suppliers. Companies generally get their barley from farmers who also sell their products as animal feed as well as the hard liquor industry.
Presence of substitute inputs
The end product is a mixture of the four main ingredients but also includes other inputs, which is unique to each blend. There are no substitute inputs for the four main ingredients giving suppliers power.
Differentiation of inputs
The four main ingredients of beer are resources that need to be farmed however the quality of the ingredients is crucial to the end product. Brewing companies look for the highest quality ingredients giving the suppliers power.
Importance of volume to supplier
Many suppliers of the ingredients, in particular barley, also produce the ingredient to sell as animal feed and to distillers of spirits, making the brewing industry only one of its many buyers.
Impact of inputs on our cost or ability to differentiate
The largest cost of the brewing industry is the purchases of raw materials allowing supplier power to grow.
Threat of forward or backward integration
The brewing industry has historically been non-vertically integrating however in recent years many of the larger companies have started to grow their own ingredients diminishing supplier power ("Beer in the United States," 2009).
Access to capital
Profitability in the brewing industry has always been high, one of the major reasons being that there are only a few companies that make up the largest share. After tax profits have accounted for approximately 9.8% of revenue. The industry is in its maturity stage however beer is always popular. This past year alone the industry had $3.6 billion in profit and the industry is expected to have an annual growth of 1.3% over the next 5 years. The larger brewing companies should not have a problem securing capital because of their large size and the expected rate of growth ("Beer Production in the US," 2010).
Access to labor
Labor accounts for 10% of the industry's revenues, making it the second largest cost for the industry. In recent years the brewing process has become more automated reducing the need for labor, lowering labor costs for the whole industry ("Beer in the United States," 2009).
Buyer power is moderate.
Buyer concentration is high. Supermarkets and wholesalers represent the largest section of buyers. Supermarkets have a large voice in the price of the product because of the fight for shelve space, increasing buyer power.
Buyer switching costs
Switching costs for buyers is low due to the large amount of competition in the industry. Buyers have more power since they have many different products to choose from at similar prices. Nevertheless buyers need to provide a wide variety of beers to satisfy their consumers.
Beer has been around for many years and is one of the oldest beverages around. Many people know how to produce beer, and many try it at home. Buyers have the information concerning how to make beer and it is easily accessible on the internet. However brewing companies can easily differentiate their product, making it difficult to imitate such a product. Unlike other beverages, beer is not one that supermarkets tend to make their own generic form.
Threat of backward integration
Buyers are not backward integrating. Many states regulate who can sell alcohol and have limitations on licenses, limiting the draw for buyers to backwards integrate into the supplier role.
Brewing companies spend a large quantity of money on advertising, increasing brand loyalty. Since there are only a few key players in the industry, many popular brands are from the same company creating a pull through. Buyers need to have certain brands on their shelves to entice consumers, limiting buyer power.
Brand identity of buyers
There is a moderate brand identity of buyers. The cheaper beers that the large companies produce would not have a large impact on brand identity since they are similar however they do have loyal customers. The premium brands such as Hoegaarden and Blue Moon are very popular and would entice consumers giving them a larger impact on brand identity.
Buyers are price sensitive to certain products. Since the large brewing companies have similar products there is a push towards having similar prices. The industry has moved away from price differentiation to product differentiation. In times of economic boom, the premium brands have a larger demand, however in recessions the opposite is true ("Differentiation Advantage," "Cost Advantage," 2005).
Price to total purchases
For certain buyers the purchases of beer products do not represent a large amount of their purchases such as supermarkets. Other buyers, like liquor and beer stores, the beer purchases represent a large amount of their purchases. Overall the beer purchases represent a large portion of many buyers diminishing their power ("Beer in the United States," 2009).
The main substitutes for beer include hard liquor and wine. Other substitutes would include non-alcoholic beverages including: carbonated beverages and functional drinks.
Relative price/performance relationship of substitutes
Liquor and wine are the substitutes that provide a similar effect to beer; however they are generally more expensive and have a different target market. Carbonated and functional beverages do not have the same effect as beer but are less expensive.
Buyer propensity to substitute
Many consumers of beer chose beer because of the cost, the taste, and the effect. Hard liquor and wine have different tastes and are more expensive. Yet they still have a similar effect, and it can be achieved in many cases faster.
Increasing concern over the dangers of binge drinking may cause an increase in the consumption of nonalcoholic beverages like carbonated beverages and functional drinks. Consumer preferences are also very personal, making it easy to substitute beer for other forms of alcoholic beverages ("Beer in the United States," 2009).
Threat of rivalry is strong.
Degree of concentration and balance among competitors
The brewing industry is in its maturity stage and will most likely be in that stage for many years to come. The industry has three major players, two of which are participating in a joint venture. The brewing industry is concentrated with three companies control approximately 80% of the market share.
The industry is not in balance. Anheuser Busch has 50.1% percent of the market share, while the joint venture between MolsonCoors and SABMiller only has 29.1% of the market share.
Diversity among competitors
Firms in the brewing industry have similar markets. All of the major players in the US brewing industry have consolidated in some form, either through a joint venture or an acquisition. Since many of the brands of beer available throughout the US are under the same two companies there is not much diversification of marketing strategies. The major companies rely heavily on advertising and marketing alongside their distribution networks.
Industry growth rate (past and projected)
The past five years have been difficult for many industries including the brewing industry that had an annual growth of negative 0.3% due to the economic recession. Despite the negative growth rate in the past, the industry is expected to grow at 1.3% annually reducing competition for market share ("Beer Production in the US," 2010).
Fixed costs to value added
Economies of scale are possible in this industry due to the high fixed costs associated with this industry. Fixed costs are high because of the mass marketing and distribution needed in the industry. Due to the amount of volume produced each year, large breweries are necessary making fixed costs even higher. Value added in the industry has been decreasing with a negative 0.4% change from 2009 to 2008 ("Beer in the United States," 2009).
While the industry is in the maturity stage of its life cycle, the industry is in the normal range in regards to capacity. Large capital investment is required to enter the market, reducing the threat of rivalry.
Firms in this industry compete with product differentiation rather than on price. Price is very similar due to the pressures from buyers and consumers. Firms tend to differentiate their product through advertisements, packaging, and beer segment. Despite the focus on product differentiations, consumers generally cannot differentiate similar product taste among competitors.
Growth of foreign competition
The presence of foreign competition is great. Anheuser Busch is owned by an international brewing company. Foreign firms are always looking at ways to penetrate the market and most have come in through craft breweries and premium products.
The firms in the industry are reliant on this industry and not many have branched out to include other industries. They all have a presence in the different market segments of the brewing industry however the mass market for the standard beers pulls most of the firm's attention.
The large production plants necessary to brew beer may be difficult to convert to be used for the production of another product however it may be possible to use them to produce other beverages. Despite the possibility of producing other beverages, exit barriers are high due to the size of the companies ("Beer Production in the US," 2010).
Critical Success Factors
Critical success factors include market research and understanding, economies of scope, optimum capacity utilization, control of distribution arrangements, establishment of brand names, and economies of scale.
Firms in the brewing industry are able to succeed in many of these areas due to the economies of scale and the size of the companies. The ability to achieve economies of scope is a critical success factor since it will allow brewing companies to remain competitive in the mature industry. By being able to provide different products to fit the diverse wants of the consumers, companies will ensure their existence in the industry.
Another factor that leads to the success of the few firms in the industry is the connections and relationships they have with their distributers. Due to the decreasing number of distributers, having promising associations with them will help firms be a constant in the beer market.
The brewing industry is in the mature phase of the life cycle. Despite the limited room to grow and the small expected growth rates, the beer industry has been around for centuries. The industry may be in the maturity stage but it has a very long life cycle and will most likely be around for centuries to come if the resources used in the production of beer do not disappear.
Investment in the industry is a prospect but it would need to be in the form of investing in already existing companies since the industry is filled with competition. Another option would be to invest in the smaller craft breweries that focus on premium products rather than the mass market products.
Part II: Firm Analysis
Brief firm history
Coors was founded in 1873, when Adolph Coors and Jacob Schueler start the Golden Brewery in the Rocky Mountains, where there is a large source of spring water. Adolph Coors buys out his partner in 1880 to have total control over the company. Prohibition starts in Colorado in 1916, three years before the rest of the US, and Coors has to immediately stop production of their alcoholic beers and drain the barrels they had.
During Prohibition Coors does not stop production but rather shifts into the production of malted milks and nonalcoholic beers. When Prohibition ended Coors was ready to continue brewing beer and quickly changed its processes. In 1991 Coors entered Indiana, making it available in all states. In 2005, Coors merged with Canadian brewing company Molson (Coors, 2010).
Coors is currently in the third largest brewing company in the US behind Anheuser Busch and SABMiller. SABMiller and Coors are in a joint venture together to provide their products to the US market, essentially making them one company in the US. MillerCoors has a variety of popular products that fit many of the segments, such as Miller, Coors, Blue Moon, Leinenkugel, Pilsner Urquell, Peroni, Keystone, and Milwaukees's Best. The primary market focus is on the mass market standard products, for instance Miller, Coors, and Keystone.
Coors's vision is to be a top global brewer in profitability. They plan to achieve this vision through their people who are dedicated to delivering extraordinary results.
Coors current strategy is to cross market their products by the use of mergers, acquisitions, and joint ventures. Coors strategy is entering into strategic alliances to better compete in a market. In the US market, Coors has a joint venture with SABMiller to better compete against Anheuser Busch. In the UK and Canadian markets, Coors works with the company Molson that acquired them in 2005 to better distribute their products. Coors has also entered into a joint venture with Mexican company, Grupo Modelo, to better compete with a larger product portfolio in the Canadian markets.
Coors strategy is to better market their products to the minority groups, African Americans and Hispanics. Coors has the possibility of helping this goal with the joint venture with Grupo Modelo if they can negotiate a joint venture in the US as well. Grupo Modelo offers several products that are popular among Hispanics, like the Corona products, and the Modelo products, like Negra Modelo ("Molson Coors Brewing Company,' 2009).
Political factors affecting Coors is governmental regulation in each state in the US. Many states have regulations concerning the number of distributers and who can sell the products. In some states, Coors is not allowed to directly sell to liquor stores, restaurants, and convenient stores and have to go through a distributer.
The recent economic recession impacted what Coors products they buy. Previous to the drop many consumers preferred to buy Coors premium brands such as Blue Moon, Pilsner Urquell, and Peroni. Due to the recession Coors consumers are now opting to buy the standard products such as Miller, Coors, and Keystone. Coors more popular brands are in the standard product segmentation and not as popular in the premium brands. Coors has the opportunity to expand to include a larger variety of products that can fit the consumer demand for higher quality products.
Binge drinking is becoming a large issue for adults that are preoccupied with their children's drinking behaviors. Alongside the issue of binge drinking comes the issue of underage drinking. As a producer of an alcoholic beverage, Coors has many pressures to combat binge and underage drinking.
Technological advancements in processing occur constantly however the changes are alight and do not impact the processes too much. Coors has patents on their process of production and are constantly innovating and looking at ways to make their process more efficient ("Molson Coors Brewing Company," 2009).
Coors faces high pressures from their main competitor Anheuser Busch. SABMiller is another competitor of Coors, but in the US market, Coors and Miller have joined to compete against Anheuser Busch more effectively. Competition is the largest threat for Coors since the market is dominated by Anheuser Busch. Coors will have to find an effective way of combating this large threat.
Threat of new entrants for Coors is low due to the size of the major companies in the brewing industry. Alongside Miller, Coors has the advantage of being a major competitor and creates products for many different consumer wants.
Switching costs for consumers is low between different beer products and moderate among different types of alcohol. Wine and hard liquor are popular choices for consumers even if beer is available. By having a diverse portfolio Coors will be able to reduce the threat of substitutes by providing different types of beer rather than just their popular light beer.
Threats and Opportunities
Coors main threats include the rising prices of their main materials, slow growth in the US market, changing consumer preferences and rising cost of labor. Barley has always been used in different industries, ethanol being one of them. The demand for ethanol has been increasing, raising the price of barley on average 13% per year for the last 20 years. Growth in the US has been slow since the brewing industry is in its maturity stage. Coors is very susceptible to this threat since 60% of their overall revenues come from the US and European markets.
Changing consumer preferences towards wines and hard liquor is a threat to Coors since their portfolio does not include these beverages. Young adults, who typically in the past have preferred beer due to the lower costs, are favoring wine and hard liquor because they view beer as being a drink of their parents. Consumers are also more preoccupied about health concerns with beer since it has a large amount of calories and are known to be fattening. Wine is seen as a healthier option, especially since the findings that red wine is good for the heart.
One of Coors main opportunities is to participate in more strategic alliances. They currently have a joint venture with SABMiller to help compete against Anheuser Busch. Molson Coors also entered a joint venture with Mexican company Grupo Modelo. This alliance is primarily for the Canadian market however similar alliances with other companies can help combat changing consumer preferences ("Molson Coors Brewing Company," 2009).
Internal Environment (Strengths and Weaknesses)
Strengths and Weaknesses
Coors has the advantage of being one of the largest companies not only in the US but also globally. They are primarily in the US, Canada and the UK, giving them large areas to expand into. Their weaknesses include slow financial performance, weak employee efficiency and reliance of third party service providers.
Board of Directors:
Board size and composition
The Board of Directors is comprised of fifteen people. Molson Coors is known for being a family business, four of the fifteen people are part of either the Coors family or the Molson family, and five total members are internal members (Coors, 2010).
The skills of the Board are mostly focused on management, with many of them being executives of their companies. They do have board members that their experience lies in marketing and organizational development.
Members from the Molson and Coors family have over 50% of the voting power, limiting the control from outside members. Coors is a controlled company by retaining the voting power among a small number of insiders.
There is large involvement of select members whom participate in most of the committees and leadership groups of the company. Decision making is a centralized process due to the role of internal members among the company (Coors, 2010).
Top Management (usually only the CEO):
Peter Swinburn is the president and chief executive officer. He has been in the brewing industry for over 34 years. His experience lies within international business management, operations management, marketing, retail management and sales.
The organizational structure of Coors relies heavily on family control. Due to the control that the family has decision making tends to be slower and response to market trends are slower as well. In such a large company with a large market presence, decision making could have a quicker response since competition is such an active force within the industry.
Coors's organizational culture focuses on their employees and being socially responsible. They were one of the first companies to switch from steel cans to aluminum cans, not only because of quality control issues with steel but also because it was cheaper and recyclable (Coors, 2010).
Coors's product portfolio is smaller than their main competitor and their joint venture with Miller helps them compete with more products. Their main product Coors Light is only the fourth largest selling beer in the US.
Pricing does not vary much among similar products from different companies due to the pressures of wholesalers to keep their price down. Coors does not have as much control over the market price of the product since rivalry in the industry is intense.
Coors is able to provide their products to all states in the US and has a large presence in Canada and the UK. Distribution in the US is reliant on relationships between Coors and the limited number of distributers. Coors places their products in bars, pubs, restaurants, grocery stores, supermarkets, convenient stores, liquor stores, and many more. Consumers do not have to look hard to find their many products.
They use a pull strategy by mass marketing their products and having large national advertising budgets. Coors is one of the companies that spends the most on their advertising budgets. Their advertising budget, including promotions and sponsorships, is projected to be $205 million over the next five years.
Many of Coors's managers have experience in operation management. Coors capital spending focuses on strategic acquisitions, improving brand imaging, brand innovation, and improving production processes. These areas are all concerning the improvement of the company as a whole. Coors has also been investing in improving productivity and quality management.
Coors strategy is to focus on product diversification. Coors focuses on differentiating their product since many of their available products are similar to their competitions. By focusing on diversification and looking at market trends, Coors can reduce the amount of time between new product launches of their competitors' products and their own ("Strategy as Active Waiting," 2005).
Fixed costs are rising due to growing production sizes. Coors has many production plants but their largest plant is located at where the company started, in Golden Colorado. While they have been able to expand there they also have production plants in multiple areas around the US. Large fixed costs are associated with production, with Coors producing 85 million barrels of beer annually ("Molson Coors Brewing Company," 2009).
One of Coors weaknesses is the sluggish financial performance. Revenues for the company have declined by 22.9% from the previous year (2007). Profitability of the company has declined, with operating profit declining at a rate of 3%. Net profit has decreased at a rate of 22%. Despite the sluggish financial performance, analysts expect the industry to grow in the next five years, even though in the past five years it has decreased by a rate of 0.3%. One factor of this financial performance may be due to the economic recession when people had lower disposable incomes to buy large amounts of Coors products ("Molson Coors Brewing Company," 2009). Coors competitors do not have the same sluggish financial performance, but it may be due to the large amount of market share they have secured and their larger presence internationally.
Coors's cost of capital is large due to the long process of fermentation. While they have a large cost of capital, their competitors do as well. Management will most likely re-invest in the company because even with the high cost of capital, the company is number two in the industry. Coors's total debt to equity is 24.2%. Coors's is susceptible to external forces; they have already merged with Molson and are participating in a joint venture. This allows them to compete on a better level with Anheuser Busch.
Human Resource Management
In the past, Coors has been involved in controversies concerning worker discrimination. Coors has since then modified their vision to be more diverse and inclusive (Coors, 2010).
Management Information Systems
Current information is not available. However one of their weaknesses is their reliance on third-party service providers ("Molson Coors Brewing Company," 2009).
Critical Success Factors
Coors has been able to adequately achieve economies of scale. Their large production plants in Golden, Colorado and elsewhere make the production of beer a more efficient process. They have also been able to distribute to the whole US by having healthy relationships with their buyers and distributers. The most critical success factor is economies of scope. While Coors has diversified their products to fit many consumer wants, they still have many substitute products that are gaining popularity.
Coors has had difficulty ensuring their long-term survival because their primary market is in the mature stage and consumer preferences are changing. Coors is not the leader in their industry and is far behind the leader. Not only are they far behind but they have a larger market share than what they would have if they had not entered into a joint venture.
With changing consumer preferences and the market being run by Anheuser Busch, Coors has the opportunity to enter into different market segments. Coors can do so by entering into strategic alliances with companies that focus more on the premium brands rather than the standard brands. Another option is to enter into a strategic alliance with a spirit producer since some spirits use the same raw materials. This could allow Coors to enter into a market that is growing and has more room for diversification. An issue with this plan is that Coors does not have experience with these markets. They also have only focused on beer in the past; there is the disadvantage of spreading themselves thin if they decide to venture into a new industry.
Another option Coors has is to expand into Chinese and Russian beer markets. China is a developing nation with a growing middle class. Globalization has provided the Chinese consumers with more job opportunities, thus they have more disposable income. The Chinese beer market has been experiencing large growth over the past five years opposite of the US market. Russia's size is one reason to enter their market, even without knowing that it is one of the largest beer markets in the world. Coors does not have much international presence except for in the UK and can branch into other markets. Entering into new international markets would require large capital investment and a large amount of market research to understand how to effectively enter these new markets.
Coors should enter into strategic alliances with a company that produces spirits or extent their joint venture with Grupo Modelo to include the US market. This would allow them to stay within their home country. By staying in their home country they could still actively focus on their current beer industry while dipping their toe into the spirit industry. The changing consumer preferences towards less calorie beverages such as hard liquor would allow Coors to reach consumers that they have been losing. The alliance with Grupo Modelo could also help them combat changing consumer preferences by offering a different type of beer that is popular with Hispanics.
Coors can implement this strategy with different steps. Part of Molson Coors current strategy is their alliances with several companies including SABMiller and Grupo Modelo to better fit their consumer needs. They have recognized that consumer preferences are not lenient on a specific type of beer. To implement the strategy of better suiting the changing consumer preferences Coors can either use their alliance with Grupo Modelo to establish a relationship for the US market, or enter into a strategic alliance with a spirit producer to fit another growing market.
Due to the large role of family members in the Molson Coors Brewing Company, agreements would have to be made in what role they can have in the alliance. By entering into a 50-50 alliance, Coors will be able to know where their management can step in but they also need to be able to negotiate and communicate properly on management levels.
Coors success in marketing and advertising can be helpful in the alliance to better promote the products that will be introduced or re-introduced to fit the wants of the consumers. In the alliance with Grupo Modelo, Coors can use their advertising experience to market their products towards the Hispanic community, not only diversifying their product but also helping achieve their goal of having more popularity with the Hispanic group.
The alliance with Grupo Modelo in Canada has been successful because of the distinct roles each company took on. Molson Coors was responsible for selling and distribute the brands across the country and Grupo Modelo was responsible for producing the products. The roles in regards to production and distribution can be similar in the US. Both companies have relationships with distributers that will be able to sell their product in more areas.
With this strategic alliance implemented in the US, Coors will be able to better market their products to consumers they have not reached in the past. They will also be better able to combat changing consumer preferences by adding to their portfolio beverages that have growing consumer demand.