Coors Brewers

Topic: BusinessOrganization
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Last updated: April 16, 2019

The following report looks at the major environmental factors affecting Coors Brewers, as at March 2002, using five steps to environmental analysis. The report highlights that the major elements that have affected the former Bass Brewers organisation have been political, through the policies of the Monopolies and Mergers Commission. It also highlights the changing social and cultural behaviours of consumers in the UK and stresses the importance of Coors being able to react to these, and not be frightened of generating profits from non-beer activities.Coors adopts a point of differentiation compared to other Brewers in the UK, selling a broad range of brands to both on and off trade sectors. The point of differentiation being the superiority and popularity of its brands.

In particular the market leader Carling. This broad targeting exposes Coors to weaker, lower margin areas of the market.The report stresses clearly that customers are gaining more power as the trade moves towards the multiple sectors in both On and Off trade, and of course a massive swing to off trade sales as drinkers stay at home.

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Coors can do little to stop this and the result will be escalating discounts and therefore reduced margins. This in an already shrinking beer market. This again highlights the need for new products and possible moves away from beer, like FAB’s, Spirits.It also recommends more aggression used in the marketing of Coors biggest brand Carling, going back to massive exposure for the brand similar to the type seen when Carling sponsored the English Football Association Premiership.It also expects that Coors will look at cost cutting exercises and perhaps should compare these to expansion of these areas to therefore generate new business in areas not pursued before.

For example using Technical Services or Telesales to take on work for other brewers or retail groups.In conclusion the report looks for Coors to become far more dynamic in its approach than that of the former Bass Brewers, and that it must set up an internal structure that allows and promotes this cultural change.1.

IntroductionIn order to assess Coors Brewers environment we will follow five steps. Firstly perform an audit of environmental influences on Coors, and then assess the nature of the environment Coors operates in. From this we will see the key forces, then identify the competitive position of Coors and then look at the key opportunities and threats that face Coors. This will then give us Coors strategic position.2.

Audit of Environmental Influences.To do this we will use the model depicted in Bartol ; Martin (1998 Chapter 3 P69 Fig 3.1). This describes the 3 levels of the environment that affect an organisation. At the central core of the environment we have the internal elements of an organisation, its location, size and structure. Surrounding this is the task environment, which an organisation has some affect over, like its customers and suppliers.

Finally we have the mega or macro environment, which effectively is the ‘outside world’ on which an organisation has no affect, but is constantly, influenced by forces from this environment.2.1 Internal EnvironmentThe internal environment, this is Coors internal structure, size, and overall objectives. An organisation’s culture, is a list of shared beliefs or values that identify all members of the organisation. Effectively Coors produces and sells beer, and that is their overall objective. Coors is split into 2 distinct operating companies On Trade and Off Trade. Off trade is serviced by a head office in Burton. The On trade splits itself into two independents and national multiples.

The national multiples are serviced from a head office in Burton. The independent customers are split into four regional operating companies, taking up responsibility for geographical areas of England and Wales. North, North West, Wales and the West of England and Midlands and the South East. A Sales MD who has sales teams and support staff working under them heads each region. Virtually all external sales people are mobile workers and are home based.

Telesales operations are based in 3 centres, and a central customer service centre is based in Leeds. Marketing is centrally based in Burton. Some services like distribution and credit control are supplied by third party suppliers, which will be mentioned later. This structure dictates the way Coors employees’ interact with each other, and the physical setting in which they operate. A strong culture of mobile working exists, so an electronic e-mail world is quite profound in Coors.2.2 Task EnvironmentThe second level is the Task Environment; this is made up of elements, which are controllable to some degree. Each element is broken down where possible into the groups affecting Coors.

See appendix 1.Competitors are a major influence in the environment of Coors as it tries to survive in a shrinking beer market. Therefor it constantly looks to get ahead of its rivals, of which there are too many. Coors currently uses an internal focus called ‘Crushing the competition.’Suppliers are an area Coors has made a lot of progress over the past five years.

It has sought to rationalise its suppliers and reduce overlap in supply chains. This has given Coors better pricing from many of its suppliers. Coors has also been innovative in its approach to supply and even set up a third party distribution company Tradeteam to deliver its products. Coors partly owns this company and therefore has great control over it.The largest area Coors tries to influence control is over its customers. It does this through tied loans in the On-trade, and seeks to gain total supply agreements in the independent sectors. However the power is rapidly shifting towards the customer as national chains get larger and the total volume in the market shrinks.

Therefore competition in the market gets fierce.2.3 Mega EnvironmentWe now need to look at the external elements, which affect Coors Brewers.

This is often called the Macro Environment. These elements operate outside the organisation’s arena, whose actions may affect any part of the organisation. The organisation has no control over these elements. It can only influence them by going through the elements in the Task environment.

Often an organisation would not be ale to influence any of these elements on its own. (see appendix 2)Three major elements come from this, Political, Legal, and Social, that affects Coors the most.Politically Coors has been affected in the past and dictates its current position and structure is political and legal. The British government has twice blocked mergers and acquisitions by Bass Brewers and its owners to grow in size. Claiming an unfair competitive advantage would be gained, and therefore consumers would suffer.

Drink drive laws have helped to reduce beer consumption in the UK; this is clear with the growth in food sales in pubs. Laws dictating licensing laws on selling alcohol clearly influence Coors.Social and economic climate affects Coors’ greatly, with alcohol perceived as a luxury non-essential item, especially in the on-trade sector. Alternative areas of spend take cash away from the beer sector. The mobile phone explosion took disposable spend away from consumers. Consumers now have a far greater choice of leisure activities both in the home and outside, a lot of which do not include beer.

The use of soft and hard drugs clearly moves spend away from beer. Beer sales in Dance Venue nightclubs are significantly less than in the local pub, even though a dance venue will probably hold three times as many people. Changes in habits and lifestyle and disposable spend greatly affect sales of beer.3.

The Nature of the EnvironmentThe environment an organisation operates in generates uncertainty. The degree of uncertainty varies with the complexity of the environments.As an environment becomes more complex and dynamic the more uncertainty is generated.Environmental uncertainty is a position where future environmental circumstances affecting an organisation cannot be accurately assessed or predicted. The number of elements in an organisation’s environment and their degree of similarity measure environmental complexity.

To help us assess the nature of the Coors environment we will use model shown in Bartol & Martin (1998 Chapter 3 Page 82 Fig. 3.4).Coors Brewers best fits in the simple/static segment of the model. Essential its business is simple to understand.

Technical processes used are simple in brewing. The competitors to Coors have remained the same over the past 10 years. However the position is shifting to become more dynamic or homogeneous, as the power of customers becomes greater squeezing margins. This will force Coors managers to think of more alternative and even complex systems and products to generate profits.

4. Key Environmental ForcesThe best model to find the key force is to look at Porters Five Forces model. Hannagan (2002 Chapter 5 P148 Fig 5.3. When we list all the elements discussed in the Mega Environment under the four outside headings we find which force has most power.

The key environmental force upon Coors Brewers, is the Customer base. As the market moves more towards multiple groups in both on and off trade and these operators get bigger, discounts will become greater and therefore margins shortened.Enterprise Inns PLC only last week announced a major acquisition of pubs in the UK pushing there total estate to 7700 pubs, the largest single pub operator in the UK.Suppliers have seemingly little force upon Coors, with must suppliers being smaller in size than Coors or in a position where they are not the only suppliers. The only supplier, which does have some power, is Tradeteam, which is the distribution company used. However their power is reduced by the 49% share holding Coors has in the company.

The competitors have remained static for some years in the industry with similar market shares. Market share has continued to grow for Bass Brewers till now by about half a percent a year for the past five years and there seems no reason why this should change massively for Coors.Substitute products are a strong force for Coors, the growth of the PPS (Premium Packaged Spirit) e.

g. Smirnoff Ice, has taken away consumer spend from Beer. The fasting growing sector in the alcohol market in the UK at present is Wine, which is another movement of spending.

Although Coors factors on Wine to its On-trade customers it is the lowest profit stream per unit it has. Alternative spend areas for disposable income are a major factor that has influenced our business, and could be a reason for the Bass PLC sell off of Bass Brewers.It is unlikely that any new entrants will enter the UK Beer market at present, as it is widely recognised that UK has too many brewers operating in a shrinking market.

This makes competitive rivalry very fierce, between the major brewers. Customers are aware of this and help to up the tempo as they gain a better price.5. Competitive PositionTo analyse the competitive advantage of Coors Brewers we must decide how it differentiates itself from other brewers.Coors owns the UK’s No.1 mainstream lager brand, Carling, it also owns the No.2 ale brand Worthington.

Coors is regarded as the most highly efficient brewer in the UK, and therefore maintains higher margins than its closest rivals.Coors have also in the past demonstrated a flair for innovation, with products like Carling Premier uniquely smooth lager, Caffreys unique Irish ale and Hooch the first mass produced Flavoured Alcoholic Beverage (FAB). This more recently has shown with the brand Reef, Barbox an Internet web site for the industry and Arc a unique super chilled ice draught lager.Coors targets a broad target audience with brands in virtually every sector of the market, and where it does not own them it factors them in to sell on to the On-trade. For example Wines Spirits and Soft Drinks and Ciders. Coors uses all routes to market with nearly all its brands.The closest rivals to Coors market position are, Scotco, and Interbrew UK.

Both have problems with their mainstream lager being massively secondary to Carling. Mainstream lager is the largest sector of the beer market. Neither competitor has demonstrated skills of innovative products being brought to market, and have often adopted a copy cat, me too policy.This puts Coors in a position of differentiation, by owning the number one lager brand in the UK. This gives Coors a competitive advantage over its rivals. However Coors sells products in all sectors, standard lager, premium lager, ales and bitters, and also factors brands like Budweiser, Guinness and wines, spirits and soft drinks.

Thus reaching a broad target and aiming to gain advantage in all of them.

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