Douglas Leavitt Matthew Lubman John Palys April 16, 2005

Coors Brewing Company

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

2

SageGroup, LLP Coors Brewing Company

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.

3

SageGroup, LLP Coors Brewing Company

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 4

SageGroup, LLP Coors Brewing Company

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 5

SageGroup, LLP Coors Brewing Company

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.

6

SageGroup, LLP Coors Brewing Company

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 7

SageGroup, LLP Coors Brewing Company

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.

8

SageGroup, LLP Coors Brewing Company

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

9

SageGroup, LLP Coors Brewing Company

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

10

SageGroup, LLP Coors Brewing Company

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.

11

SageGroup, LLP Coors Brewing Company

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.

12

SageGroup, LLP Coors Brewing Company

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 13

SageGroup, LLP Coors Brewing Company

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.

14

SageGroup, LLP Coors Brewing Company

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.

15

SageGroup, LLP Coors Brewing Company

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 16

SageGroup, LLP Coors Brewing Company

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 Entry Supplier Buyer Substitutes and Rivalry Power Power Complements Coors’ high low mid low mid-high Level

17

SageGroup, LLP Coors Brewing Company

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.

18

SageGroup, LLP Coors Brewing Company

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 19

SageGroup, LLP Coors Brewing Company

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

20

SageGroup, LLP Coors Brewing Company

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.

21

SageGroup, LLP Coors Brewing Company

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.

22

SageGroup, LLP Coors Brewing Company

References

The Wall Street Journal www.coors.com www.molson.com finance.yahoo.com www.hoover.com

23

SageGroup, LLP