Coors Breweries - Value Added Marketing and Its Related Strategies - Literature review Example

Coors Breweries – Value Added Marketing and its related strategies Table of contents Introduction: Historical look into the Bass breweries……………………………………..3 Strategic analysis before the year 2000…………………………………………………...3 Strategies change in 2000…………………………………………………………………5 Marketing strategy changes after 2001…………………………………………………..5 Beer market in US……………………………………………………………………….5 Beer market leaders in US………………………………………………………………..6 Beer market in UK………………………………………………………………………10 The sales before the year 2001…………………………………………………………..11 After the year 2000………………………………………………………………………13 Coors strategy: 2004……………………………………………………………………13 Strategies of Coors breweries: value added marketing…………………………………15 Results of the Value Added Marketing by Coors……………………………………….15 Analysis………………………………………………………………………………….19 Recommendations………………………………………………………………………20 Conclusions………………………………………………………………………………21 Appendices…………………………………………………………………………...22-24 Introduction Historical look into the Bass breweries Baye and Nelson (2001) give an overview of the history of the brewery by arguing that William Bass laid down the foundations of the Bass brewery in UK in the year of 1777. With the passage of the time and the years, the beer industry that was laid down grew by incorporating one more of the functional strategies as the addition of the companies making the soft drinks, addition of the hotels, some betting shops and gaming machine manufacturers. Strategic analysis before the year 2000 1. The failure in the merger The 20th century brought some new strategic changes in the Bass brewing industry. It can be presented by the fact that in the year of 1996, the Bass brewers had a merger of companies with the Carlsberg-Tetley brewers. After this merger the competition was expected to occur in between the merged brewing companies. In that case, the Bass breweries had to make sure that the guidelines that they have designed to be followed in the case of the competition arising from within the company were followed. The guidelines had to go social and for the purpose of the government awareness there should have been a campaign. Because of the failure in making and following the correct strategy, the new company did not follow the guidelines and they blocked the deal which cost the bass breweries a huge loss rounding up to £60m. 2. The coming success: the growing profit After the huge loss that the company had to face, the year of 1997 was the year of profit as it was very evident from the growth of the profits that the brewing company was making. The bookmakers for the company were Corals. Through these growing profits it was decided to takeover the major competitors of the Corals, William Hill. This plan of taking over William hill failed as the company failed the bid against another Japanese investor in the bidding. 3. The next thing that the Bass breweries did was to dispose off all the public Houses being managed independently. However the major of the public houses were held back from being disposed off. This strategy was not very much liked by the analysts and the Bass breweries had to face a lot of criticism. It was a being said that the disposing off activities of the Bass breweries are higher than the acquisition activities. 4. The coming year of 1998, there were some changes in the strategies made by the bass breweries in their purchase and clearance related strategies. Up till this case it was being noticed by the UK share markets that the Bass breweries were acting very carelessly in the case of getting hold of the shares in the market. All these criticisms had to be taken seriously and analyzed by the Bass breweries. Beer Institute (2007) discusses that the changes in the strategy of disposal and the acquisition were because of the constant criticism being faced. As a result of this it was seen that the Bass breweries took over the Inter continental hotels. This helped in adding to the Holiday Inn chains that the Bass breweries owned. In addition to this, some of the items in this case were also disposed off. It was seen that the company had to focus on three aspects, the breweries, the hotel chains and the public house chains that the company owned. Strategies change in 2000 The strategies that were used in the year of 1996 and the year 2000 were entirely different from each other. The strategy of the year 1996 focused on growing the brewing business. The brewing company from Belgium Interbrew took over the Bass by winning the bidding operation. In this case, the public houses and the hotels owned by the Bass breweries were retained. However the new trading name was thought for this trade, Six Continents. It was seen that this merger that took place was for a very short time. The Six Continents remained intact for a very short period of time and soon the UK market saw that the Six Continents spilt up into two major groups. The first group included the Inter Continental Hotels and the second group included the retail public houses trading by the name of Mitchell and Butlers. The year 2001 and 2002 The interbrew was asked to give up the acquisition that they had in the case of the Bass breweries as the UK competition commission had analyzed the case. Marketing strategy changes after 2001 Particularly in the year of 2003, it was noticed that there were some factors that were involved in the US market that separated the beer market in the country of UK. In addition, the 80% shares of the market are held by the greatest brewing industries in the UK. Beer market in US Blocker and Tyrrell (2003) says that the US market was seeing the growth in the beer industry however the market growth was a bit slow. The beer in US was sold by the wholesalers instead of the breweries directly. Out of all the beer, the 75% of the beer produced was sold in the market at an off trade rate. However the cases have been seen that there are some restrictions in the US for the consumption of the beer in perspective of the age. It has been seen that the consumption of the beer is strictly prohibited before the child reaches the age of 21 years. However the laws regarding the beer consumption and the sales vary from one state to the other. The beer consumption comparison that has been carried out in the US shows that the US women drink approximately 25% of the total beer. Beer market leaders in US It has been seen that in the year of 2003, the 50% of the beer produced in the US was produced by the company Anheuser-Busch. This was the reason that this particular company was seen to be the dominant beer producing industry in the US market. In the year of 2003, it was noticed that the revenue generated from the sales of the beer produced by this company was increasing by the percentage of 4%. Christensen (2003) discusses that the volume indexes of all the companies are recorded on the regular basis. And in the case of this US market leader it was noticed that the industry was showing the growth in the market at the rate of 0.8%. This reflected the over all sales that were made in the beer market in US, which came out to be that the industry had sold out the total amount of around 112 million barrels of the beer. Out of this the amount of around 102 million barrels were sold in the US market thereby this makes the industry the 50% shareholder of the US beer market. The company has been shown to sale out the beer to the foreign markets as well which has been seen to be one of the strategies of the industry. It has been shown that in the year of 2003, around 19million barrel of the beer was sold out to the foreign markets. The beer market in the country has three major beer producers that have a tough competition with each other. In this case the second major shareholders in the US beer market are the SAB Millers. This brewing industry was bought by the South African beer producing industries in the year of 2002. If the performance of these beer producers is noticed, in the year of 2003, it was noticed that the industry had come on the scene in the very year. In the starting first ten months, the sales figures that was noticed for the beer industry was totaling to 29 million barrels in the US market. As compared to the number one US beer market shareholders, this sales volume figure gave this brewery the 20% hold of the US beer market. Davidson (2003) discusses that within this brewing industry, there were some changes that were taking place in the management section and this caused the changes in the management operations by the industry. The changing management strategy that was being implemented by the industry included the better strategy of the marketing of the beer brands, giving a new look to the beer brand. In addition to this, the strategy also included the changes in the sales figure of the beer in the US and the foreign market, some changes that needed to be made in the distribution of the beer in the major markets. The major changes included the changes in the costs on which the beers were being sold-out in the market and the changes in the organizational level that make lead to success against the major beer producing rivalries. In the same year when the restructuring of the beer industry was taking place along with the other strategies being implemented, the sales figure of the brewing industry had shown a decrease by 5%. The third greatest US beer market shareholders were Coors brewery. The numbers are truly based on the sales value that the beer brewing industry makes in the US market in one specific year. This includes the volume sales that have been made in the domestic market as well as the foreign markets. Among all the breweries in the US market, particularly among the key share holders, this brewing industry was the oldest in terms of the years when it was founded. The brewing industry was founded in the year of 1873. Since this year, the major growth that the beer industry saw was in the ten year period of 1983 to 1993. Before this particular decade, the industry was holding the fifth position in the US market share holders in terms of the sales that it was making. Draper and Pearce (2006) argue that the growth was because of the reason that the marketing strategy that was implemented in this case was that the beer distribution was increased from just being distributed in the US market. The distribution was also targeted in around 50 of the North American states between the years 2000 till 2002, thereby that definitely helped in increasing the sales in the North American states. In addition to this the sales volume figures have shown that the main market for the sales of these beer producers in the US market was in the southern states. It was noticed that between the year 2000 and 2002, the sales volume figure in the US market remained unchanged at the figure of 23 million barrels. This was the sales volume figure that gave the Coors the 11% share of the beer market hold in the US. To increase the sales volume figure the industry wanted the right the strategies that were available to them and that were able to be implemented. In this case, the only strategy that was decided as to be final by the industry was to increase the market of the beer in the other markets thereby expansion was necessary in this case. This would increase the market share of the beer industry, in addition will add up more and more of the customers to the already existing list. The expansion in the foreign markets had been tried and experienced in the year 2000, when the Spanish market was targeted for the beer sales and it was shown to be the failure in Spain. The cost that the company had to pay included the ceasing of the brewing manufacture process and the company had to face the total loss of around $20milion. Elliott and Percy (2007) discuss that in addition to this the Coors also saw some losses in the year of 2003. It was seen that the sales volume figure of the Coors brewers was falling by the index of 1.4%. This is the percentage that was seen in the US marketed only. In the overall terms it was noticed that the company made profits in the year of 2003. The sales figure and the volume indexes in terms of the beer sales were rising in the very year. This was due to the many reasons one of which was the expansion of the sales and the beer market in the countries as Canada and the US itself. Graham and Trotman (2002) argue that for the Coors, when it came to increasing the marketing and the distribution of the products in the North American states, they had to face some tough competitions from the beer brewers in the North America domestic markets. Therefore in addition to the rivalries that the Coors had to face in the US market, they had to face and than compete with the beer brewers in the North American market. This made the Coors industry face some really low market shares in the Latin markets because of the competition that they had to face. The prediction of the growth in the US beer industry, when expanded in the North American states was given in by the Beer Institute many years earlier. The Beer Institute is the one that represents the main beer producers in the US. It had predicted that the growth of the beer industry in the US will be very limited in between the years of 2000 and 2010. This means that if the beer producers from the US plan to extend there sales and the market operations in the north American states than they would have to face the failures. In the year of 2003, it was noticed that the beer industries including the major beer brands launched a rather new product in the beer market in the US. The new product was the low carbohydrate beer. This was the product that was very much appreciated among the beer customers. These were the products that showed very high growth of the beer producing industries in the beer market in US. Because of this low carbohydrate beer that was launched it was noticed that the growth in the sales figure that it showed, produced a decline in the sales of the alcoholic drinks in the US market. Coors were the ones who launched their low carbohydrate beer in the US market after a year as compared to the other beer producers. The beer of Coors became very popular in the customers and it was marketed in a very well planned manner. This was the reason that the top beer brand in US, Anheuser-Busch were left behind by the Coors in the year of 2004 by the low carbohydrate beer of Coors. Beer market in UK Humphrey and Lee (2004) argue that the beer market in UK was noticed to be greater as compared to the clothes market, the market of the automobiles and that of tobacco. In the year of 2002, it was noticed that the sales figure of the beer in the UK market equaled to about £35 billion. This is very advantageous for the British government as the maximum revenues is generated from the beer industry in UK. This helps in the growth in the economy and the even better generation of the revenue generation from the beer sales, in addition the taxes and the excise duty applied on the beer products can also generate a lot of economy for the UK economy. Figure 1: Beer market in the UK The sales before the year 2001 The market and the sales of the product only decrease when the consumer stops or ceases to buy the product. No matter how hard the company or the manufacturers try, if the consumer stops buying the product the sales volume and the sales figure would face the decline in the market. In this case, the Office for National Statistics has shown that since many years the consumer’s interest in the beer has been decreasing to the larger extent. In addition to this as compared to the expenditures that are being made on the beer manufacturing by the manufacturers, the consumer expenditure on the beer has been seen to be decreasing. Johnston (2002) argues that it has been shown by the Office for National Statistics that in the past, if referred to the year of 1976, out of all the consumer expenditure that the customer was making on the market, around 7.8% was the expenditure towards the beer only. In the year of 2000, the statistics show that the expenditure by the customer has decreased to about 5.4%. Similarly if the comparison is done in the case of the beer volumes that have been sold in the years it was showing that as compared to 41 million barrels of the beer that were sold in the UK market, the year of 2000 saw the saling of only 35 million barrels of the beer. Figure 2: Comparison of beer market between the year 1980 and 2002 Similarly in the case of the sales that are made of the beers in the market, the on trade sales and the sales of the beer that is made in the public house is compared in the case of the UK markets it can be noticed that there was a major changes in the sales figure of the sales of the beer. Figure 3: The off and on trade sales comparison between 1980 and 2000. After the year 2000 The beer market in UK faced some changes as the beer market as shown by the graphs was constantly facing the decline till the year 2000 since the year 1980. Therefore the two decades were quiet tough and hard on the beer market. It was noticed between the years of 1997 and 2001 that some of the beer manufacturers started to disown the public houses that they owned for the beer sales. The result of this was that the beer manufacturer’s profits further decreased in the case of the beer sales. At this point the UK beer manufactures in the UK market had to face some of the criticism. The main item was that the UK beer market was not performing up to the mark and the total summed up capacity in which the UK beer market was performing at about 50% of its total capacity. Because of the beer manufacturers who were shutting down the beer public houses, the number of the public houses in UK was constantly decreasing and in the year if 2003, there were only 60,000 public houses left in UK. Coors strategy: 2004 Lopes (2007) says that in this failing market, where the beer outhouses were constantly being shut down, the sales volumes and the sales figures were constantly decreasing, Coors made a strategy to uplift the beer market in UK. The strategy that was made at that time was the increase of the beer’s wholesale price by the rate of 5p for 1 pint of the beer. The reason for the implementation of this was that in the UK market the costs of the manufacturing and the distribution of the beer was constantly rising therefore some strategy had to be implemented to make up for the costs. As a result of this the public houses started to increase the price of the beer at a steady rate. Yaeger (2008) says that in the 2000s, the consumer view points in the beer consumption also changed to a large extent. As compared to the view points that the customers had in the 20th century, the customers in the 21st century had the view points very different and improved giving an advantage to the beer industry. The view points focused that the social circumstance of the people living in the era of the 21st century have better and improved social lives as compared to the people living in the 20th century. This influenced the number of people going to the pub houses and having the beers. In the pub houses the customers were happier with the fact that they have a greater variety of beers to choose from and the greater variety of the beer brads are available. Sheth and Sisodia (2002) argue that therefore in the era of 2000s, the beer once again became one of the greatest revenue generating power plants for the UK economy. Figure 4: Beer the revenue generator There were some changes that were taking place to increase the beer sales in the UK market. One another change was that traditional consumption of the hard beer was decreasing among the customers and the customers were growing to be more satisfied by the softer beers and the lagers. It was seen that among the younger people the lager was much more popular to be used as compared to the rest of the beers and this is what gave the beer manufacturers the edge. Strategies of Coors breweries: value added marketing In the year of 2001, by the Coors a strategy was designed by the management and the authorities at the Coors. The strategy that they had was to get moving on the international scale. This makes an increase in the market of the product but also in the domestic market but also in the international market. The strategy also included that by implementing this very strategy the market share of the competitors of the beer manufactures in the UK market can be snatched away thus increasing the market share of Coors in the domestic market. The year of 2002 The Carling brewery was renamed as the Coors brewery in the year of 2002. The Carling brewery was bough by the Coors brewery at the price of £1.3 billion. In addition to this Coors had also purchased Caffreys and Worthington beer brands and the Grolsch. The acquisition strategy gave the Coors a 20% share of the beer market in the UK. Not only this, the Coors brewery was standing in the all of the market as the eighth greatest beer brewer on the international scale. Because of this the debt ratio was also increased and the further purchasing were being planned because of which the debt ratio changed into the capital ratio. The year of 2003 Standard & Poor's (2005) says that the year of 2003 was the profitable year for the Coors. The year saw an increase in the market share of the beer market for Coors in UK. And this helped the Coors to increase the profits that were being earned by the manufacturers. This helped the manufacturers to return the capital that they had taken at a fast rate. The same year saw that the Coors released a new type of the product in the market named as Coors Fine Light. Results of the Value Added Marketing by Coors As a result of the strategic implementation of the value added marketing which included the expansion of the market of the beer in UK, it resulted in a number of advantages for the Coors beer manufactures. In the year of 2003, the beer brands under the name of Coors including specifically Carling & Grolsch showed a lot of growth in the market. Tremblay (2005) discusses that the sales that the Coors made in the UK market were equivalent to selling out 5 million barrels of the beer in the UK market on the yearly basis. As we know that the Coors had many beer brands attached to it, only carling was the one which was being truly controlled by the Coors having the rights over it. So the distribution of the other brands under the name of the Coors was about troublesome for the Coors, therefore some of the strategies were designed by the Coors in this case. 1. Redevelopments and the cost cutting The strategy in this case was that the brewery in the UK was being shut down and therefore the land that was available was to be used for the redevelopment. 2. Changing the customer view points about the beer Through the proper marketing it was seen that the beer perception was lagging behind when it came to increase the idea of the consumption of the beer by the consumer. So the main strategy included changing the ideology of the consumption of the beer among the customers. Figure 5: Changing the viewpoint of the customers about the beer 3. Brand promotion The soccer is one of the sports which is loved by many people all round the worlds. So taking the opportunity, the Coors started to brand the carling beer in association with the football challenges named as the carling cup. In this way a lot of the customers were attracted to the product and wanted to try the product. 4. Off trade and the on trade strategies At the end of the year 2003, the Coors decided to make there focus on the sales profits that could be achieved instead of the sales volumes that could be made. In the year of 2004, it was seen by the Coors that there was an overlap in the strategies designed between the sellers of the beer and the brewers. Figure 6: Strategy overlap. 5. The brand responsibilities The major responsibility of the Coors was that they had to realize that they were saling out the alcoholic beverages. And in addition to the fact that the brand was to remarket among all the customers of the various ages it was also needed that the responsible marketing wads done. Therefore the strategy was to promote the brand with all the outlines of the responsible behavior associated. Analysis The time and the years before the 21st century in the UK faced a lot of downfall in the case of the beer market. Same changes had to be made in this case so as to change the failing scenario. It was noticed that the beer manufacturers were shutting down and they were shutting down the public houses in the UK. In this tough time and the failing market in the UK, the Coors had come up to the front and they had made some strategies and changes that could bring some major changes in the beer market. We have noticed the changes that were made so as to make the sales grow better for the beers. The important strategy that was implemented was that the price of the beer was increased and some of the pub houses as result of this stated to sale out the beer at those prices. Similarly the view points of the customers were changing as the times were changing which made the customers make there way to the pub houses. The Coors had some acquisitions that were made in the years of 2003 that made the company make some huge profits. It helped in the beer market to increase and so were the sales volumes and the profits that were being made by the breweries were increasing at a steady rate. The value added marketing strategy that was planned and laid out by the Coors in the year of 2001 proved to be very successful for the breweries. The company not only gained the profits and the market increase in there shareholder value but also greater customer demands which helped the breweries in launching the new product in the market. In the case of the ,marketing it has been seen that the Coors have been very responsible in the case of marketing an alcoholic beverage and that makes the Coors quiet popular among the customers. Recommendations The Coors has already been very successful in the case of there strategies that have been implemented in holding the share holder value that they have in the market and getting the attention of the customers. It has to be noticed that still there are some back drafts in the case of the Coors strategy that has been noticed and outlined here. The market has to be expanded in the other countries especially the countries where the demand of the beer is higher and higher. This will help the Coors make more an increasing profits. The new beer products should be launched but not only in the domestic market but also in the foreign market. Newer and better growing markets should be targeted for this matter. The proper work should be done in the case of targeting newer markets. The analysis should be done in this case by the markets of the beer brand. The competitors that are present in the foreign markets should be dealt with in the proper manner. Conclusions The volume indexes of all the companies are recorded on the regular basis. And in the case of this US market leader it was noticed that the industry was showing the growth in the market at the rate of 0.8%. It has been seen that in the year of 2003, the 50% of the beer produced in the US was produced by the company Anheuser-Busch. The second major shareholders in the US beer market are the SAB Millers. This brewing industry was bought by the South African beer producing industries in the year of 2002. The third greatest US beer market shareholders were Coors brewery. To increase the sales volume figure the industry should look out for the right the strategies that are available to them and that are able to be implemented. The only strategy that is to increase the market of the beer in the other markets thereby expansion. The market and the sales of the product only decrease when the consumer stops or ceases to buy the product. No matter how hard the company or the manufacturers try, if the consumer stops buying the product the sales volume and the sales figure would face the decline in the market. The beer market in UK faced some changes as the beer market was constantly facing the decline till the year 2000 since the year 1980. The Coors strategy should be inclusive of strategy related to capturing the market share of the competitors of the beer manufactures in the UK market thus increasing the market share of Coors in the domestic market. Appendices Appendix 1 Tables showing the Coors value added marketing strategies and their outcomes Table 1: Value added Marketing of Coors in US 2000-2002 2003 Marketing initiative -Targeting north American states for the brand marketing -Targeting the Spanish market for brand marketing -Targeting Canada and US markets for brand promotion Outcomes -11% market shareholders of the beer market in UK. -Higher sales achieved. Table 2: Value Added Marketing of Coors in UK 2000 2001 2002 2003 Marketing initiative -Expanding the product branding. -Targeting greater markets. -Increasing the beer price by 5p on 1pint of beer. Designing the value added marketing strategies. Acquisition of Carling breweries The redevelopment programs -Launching a new beer product Shareholder value changes 20% increase in the shareholder value in the US markets. -Greater capital returns. -Greater profits. Becomes the eighth greatest beer brewery in US. Higher profits. Appendix 2: Figures Figures Names Page numbers Figure number 1 Beer market in the UK Figure number 2 Comparison of beer market between the year 1980 and 2002 Figure number 3 The off and on trade sales comparison between 1980 and 2000. Figure number 4 Beer the revenue generator Figure number 5 Changing the viewpoint of the customers about the beer Figure number 6 Strategy overlap References Baye, M., and Nelson, J. (2001) Advertising and Differentiated Products. University of California. Beer Institute. (2007) Protecting Our Land, Preserving Our Resources. Beer Institute. Blocker, J., Fahey, D., and Tyrrell, I. (2003) Alcohol and Temperance in Modern History: An International Encyclopedia. ABC-CLIO. Christensen, L. (2003) Branding and Advertising. Copenhagen Business School Press DK. Putman, R. (2004) Beers and Breweries of Britain. Osprey Publishing. Davidson, K. (2003) Selling sin: the marketing of socially unacceptable products. Greenwood Publishing Group. Draper, D., and Pearce, L. (2006) Business Rankings Annual: Lists of Companies, Products, Services, and Activities Compiled from a Variety of Published Sources. Gale Research. Elliott, R., and Percy, L. (2007) Strategic brand management. Oxford University Press. Graham., and Trotman. (2002) Major Companies of the Far East and Australasia. University of California Humphrey, C., and Lee, B. (2004) The real life guide to accounting research: a behind-the-scenes view of using qualitative research methods. Elsevier. Johnston, R. (2002) Cases in operations management. FT Prentice Hall. Lopes, T. (2007) Global Brands: The Evolution of Multinationals in Alcoholic Beverages. Cambridge University Press. Sheth, J., and Sisodia, R. (2002) The Rule of Three: Surviving and Thriving in Competitive Markets. Simon & Schuster. Standard & Poor's. (2005) Standard & Poor's 500 Guide: 2006 Edition. McGraw-Hill Professional. Tremblay, C. (2005) The U.S. brewing industry: data and economic analysis. MIT Press. Yaeger, B. (2008) Red, White, and Brew: An American Beer Odyssey. St. Martin's Press. Read More