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Adolph Coors in the Brewing Industry

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Adolf Cooers commenced operations in 1873 in the brewing industry in Golden Colorado. The company enjoyed prosperity over the years and it reported a remarkable financial performance in 1985 in its annual reports. Notable is the one billion sales turnover upon successful diversification into other states (Harvard Business School 1). Analysing the market structure of Cooers will explain the reason for deterioration of the company’s competitive performance between the mid-70s and mid-80s, and this will assist in improving the prospects of the company in a competitive market.

Supply of beer to only 11 states in the US contributed to deterioration of the competitive position of Cooers. A limit in their outreach constraints the revenues of the brewery as the product is not available to other consumers in different geographical regions unlike their competitors; the cost of running distribution centres and the monitoring centres reduces the competitiveness of their products. Securing a strong wholesaler in new markets accepting to carry their output as a lead brand also limits competition. Furthermore, the ageing process of Cooers compared to their competitors is long and this limits the ability to respond to immediate demand changes, hence further tainting the competitiveness of the brewery. Moreover, the company overlooks pasteurization to retain the taste of their beer. This strategy reduces the shelf life of products and accrues additional costs for refrigeration, hence reducing its appeal to the consumer. The numerous labour strikes by workers and litigations also tainted the image of the company in the eyes of the consumer.

A capacity constraint in the only production plant owned by Cooers contributed to deterioration of the competitive edge of the company as limits availability of products to the consumer. Furthermore, having one processing unit supplying several states limits timely availability of products in the market to the advantage of competitors with diversified operations; this negatively affects both the level of competition in these markets and the aggregate demand. Moreover, the growth in sales is more than the production capacity of the company; this limits availability of beer to the loyal consumer, hence tarnishing the competitive position of the brewery. Additionally, the stagnant level of demand of the product failed to capitalize on the baby boomers reaching the set drinking age who consume more beer compared to the elderly drinkers, thus deteriorating the competitive position of products in this crucial target niche.

Cooers should adopt strategies characteristic of an oligopoly, which is the market structure of the company, to enhance the future prospects of the company. The company should adopt adequate product differentiation and pricing strategies to make them compete favourably with the few firms dominating the brewing industry. The tastes and preference of the US consumers is shifting over time, prompting the brewery to adjust to changes in the macroeconomic environment to maximize profitability.

Cooers should strategize on increasing efficiency in production of canned beers for consumers and curtail the manufacture of keg, which is mostly available on-premises; majority of the buyers prefer off-premises retailers as a source of supply. Furthermore, they should implement the newly innovated fermentation process or reduce the production time of beer to help Cooers respond to immediate market, reduce cost, and guarantee availability of commodities to eliminate the bottleneck. Moreover, the integrated brewery strategy should guarantee production at optimal levels to reduce the unit cost of capital.

Stimulating the advertising campaigns of Cooers is a technique for enhancing the prospects of the company as it raises the level of consumer awareness, which yields loyalty. Partnership with appropriate wholesalers in the new markets is critical to success of undertakings, as in-house sales are minimal at 5%, hence complementing the distribution network. Moreover, they should enhance consumer sovereignty by providing the customer with a variety of differentiated products; this yields customer loyalty and acts as a retention strategy in the long-term, hence complementing the prospects of the company.

Price discrimination is a strategy that Cooers can adopt by charging different costs to consumers in different states depending on the level of elasticity of demand to remain competitive in the market as indicated by figure 1.

Figure 1: Kinked demand curve of an oligopoly

Other firms in the brewing industry would not respond by lowering prices if the demand for Cooer’s product is in the inelastic part or rather when the price is not more than p, thus improving the prospects of the company. Cooers can also consider mergers with other breweries to increase its presence in American states and improve the outlook of the company. The brewery can also focus on lowering production costs and use price wars as a means of eliminating competitors to gain a considerable market share. Moreover, Cooers can secure availability of inputs to avoid downtime during shortages.

In conclusion, the study commences with giving a brief introduction of Adolf Cooers noting the period of reviewing the market structure of the company. The investigator highlights reasons behind the decline in competitive positioning of brewery in the mid-70s and mid-80s. Furthermore, the researcher articulates actions that Cooers must pursue to guarantee prosperity of the organization in future.

 

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