Introduction To The United States Beer Industry

Introduction To The unite States Beer IndustryBeer in the united States has had a long and profitable history. Today it is the largest segment of Alcoholic beverages and accounts for millions of dollars in gross sales e very year. Although there stick pop out been periods of less demand, the popularity and wealth of the attention has grown significantly. The intentness has had to address umteen challenges and adapt to continuously changing purlieus which translated into many consolidations and the reduced number of regional brewers. Todays market is heavily controlled by three chief(prenominal)(prenominal) players, In Bev Anheuser-Busch, Miller Coors.In the late 19th century, most beer was be brewed by groups or individuals in their wishive homes, however with the industrial revolution and the advancements of new technologies in automation, commercial brewers began to enter the market and transform the way beer is made, exchange, and marketed as it never had been befor e. Some of these large national brewers were Anheuser-Busch and Miller as mentioned before. Other large domestic brewers implicate Pabst, and Schlitz. All of these companies have played a pct in shaping the yield, structure and development of the industry over time. Due in part to these large commercial entities, the United States now has the largest number of breweries in the world.Although it is necessary to grasp the industries procedure as a whole, it is even more vital that the performance and structure of the industries particular segments. At one point, two types of beers controlled the absolute majority of the market popular beer which was made and sold inexpensively, and Premium beers which were produced for a similar worth yet sold at a uplifteder cost unaccompanied for their brand recognition and popularity. Throughout history, as the brewing industry matured, the addition of different kinds of beer multiplied. Today, the types of beer which account for the majori ty of sales be classified as Light, house servant Premium, and Imports.This paper give be divided into three parts. In the first section I will take an in-depth look at the Beer Industry as a whole through the use of Porters Five Forces analysis. In the second part I will be focusing on Molson-Coors and its relationship to the industry, its segments, and opportunities for step-up and continued success. I will wrap up my paper by comparing and contrasting Molson-Coors position and strategy in the Beer industry to Harley-Davidson in the inexpert vehicle industry.Socio-EconomicWhen addressing any industry, it is important to analyze the various external macro-environmental factors which contribute to a companys operations. Through a PEST (Political, Economic, Social, and Technological) Analysis, one can better generalise the risks associated with growth and decline, as well as its industry position authorizedly and in the future.Politically, the beer industry is restricted on th e decisions and regulations of the US Government. One of the most limpid examples of the governments role came in the form of prohibition during the untimely 20th century. Today, the beer industry is still heavily monitored by the government. One of the most noteworthy controls is that the system requires a middle-man. This limits the creator of large corporations to control every aspect of the business chain, and reduces the risk of a monopoly. When it comes to the retail of alcohol, allege and municipality governments decide on the type of off-premise vendors that are allowed to wander the alcohol, and how they go about selling in order to raise funds for fighting the abuse and addiction of the ingathering.Currently the demesne of the United States economy is not helping to provide increased wealth to the industry. With the economic downturn and lower discretionary spending, consumers are spending less on alcohol, beer included. Socially, there are signs indoors the indust ry that suggest an change magnitude demand for torrent beverages besides beer. However, within the beer industry itself, Light brands are experiencing increasing popularity ascribable to the heightened importance of consuming few calories as well as the risks/consequences of drunk driving.The level of technology change in this industry is low. That said, there are a variety of technological advancements in the industry which are affecting operations. Many of these innovations are changes within the brewing of the beer itself. As efficiency in mathematical fruit was the drive view World-War 2, technological changes which alter quality, lower health risks, and increase the use of sustainable energy are beginning to gain more significance.Porters 5 ForcesThreat of New EntrantsIn the early days of this industry, an individual or family could start up their own brewery with relative ease in semblance to todays standards. The increase in productionion techniques, beginning post World-War 2 played a large part in creating a high barrier to entry as the working metropolis requirements increased from several(prenominal) billion to hundreds of millions of dollars. Even greater barriers to entry are created through large brewers control of distribution channels as well as the different state governments regulations and laws attributed to those channels. As production innovation created a barrier to entry in the mid 20th century, trade and advertising expenditures from large companies in this industry have increased brand loyalty and recognition, creating another high barrier to entry. Amongst these barriers, there experiences the possibility of new entrants achieving economies of casing, for example, the Boston Beer Company has taken a relatively remote approach to the industry as they have foc apply their attention on its recipes while outsourcing the majority of the other business activities. Although larger companies have likewise achieved economies of scale and have the ability to increase revenues without increasing input, the offset of companies much(prenominal) as the Boston Beer Company and trends pointing to consumers trading-up to higher quality products, these barriers could begin to change down the road.SuppliersSuppliers in the brewing industry play a significant role. Starting with the production of the good, suppliers from agricultural industries much(prenominal) as corn, barley, and yeast are divulge in the production and pricing of the end product. Other suppliers include the glass industry and paper labeling industry. Because of the low concentration in production suppliers, more power is given to the industries main players who are able to strike larger supply contracts for a better price. Most of the key inputs of brewing are highly regulated thus care bulk prices steady and allow firms to purchase ingredients over a year in advance. Some differentiation exists in the inputs when it comes to the higher quali ty ingredients that are used in some premium beers. The effects of substitutes in this industry are dependent on industries such as the performance of wine and spirits as well as imported brands of beer. These are significant substitutes and have been experiencing a steady growth in recent years. Although the brewing industry requires a veritable amount of inputs from suppliers, they do not control those industries as well. Suppliers from the corn/wheat producing industries as well as from the sugar processing industry are not dependent on the beer industry and exist in other markets. As mentioned, the brewing industry is highly regulated and runs in a three mark system which takes away the threat of vertical integration and the possibility of one player gaining the majority power. Looking at the current major players Anheuser-Busch and MillerCoors, opportunities to grow exist in marketing and brand awareness, with recent struggles in the economy, access to capital is more difficu lt but also comes at a lower price with lower interest rates. The industry gained $3.6 billion in 2009 which is significantly better than many industries and will favor them as they seek opportunities to finance growth opportunities. The industry requires skilled workers mostly in the areas of marketing and has usually refrained from unionizing. Overall the power of suppliers is very limited among large firms and the brewing industry is not an attractive industry at this time.BuyersWholesalers, Super markets, liquor stores, and bars/night clubs account for some of the major buyers in this industry. These buyers can be broken down into two segments, off-premise and on-premise. On-premise locations include bars and off-premise locations include warehouses and liquor stores. These industries are grateful for the position of the brewing industry however on-premise buyers are experiencing a decline in growth as disposable income decreases among consumers. Off-premise wholesalers although protected from organism protected from being taken over by large breweries have experienced a loss in power due in part to the rapid consolidation of the brewing industry as well as the increase in popularity of small breweries. However, due to factors such as being in the mature phase of its business cycle, these industries are in a good position to grow. Beer will continue to be sold and consumed buyers will contend with the changing environment and gain more power through diversifying their product offerings. This may not be the case in on-premise sites as they are more easily influenced by the impact of a down economy. Overall, the power of the buyers is low as they are at this point very dependent on the fluctuations of the brewing industry.Substitute ProductsAs mentioned previously, substitutes to the domestic brewing industry are the wine and spirits industry, as well as imported beers. In the case of this industry, the substitutes play a main role in determining current p osition and future growth. When looking at the main players in the US market, they may need to shift some of their focus to niches which microbreweries have begun to make popular as well as deal with the constant threat of imports and their exploitation popularity in the United States. As large brewing companies work to meet the needs of their enormous market, the industry is attractive to smaller breweries seeking a smaller market.RivalryThe US brewing industry has consolidated to be controlled primarily by two main players, the largest being Anheuser-Busch, and the other being MillerCoors. This represents a high concentration which boosts rivalry. In this particular competition, price is not the determining factor, rather massive marketing campaigns to increase brand value. Although there exists two main companies, they are not very balanced as Anheuser-Busch controls the majority of the market share. The diversity among adversarys is greatest amongst the craft-beer breweries wh ich focus on recipe rather than brand image. Among the major players there is little product differentiation as they sell primarily the same types of beers. Although there exists a large brand awareness in loyalty to these players, irrelevant competition such as Heineken have penetrated US markets and have experienced large sales. This industry is very dependent on the segment of selling alcoholic beverages, although segments within the types of beer can fluctuate, firms focus primarily on the selling of their product. The barriers for exiting this market are high as there are specific markets, and technologies which have been produced specifically for this industry, the best chance for converting to another product would be into the firm of a non-alcoholic malt beverage.ConclusionAfter looking in-depth into the brewing industry, a number of key success factors stick out. One of the most important that stood out to me is its ability to keep up with trends in domestic markets as wel l as increasing brand awareness through quality of beer rather than price. Another important factor for success in this industry is the ability to control debt and deal with fluctuations in the economy. Many people questioned how Budweiser could remain Americas beer by being owned by a Belgium company. Furthermore, it is necessary for these large firms to find areas of increasing beer consumption and market their product in an attractive way. Through my analysis of the brewing industry, it seems clear that although the industry has recently experienced slower growth and lower demand, companies have remained profitable and the emergence of new players (Microbreweries) prove to be a good sign for the future growth and stability of this industry.Part 2 Firm AnalysisAdolph Coors based out of Golden, Colorado has been in the brewing industry since the late 19th century. It thrived on its focused market in the Western United States as well as the early brand recognition that its premium b eer gained with celebrities and athletes. It also was able to differentiate itself from other competitors by focusing on being a self-sustainable company which act to provide as much of its own inputs as possible. In 2005 due to increased pressures to consolidate, Adolph Coors merged with Canadian brewer Molson. With this merger, Molson Coors became the fifth largest brewer. In 2008 in an political campaign to keep up with Anheuser-Buschs recent merger with InBev, Molson Coors merged another time with SAB Miller to form Miller Coors LLC. This merger, is expected to decrease production and distribution be which will enable the company to remain profitable and able to increase its market share. This however goes hand in hand with the challenge of maintaining its market for smaller brands with more specific niches.External EnvironmentIn order to analyze Coors position in the industry it is important to look at the external environment which will affect the way Coors does business. A s stated previously there are a number of different factors which are influencing the brew industry at this time. One of the major external threats to Coors and the industry as a whole is in the form of Government regulation. With a variety of different state laws effecting the sales and distributions of beer, this poses as a threat as it could consume an unnecessary amount of time in daily operations and market analysis. With more focus on broader, international markets, the increasing trend of regional microbreweries are also a threat on the domestic market as they could better handle the state laws and their performance within those standards. Technologically, Coors has the opportunity to become an industry go bader in this category. Although technologies primarily are focusing on the quality of the beer, Coors could look to expand its technologies with respect to environmental awareness. Presently, Coors is being most affected by the rivalry within its industry. Once an industr y with hundreds of breweries, the US market has consolidated down to two main players. This is forcing Coors into becoming a hybrid international/domestic company at a rapid pace. I think one of the biggest threats that could affect Coors is the difference of the current market in comparison to the original focus and market of their beers.Internal EnvironmentFor many years, Coors was a family run business this was extremely positive for its sign growth and sustained spot as one of the top players in the brewing industry. Another key strength of Coors is its ownership in its own machinery and its obsess nature on remaining a company which is homegrown. Coors has throughout its history maintained an ability to adapt to current markets and trends as well as foreseeing areas of growth an opportunity. Early on, a weakness of Coors was its inability to attract minority markets and by some cases, they still struggle at this. Another weakness that could affect Coors performance is its his tory of avoiding debt spending. I believe this to be a weakness even though it could just as easily be a strength of the firm. Coors limits itself in research development as well as other possible market risks by not unciviling itself up to debt-spending. Another weakness of Coors, in line with the previous idea of debt-spending is that its a company which is slower to find niche markets and better products in comparison to Goliath InBev/Anheuser-Busch.MarketingIn comparison to Anheuser-Busch, Coors has presently and throughout history, struggled at finding a niche market and in turn has had to give up substantial ground to its main competitor in the form of Domestic Sales as well as having strong brand recognition. Anheuser-Busch in its merger with InBev is focusing its advertisement on marketing its large brands such as Budweiser. Coors has experienced a positive trend in its sales of Blue Moon which has been a hit, especially among fans of smaller, quality beers. It has outperf ormed a similar beer by Anheuser-Busch, Bud Light Lime. Coors, although struggling in some sense to gain market share back from Anheuser-Busch has a better location in terms of its distribution and production systems which are the one of the key strengths and highlights of its company, and one of its main areas of focus.Operations/ProductionCoors has a history of innovation and capital expenditures which have proved equitable to its operations and overall production efficiency. Coors has focused product innovation in the form of technologies which inhibit freshness and quality in its product. To this extent, it seems as though the two competitors are beginning to shift focuses, as InBev tries to beef up product, brand awareness, and market share, while Coors is insistent on being the industry drawing card for the best beer in America. As Coors focuses its attention on operations domestically, they are able to create a cost advantage in the midst of themselves and other main compet itors, they will have better control over what they produce and how they go about producing it which in the long run may open up many areas of growth.FinanceIn the merger of MillerCoors, the company experienced a rapid decline in growth and sales. The positive side of this down-sizing is that they will have better control of their finances and although they still control thousands of employees, the ability to focus on cost cuts will in turn maximize shareowner wealth. In focusing on the quality and production of its beers, Coors has begun to outsource many of its financing and accounting to third party sources. In the upcoming years due to its merger, Coors will be refinancing its debt and looking to use cash from its operations as a way of approaching other strategic investments. It also hopes that refinancing its debt will lead to pension plans for its employees as well as better return to it its owners.Critical Success FactorsIt is imperative for Coors to become the leader in pr emium beers produced in the United States. With Anheuser-Busch selling out to Belgium, a great opportunity for Coors to utilize its domestic brewing facilities and resources exists and should be approached. Another factor that is necessary for Coors is to become an industry leader in innovation and social/environmental responsibility. They need to diversify their products to attract a wide variety of people and work hard not to segregate their marketing to specific niches which leave minorities out of the picture. Strategic ProblemManagement has failed to ensure the long-term survival of Coors because it expanded too quickly and had too intriguing of hopes in competing on a global scale with Anheuser-Busch. With that in mind, Coors with its merger with Miller has the opportunity to regain the domestic strength that it once prided itself on.My recommendation for Coors would be to continue its pursuit of quality within the domestic United States market. It can work to regain capital to spend on future strategic investments such as popular microbreweries with a high-quality, popular taste. The United States although a major player in the production of beers, still lacks the reputation for having a quality product which is globally recognized. Some could argue that Budweiser is this, however others would say that Budweiser lived in the realm of being an inexpensive beer too long before committing itself to the more trendy Lager. executingCoors can implement this strategy easily if it can regain its focus on its core mission from its history, the emphasis of self-sustainability as well as product quality. By outsourcing parts of its business to other parties, Coors has removed responsibilities which could have weighed the company down in making strategic and financial decisions.Part 3 Firm-Firm bandage working on the analysis for this case-study, thoughts of Harley-Davidson continuously entered my mind. Harley-Davidson is a company that thrives itself on its proud history as well as its quality and brand recognition, very much of what Coors itself does. One area in which Coors could mimic HD in terms of its business model is its focus on being the best US American brand available. HD faces similar competition and rivalry as Coors does only HDs exists in the form of mostly Japanese and Korean companies while Coors deals with primarily European competition. Coors and HD also face similar problems in terms of attracting niche markets. For HD, they have primarily been seen as a white, male, tough-guy brand, while losing out on markets which include women and younger riders. In a similar way Coors needs to be able to attract consumers who prefer a high quality local brew in the United States rather than a watered down beverage from an aluminum can.In closing, Adolph Coors has existed through an array of market changes, downturns, and booms. In a mature industry, they represent the abbreviation of maturity and market knowledge. If Coors can maint ain its mission of becoming US Americas best beer maker, it will have many profitable years to come in the future.