Industry Analysis Of The Beer Companies Commerce Essay

The U.S. beer industry got its start in the 1840s and 1850s with the introduction of lager style beers, brought by German immigrants. Before that point, beers were heavily oriented toward ale, porter, and stout and were mostly brewed at home. At about the same time, several technological advances occurred that led to the development of the U.S. beer industry as we know it today. 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. By 1850 there were about 430 breweries in the United States, producing about 750,000 barrels of beer annually. Commercial brewers began to grow in size and number, and by the late nineteenth century there were almost 1,300 breweries.

The beer industry is widely known for been an oligopoly. However, in our approach, we will explore the possibility of analyzing microbreweries in particular from a monopolistic competition market structure perspective. The beer market oligopoly is composed by three big players: Anheuser-Busch which holds 48 % of the market share, Miller Brewing Co., with 18% and Coors Brewing Co. with 11%. Please refer to the below graph and table for information regarding the market share held by the remaining companies. (Market shares are shown based on shipments of 205.6 million cases in 2005 and 210 in 2006)

Anheuser-Busch Company is a dominate competitor. It is the largest brewing company in the United States, operating 12 breweries in the United States and 20 in other countries. Anheuser-Busch InBev is the largest global brewer with nearly 25% global market share and one of the world’s top five consumer products. The brewing industry as a whole is made up of several dominant multinational companies and thousands of smaller producers, which range from regional breweries to microbreweries. The market is heavily saturated with competition.

The beer industry is divided into standard lager, premium lager, specialty beer, ales, stouts, and bitters, and low/no alcohol. These three varieties are divided in smaller categories based taste, what the beer is made from, calories, strength, etc. In the MillersCoors family they sell Miller Lite, Coors Light, Blue Moon Belgian White, Coors, Foster’s Henry Weinghard’s, Icehouse, Keystone Premium, Leinenkugel’s Killian’s Irish Red. Miller Genuine Draft, Miller High Life, Milwaukee’s Best, Molson Canadian, Peroni Nastro Azzurro, Pilsner Urquell, Red Dog, and that just begins to scratch the surface. Coors and Miller light are the top selling beers. They are pale lager beers called “Pilsners.” Through diversification of products, mergers and joint ventures with competitors to strength portfolio diversity and gain market share MillerCoors Brewing Company has competed fiercely against its competition and will continue to grow through striving for excellence and innovation.

Smaller Competitors (not limited too)

Asahi Breweries

Diageo

Heineken

Kirin Brewery Company

Carlsbery

Boston Beer Company

Lion Nathan

San Miguel Corporation

II. Socio‐Economic

The alcohol industry has faced many policies, regulations, laws, and rules to govern the manufacture, promotion, distribution, sale, and use of alcohol. Some include but are not limited to.

The Prohibition in the United States banning the sale, manufacture, and transportation of alcohol shut down the brewing industry for 13 year between 1920 and 1933.

The alcohol excise taxes that impose volume taxes on distilled spirits, win, and beer that are in addition to State alcohol taxes.

Keg tagging and Registration that would hold buyers accountable.

Community-based approaches to reduce risks associated with retail alcohol environments such as Responsible Beverage Service.

Limiting alcohol sales licenses.

Limiting Alcohol Sales at public events, being able to “cut” people off.

Advertising limits and regulations, underage consumers can not be marketed to.

Numerous state laws regarding the sale of alcohol (such as Indiana cannot sell alcohol on Sundays) and legal limits for driving.

III. Porter’s Five Forces

A. Threat of New Entrants (low/medium)

The Threat to New Entrants in low to medium, low because it would be difficult to achieve the success of the larger companies such as Anheuser-Busch or MillerCoors and medium because it is possible to enter as a small microbrewery although if success surround the microbrewery more than likely one of the big competitors would enter a joint venture or merge with the company. Although as illustrated in the graph below the beer industry is growing. Many factors could cause this including the current economic recession. During difficult economic times the sales of alcohol increases. Due to the high rules and regulation apposed on the beer industry and the high market presence of top competitors it would be difficult for new entrants to hurt MillerCoors.

Looking at the situation in a different way Coors to be successful and competitive had to merge with Molson Inc. and begin joint venture with multiple other companies the largest being Miller Inc. To be successful in this market it takes a great deal of capital for raw materials, production, advertising, and distribution. For a start-up company alone it would be difficult to raise the capital needed.

B. Suppliers

The Threat of Suppliers is Medium/High. Raw materials account for a large percentage of the total costs and if supplier increase prices it cuts into the profit or the company has to price its product higher and because the beer industry is so competitive that could prove to be problematic. Although it is medium to high because MillerCoors is such a large company that it gives them a “backbone” to be able to negotiate. The supplier though overall could have a big impact on the final product.

C. Buyers

The threat of buyers is high because people do not always have brand loyalty when it comes to beer. There is a large number of brewers and companies and without brand loyalty the buyer way buy what’s cheapest, or on sales, etc. Buyers taste and preferences control the market. The beer industry has even began to make beers with only 55 calories for the beer drinkers trying to watch their weight. The amount of money put into research and development and advertising shows the power of the consumers and the need for market share.

D. Substitute Products

The threat of substitutes is medium because although in the alcohol industry there is a lot of choices many beer drinkers like the low alcohol social drink. Many people drink beer at ball games, bars, football games, nascar events, and so on and it is more a culture. There will always be other options to what people would like such as water, tea, carbonated beverages, etc. but beer is beer and not easily replaced in the culture.

E. Rivalry

The threat of Rivalry is high because the market is heavily saturated with completion. Many companies have merged and began joint ventures and the market has consolidated thus creating powerhouses and it would be difficult for a company to penetrate the market while the “powerhouses” have such strong market shares not only in the United States but globally also.

IV. Conclusion

As for the industry analysis I believe that the beer industry is a growing market with few major players and many microbreweries. Anheuser-Busch has a strong hold on the market share although there are areas that Coors can improve upon to gain market share such as brand image and lack of marketing. The market is heavy saturated with competitors although many are small compared to Anheuser-Busch, Miller, and Coors. It would be difficult to penetrate the larger market because of the strong hold they have on the market share especially Anheuser-Busch. Anheuser-Busch has strong brand recognition/awareness and strong marketing campaigns this is the key to their success.

Part II: Firm Analysis

I. Current Situation

It is drank at ball games, bars, when people are celebrating, when people are depressed, and sometimes just when people have had a long day at work. Beer is the oldest and most widely consumed alcoholic beverage. It ranks third in most popular drinks falling behind only water and tea. In 2006 more than 35 billion gallons of beer was sold with producing total global revenue of $294.5 billion. The Coors Brewing Company is the world’s fifth-largest brewing company in the world and Molson Coors Brewing Company is third largest brewing company in the U.S. Its popularity is linked to having the largest single brewery facility in the world, marketing research and understanding of it consumers, financial structure and most importantly through strong branding. Molson Coors Brewing Company strive to continually challenge and consistently reinvest in its people as passionate stewards of the brand.

Molson Coors Brewing Company grew from the dreams of Adolph Coors and John Molson. Both individuals though different in many aspects shared the same common passion for brewing. Their journeys started and ended in different times and locations but together they work toward what is now known as Molson Coors Brewing Company. Separated by many years and numerous miles their dreams in 2005 overlapped with the Merger of Molson Inc. and Golden, Colorado’s Adolph Coors Company. Than to become a better competitor of Anheuser-Busch in 2007 SabMiller and Molson Coors Brewing Company entered into a joint venture to create MillerCoors.

The Coors history begins in 1873 when the Golden Brewery opens, advertising bottled beer, ale, porter, cider, imported and domestic wines and seltzer water. In 1890 17,600 barrels of beer were outputted. With a growing company in 1920 the prohibition aka The Noble Experiment took place making the sale, manufacture, and transportation of alcohol for consumption illegal this ended in 1933 and the Golden Brewery resumed operations. In 1953 Coors began to advertise on television and in 1955 Coors produced more than 1 million barrels. In 1970 the annual sales exceeded 7 million barrels. 1975 Coors becomes a publically traded company. In 1990 annual production exceeds 19 million barrels. In 1991 Coors became available in can and bottles in Indiana and was than available in all 50 states. In 2005 Coors Brewing Company and Molson Inc. merged together to take a leading role in the consolidating global brewing industry. In 2008 Molson Coors entered in to a joint venture with SABmiller to create MillerCoors in the United States.

B. Strategic Posture

The mission is not clearly stated on their website. All I could find was their community investments mission which is “Our community investment mission is to promote the health and well being of individuals and communities where we do business. Our investments treat all people and resources with integrity and respect.” I think on their website they have done a good job at showing people how they have become involved in protecting the environment and that they view being socially and environmentally responsible important. I believe that Coors need to have a mission, vision, and values statement to show all their employees, managers, suppliers, distributors, and even customers what they hope to accomplish and what they stand for. If a company has a direction to move toward they can begin taking steps forward.

After more research on another site I found a vision for the company but on the company’s own site I could not find it. The other site said their vision was, “Molson Coors’ vision is to be a top-performing brewer winning through inspired employees and great brands. We’re driving growth by becoming an innovative, brand-led company, delivering and re-investing productivity for growth as we build a winning, value-based culture.”

I believe for them to get their desired results that they will have to better market themselves. This includes restructuring their website and getting their mission out. Anheuser-Busch does a great job at presenting a story that people can follow and laugh with.

II. External Environment (Opportunities and Threats)

Opportunities included their merger with Molson and their joint ventures to capture more of the market share. They also have a lot of potential for growth because the beer industry itself is growing. Their name is known and now they just have to improve on what their name signifies.

Threats included substitutes products as well as other brewing companies. The high market share of Anheuser-Busch.

III. Internal Environment (Strengths and Weaknesses)

Strengths included innovation, and a diverse portfolio of brands and products. The company also has a long history, working capital, and experience through difficult times.

Weaknesses include bad publicity that has occurred. No clear mission, vision, and values for the company, suppliers, distributors, and customer can read. Another weakness is the high threat of substitutes in the market.

The management of Coors realized that they needed to band with other competitors to ensure that they could be a presence in the marketing. They have taken actions to improve marketing and are still working toward making the company better. Change is not a short process and it takes a lot of time for people to accept change.

Recommendations

Improve on brand awareness through marketing and advertising. Coors needs to become a more “friendly” company that people can known and trust like a Disney or Pepsi. When people think beer most people automatically think Budweiser and Coors needs to work to have their name out more, sponsor events, have commercials, etc.

Part III: Firm to Firm (Coors vs. “Class” Strategic Company) Analysis

Anheuser-Busch and Coors are much like Pepsi and Coke. They are both highly competitive companies that continually try to innovate and create new more attractive products for their consumers. All four companies attempt to satisfy consumer needs and wants. In this situation Anheuser-Busch is the Pepsi Company because they both hold overwhelming control of the market share. Coors is like Coke as Coke only holds 27% of the market share in the United States and Coors holds somewhere in the high teens. Unlike Coors though Coke has a strong marketing strategy but has not been able to compete with Pepsi on a global level. Their Porter’s analysis are also very similar.

Work Cited

Banham, Russ. Coors: a Rocky Mountain Legend. Lyme, Conn.: Greenwich Pub. Group, 1998. Print.

Ogle, Maureen. Ambitious Brew: the Story of American Beer. Orlando: Harcourt, 2006. Print.

Van, Munching Philip. Beer Blast: the inside Story of the Brewing Industry’s Bizarre Battles for Your Money. New York: Times Business, 1997. Print.