Adolph Coors Company Analysis

Adolph Coors Company Analysis Free Essay

Introduction

Adolph Coors’s strategy towards his brewing company changed substantially between 1975 and 1985. In 1975, merchandise turnover dropped drastically to 11.9 barrel decreasing the volume by 4 per cent. During that time, he also refused to enter the national market if the idea was not favorable financially.  This policy influenced negatively the company’s profitability and growth as well as the market valuation. In the same year, the company had to offer part of its stock to settle an inheritance tax bill of 50 million dollars. In the mid-1980s, the younger members of the family started to run the company (Ghemawat 3).

 

Reasons Why Coors Competitive Potion Deteriorated

The main reason for the drastic drop was the stiff competition from other breweries. The production of differentiated beers and high-cost brands rose among other larger breweries. That situation gave the consumers access to many brands, thus reducing the sales volume of the Adolph Coors Company.  In fact, the brewing industry consists of many companies which enter an intense competition. Coors, however, did not have the strategic plan to outsmart his competitors hence the company lost its consumers to the rivals.

Withdrawal of its advertisement greatly attributed to the failure. Starting from the late1960s to the mid-1970s, the Coors Company had been improving significantly. Its beer became extremely popular. Market demand for company’s products had increased in the East Coast and made them overestimate their superiority. Unfortunately, the managers of the company believed that the clients would continue consuming their beer even without hype. Thus, they should not have spent additional resources. The company withdrew from the competition in nine states. However, if Adolph Coors had not done it, it would have become the fourth largest brewery company in the country. He was kidnapped and murdered in 1960. His death intensified the clan's exclusion. Later, his descendants launched circumspect job hiring policies employing the loyalty sworn statements and polygraphs.

The hiring process encouraged the workers to regard the company as the unfair institution which promoted racial discrimination. Therefore, the policies damaged its public reputation.  That fact was vividly evident from the number of Hispanic and African American employees working in the company. The workers filed the lawsuits that alleged racial discrimination. Moreover, the minority coalitions and labor unions organized boycotts which were detrimental to the reputation of the company. The community developed a negative view of the company while the lawsuits and the boycotts subjected the family and Coors Company to intense public scrutiny. In 1975, The Washington Post had been constantly publishing provocative articles. The reports documented the ultraconservative political philosophy of Joe Coors. The revelation did not only exacerbate the boycotts but also affected the average customer's behavior and undermined the company’s market position. Coors’ advertisement expenses in the 1970s equaled 0.65 dollars per barrel compared to the leading beer distributors that spent 3.5 dollars per barrel. Thus, its competitors were ready to pay more in order to capture the market. In 1982, the company suffered a decline of 12 million sales of the barrel.

Coors’s family thought that the best response to the instabilities would be litigation and retrenchment, but the 1975 sales drop in California to 10% made its members change the tactics. They agreed to the settlement of the lawsuits and the employment of the minorities. They also directed the efforts at the launching of advertisement campaigns that would help in raising the company’s reputation and showing her safe side. The advertisement portrayed the company as the place where the minority were satisfied and enjoyed working. Moreover, Bill Coors addressed his concerns about the environment and announced subsequently that the company had been ahead of the industry and the government in its pursuit of reducing pollution. However, the late 1970s reduction in sales was devastating to the enterprise. The volume of the sales decreased to 1 million barrels. It translated into 12.5 million barrels before the revival in 1980 which consisted of 13.5 barrels. The drastic drop was experienced in 1976-1978. Joseph and William Coors, the family’s third generation in taking charge of the company, claimed that the challenge of the reduced sales originated from the company’s bad reputation that had been successfully rebuilt.

However, two situations could have vehemently signaled and provided a clear understanding that the problems of the company were far beyond its image. Those incidences happened in 1975 and 1976. For the first time, the Coors family forcefully offered its shares to the public and raised 50 million US dollars. The money was used in the payment of a family member’s inheritance tax. The initial idea became successful because more than 130 million dollars were raised. The sold stock belonged to the non-voting class and hence the company did not relinquish control of the business. The reluctance of the company to undertake the offering revealed a disdain for the capitalization methods prevailed in the world. The second incidence involved the ruling of the Federal Trade Commission that prevented the development of the company’s distribution tactics. It, therefore, resolved in not distributing the beer to individuals that would mishandle it. Consequently, the Coors’s portrayed a disdain for its mass techniques of marketing its product.

A delay in the company’s growth of sales led to the insufficient amount of drinks that could not meet the consumption demands during the peak periods. The reason for that failure was the strategy that the company used. Particularly, the company had been ‘making small amounts of beer, waiting for all of it to be sold them, making a little more’ (Ghemawat 6). Besides, during that period, the company invested mainly in the improvement of its market picture and also in the areas that could make it self-sufficient. For instance, the company had installed the malting system that it required for the production, 75 per cent of needed packaging equipment, and 90 per cent of the brewing devices. At that time, it had also finished working on a coalfield to make self-sufficient regarding energy expenses.

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What to Do to Improve the Future Prospects

The company has to formulate its marketing strategies. It has been already examined how corporate failure diminished the prosperity of the company in the past. Thus, it should expand its product portfolio to the level of its competitors. Even though it does not have proper price controls on the market, it should, however, set the prices related to those that attract consumers. Its promotional strategy should encompass massive marketing of their products. Moreover, it should increase its budget for the national advertising campaign. The company has to consider entering the strategic alliances with a spirit producing company. Additionally, it could extend its partnership with Grupo Modelo to incorporate the US market. This will help them to remain on the market and to focus on the new products that they could offer in the cooperation with the other companies. For example, if the managers take into consideration the consumer preferences for the beverages with fewer calories, they will be able to target a new audience. The alliance will also provide a stimulating environment for meeting the consumer's needs and responding quickly to new tendencies.

Conclusion

To improve its future prospects, the company should ensure that it accomplishes its expansion goals within the shortest time possible. This means that it will have to complete another phase of expansion that will lead to the integrated brewery policies which will produce more than 20 million barrels of beer per year. Even though the accomplishment will need funds and may additionally lead to a reliance on external financing, it should happen since it will lead to the increase of sales and the overall improvement of the company.


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