Coopers Brewery - Analysis Report
Contents
1.
Executive Summary
The
purpose of this report is to analyze the current situation of the Coopers
Brewery, a South Australia based beer producer, and provide appropriate
recommendations to the company for its better performance in the competitive
environment.
Coopers
brewery, a family business with 115 employees and 132 shareholders, is a third
largest brewer in Australia. On its ~ 150 years of operation, it has occupied 3.1% of market share of
Australian brewing industry and has expanded its exporting business to 26
different countries. Inside Australia, it is facing intense competition from
two conglomerates; Foster’s brewing group and Lion Nathan. Despite the intense
competition the company has managed to be among the top three brewers in
Australia.
Through the basic business tools (SWOT, Poter’s 5 Forces,
PESTLE, Generic strategies analysis, and competitors analysis), this report
investigates the various strategies employed by Coopers. The major finding from
the investigations forms the basis for recommendation to the Coopers Managerial
Board.
On the basis of findings from various business tools the
report recommends the Company to;
·
increase the capital
investment,
·
invite shareholders
from outside the Coopers family,
·
apply the integrative
growth approach,
·
form alliance with the
foreign brewery, and
·
focus on its premium
product (Coopers Pale Ale)
The report concludes
that the effective implementation of the recommendation can assist those
prudent managers to overcome some of the shortcomings, to mitigate the
challenges posed by new global trends and perform better in the competitive
global environment.
2.
Company Introduction
Coopers
brewery, established in 1862 by Thomas after his success in serving his sick wife
with a home brewed tonic, is a fifth generation family business. Later on, Thomas’
two sons had developed the company’s reputation as a scientifically-based
brewer of distinction. Since its establishment, the business mainly focuses on
brewing of beers through the process of natural conditioning, uniqueness of
being cloudy and handcrafted, and family tradition.
In
various strategic moves, Coopers developed varieties of products targeting
different customers groups, established the Coopers Club, purchased 60% of
Morgan’s Brewing and formed joint venture with American Beverage Distributors
(ABD) to focus in national distribution.
After
its move to new Regency Park Production site in 2001 the company was able to
improve its consistency in production, maintained the quality of goods and is
fully committed to the eco friendly operation system. In 2005, Coopers successfully resisted the
takeover by Lion Nathan and convinced its shareholders to the family business
rather than the corporation.
In
2007, as a small company, it had only 115 employees and only 132 shareholders
of which 95% of the shareholders are the family members. It produces and sells
11 different lagers, ales and stouts as its major products. In addition, it sells
19 different varieties of home brew kits and Malt as an industrial food. The
company has a market share of 3.1% in Australia and is exporting its goods in
26 different countries. Further, the managerial
capability and competency of Cooper’s family has established the Brewery among
the top three brewery leaders in Australia. But changing business trends, changing needs
of the customer and intense competition in Australian brewing industry present
a great challenge to the Coopers brewery.
Mission Statement: “To
provide natural beverages and food ingredients which satisfy tastes and
nutritional needs and create enjoyment.”
3.
Situation Analysis of
the Company
After
defeating the giant Lion Nathan in the protracted legal battle in 2005, the
company amended its constitutional provision to prevent itself from any
possible takeovers by other larger institutions. In contrary to the saying that
most business start small and continue to remain as they are (Dahl, 2o1o),
coopers brewery has got great success in occupying 3.1% market share of total
Australian brewing industry and 20.9% market share of the South Australian
brewing industry. The company’s fifth generation managers, Gleen and Tim Cooper,
perceive these activities as their great achievements and their confidence
level has been leveraged further by the two awards on family business category
at Southern Australia and at national level in May and August 2006
respectively.
But
the situation is not as easy as it seems to be. The two giant groups, Foster’s
brewing Group and the Lion Nathon, occupy the 94% of the total Australian beer
market by volume. Microbreweries (around 50) occupying 3.6% of market volume in
2006 are also the potential competitors for the coopers brewery. The national
market is declining as there are more imported brands. The imported brands are
being popular among the new generation drinkers. In addition to this, other
competitors have announced a joint venture for better market penetration and
coverage.
3.1
SWOT Analysis
The
SWOT analysis of the company shows the following:
Helpful in achieving the objectives
|
Harmful in achieving the objectives
|
|
Internal Attributes
Attributes of the organization
|
Strength
|
Weakness
|
•
Marketing and advertising: coopers club, niche marketing, branding and
merchandising, community projects (philanthropic activities)
•
Products: Focused differentiation
strategy, unique product, varieties of products with 19 different home brew
kits, market segmentation.
•
Operations: Eco-friendly brewing
plants, technical expertise and experience of the employee, use of modern
technology.
•
Goodwill and awards: Renowned by the
two family business awards
|
·
Financing: Low capital investment
·
Management: Family owned, minimal
interest in seeking external expertise
·
Fear to growth from family business to
multinational
·
Lack relocation and branching out
·
Products: only one mainstream product,
have varieties of product which costs more in promotion, marketing and
advertisement.
·
Trimming its horizontal and vertical
growth by selling the hotels and radios.
|
|
External Attributes
Attributes of the environment
|
Opportunity
|
Threats
|
·
Loyalty of the customers as the sole
Australian-owned brewery
·
Alliance with the foreign company to
import beers.
·
Opportunity to expand outside South
Australia and globally
·
Establish the wine division where the
competitors are unsuccessful
|
·
Fierce competition in national and
global market.
·
Changing government policies and
taxation laws.
·
Loyalty of Generation Y customers
towards the imported products.
·
Small niche player with no imported
products
|
|
Strength:
The
Company has the competitive advantage of having unique products such as crafted
beers, cloudy beers and product diversity including 19 different home brew
kits. Top fermentation and use of natural ingredients make their product
unique. Niche marketing, good market segmentation and specific targeting
(hotels, restaurants, university cafes etc.) are adding its strength to occupy
competitive position. The unique style
of advertising, for example, continual expansion of the Coopers Club, funding
the community projects are also the major strengths. The family business Awards
in 2006 at South Australian and at National level has also leveraged its
goodwill.
Weakness:
The
Company is family owned business with low capital investment in comparison to
its giant competitors. The family business is unwilling to seek the external
expertise and expand as a multinational company. Its unwillingness in
international sales promotion is hindering its global growth. Instead of
expanding its activities horizontally and vertically, Cooper sold hotels, local
radio operations etc considering them as the non-core business.
Opportunity:
Being
solely Australian owned brewery, Coopers can win the loyalty of Customers. The
imported brands are becoming popular in the new generation drinkers. So, it has
the opportunity to make alliance with foreign brewery to import a beer. In
addition, they have an opportunity to expand globally and take advantage of
their unique products globally.
Threats:
Coopers
brewery is facing competition with the two Giants. The competition can be
fiercer if the trend of accepting imported beer products increases among the
young generation Y drinkers.
3.2
Porter's 5 Forces
The competitive
structure of an industry can be analyzed by using the Poter’s 5 forces
model. This model of industry analysis
reveals the following insight to the Coopers brewery:
Competition
among Existing Companies:
Fosters brewing group
and Lion Nathan are the strong competitors holding 94% of the market by volume.
The second largest premium beer, Pale Ale, is also facing strong competition
with other imported beers such as San Miguel, Beck’s and Corona etc. However,
Coopers Niche marketing strategy, unique products and different way of
advertising are encountering the strength of competitors. Furthermore, Coopers
mission to meet the nutritional needs through their products leverage its
effort to compete with Giants.
Threats
of New Entrants:
The Trade Practice Act
1974 led to the national consolidation and many companies are now focusing on
economies of scale and scope. Large capital is required for a new company to
enter the market. Due to economy of scale, switching cost and lack of access to
new distribution channels the environment is not favorable to the new entrants.
So, entry of new company is the least threat though the entry of new imported
product always remains in the era of globalization.
Threat
of Substitute:
Many different drinks
are available in the market and buyer’s tendency to substitute the product
always exists. But for Cooper’s brewery
the threat of substitute is low in comparison to others because of its
uniqueness in its products and loyalty of the customers in their preferred
bands.
Bargaining
Power of Suppliers:
The bargaining power of
suppliers for brewers industry is usually low because of the easily available
raw material. But for Coopers, its geographical location and its lower bidding
power as compared to its competitors reveal the greater threat of suppliers.
Bargaining
Power of Buyers:
Buyers are price
sensitivity and have the tendency to examine various beers. The beer market in
Australia is highly influenced by the buyers because the buyers are loyal to
regional brands and the Generation Y costumers are attracted towards the
imported products. However, Coopers Brewery has managed to mitigate this
challenge by establishing the Coopers Club and maintaining its uniqueness in
product.
|
New
entrants
(+)
Low possibility because of high cost
(+) Economies of scale and scope favored
consolidation
(+)
Has its own distribution channel and marketing partner
(-)
possibility of imported brand to enter the market
|
|
Suppliers
(-)
Lower bidding capability
|
|
Industry
Competitors
Intensity
of rivalry
(-)The
Lion Nathan and Fosters are the strongest force occupying 94% of the
market.
(-)
competition remains in the premium products too
(+)Advantage
of having niche brand not affected by price
|
|
Substitutes:
Low
threat of substitute:
(+)Loyalty
of customers to preferred brands and taste
(+)Uniqueness
in product
(-)
Buyer’s tendency to substitute
|
|
Buyers
(-)Loyalty
to regional brands
(-)Young
generation preference towards the imported brands
(+)Coopers
club: Stability of buyers and increasing customers as chain reaction
(+)
Uniqueness in product attracts buyers
(+)
community projects
|
|
Bargaining power of suppliers
|
|
Bargaining power of buyers
|
|
Threats of new entrants
|
|
Threats
of substitute
|
Note: (+) merits due to company stratergy. (-)
weakness/ threats
3.3
PESTLE Analysis:
The PESTLE analysis
mainly focuses on the analysis of the external macro environment of the
industry. Political and legal environment affects every industry. The alcohol industry
is more affected by laws such as, higher taxation on alcohol to curb alcohol
drinking especial for drivers. Some unofficially organized cartel like
arrangements can also play an important role in industrial growth. Environmental
criteria on carbon foot print emission, criteria for waste disposal in
landfills and various environment Protection Acts may have impact on the
brewing industry. To mitigate this challenge, it has established an operation
brewing plant with many environmentally sound features. Economically Cooper’s
brewery is far behind its competitors due to its hesitation to grow outside the
family. However, it has established itself socially through Cooper’s club, fund
raising for community projects, sponsor in festivals and games.
3.4
Generic Strategy Alternatives Analysis:
A company can have two
competitive advantages; cost and differentiation (Poter, 1980). The three
generic strategies; cost leadership, differentiation and focus, of a company
are outcome of competitive advantage and its activities.
Target Scope
|
Advantage
|
|
Low cost
|
Product Uniqueness
|
|
Broad
|
Cost Leadership Strategy
|
Differentiation Strategy
|
Narrow (Market Segment)
|
Focus Strategy
(Low cost)
|
Focus Strategy
(Differentiation)
|
Source:
Poter’s generic Strategies, Strategic Management
The
Coopers brewery has differentiated its products targeting different customers
group. For example, Coopers Sparkling Ale targeted at hotels, restaurants and cafes;
Coopers Pale Ale targeted at female drinkers etc. During the period when there was a
concentration on economies of scale and national branding, Cooper
recognized that the taste of mainstream beer brands was similar.
So Coopers utilized this opportunity to introduce very different “cloudy”
beers.
Further the uniqueness in product can be
considered as its most important focused differentiation strategy which helps
the company to thrive in the stiff competition.
Cost leadership
strategy targeting broader market can have the advantage of having larger
market share. But for Cooper’s brewery, it is difficult to achieve the cost
leadership because of their low capital investment and less efficient
distribution channel as compared to its giant competitors. Furthermore, economy
of scale plays significant role for low cost production. The Niche marketing
strategy is one of the competitive advantages of Cooper’s Brewery. But due to
the Narrow market range (only within the Southern Australia), this strategy has
little contribution in increasing the total market share.
3.5
Competitors Position
Analysis
The two competitors of
Cooper’s brewery, Froster’s brewing group and the Lion Nathan occupy 94% of the
total Australian beer market. The
capital investment of these two companies is much greater than the Coopers
Brewery. These younger have companies established themselves in top two
position in Australian brewing industry through the following events:
- Series of merger
and acquisition
- Economy of scale
and scope
- Focus on mid and
upper market.
- Horizontal and
vertical extensions
4.
Recommendation
Above analysis shows
that Coopers brewery management has strategically handled the company in
various predicaments during the course of its 150 years business history. The
company’s position in top three breweries in Australia can be attributed to the
efficient managerial skill of board members and managers. Despite its continual
growth and better performance, there are some weaknesses within the company. The
following recommendations can assist those prudent managers to overcome some of
the shortcomings, to mitigate the challenges posed by new global trends and
perform better in the competitive global environment.
Increase
in Capital Investment:
The financial data
shows that the capital investment of Cooper’s brewery is minimal in comparison
to its giant competitors. So, a good capital investment is required for coopers
to be a significant player outside the South Australia. Attracting the
shareholders from outside the Cooper’s family can be one strategy to increase
its capital investment.
Integrative
Growth Approach:
Younger company, The
Fosters Brewing Group, is the market leader in brewing industry of Australia.
Its strategic move related to series of merging and acquisition has led it to
the topmost position. Lion Nathan is also extending its activities horizontally
and vertically. These are the current trends in Business Growth.
Buying small competing
business can eliminate the competitors and enable the company growth; buying
the suppliers can be helpful in undisturbed and continual supply of raw
materials; and better control over the distributing chains such as
supermarkets, acquisition of hotels and restaurants, owning the advertising
agencies can leverage the sales. These growth strategies can be advantageous
for the Coopers brewery to be a significant player outside Southern Australia.
Alliance
with Foreign Brewery:
As mentioned in the
case, the imported brands are becoming popular among the young generation Y
drinkers. So forming alliance with the foreign breweries and importing the
foreign can be good strategic move for Coopers to address the needs of new
generation.
In addition, the
Australian market can be saturated with many brewers. Therefore, such strategic
alliance with foreign brewery can be helpful in leveraging the sales of Coopers
export.
Focus
on Premium Product (Pale Ale):
Coopers brewery has a
competitive advantage of having unique product and unique marketing strategy.
Its Pale Ale has a market share of 7.7% in Australia. So, Coopers can perform
well in its sales by emphasizing the Pale Ale promotion. New marketing
strategies such as online sales and marketing, increasing its retail branches
in different location of the country can be helpful in raising the market
share.
5.
Conclusion
Coopers
Brewery has been able to distinguish itself from its competitors, the two
multinational giants, through its focused differentiation strategy and niche
marketing. Investment in production facilities, enlargement in brewing capacity
and joint venture with the Premium beverage for national distribution has
proved to be beneficial. The company can address the needs of new generation
and perform better in and outside Australia by increasing its capital
investment, making alliance with foreign brewery to import new brands, focusing
in its differentiation strategy and export its product and through the
horizontal and vertical expansion.
6.
References
Porter, M.1980. Competitive Advantage. Creating and sustaining
Superior Performance, page 4- 10.
Darren Dahl. 2010. How to
Develop a Business Growth Strategy. Inc. Magazine
Strategic Management. The
Value Chain. http://www.quickmba.com/strategy/value-chain/ Retrieved Date 2012/11/10
Nice post....
ReplyDeleteIts called a guide line post for capital investment analysis.
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