The period between the years 1975 and 1985 saw Coors enjoy a very successful business. Coors had weathered the storm that affected other competitors in the beer industry. The cost of raw materials in this period accounted for half the revenue of the beer companies, input costs had skyrocketed, and there was a decline in prices. Coors irrespective of these issues made huge profits, and began drastically expanding.
It was only in 1975 that Coors recorded its first drop in sales. The sales volume dropped by four percent. The company had never experienced drops in sales for two decades, although the company was running a large advertising company at that time. After the decrease in sales, the company sold less than twelve million barrels of beer. This exerted pressure on its profits that eventually affected the market valuation.
During this period, the company saw stagnant demand for its products. This limited its expansion because the company had to keep the production of its beer at seven million barrels yearly. Before this period, the company was going to launch projects according to which the production would average twenty million barrels annually. This problem is interconnected with another one, namely, capacity conditions.
The capacity conditions for Coors are based on small sizes. This period saw its capacity use fall to an average of eighty-four percent down from an impressive average of ninety-two percent. This was way below the industry’s utilization capacity. The company was operating below the industry performance, an exact opposite of the company’s performance in the decade that proceeded.
The fall in utilization capacity was also affected by competition. Coors initially enjoyed being physically close to the market. Whereas its competitors’ location was in Wisconsin and others were in Texas, its residence in Colorado was advantageous. Coors, therefore, filled the deficit created by the lack of the capacity by its rivals.
This changed during this period when the competitors increased their capacity barrels, which led to the elimination of the advantage, as such, Coors’ capacity fell. Another cause that led to the competitive deterioration of the company was the challenge brought by its poor operating practices. The company was facing frequent strikes by its workers and was involved in numerous legal suits initiated by federation unions.
The accusations ranged from forced loyalty, unjustified dismissals and discrimination based on race and sex among others. Suits from FTC and attempts to micromanage the wholesalers did more damage. FTC accused Coors of dictating the prices of their products to wholesalers, which reduced the scope of business since the criteria were strict and unacceptable to many.
Finally, Coors had a very poor marketing strategy. They relied on the beer preferences, which was unreliable when it came to increasing the volume of sales. Going forward, Coors must initiate a lot of changes to regain its lost status in the market. First, it must overhaul its operating practices.
Employees must be treated equally irrespective of their sex, race, or religious background. It should allow workers to form unions. The management and union officials can handle a crisis in a better way than the crowd. The company has to improve its marketing strategy and accommodate the modern methods; it has to reevaluate its policy that appears to be too strict for the modern market.