strategic management , bus

By: Joseph Brandt

(Consultant)

Company overview

Molson Coors Brewing Company drinks with the big boys: the company is one the world’s largest beer makers by volume. Operating through its subsidiaries, MCBC produces some 502 million US gallons of beer a year. The beer maker’s portfolio of brands, led by Coors Light, dominates the Canadian market, accounting for 40% of the beer sold in that country. In the US, MCBC does business through Miller Coors, a joint venture 58%-owned by SABMiller. Miller Coors, the second-largest US brewer by volume, markets Coors, Coors Light, and Molson brands. In addition to Canada and the US, MCBC operates in the UK, and as Molson Coors International, in developing markets.

Problems

Primary Problem #1

Molson Coors produces over 40 different brands of beer while the strong four Coors, Coors Light, Blue Moon, and Keystone account for over 80% of the company’s sales. Variety is key, but overproduction is causing a problem for Coors by producing too much unnecessary cost.

Primary Problem #2

Few brewing sites makes distribution costs high and production low

Secondary Problem #1

Advertising expenses are very high throughout the US, especially when trying to compete with Anheuser Inbev.

SWOT

Strengths

· Strategic alliances with the NFL and NASCAR

· Merger with Miller Brewing Company

· Innovative (survival of prohibition)

· Can and bottle design

· Worlds largest brewery in Golden, CO

· Going green marketing water and energy savings

· Vertical integration

Weakness

· Few brewing sites

· Union worker dispute

· EEO accusations

· Dependent on raw materials (wheat, hops, barley)

· Reliance on only a few popular brands exposes the company to vulnerability

Opportunities

· Growing number of sponsorships

· Merchandise

· Loyal customer base

· Asian beer market provides business expansion because of consumption and growing population

Threats

· Competition (Budweiser)

· Growing import market

· Changing market trends

· Economic slow recovery, most beer drinkers are middle class who have the least disposable income

Market Share

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Value chain

Firm Infrastructure: Coors operates the world’s largest single brewery facility at its headquarters in Golden, Colorado. It has over 40 different types of beverages and has made over 5 billion dollars in US revenue.

HR Management: Coors hires many minorities and offers growth from within the company for all employees.

Technology Development: Coors is the first brewer to develop a recycling plant.

Procurement: Vertical integration, Coors is in many cases their own supplier.

Inbound logistics: Customers can be assured that the resources are of the quality that Coors claims. (i.e. Rocky Mountain spring water)

Operations: Non-pasteurization and longer fermentation, Coors processes beer differently than competitors for better taste.

Outbound logistics: Refrigerated shipping, the stores receive the beer cold and it is never heated for better taste.

Marketing and Sales: Brand segmentation, Brand image, American-made Rocky Mountain taste is far better than the competition.

Additional Notes:

· By having their own rice and water fields Coors has strengthened its image and sales.

· The process by which they select these resources is due to them producing many of their resources.

· They developed their recycling facility to produce aluminum cans.

· Marketing and sales has the most interrelated part of the value chain. They Rocky Mountain taste is due to vertical integration, the way they brew or operation, the refrigerated trucks and rail cars (outbound logistics), and the way they select resources (procurement).

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Financials

Quick Raito	1.5
Current Ratio	1.66
Debt to Equity	25.65
Return on Equity	8.73
Return on Assets	5.37
Return on Investments	6.02
PE Ratio	11.26
52 Week High	49.58
52 Week Low	37.99

5 Year Income Statement (In Millions)

YEAR	2011	2010	2009	2008	2007
Gross Revenue	$5,169.90	$4,703.10	$4,426.50	$6,651.80	$8,319.70
Tax Receipts	$(1,654.20)	$(1,448.70)	$(1,394.10)	$(1,877.50)	$(2,129.10)
Total Revenue	$3,515.70	$3,254.40	$3,032.40	$4,774.30	$6,190.60
Cost of Revenue	$2,049.10	$1,812.20	$1,726.90	$2,840.80	$3,702.90
Gross Profit	$1,466.60	$1,442.20	$1,305.50	$1,933.50	$2,487.70

Financial notes

Molson Coors has had some financial ups and downs the past few years in 2007 the company merged with Miller and showed a large increase in revenue and profit. The company and the merger took a hit in 2008 at the height of the US recession. They continue to recover slowly and continue growth with current aspirations of buying STARBEV the eastern European Brewer. Molson Coors has not shown a constant growth over five years but they remain extremely competitive and solid: a good purchase on the stock exchange.

Alternatives

Problem #1

-The problem of producing too many kinds of beers can be solved by simply stopping production of most of the lines that produce the least amount of income.

-The second alternative to the problem could be to focus on new marketing options to sell the lesser beers.

Problem #2

-Reduce distribution costs by utilizing some of Miller’s brewing location

-Build new brewing locations

Problem #3

-High marketing expenses can be solved by utilizing free advertising on the web and making the current marketing work harder.

-Cutting some sponsorships

Solutions

Primary Problem #1

With marketing costs already high, adding more costs by marketing undersold beers would not be advisable. Stopping production of these lesser beers would, however, be a smart option for Molson Coors. Focus time and money on the top brands and make the company leaner and meaner. Coors, Coors Light, Blue Moon and Keystone account for over 80% of the company’s sales with 37 types of beer only bringing in 20% sales. This process should be pursued by Coors to cut costs and focus energy on top sellers.

Pros: -Draw more attention to top brands

-Help lower production costs

Cons: -Lose customers in search of rare specialty beer

-Possible profit loss if sales of tops sellers doesn’t increase

Primary Problem #2

Brewing sites and distribution is important to Coors. Because they do not pasteurize their beer, it spoils quickly if it gets hot. The beer is transported in refrigerated tucks and rail cars, which is costly. Coors should utilize some more of Miller’s brewing sites to cut distribution cost and ramp up productivity. Since the 2008 merger, Coors beer has only been produced in one east coast Miller brewery. Coors should follow this suggestion and move some brewing operations to these sites that are already equipped to brew Coors beer.

Pros: -Cut Distribution costs

-Increase brand recognition across the states

-Increase production

-Low cost

Cons: -Could slow down production of Miller products

Secondary problem #1

Marketing expenses may be high but they are necessary to compete with industry leaders AB Inbev. However, Coors can make the current marketing strategy, which includes alliances with the NFL and NASCAR, work harder. The current sponsors and marketing outlets attract the same type of audience: male sports fans. Diversifying some of the advertising funds can help attract new audiences and help increase sales.

Pros: -Increase brand recognition

-Market to larger audiences

Cons: -Possible loss of current customer