Douglas Leavitt Matthew Lubman John Palys April 16, 2005

Coors Brewing Company

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Table of Contents

Executive Summary...........................................................................3

Company History ...............................................................................4

Financial Analysis..............................................................................6

Competitive Analysis .......................................................................12

Industry ................................................................................................ 12

Entry ..................................................................................................... 14

Buyer and Supplier Power ..................................................................... 14

Substitutes and Complements ............................................................... 16

Key Issues.......................................................................................18

Conclusion.......................................................................................22

References ......................................................................................23


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Executive Summary

Coors Brewing Company is the third largest domestic beer producer.

Headquartered in Golden, CO, Coors produces a variety of beers including its

cornerstone brand Coors Light. While Coors has been doing well, the

company needs to improve its presence in the premium beer market by

leveraging its distribution network to increase the availability of beers brewed

by newly-acquired Molson. It also needs to restructure its advertising,

moving away from hyping how its beers are “cold from birth” and focusing on

targeting its chosen demographic of younger drinkers. This would also allow

the company to redesign its distribution networks in such a way as to get its

margins in line with those of its competitors. Making these strategic changes

would really help Molson-Coors compete with Anheuser-Busch and SAB-Miller

in the US market.


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Company History

Coors Brewing Company produces, packages, and distributes a variety of

alcoholic beverages including its signature brand Coors original and its best

seller Coors Light. Other notable brands include Keystone Light, Molson, and

Carling. As the primary subsidiary of the Adolph Coors Company, Coors is the

third largest brewer in the United States and controls approximately 11-12%

of the domestic market.

Coors Brewing Company was founded in 1873 by a German immigrant,

Adolph Coors, just outside of Golden, Colorado. Adolph contributed only

$2,000 of the original $20,000 investment, but his primary contribution was

his extensive brewing background. Learning as an apprentice in Europe,

Adolph dreamed of operating a brewery of his own once he reached the

United States. “The Golden Brewery” saw immediate success and Adolph

Coors bought out his only partner Jacob Schueler in 1880, giving Mr. Coors

full ownership and control.

Coors Brewing Company still continued to grow. By 1890, the brewery sold

17,600 barrels. Due to poor and expensive transportation, distribution was

limited to a small region in the Western United States. The company saw

sales grow each successive year until prohibition became law in Colorado in

1916. The company managed to survive this difficult time for the brewing

industry by producing malted milk and other food products. There were

1,568 brewers in the U.S. before prohibition and only 750 reopened when

prohibition ended in 1933. Coors was fortunate enough to endure and

reached sales of 136,000 barrels throughout 11 western states in its first full

year of post-prohibition operation.

Coors grew further during the 1930’s without any major setbacks until

rationing of beer was introduced during World War 2. Although government

rationing was common, the beer industry occupied special significance


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because of it was consumed by soldiers and used to boost morale. Half of

Coors’ sales went to the government during the wartime years. The alcohol

content of Coors products was also cut from 4.6% to only 3.2% during the

war. When the war ended in 1945, Coors’ total sales were at 300,000

barrels, but the post-war period proved to be a time of rapid growth for the

company. By 1955, sales had increased to 1 million barrels, and Coors was

gaining recognition as a national brand. Around the same time, Coors

introduced the first all-aluminum two-piece can manufacturing center.

Moreover, Coors introduced a recycling program, giving out one penny per

can donated.

Coors’ success reached new levels in the late 1970’s and early 1980’s. In

1978, Coors introduced Coors Light. The popular new drink would eventually

become and remains to today as the best seller of the entire company. In

1981, Coors distribution crossed east of the Mississippi for the first time. By

1991, Coors was sold in all 50 states. This was a major milestone for Coors,

but it did not mark the end of the company’s attempts to continue its rapid

growth.

In the early 1990’s Coors expanded into Canada, where the flagship Coors

Light brand proved to be extremely popular. In 2002 Coors made a move to

broaden its product lines by purchasing a majority stake in Bass, the popular

English brewer. This transaction increased sales volume increased by 40%.

Coors Brewing Company became the 2nd largest brewer in the United

Kingdom and in the top ten of the world. In 2003, they sold 32.7 million

barrels. Net sales topped out at 4 billion with a net income of 174.1 million

for the firm.

Coors’ original plant in Golden, Colorado is the largest single site brewery in

the world today. Coors also operates a brewery in Memphis, Tennessee and a

packaging plant in Virginia’s Shenandoah Valley. Outside of Golden, Coors

owns and is a partner in the largest aluminum can manufacturing plant in the


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United States. Coors Brewing Company is among the 500 largest publicly

traded companies in the U.S. With their global influence, huge capacity, and

vertical integration, the future seems bright for Coors.


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Financial Analysis

Adolph Coors Brewing is the third largest brewer within the Unites States.

The company produces many different beers including Keystone, Killian’s

Irish Red, Aspen Edge, and its most popular beverage, Coors Light. While

Coors is an extremely large company, Coors Light is definitely its “franchise”

product and it is fair to say that Coors’ fortunes are largely dependant on the

performance of its franchise brand. In 2004, Coors Light accounted for ~75%

of Coors’ domestic sales and ~50% of its international sales. As a result of

this dependence on one product, Coors would be very vulnerable to a serious

fall in its earnings if something was to go wrong with Coors Light.

Furthermore, since so much of Coors’ product (about 90% of total volume) is

produced at its main brewery in Golden, CO, transportation costs are high.

Coors is also advertising that its ships all of its products in refrigerated

vehicles, further raising costs. This effect will only be multiplied if the current

high oil price environment persists, as “reefer” trucks consume much more

energy than standard trucks do. The end result is the highest per barrel cost

of any major producer in the U.S. This seriously reduces profit margins.

Coors management has made it clear that they view their dependence on

Coors Light as a problem, as they have been attempting to diversify their

revenue streams since the late 19i90s, when they bought the British brewer

Carling. Recently, Coors has taken aggressive steps to expand its role as a

worldwide beer distributor. Building on the Carling acquisition, Coors has

continued to focus on international markets. In 2002 they purchased a

majority stake in Bass, another British brewer, but their greatest step yet

towards diversifying their revenue streams occurred in 2004 with the

announcement of an agreement to merge with Canadian brewing giant

Molson. The new company, now called Molson Coors Brewing Company, is

the fifth largest brewer in the world. Molson shareholders control 55% of the

stock, though the Molson and Coors families have equal voting rights on the


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board. A quick glance at common financial ratios shows that the new

company is generally representative of the industry.

TAP BUD Industry

Market Cap: 4.44B 37.33B 4.33B

Employees: 5,400 31,435 5.40K

Rev. Growth (ttm): 7.60% 5.60% 15.80%

Revenue (ttm): 4.31B 14.93B 765.20M

Gross Margin (ttm): 36.33% 39.85% 38.78%

EBITDA (ttm): 614.35M 4.29B 214.90M

Oper. Margins (ttm): 8.09% 22.51% 13.32%

Net Income (ttm): 196.74M 2.24B 76.68M

EPS (ttm): 5.167 2.768 1.33

PE (ttm): 15.16 17.36 22.26

PEG (ttm): 1.56 1.81 1.81

PS (ttm): 1.01 2.35 1.44

Anheuser Busch (BUD) is the behemoth of the beer industry. The company

generated more than three times as much revenue as Coors and Molson

combined in 2004. With multiple breweries across the United States,

Anheuser Busch can capitalize on efficient distribution and market power

over its suppliers. They produce the top two selling beers in America, Bud

Light and Budweiser. Anheuser also has higher profit margins than Molson

Coors, mainly because of its transportation advantage that was discussed

earlier.


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Growth Company Industry1 Market2

12-Month Revenue Growth 7.6% 1.0% 4.3%

12-Month Net Income Growth 12.6% 2.1% 17.2%

12-Month EPS Growth 8.8% 3.0% 14.7%

12-Month Dividend Growth 0.0% 1.3% 4.5%

36-Month Revenue Growth 19.4% 1.2% 5.5%

36-Month Net Income Growth 16.0% 8.7% 63.6%

36-Month EPS Growth 15.3% 25.7% 66.7%

36-Month Dividend Growth 0.7% 7.7% 3.5%

While Anheuser may dominate the US beer market, it is Molson-Coors that

has shown stronger growth in recent years. This is not surprising, as

Anheuser has been down on its luck (its stock is currently trading very near

its 3-year lows). Of course, Anheuser still has the stronger overall

competitive position and a better portfolio of brands than Coors does, so it

remains to be seen whether Molson-Coors’ superior financial performance

over the past few years can be maintained.

While Molson-Coors stock fell initially after the merger, it has made a strong

comeback and is currently trading at all-time highs. This is in marked


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contrast to the poor financial performance of Anheuser-Busch, which is

currently trading near its three-year lows. While Anheuser is still much larger

than Coors on a market capitalization basis, in recent years Coors investors

have had a lot more to smile about than their counterparts at America’s

largest brewing company.

It appears that the recent merger has solved the major problems that used

to be facing Coors Brewing. Transportation costs can be reduced and the

sales revenue is spread out over more brands. Expansion will be more

profitable in international markets since the United States is already

saturated with both major and micro brewers. By merging with Molson, Coors

accomplished both goals at the same time. Molson already possessed a large

line of products and facilities. Now the new firm controls the loyalty of all

brands from both companies while now having the ability to capitalize on

synergies and economies of scale. The result should be a higher profit margin

for the combined firm.

Since few combined figures are readily available for Molson Coors Brewing,

we have constructed two separate free cash flow models, one for each

company prior to the merger. The results of the model indicate a share price

near what the company was trading for. The figure for Molson is indicated

prior to the merger while Coors’ price is after the merger. Coors has not had

a dramatic change in price, so the numbers are still close to the pre-merger

levels. As with all free cash flow models, the outcome highly depends on the

assumptions. We have used a higher growth rate for Molson products than

Coors because the Canadian and international beer markets are not quite as

saturated as the domestic market. The models are also slightly different

because Molson is a Canadian based company. Consequently, they have to

report their financial statements according to Canadian accounting standards.

The major differences seem to be how amortization is factored in as well as

their depreciation laws. Companies appear to have much more freedom


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about deciding how much, if at all, to record depreciation. Our assumptions

about the depreciation and amortization are much less concrete in this sense.

Overall, our models fit the numbers extremely well. With our reasonable

assumptions, we calculated a share price close to the actual share price at

the time of evaluation. In our opinion, Molson Coors Brewing is moving in a

positive direction. We feel the merger for Coors has reinvigorated the firm

and helped solve to some extent the two biggest difficulties facing the

company. Transportation costs and brand diversification are positively

affected for Coors. From Molson’s perspective, they gain a connection with a

highly popular American brewer as well as strengthen their grip on the

Canadian market where Coors Light is the best selling light beer.


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Competitive Analysis

Internal Rivalry

Molson-Coors Brewing Company competes on an international level centered

mostly in the United States, Canada, and the United Kingdom. Molson-Coors

is the third largest domestic brewer in the United States behind Anheuser

Busch and Miller Brewing. These three companies together control about

80% of the U.S. beer market. The remaining 20% consists of smaller, yet

still large scale producers like Pabst and also micro or craft brewers. The

most well known craft brewer in the U.S. is Samuel Adams. The micro brews

mainly compete with import beers, such as Heineken, and other domestic

micro brews. The three large U.S. producers compete among themselves for

market share. Their products are mass produced and mass marketed across

the whole nation. Virtually no other firms are able to distribute their product

and compete in advertising on such a large scale. Consequently, for this

analysis, we will define the market as the three industry giants in the U.S.

The big three firms compete in a number of different categories within the

domestic beer market. There are premium, light, and sub-premium

categories. Premium beers, according to Coors, are what we generally think

of as common beers, including Coors Original. Coors Original competes

directly with Budweiser and Miller Genuine Draft. Coors Light competes with

Bud Light and Miller Light. The sub-premium category consists of value based

beers such as Keystone for Coors, Natural and Busch for Anheuser Busch,

and Miller High Life and Milwaukee’s Best for Miller. Generally, the value

priced beers are targeted to different consumers and advertised separately

from the flagship brands.


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The beer industry is highly competitive overall. It has extreme price and non-

price competition for a variety of reasons. First, the beer industry itself has

been performing poorly for the past few years. Sales of macrobrews have

stagnated while hard alcohol, wine and “malternatives” like Smirnoff Ice have

taken market share away from beer. The hard alcohol industry, long a pariah

in Washington, has reorganized its lobbying under the leadership of Britain’s

Diageo Group and has used the lobbying slogan “A drink is a drink is a drink”

(referring to the equal alcohol content of a glass of beer, shot of liquor or

glass of wine) to gain the right to advertise in spaces where they had

previously been excluded. The response of the brewers to the rising threat of

hard liquor has thus far been fairly tepid. The Big 3 brewers continue to

battle internally for market share and have not focused on growing the total

beer market. As beer is a very mature product and there is little that the

brewers can do to reverse the image improvement occurring in hard alcohol,

this is probably the right strategy for the firms to pursue. As a result,

however, beer sales remain flat. Firms cannot grow without stealing market

share from a competitor.

Second, beer distribution is relatively expensive. Beer consists of mostly

water and transporting water is expensive because of the heavy weight

involved. Coors also ships all of its products cold, which further increases its

specific transportation costs. Coors produces more beer at one facility than

any other company in the world. The brewery in Golden, CO is the largest on

earth. While capitalizing on some economies of scale, transportation costs

are increased since beer must be shipped further on average. The end result

of cooling and extra distance creates a different cost structure for Coors; this

is a major competitive disadvantage for the firm.

Finally, domestic beers are fairly undifferentiated. Each tastes slightly

different but switching costs are extremely low. Buyers rarely buy more than

a case at a time, so it is easy to buy a different brand the next time. Most

domestic beers taste similar enough that consumers will choose one over


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another if the price is noticeably lower. This is especially true among younger

and more cost sensitive consumers. Coors must pay special attention to this

problem when considering its flagship brand, Coors Light. Since nearly 70%

of domestic sales come from the light beer, a significant price reduction for

Bud Light or Miller Light could substantially hurt sales.

Since the beer industry is so competitive, the companies practice extreme

non-price competition. Advertising is the best example of the battle. Non-

price competition increases both fixed costs and marginal costs. Developing

new products, such as low-carb beers, increases fixed costs, while

advertising wars, such as Anheuser Busch and Miller’s war over the king

versus the president of beers, drives up variable costs. The big three can still

enjoy solid profits, however, while competing in advertising.

Entry

After defining the market to the big three firms who can compete effectively

in distribution, size, and advertising, entry into the market is not a threat.

The industry’s recent stagnation further reduces the desire for other

companies to enter. Companies could easily drop prices to drive out recent

entrants. New brewers are predominantly craft beer firms that compete

regionally. They represent no significant threat to the big domestic

producers. Recent entrants would steal business from other small, micro

brewers. The big three would enjoy economies of scale, reputation, and

brand loyalty over any new firm. They would also have better, more concrete

distribution networks and contracts. Any firm trying to compete nationally

would likely see an increased price war in response.


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Supplier and Buyer Power

In the beer industry, input suppliers do not wield much supplier power. The

major inputs are all commodities. Water, barely, and hops are all available in

significant enough quantities to yield competitive markets. Agriculture in

particular produces highly competitive prices. As large scale domestic

producers, the quality of the barley and hops must be consistent and high,

but it does not have to be the best of the best. Smaller craft brewers would

take more care in selecting their ingredients because they can devote more

time to selection and market their products based more on quality. Again,

because of the large scale of the big three, they can extract some profits

from their suppliers based on high volume orders. An order from a company

as large as Coors could make or break a small to medium size farmer’s

years. Substitute inputs also limit the ability of suppliers to have high prices.

The brewers could go to any number of other hops and barely producers to

buy inputs. Consequently, suppliers must respect the buying power of such

large companies. Each of the big three produces hundreds of millions of

barrels of beer each year. That requires an enormous amount of inputs. No

one supplier can produce all of the materials required. Moreover, it would be

to the beer producers’ advantage to buy from multiple farmers in order to

further reduce potential supplier power. Even smaller orders mean more to

small producers. Thinking for a second about the major producers of barely

and hops, there are only a few buyers that require that amount of barely and

hops. If a large producer doesn’t make a sale to one of the big firms

requiring their product, the farmer’s financial year could be severely

damaged. It is easier for the beer producers to find a bunch of smaller

producers than for the large farmers to find small demanders. The underlying

reason is that the beer industry enjoys higher profit margins and a greater

amount of resources that it can dedicate to finding suppliers. Farmers face

more constraints and the transaction is more important to that side. As a

result, the farmers must yield some power over to the buyers of inputs.


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Even though Coors could have power over large producers, the firm buys

from smaller producers when possible. Coors uses a diversity initiation policy

for its suppliers. Coors actively tries to buy from minorities and women.

These producers tend to have smaller farms and volume. A contract with

Coors could mean the entire financial year for these types of farmers. While

part of the reason for Coors’ policy is community support, the company could

use more leverage on the smaller producers. Switching costs are low for

Coors if it has a small volume from any individual producer. The farmers

have no ability to raise prices without a threat of Coors dropping the

producer.

Buyers of Coors’ products are price takers. There is little if any buying power

in the industry. The only exception could be large scale contracts such as

stadiums. The exclusive right to serve beer in a huge stadium would be

valuable to Coors. In this kind of situation, the buyers might be able to exert

some influence over Coors, but overall, this would still be a small percentage

of sales. Buyer power is minimal.

Substitutes and Complements

Recently, the beer industry has faced increasing substitute competition from

the spirit industry. The popularity of low-carb diets has hurt the beer

industry, as hard liquor has been advertised as a way to get drunk while

consumer fewer carbohydrates than by drinking beer. Wine has also gained

some popularity in recent years. However, the new substitute for beer that

deserves extra attention is “malternatives.” While SageGroup’s analysts look

down on these products, which we are more likely to refer to as “Barbie

beer,” there is no denying the fact that their introduction has fundamentally

changed the nature of the alcoholic beverages industry. Malternatives appeal

primarily to young females, who are a major portion of the Coors

demographic, and feature alcohol levels equivalent to those of traditional

beer but have are much sweeter, making them easier to drink. All of the


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major spirits players have entered the market for malternatives, but the

brewers have thusfar remained on the sidelines. It’s probably too late for

Coors or the rest of the Big 3 to enter this market, as its growth has leveled

off after a few years of astronomical growth. Nonetheless, it will be

interesting to see how Coors competes with the malternatives in its attempt

to win back the drinking dollar of young females.

Common snack foods, such as chips, nuts, and pretzels, serve as

complements to beer. Those products face tremendous price competition

within their own industries because of the large number of producers. No

firm is likely to lower the cost of their pretzels by a significant enough margin

to increase beer sales noticeably. Complements are unlikely to have a

significant effect on beer industry profits.

Internal

Rivalry

Entry Supplier

Power

Buyer

Power

Substitutes and

Complements

Coors’

Level

high low mid low mid-high


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Strategic Report

Coors faces tough decisions regarding its strategy in the highly competitive

beer environment. The decisions facing Coors are not about survival but

rather how the company will adapt to the saturated domestic beer market.

Coors must focus on three key areas: product differentiation, introducing and

distributing new products, and profit margins. Coors’ ability to successfully

pursue and implement these strategies will determine whether their stock

continues to rise or falls into the rut along with Anheuser-Busch as the

difficulties of competing in the US beer market weigh on all of the

participants.

As noted in the five forces, the major domestic beers are easily

interchangeable. Price competition is already so heavy that lowering prices

will likely only create an even greater price war. Coors must find a way to

differentiate its products from other major brands and gain customer loyalty.

The risk of alienating current customers prevents Coors from changing its

traditional flavors and recipes. Consequently, advertising and marketing are

the only real options available to separate Coors’ products from the

competition. Coors must paint its beers as offering something unique or

having a different character than the competition.

Since Coors occupies third place among domestic brewers, it has a unique

ability to focus on characterizing its own brands without having to defend its

products from other rival ads. For example, the two biggest brewers,

Anheuser-Busch and Miller, are currently fighting a major advertising war.

Both companies run television commercials not only touting the superior

quality of its products but also run ads directly mocking the campaigns each

other. Since the other two giants focus on one another, Coors is free to use

alternate strategies.


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Coors advertises with two main techniques to differentiate and promote its

core products. First, Coors actively advertises its beer as the coldest around.

The “cold” campaign claims that their beer is ice brewed and shipped in

refrigerated trains and trucks. The commercials use scenes with ice and frost

to reinforce the image. Moreover, the campaign matches the traditional

image of Coors’ products being born in the Rockies. Second, Coors uses

music, sports, and party images to target younger beer drinkers. The

company uses commercials with a bunch of college-age or young adults at

parties or rock concerts. Coors also targets sports fan by actively supporting

the NFL and advertising during a variety of other sporting events. Such

advertising is common with the other brewers as well. Once again targeting

younger consumers, Coors uses musical commercials, with the entire

advertisement being in song format.

The problem with the emphasis on selling “cold” beer is that it is impossible

to distinguish between a beer that has been cold since it was created and a

beer that has been allowed to change temperature over the course of its life.

An informal study conducted by SageGroup analysts showed that a group of

10 college-aged males were unable to distinguish between “cold since birth”

Coors Light and “shipped in a warm truck” Bud Light when both were poured

into a red cup and served at the same temperature. What is even more

disconcerting to Coors is the fact that none of the 10 males expected to be

able to tell which beer was “born cold.” This suggests that the emphasis on

being cold in Coors advertising simply is not working. Coors should therefore

dump this element of its marketing campaign and try to refocus on its image

as the “younger persons light beer” to get more bang for their advertising

buck.

The introduction and distribution of new (and newly acquired) products is the

next area of concern for Coors. Because the domestic market is essentially

flat, Coors must steal market share from its competitors. Of course, taking

market share from the other two giants is difficult at best. Their huge


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advertising budgets and more established distribution networks makes

competing in some markets, those in the eastern U.S. in particular,

challenging. The task of taking share from Anheuser and Miller may not be

an impossible one for Coors, however. The secret weapon for Coors in the

battle for domestic share may well end up being Molson. Original Coors lags

far behind Bud and MGD in the premium market, but adding Molson Golden

to Coors’ extensive US distribution network could allow the Canadian

premium beer to become a real competitor to Bud and MGD in the US.

Another possible strategy is introducing a “malternative” beverage. While

SageGroup analysts are sanguine about the overall growth characteristics of

the malternative market, we see an interesting opportunity for Coors to

target young people by selling cases of Coors Light and a new Coors

malternative together. This would be a way to target both males and females

in the same package. While Coors would have to be careful not to alienate

male beer drinkers while creating this product, it could potentially be an

interesting way for the company to differentiate itself in the crowded beer

market.

The last way for Coors to gain new products is to acquire other brewers.

Coors recent merger with Molson is a prime example of this. While Molson

was only a nominally international expansion given the similarities between

the beer markets of the US and Canada, expansion outside of North America

might be a better option then fighting the intense domestic battles. Gaining

more notoriety and a connection between Coors’ products overseas might

boost sales of all brands. Expanding overseas, especially in South America,

could make Coors more famous and popular world wide. The South American

beer market has been dominated by Brazil traditionally. The Molson Coors

combination has a small footing in Brazil and could expand further. This

would spread out revenues more globally and allow the company to rely less

on the stagnant U.S. market. Buying smaller brewers domestically could

potentially help close the market share gap between Coors and Miller. The


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possibilities domestically seem far smaller and more challenging than

overseas growth options.

As noted earlier in the report, Coors has the lowest profit margin per barrel

of any of the domestic producers. Two main factors are responsible for the

low margin. On average, Coors takes about 55 days from brewing to

packaging of their products. This is about twice as long as Coors’ major

competitors. Consequently, Coors incurs additional costs of production

including, salaries, overhead, and the opportunity costs of occupying the

storage areas and moving the beer along in the aging process. The second

reason for the low profit margin relates to Coors’ distribution network. Since

Coors has the largest brewery in the world, a large portion of its beer is

produced in Golden, CO. The cost of shipping from one location is greater

than it would be from a variety of breweries distributed more evenly across

the country. Even more importantly, Coors keeps its beers cold at all stages

of the distribution process while its other major competitors allow their beers

to be shipped warm. SageGroup’s advertising mini-study concluded that

drinkers are jaded about the alleged taste advantages of drinking beer that

has been shipped cold. The easiest way for Coors to improve its margins

would be to stop the practice of shipping its beer in refrigerated trucks and

switch to warm trucks like its competitors do. In SageGroup’s opinion, this

would be a very good idea.


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Conclusion

Coors Brewing Company’s strong past performance has positioned it as one

of the leading beer brewers in the world. Solid sales and strong advertising

have allowed Coors to earn a 12% market share domestically, placing it third

behind Anheuser-Busch and Miller. In order to improve upon this, especially

after completing the acquisition of Molson, Coors needs to refocus its

advertising away from emphasizing how “cold” the beer is and towards

associating it with popular products and appealing to the younger

demographic, which has been a successful strategy for the company thusfar.

One critical benefit of moving away from the “cold beer” advertising is that it

would allow Coors to realign its cost structure to improve profit margins by

decentralizing beer production and reducing shipping costs. This would allow

Coors to really improve its profitability and emerge as a serious competitor to

Anheuser-Busch in the domestic beer market. The other weapon for Coors in

the war against Budweiser is expanding the distribution network of Molson

Golden to provide Coors with a premium beer capable of competing with Bud

and MGD in that critical market. While this seems like a difficult task,

remember that MGD was launched from scratch in the early 1990s and has

become the #2 player in the premium beer market. With the strong

reputation that Molson Golden already has, it should be even easier for Coors

to grow this brand and finally have a competitive entry in the premium beer

market.


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References

The Wall Street Journal

www.coors.com

www.molson.com

finance.yahoo.com

www.hoover.com

Douglas Leavitt Matthew Lubman John Palys April 16, 2005

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