Introduction
Adolph Coors, Sr. opened his brewery in 1973 in Golden, Colorado. By the 1930s, Coors started selling beer in eight different states. These states included Nevada, California, New Mexico, Oklahoma, Utah, Idaho, Kansas and Wyoming. By 1948, Coors expanded its territory and started selling beer in Texas. These states were the only states Coors sold out of until 1975. By 1985, Coors’s distribution network consisted of 569 independent wholesales and five which were company owned (Ghemawat 6).
Coors’s beer was a growing success in the 70s. In the 1960s, Coors sold 1.9 barrels of beer. The numbers jumped to 7.3 million barrels in 1970. By 1974, Coors was up to 12.3 million barrels. However, Coors took a downturn in 1975. That year Coors sells dropped 4 percent to 11.9 barrels. Furthermore, Coors was known to can more of its beer than any other U.S. brewery. Coors canned 69 percent of its beer versus 57 percent for the rest of the industry (statistic from 1985) (Ghemawat 6).
Coors also has some differences when it comes to packaging and production of their product. First, Coors made most of its labels and packaging. Secondly, Coors aged its beer for a significantly more amount of time than any other brewer. Coors beer was aged for approximately 70 days, whereas other brewers only aged their beer for 20-30 days. This leads to higher capital. In 1984, Coors assets per barrel were 57 dollars. Whereas Busch and Miller were $45 and $43 respectively. Thirdly, Coors did not pasteurize the beer that it bottled or canned (Ghemawat 6).
Coors marketing was also different than the rest of the industry. Their containers were different than other brewers are making them stand out from the others in the industry. In 1975, Coors had a volume decline in production, however, still managed to sell more beer than any other brewer in 10 of the 11 states that it had targeted. After 1975, Coors sells started to decline and by the late 70s Coors decided it was time to change their marketing techniques. They began to hire marketers to help increase their consumer numbers. As they increased their advertising techniques, they also increased their prices to cover the expense (Ghemawat 6).
Problem
The problem that Coors has been facing is that their sales have been outstanding, however, their revenue has not be changing. There are two main reasons for this. First, sales have been increasing due to Coors increasing their sales territory. Coors started selling their product in more states leading to more sales. However, revenue did not increase due to the cost of shipping their products farther distances. The cost of shipping negated the increased revenue the company would have received from the increased sales. The second reason is due to their marketing techniques. While their advertisements have increased sales for the company, they also have been negated by the cost of their advertisements.
Reasons
The first reason why sales have increased, but revenue has not been due to increasing its sales territory. Coors was priced significantly lower than Budweiser. However, after the increased advertising, Coors was priced closer to Budweiser than it was before. The cost of advertising was covered by increasing the prices of the beer. Furthermore, increasing their sales territory also increased their cost of conducting business. The additional cost of beer was negated by the cost of shipping the beer a greater distance from the brewery. The company used refrigerated rail cars to ship 74 percent of its beer. The remainder of the beer was shipped in refrigerated trucks. The company did own its own transportation trucking company, Coors Transportation Company, which hauled almost half of the truck shipments. However the company did not have enough trucks to ship all of the supply that needed to be sent across the nation. The company used independent carriers to ship the rest. These independent carriers increased costs for the company by 10-15 percent (Ghemawat 2).
Another reason is due to its marketing. Coors marketing is considered less than successful compared to their competitors. Coors had its first successful advertisement with their “Silver Bullet” theme. The advertisement consisted of men and women at the Silver Bullet bar. None of the men or women endorsed the beer. Instead, the beer was used as the background to the story. This type of advertising set Coors apart from their competitors. That year, Coors becomes the second best selling light beer. However, this caused a problem for Coors. Their advertising led to an increase of popularity for Coors Light. This overlooked Coors Banquet and actually ended up decreasing the sale of the Banquet beer. This caused a major problem for Coors. First, it caused more people to purchase Coors Light rather than Coors Banquet. Coors Light is cheaper to make than Coors Banquet. Encouraging individuals to purchase Coors Light lead people away from Coors Banquet. As a result, more people were purchasing the cheaper beer that is cheaper to make. Therefore, increasing sales, but decreasing revenue (Ghemawat 2).
Another problem with their marketing is with Coors Banquet. It took the company longer to find a proper way to market the beer. Finally, they came out with their first national advertising campaign called “Coors is the One”. This advertising campaign used Mark Harmon, a quarterback/actor, in the commercial. As a result, this advertising method was more expensive than other marketing techniques the company uses for Coors Light. The commercial was a flop and ended up costing the company tons of expenses without much profit. The sales the company did receive from the commercial were shadowed by the expense of the advertisement. Both of the marketing errors lead to increased sales for the company without increasing the company’s revenue (Ghemawat 3).
Recommendations
The first recommendation for Coors is to further increase their prices in their expanded sales territory. It is important for Coors to always keep their prices below Budweiser, but increase it enough to make a profit after the cost of shipping. When cost increases, prices need to increase as well in order for a company to increase profit.
The second recommendation is to decrease how much they spend on marketing. Coors has been known to have problems with its marketing. It took Coors longer to advertise its premium brand (Coors Banquet) successfully. One of the reasons why it was considered a waste of money was due to the fact they had an endorser. They need to properly execute their marketing strategies in order to increase profit with their sales. The cost of their marketing techniques should reflect how much money they are going to make and not how many sales they are going to make. That was their problem with their commercial with Coors Light. Their advertisement was a success and increased sales, however, it did not increase revenue because the cost of the advertisement negated the profit from the sales. Coors beer does not make enough money in sales to use expensive advertising techniques.
Conclusion
Coors should use a cheaper marketing technique to increase the sales of their beer. Ideally, the marketing techniques that were used for Coors Light would have increased revenue if that same technique was used for Coors Banquet. They should pair marketing techniques with the product that has the highest ability for profit. This would maximize revenue.
Works Cited
Ghemawat, Pankaj. "Adolph Coors in the Brewing Industry." (1992): 1-21. Print.
