Coors is one of the leading brewing companies founded by Adolph Coors in Colorado. Coors beer was a regional product throughout its history in the marketing area of west side of the USA. By mid 1970s, the Company was financially strong and successful with 16% return on its sales. However, this high performance decreased between the years 1977-1985, but the year 1985 was the most profitable year of the Copmany with revenue of $1 billion.
The main strategy of the Coors was differentiation by producing a high quality beer among competitors. Producing its beers with Rocky mountain spring water, the taste of the Coors beer was more fresh. Although this could be considered as an endowment too, Coors used its brewery skills in pPasteurization, fermentation and filling to gain competitive advantage from its locations natural sources. Most of the competitors used pasteurization technology to make the shelf life of the beer longer and to lower their cost.
However, Coors did not accept this technology to be focused on the freshness of its beer. In addition, most of the rivals used additives in fermantation process of the beer to make the aging period shorter, however Coors has chosen to use less additives and longer aging time (70 days in average compared to the rivals’ period of 20 days) to make the taste of its beer different from the others. As Coors had only one main product, the filling lines were enough to be faster than its competitors.
Coors applied backward integration such as owning a land in Colorado with 60 springs on it, producing its own malt, buying a bottling supplier, producing its own packaging equipment and producing the required energy for its facilty as weel as forward integration like buying 5 wholesalers, refrigerated rail cars and trucks to have an efficient transportation. All these in-house production techniqes were other core competincies of the Coors which at the same time strenghtened the entry barriers for new comers to the industry.
Coors needs to consider the strategic implication of the facility in Virginia. In my opinion, building the new facility outside the Colorado will have negative effects on its image. As Rocky Mountain spring water and its location to that water is its main core competency, any facility built outside Colorado will not brew beer that taste similar to the original. If Coors beer was no longer brewed with the high quality ingredients, Coors beer would lose their image.
Their brand image is not only based on taste; it’s the taste of freshness coming from genuine Colorado Springs. Therefore delivering the same taste from another location would not be possible. As I mentioned before, Coors did not used pasteurization technology which is a process of heating a food to a specific temperature for a definite length of time, and then cooling it immediately, so that the Company needed to ship its beer in refrigerated rail cars or trucks.
According to me, Coors should have tried this technology and test whether there is a difference in taste of the beer or not. By doing so, Coors would transfer its beer to the more distant places with longer shelf lives by using other distribution ways such as speed cargo. The Company would have built more store houses in strategic places and make the distrbution of its product easier to the different places. Regarding the whole case, we can easily understand that, Coors had made all operations under its roof.
This is valuable in terms of swithcing costs but dangerous in terms of fixed costs. If the Company increase its sales every year, it can compansate its fixed costs due to large sales volume. In my opinion, the Company should focus more on the profitability now on. In order to do this, it can choose to increase and strenghten its distribution channels or to try outsourcing of some part of the operations to the other companies to decrease fixed costs.