2.1 Internal Environment
The internal environment, this is Coors internal structure, size, and overall objectives. An organisation's culture, is a list of shared beliefs or values that identify all members of the organisation. Effectively Coors produces and sells beer, and that is their overall objective. Coors is split into 2 distinct operating companies On Trade and Off Trade. Off trade is serviced by a head office in Burton. The On trade splits itself into two independents and national multiples. The national multiples are serviced from a head office in Burton. The independent customers are split into four regional operating companies, taking up responsibility for geographical areas of England and Wales. North, North West, Wales and the West of England and Midlands and the South East. A Sales MD who has sales teams and support staff working under them heads each region. Virtually all external sales people are mobile workers and are home based. Telesales operations are based in 3 centres, and a central customer service centre is based in Leeds. Marketing is centrally based in Burton. Some services like distribution and credit control are supplied by third party suppliers, which will be mentioned later. This structure dictates the way Coors employees’ interact with each other, and the physical setting in which they operate. A strong culture of mobile working exists, so an electronic e-mail world is quite profound in Coors.
2.2 Task Environment
The second level is the Task Environment; this is made up of elements, which are controllable to some degree. Each element is broken down where possible into the groups affecting Coors. See appendix 1.
Competitors are a major influence in the environment of Coors as it tries to survive in a shrinking beer market. Therefor it constantly looks to get ahead of its rivals, of which there are too many. Coors currently uses an internal focus called ‘Crushing the competition.’
Suppliers are an area Coors has made a lot of progress over the past five years. It has sought to rationalise its suppliers and reduce overlap in supply chains. This has given Coors better pricing from many of its suppliers. Coors has also been innovative in its approach to supply and even set up a third party distribution company Tradeteam to deliver its products. Coors partly owns this company and therefore has great control over it.
The largest area Coors tries to influence control is over its customers. It does this through tied loans in the On-trade, and seeks to gain total supply agreements in the independent sectors. However the power is rapidly shifting towards the customer as national chains get larger and the total volume in the market shrinks. Therefore competition in the market gets fierce.
2.3 Mega Environment
We now need to look at the external elements, which affect Coors Brewers. This is often called the Macro Environment. These elements operate outside the organisation's arena, whose actions may affect any part of the organisation. The organisation has no control over these elements. It can only influence them by going through the elements in the Task environment. Often an organisation would not be ale to influence any of these elements on its own. (see appendix 2)
Three major elements come from this, Political, Legal, and Social, that affects Coors the most.
Politically Coors has been affected in the past and dictates its current position and structure is political and legal. The British government has twice blocked mergers and acquisitions by Bass Brewers and its owners to grow in size. Claiming an unfair competitive advantage would be gained, and therefore consumers would suffer.
Drink drive laws have helped to reduce beer consumption in the UK; this is clear with the growth in food sales in pubs. Laws dictating licensing laws on selling alcohol clearly influence Coors.
Social and economic climate affects Coors’ greatly, with alcohol perceived as a luxury non-essential item, especially in the on-trade sector. Alternative areas of spend take cash away from the beer sector. The mobile phone explosion took disposable spend away from consumers. Consumers now have a far greater choice of leisure activities both in the home and outside, a lot of which do not include beer. The use of soft and hard drugs clearly moves spend away from beer. Beer sales in Dance Venue nightclubs are significantly less than in the local pub, even though a dance venue will probably hold three times as many people. Changes in habits and lifestyle and disposable spend greatly affect sales of beer.
3. The Nature of the Environment
The environment an organisation operates in generates uncertainty. The degree of uncertainty varies with the complexity of the environments.
As an environment becomes more complex and dynamic the more uncertainty is generated.
Environmental uncertainty is a position where future environmental circumstances affecting an organisation cannot be accurately assessed or predicted. The number of elements in an organisation’s environment and their degree of similarity measure environmental complexity.
To help us assess the nature of the Coors environment we will use model shown in Bartol & Martin (1998 Chapter 3 Page 82 Fig. 3.4).
Coors Brewers best fits in the simple/static segment of the model. Essential its business is simple to understand. Technical processes used are simple in brewing. The competitors to Coors have remained the same over the past 10 years. However the position is shifting to become more dynamic or homogeneous, as the power of customers becomes greater squeezing margins. This will force Coors managers to think of more alternative and even complex systems and products to generate profits.
4. Key Environmental Forces
The best model to find the key force is to look at Porters Five Forces model. Hannagan (2002 Chapter 5 P148 Fig 5.3. When we list all the elements discussed in the Mega Environment under the four outside headings we find which force has most power.
The key environmental force upon Coors Brewers, is the Customer base. As the market moves more towards multiple groups in both on and off trade and these operators get bigger, discounts will become greater and therefore margins shortened.
Enterprise Inns PLC only last week announced a major acquisition of pubs in the UK pushing there total estate to 7700 pubs, the largest single pub operator in the UK.
Suppliers have seemingly little force upon Coors, with must suppliers being smaller in size than Coors or in a position where they are not the only suppliers. The only supplier, which does have some power, is Tradeteam, which is the distribution company used. However their power is reduced by the 49% share holding Coors has in the company.
The competitors have remained static for some years in the industry with similar market shares. Market share has continued to grow for Bass Brewers till now by about half a percent a year for the past five years and there seems no reason why this should change massively for Coors.
Substitute products are a strong force for Coors, the growth of the PPS (Premium Packaged Spirit) e.g. Smirnoff Ice, has taken away consumer spend from Beer. The fasting growing sector in the alcohol market in the UK at present is Wine, which is another movement of spending. Although Coors factors on Wine to its On-trade customers it is the lowest profit stream per unit it has. Alternative spend areas for disposable income are a major factor that has influenced our business, and could be a reason for the Bass PLC sell off of Bass Brewers.
It is unlikely that any new entrants will enter the UK Beer market at present, as it is widely recognised that UK has too many brewers operating in a shrinking market. This makes competitive rivalry very fierce, between the major brewers. Customers are aware of this and help to up the tempo as they gain a better price.
5. Competitive Position
To analyse the competitive advantage of Coors Brewers we must decide how it differentiates itself from other brewers.
Coors owns the UK’s No.1 mainstream lager brand, Carling, it also owns the No.2 ale brand Worthington. Coors is regarded as the most highly efficient brewer in the UK, and therefore maintains higher margins than its closest rivals.
Coors have also in the past demonstrated a flair for innovation, with products like Carling Premier uniquely smooth lager, Caffreys unique Irish ale and Hooch the first mass produced Flavoured Alcoholic Beverage (FAB). This more recently has shown with the brand Reef, Barbox an Internet web site for the industry and Arc a unique super chilled ice draught lager.
Coors targets a broad target audience with brands in virtually every sector of the market, and where it does not own them it factors them in to sell on to the On-trade. For example Wines Spirits and Soft Drinks and Ciders. Coors uses all routes to market with nearly all its brands.
The closest rivals to Coors market position are, Scotco, and Interbrew UK. Both have problems with their mainstream lager being massively secondary to Carling. Mainstream lager is the largest sector of the beer market. Neither competitor has demonstrated skills of innovative products being brought to market, and have often adopted a copy cat, me too policy.
This puts Coors in a position of differentiation, by owning the number one lager brand in the UK. This gives Coors a competitive advantage over its rivals. However Coors sells products in all sectors, standard lager, premium lager, ales and bitters, and also factors brands like Budweiser, Guinness and wines, spirits and soft drinks. Thus reaching a broad target and aiming to gain advantage in all of them.
6. Opportunities and Threats
Coors in the UK has some clear opportunities due to the organisation being newly formed.
Opportunities
To develop or acquire brand for the traditional cask ale market generated by the loss of Bass ale.
To enter with new brands into foreign markets.
Develop alternative profit streams from the existing customer base.
Develop new products alternative to beer.
Creating iconic status for Carling, making it easily recognisable.
Grow existing premium lager, Grolsch into N0.2 position to Stella.
Threats
Lack of traditional cask ale brand.
Stella becomes accepted as a mainstream lager.
Beer volumes in the UK falling on average by 5% a year.
Alternatives to disposable income.
Legislation on drinking laws.
Growing power of customers.
Changing habits and perception of beer with consumers.
7. Conclusion
Coors Brewers is positioning itself to pursue some of these opportunities, and thus fend off some of the threats. Coors is currently repositioning and market Worthington as a portfolio of ale brands which is available in three formats including cask ale.
It is setting up a team in Scotland to enter the Interbrew market with our brands, but somewhat tentatively. Its development of Barbox has been seen as an alternative profit stream. Also Tradeteam continue to search for business from other brewers.
New Product Development continues at full pace with new variants of Reef arriving for the last three-quarters. A defined shaped bottle for Carling is arriving to market within months, and promotion of Grolsch is continuing with TV advertising.
8. Recommendations
Coors must get far more aggressive with its branding for Carling and look to synergise all its SKU formats so they are easily associated and identifiable as Carling. I feel they should acquire a traditional cask ale brand like London Pride, as this is already established and consumers have knowledge of its heritage.
Alternative income streams must be found. The most obvious is creating Technical Services into a third party supplier and then using the company to service all brands from all brewers within a retail groups estate. Similar to the Tradeteam position. They could even use their telesales function to do work for other brewers or other licensed trade associated companies.
Coors must enlist the help of other brewers to stem the belief that beer is bad for you, which is becoming apparent with consumers. Once the anti-smoking lobby has finished its job, it is clear beer is next in line.
Coors has a danger of becoming a one-brand company with Carling. Coors must become more dynamic in its approach to generating profit streams. However I believe they will take the safer approach to generating more profit, through cost cutting and centralisation.
9. Bibliography
Hannagan, T., 2002 Management Concepts and Practices. 3rd ed. Great Britain: Pitman Publishing
Bartol, K.M. & Martin, D. C., 1998 Management 3rd ed. United States of America: McGraw-Hill
Appendices
Appendix 1
Task environment
Competitors
Other Brewers
Wholesalers
Wine producers
Spirits producers
Consumers
All adults over 18yrs of age are targets.
Customers
On-trade Multiples
On-trade Independents
Off-trade Multiples
Off-trade Independents
Wholesalers
Banks
Previously Bass Brewers did not have any loan finance from banks. However Coors has borrowed money in the US to fund the acquisition of part of the former Bass Brewers organisation.
Suppliers
Many suppliers.
Manufacturing suppliers.
Service suppliers.
Tradeteam - third party distributor, partly owned by Coors
BCW – third party supplying credit control and debt recovery services.
Pressure Groups
The Portman Group, is the nearest we have in the Beer industry to an ‘Off-Beer’ type group. They have been particularly vocal of late when commenting on the Flavoured Alcoholic Beverage sector of the market. Products like Hooch, Reef etc.
CAMRA is a historical group, which campaigns for the retention of real ale in the UK. Over the past 20 years we have seen a steady decline in this sector of the market.
Trade Unions
Trade Unions have very little presence in Coors Brewers as a total. However where Unions are evident it is in 3 main areas Production, Distribution and Technical Services (Department responsible for installing and servicing of beer dispense equipment in On-trade sector).
Appendix 2
Mega Environment
Political
Includes the governmental imposed systems to which an organisation must operate. Clearly there are many systems that governments impose that is common to all organisations within the UK. However I will try to list the ones more prevalent to Coors Brewers.
Monopolies and Mergers Commission – in last 5 years has blocked 2 mergers of Bass Brewers with other Brewers.
Green issues – Bass Brewers 5 years ago was listed in the bottom 10% of the environmentally friendly Brewers.
Government parties shifting policies to influence numbers of votes.
The levy of taxation placed on beer is a heavy influence on Coors business
Economic
This involves the systems involved in creating wealth in the country the organisation operates.
Interest Rates often influence consumer spending and disposable income.
Fuel prices dictated by oil prices clearly affect Coors distribution costs.
Again taxation is included here and Beer duty.
The foot and mouth outbreak in England and Wales had a massive affect in some areas, moving tourist spend to other areas or even abroad.
Legal
Any laws governing alcohol consumption will affect Coors Brewers. These are:
Legal drinking age.
Licensing Laws governing the premises where alcohol is sold.
Licensing Laws governing opening hours of the on-trade sector.
Drink-drive laws, a major factor in the reduction of beer consumption in the UK.
Laws governing the use of illegal drugs, any decriminalisation of the use of drugs would move spend from alcohol towards the drug.
Laws concerning strengths of alcohol allowed in a drink.
Deregulation of the licensing laws should allow alcohol to be sold in more premises, e.g. café bars in shops and libraries
Cultural
This area includes lifestyle changes and attitudes towards work or leisure. Impacting on Coors these are:
Use of disposable income for other leisure activities.
Beer often seen as not healthy.
Lager has a laddish, lout type image.
Drinking at home becoming the norm.
Generally consumers in the UK are becoming far more demanding, and consistently look for value for money.
International
Now more prevalent to Coors as they operate in two continents. This element involves trading blocks or openings, like the European Union formulating a single market. Also any trade laws between the US and UK will affect Coors possibly in the future. Also a major factor that has shocked many organisations as to its impact is terrorism. Nobody would have guessed that a terrorist act in New York on September 11th would have had such an impact on all organisations across the world. Clearly this leads to the impacts of war in a country not necessarily trading with Coors can impact upon its business.
Social
This element includes demographics of the consumers Coors is trying to get to. It is commonly recognised that the UK has an ageing population. Again the population in the UK is now over 50% female and this will influence Coors brands and marketing styles in the future. Also the population is becoming far more multi-cultural with many ethnic backgrounds being represented. Some of these groups have different attitudes towards alcohol based on religious belief or cultural habits. Also the acceptance of drug cultural by some groups puts pressure on alcohol sales.
Generally peoples social behaviours influences all leisure industry organisations.
Technological
Any developments in technology that affect production of beer influence Coors, as they strive for greater efficiencies. But also technological advances in beer dispense also affect the brands it produces. Coors are currently testing a super-chilled lager called Arc, which uses atomic structure technology to cool the lager. Also advances in computing have in the past affected Coors Brewers. Sales representatives are now totally mobile and work from home, using laptops and computer connections at home to link to Coors systems. Advances in mobile working are moving rapidly and affect all organisations with a mobile work force. Coors now use satellite navigation in their delivery vehicles to pinpoint vehicle locations. Thus creating greater efficiency and also helping to give a better customer service.
Developments in the Internet have influenced Coors in both sales and procurement.
