Anheuser-Busch Companies and Coors Brewing Company
Tuesday, October 18, 2011
Barriers to Entry:3
Power of Suppliers:5
Power of Buyers:5
Summary of Five Forces:6
Evaluation of Anheuser-Busch’s Strategy:10
Coors Brewing Company:11
Operational Excellence: Through Strategic Alliances11
Brand Management: Differentiation and Expansion14
Evaluation of Coors’ Strategy16
Event Response Analysis17
Demand Contraction: Anheuser-Busch and Coors Brewing Company17 Rise in Demand: Anheuser-Busch and Coors Brewing Company18 Conclusion19
The two companies that will be the focus of this paper are Anheuser-Busch Companies and Coors Brewing Company (Coors). As of 2009, these two companies held 50.4 percent and 10.8 percent of the U.S. beer market, respectively. The compound annual growth rate of the market value of the U.S. beer industry between 2005 and 2009 was 0.4 percent, reaching $77.6 billion in 2009, while the market volume grew at an even lower 0.2 percent reaching a volume of 24 billion liters. Until 2002, the three major players within the industry, Anheuser-Busch, Coors and Miller Brewing Company, were domestically owned and together earned 75 percent of the industry revenues. This paper focuses on the U.S. beer industry and competitive strategies of two focal companies Anheuser-Busch and Coors, prior to 2009, before global giant InBev acquired Anheuser-Busch. Despite the dominant position of Anheuser-Busch, the different strategies pursued by these two organizations will draw different reactions from each firm, should a significant event impact them. This report highlights the differences in those reactions by (1) presenting an overall view of the industry (2) analyzing and contrasting each firm’s strategies and competencies and (3) evaluating their reactions to hypothetical events.
Barriers to Entry
The barriers to entry for the beer industry are moderate to high, with the strategic group of large brewing companies being high and microbreweries being moderate. There are four primary factors for high barriers to entry into the strategic group of our focus: economies of scale and scope, brand loyalty, government regulation, and channel preemption of distributors. The minimum efficient scale of production increased from 8 million barrels of beer per year in 1970 to 23 million barrels per year in 2000, demonstrating the high capital outlay required to begin production at that scale. The firms in this strategic group also benefit from scope economies, as this gives them an ability to spread fixed costs over a variety of products, which are ultimately marketed to create brand loyalty - a challenge for new entrants in an industry where product differentiation is high. Beer companies spent roughly $975 million on advertising in the United States in 2007. Third, the beer industry is subject to both federal and state level regulations and in this particular strategic group, the challenge stems from the need to adhere to different state regulations related to production, distribution, labeling, advertising, trade and pricing practices, credit, container characteristics, and alcoholic content. Finally, large-scale brewers have established distribution channels, which create a significant mobility barrier for new entrants and those in different strategic groups (see Figure 1).
The competitive rivalry with the beer industry is moderate. The oligopolistic structure of the industry where 80 percent of market volume is produced by three companies decreases the threat of a price war (see Figure 3). In addition, the consolidated nature of the industry, as...