Strategic Business Analysis - Molson Coors

Running Head: STRATEGIC ANALYSIS: MOLSON COORS 1

Strategic Business Analysis: Molson Coors

Joshua Scott Neeper

Johnson & Wales University

MGMT 6800: Business Policy and Strategy

November 3, 2017

STRATEGIC ANALYSIS: MOLSON COORS 2

Abstract

The motivation behind this strategic analysis is to explore the history of Molson Coors

and examine their current strategy and overall performance compared to their top two

competitors, AB-InBev and Heineken.

Furthermore, this strategic analysis encompasses 23 sections of various insights, data,

trends, comparisons, and correlations ending with personal recommendations. Given the scope of

this analysis, statements, opinions, and research are backed by 54 various sources deriving from

databases, governmental agencies, reports, industry associations, leading authors, industry

professionals, experts, interviews, research case studies and current market developments.

Additional quantitative and qualitative data is outlined throughout the analysis and

illustrated in both the Appendix and Figures sections. The entirety of this strategic analysis took

a procedural approach to various areas that have proven to be vital success factors pertaining to

Molson Coors, as well as uncovering, recognizing and defining potential threats and

opportunities for Molson Coors’s current strategy and future direction.

This analysis has uncovered some critical concerns that are impacting Molson Coors’s

current performance including but not limited to strategy similarity, craft beer, cannabis,

declining beer consumption and stock performance.

This analysis is being conducted at a critical time given recent market developments

combined with an approximate 40% stock price decline over the past 52 weeks for Molson

Coors. It is strongly recommended that this analysis be taken seriously and should be explored

by Molson Coors’s executive team.


Table of Contents

Abstract ....................................................................................................................................... 2

Executive Summary .................................................................................................................... 5

Company History | Description ................................................................................................... 5

Industry........................................................................................................................................ 5

Comparing Leadership | Vision | Mission ................................................................................... 7

External Environmental Analysis.............................................................................................. 10

General Environment ................................................................................................................ 10

Political | Legal Segment ........................................................................................................... 13

Sociocultural Segment............................................................................................................... 15

Physical Environment Segment ................................................................................................ 17

Industry Environment ................................................................................................................ 17

Competitor Environment ........................................................................................................... 23

Future Objectives ...................................................................................................................... 23

Current Strategy ........................................................................................................................ 24

Assumptions .............................................................................................................................. 25

Capabilities ................................................................................................................................ 26

Internal Environmental Analysis ............................................................................................... 28

Four Criteria Test of Sustainable Competitive Advantages ...................................................... 28

Financials .................................................................................................................................. 29

Strategic Analysis ...................................................................................................................... 32

Final Analysis – Conclusions | Recommendations ................................................................... 35

Areas of Concern ....................................................................................................................... 35


Current Strategy Conclusions ................................................................................................... 38

Recommendations ..................................................................................................................... 41

Additional Ideas for Recommendation ..................................................................................... 47

Final Remarks ........................................................................................................................... 54

References ................................................................................................................................. 56

Appendix ................................................................................................................................... 67

Figures ....................................................................................................................................... 69


Executive Summary

Company History | Description

Molson Coors, headquartered in Denver, Colorado, and publicly traded on the NYSE

under the trading symbol TAP (MSN Money, n.d.), has grown into the world’s third-largest

brewer through acquisitions, and mergers. Their rich company history dates back to 1774 per

(Molson Coors, n.d.). Three individuals shaped the company’s narrative: John Molson, Frederick

J. Miller, and Adolph Coors (Molson Coors, n.d.).

Molson Coors’s diverse portfolio encompasses 98 different alcoholic brands across the

world including Coors Light, Coors Original, Mickey’s, Zima, Revolver, Miller Lite, Miller

High Life, Blue Moon, and several others (Molson Coors, n.d.).

Their ability to grow through mergers and acquisitions is well known in the industry.

Furthermore, they are recognized for brewing all Coors products with Rocky Mountain water in

Golden, Colorado. They have also become the industry pacesetter that reduced the “number of

miles driven, planning time of trucks and routes, number of resources required to satisfy the

customer and carbon footprint” (Molson Coors - ORTEC, n.d.).

Milestones are very critical and outlined throughout the company’s history. Each of their

successes, innovations, and efforts has contributed to not only their overall strategy but their

competitive advantages which have shown a trend of progression and focus on sustainability.

Industry

Molson Coors and their two top competitors, Anheuser-Busch (AB-InBev) and Heineken,

are classified under the NAICS Code 312120 Breweries, which engage in brewing both alcoholic

and non-alcoholic malt liquor, beer, and ale (SIC CODE, n.d.).

The beer industry has become one of the most competitive industries in the world.


According to (Brewers Association), the number of registered breweries in the United States

increased from 284 in 1990 to 5,301 in 2016 (N.D.). Global beer production has also increased

from 1.3 billion hectoliters in 1998 to approximately 1.96 billion hectoliters in 2016 (Barth-Hass

Group, n.d.). The conversion of a hectoliter is one hectoliter to 100 liters. It is no surprise that

beer is the most globally demanded alcoholic beverage and the third most demanded beverage

after water and tea (Barth-Hass Group, n.d.).

The top three beer production countries are Brazil, China, and the United States (Barth-

Hass Group, n.d.). Additionally, the United States has seen a rapid change in consumer palates

over the past five years as microbreweries have been the contributing factor for an increase in

registered breweries. However, the top five beers in the United States, based on sales, are Bud

Light, Coors Light, Miller Lite, Budweiser, and Michelob Ultra Light (Grocery Headquarters,

n.d.).

Six different companies own the top 20 beers in the United States. See Figure 1.1 for

U.S. rankings based on sales; data provided (Grocery Headquarters, n.d.). Additionally, Figure

1.1 allows for further segmentation and insight into this competitive landscape as illustrated in

Figure 1.2.

This industry’s competitive landscape presents complexities and fierce competition. This

competition provides my research and analysis with an abundance of possibilities regarding

impactful correlations, differing competitive advantages and strategies, and potential

recommendations.

Molson Coors has proved to be a successful company in the United States, but how do

they rank globally? According to (Business Insider), “China is home to three of the best-selling

beer brands worldwide. Snow, the top beer brand in 2014 is co-owned by SABMiller, the


second-largest global beer company. This pale lager accounted for more than five percent of beer

volume sales worldwide. Despite this, SABMiller generated 16.7 billion U.S. dollars in sales that

year” (N.D.).

Interestingly, SABMiller was acquired by AB-InBev in September of 2016 (Mickle,

2016). However, the United States Department of Justice | Office of Public Affairs required AB-

InBev “to divest stake in MillerCoors and alter beer distributor practices as part of SABMiller

acquisition” (Department of Justice Office of Public Affairs, 2016). This divestiture combined

MillerCoors and Molson Coors, which prevented the AB-InBev and SABMiller acquisition from

controlling “70 percent of beer sold in the United States” (Department of Justice Office of Public

Affairs, 2016).

According to (Roach, 2016), “five beer makers own more than 50% of the world’s beer,

Heineken, Carlsberg Group, CR Snow Breweries Ltd., AB-InBev, and SAB Miller.” The number

of competitors, brands, acquisitions, mergers, joint-ventures, and financial divestitures has

proven to be a spider web of variables that affect corporate strategies, taxes, market share,

corporate politics, and several other factors that limit a company’s competitive advantages.

Comparing Leadership | Vision | Mission

AB-InBev, Heineken, and Molson Coors each have distinctive leadership teams, visions,

and missions. The most significant distinction is within each of their leadership teams regarding

their diversity across gender, ethnicity, and countries of citizenship | nationality.

The Molson Coors Leadership team has 11 executives comprised of three women and

nine men with four ethnicities from four countries (Molson Coors, n.d.). The AB-InBev

leadership team is comprised of 21 male executives with two ethnicities from seven countries.

Brazilian citizens account for 12 of the 21 executives, and only three are from the United States


(ABInBev, n.d.). Heineken’s executive team has 10 executives -- two women and eight men with

two ethnicities from five countries (The Heineken Company, n.d.).

See Figure 1.3 for executive diversity illustration. This illustration shows that Molson

Coors has the most well-rounded executive team across the board based on Figure 1.3’s

trendline. Heineken was a close second while Ab-InBev is the most homogenous executive

make-up, as no women are on the executive team and the majority of their leadership is from

Brazil and other Latin American countries.

Another distinction between the three competitors includes their university studies and

pathway to leadership. AB-InBev’s leadership team encompasses 38 degrees, two Juris

Doctorates, 23 Bachelors, seven Masters, and six MBAs (ABInBev, n.d.). Additionally, the most

common Bachelor degrees include economics, engineering, and business administration

(ABInBev, n.d.). AB-InBev’s most notable universities include London School of Economics,

University of Pennsylvania, Purdue, Stanford, Amherst, Sheffield, TCU, Northwestern,

Georgetown, University of St. Gallen, and Harvard (ABInBev, n.d.). Lastly, 13 of their 21

executives progressed through AB-InBev over their careers with four of them coming out of their

management program.

Molson Coors’s executive team’s university education encompasses 19 degrees, three

Juris Doctorates, 10 Bachelors, four masters, and two MBAs (Molson Coors, n.d.). Their top

bachelor degrees include accounting, economics, and engineering from notable universities such

as University of South Africa, Duke, Harvard, Stanford and the University of Manchester. Their

executive career progression is very diverse as they have worked for companies such as

Hallmark, Bass, Mars, Pepsi, Cadbury, AB-InBev, Carlsberg, Campbell Soup, Unilever, Coca-

Cola and several others (Molson Coors, n.d.). However, none of Molson Coors’s executive team


progressed through management programs as AB-InBev’s executives have.

Heineken’s executive team’s education is fascinating as Heineken does not disclose their

executive’s educational backgrounds. After performing an online search on their executives, it

yielded insufficient information into their education, and the ones that did have degrees were

from uncommon universities. Overall, Heineken’s leadership team shows no direct correlations

between education and corporate hierarchy.

These competitors’ visions also vary as each of them provide insight into how they

operate, compete and make decisions. However, they share one common strategic initiative:

sustainability. Molson Coors’s vision is outlined in their 2025 goals, deploying practices and

making decisions that align with their beliefs: “responsible refreshing – enjoying one of life’s

simple pleasures, sustainably brewing – from grain to grass, and collectively crafted – for our

people and communities” (Molson Coors, n.d.).

Molson Coors’s vision is focused on sustainability and best practices. Similarly, AB-

InBev’s vision is a corporate culture surrounding three areas of focus, “a growing world, a

cleaner world, and a healthier world” (ABInBev, 2016). More in-depth research showed their

focus on some critical areas of concern around global food production, water conversation, and

climate change.

According to (AB-InBev, n.d.), “We know that volatility in the external environment

caused by water stress, soil and climate risks, infrastructure challenges and human rights issues

can be a barrier to growth and supply security. Today around 2.5 billion people rely on

agriculture for their livelihoods and the majority of these people are living on less than four USD

per day. With the world’s population predicted to exceed 9 billion by 2050, food production will

need to grow by 60% to meet increased demand. Meanwhile, 25% of global agriculture takes


place in areas with high water stress and extreme weather, which affects agricultural yields in

many parts of the world.”

Molson Coors’s last top global competitor, Heineken, is also focused on sustainability but

they place a high significance on other business functions. According to (The Heineken

Company, 2016), “HEINEKEN is focused on six business priorities. They help us to achieve

sustainable growth in all markets and to create value out of our heritage, global scale, people,

brands and the green thread that unites us all around the world, the Heineken® brand.”

Their six priorities include, “win in premium led by Heineken, shape the cider category,

lead by cool marketing and innovation, be commercially assertive, drive end2end productivity,

and brewing a better world” (The Heineken Company, 2016).

Each of these companies has one common characteristic within their visions –

sustainability. This commonality provides more insight into particular trends that are apparent in

the external environment, and additional information contributing to driving forces.

External Environmental Analysis

General Environment

The general beer industry environment has experienced several driving forces over the

past several years. However, some of these driving forces have presented different market trends

that turned into key success factors for Molson Coors, AB-InBev, and Heineken. The most

critical characteristics and trends include overall beverage consumption, industry consolidation

through mergers and acquisitions, craft breweries, shifting consumer preferences, and corporate

sustainability initiatives.

Beer production has been stagnant for the past five years. According to (Barth-Hass

Group, n.d.), global beer production has remained at an annual rate of 1.96 to 1.97 billion


hectoliters from 2012 to 2016. See Figure 1.4 for graphical illustration. Though beer production

has been relatively stagnant for the past five years, overall global alcohol consumption is

projected to increase over the next several years.

Global alcohol consumption in 2016 was approximately 250 billion hectoliters and is

poised to increase to an estimated 269 billion hectoliters by 2020 (Nordeste, Consumption of

alcoholic beverages worldwide from 2016 to 2020, n.d.). China, the United States, Brazil,

Germany, and Russia were the leading countries for overall alcohol consumption (Nordeste &

Euromonitor, n.d.). China’s alcohol consumption is the highest in the world and approximately

double that of the United States’ (Nordeste & Euromonitor, n.d.).

Beer consumption per capita contradicts China’s impressive overall alcohol consumption

as the 2015 leading beer consumption countries per capita included the Czech Republic,

Seychelles, Germany, Austria, Namibia, Poland, Ireland, Lithuania, Belize and Romania (Kirin;

Cie Bartholomaus; Canadean, n.d.). For perspective purposes, “Czech Republic was ranked first

with an annual beer consumption of 142.4 liters on average per person” (Kirin; Cie

Bartholomaus; Canadean, n.d.).

Beer and overall alcohol consumption are directly related, but in 2015 Africa was ranked

fifth in beer consumption (Kirin, n.d.). Africa could be an emerging market, but distribution

challenges could limit market entry. Distribution and per capita consumption are critical

components to successful sales. Overall, China’s consumption is impressive, but their per capita

consumption is relatively weak.

Distribution has proven to be a severe market barrier for global beer companies like

Molson Coors, but they have managed to overcome those distribution challenges like their

competitors have through mergers, acquisitions and licensing agreements.


Acquisitions have become a necessity for the top competitors in the industry, due to rapid

changes in consumer preferences, and the need to grow revenue or at least maintain market share

in the world. These acquisitions and mergers have benefited Molson Coors by increasing their

revenue and opening new markets and distribution channels.

In the United States, consumer preferences and tastes have driven Molson Coors’s

acquisition pattern. According to (Barth-Hass Group, n.d.), “The American beer palate has

undergone changes in recent years. More and more consumers are turning to craft beer over the

well-established name brands”. This consumer shift can also be attributed to other driving forces

in the overall economy.

Movements such as locally sourced and grown have impacted the beverage industry,

among others. This movement has shown that consumers care about supporting local businesses,

and care about supply chains. Furthermore, this sense of consumer awareness has forced

companies to adapt by focusing on sustainability and deploying more best practices.

Molson Coors, AB-InBev, and Heineken are focusing their efforts on sustainability.

Molson Coors’s sustainability has been a critical success factor as they have been able to achieve

water conservation goals, reducing their environmental impact and operating costs.

The overall general environment presents some surface trends, but the most concerning

trend is that all three of them are focused on sustainability. This is problematic as each of them is

merely trying to mimic each other’s competitive advantages by focusing on doing something

better than the competition.

This industry has proved to be highly competitive, and therefore, their strategies are

lacking value innovation. There are three of the seven segments in the external environment that

are perplexing political/legal, sociocultural and the physical environment.


Political | Legal Segment

There are several components to the political and legal segment in the beer industry.

M&A (mergers and acquisitions), antitrust laws, and anticompetitive prices are just a few of the

components within this segment. Each of them has evolved over the past several decades, and

today’s current environment has forced some of these companies to adjust their strategies

moving forward to stay compliant in accordance with U.S. antitrust laws and legislation.

M&A, coined as Merger Monday on Wall Street is “when the details of the mergers are

finalized over the weekend and announced on Monday” (Farlex Financial Dictionary, 2009).

There has been plenty of hype on Wall Street and excitement when it comes to M&A’s over the

past several years. See Figure 1.5 for the number of M&A’s valued at $1 billion or more from

1995 to 2015, provided by (Wells, Nick; Chemi, Eric, 2015).

Figure 1.5 does not illustrate industries, but it provides insight into this political and legal

environment. According to (Wells, Nick; Chemi, Eric, 2015), there have been 606 M&A’s

valued at $1 billion or more from 2010 to 2015. That averages to 101 M&A’s per year valued at

$1 billion or more. M&A activity has been widespread across industries, but this amount of

activity valued in the billions across industries shows industry consolidation that leads to

increased levels of antitrust law infringement and anti-competitive pricing concerns.

Anti-competitive pricing is nothing new to the beer industry. According to (Ascher &

Institute, 2012, pp. 16-17), “In 1986, New York State filed suit against several brewing

companies and their distributors.” Anheuser-Busch and Miller Brewing were the two most

notable brewers that “entered into market allocation contracts where each franchised wholesaler

was assigned a territory and forbidden from selling beer to distributors outside its assigned area”

(Ascher & Institute, 2012, pp. 16-17). Furthermore, “In 1992, the State of Texas filed suit against


three Coors beer distributors for damages and injunction, alleging the defendants conspired to fix

prices for the sale and distribution of beer in Texas” (Ascher & Institute, 2012, p. 17).

These antitrust and anticompetitive price-fixing lawsuits are not only confined to the U.S.

but also reach into Europe. “In the period of 1996-1999, four large beer companies were engaged

in price fixing and market carve-ups in the Netherlands. Three of the companies were fined

millions of euros: Heineken, 219 million; Grolsch, 31.7 million, and Bavarian, 22.9 million. The

fourth company, InBev, was not fined because it was the whistle-blower in the case” (Ascher &

Institute, 2012, p. 18).

Overall, antitrust and anti-competitive practices have been a norm in the beer industry

and are not only confined to the U.S. and Europe. Mexico, Luxembourg, and South Africa have

experienced severe issues and behaviors pertaining to antitrust and anti-competitive practices

(Ascher & Institute, 2012, p. 18). Whether it is SABMiller’s 2011’s 88% South African market

share or Heineken’s 72% market share in Greece (Ascher & Institute, 2012, pp. 20-21), these

trends show concerning behavior and illegal monopolization activity. However, the legal and

political environment can be navigated through legal strategies outside the scope of this analysis.

These strategies are worded perfectly by (Ascher & Institute, 2012), “multinational corporations

form joint ventures or strategic alliances to challenge the leader. For many observers, this

signifies attempts at increasing competition. For others, it may bolster the perception of market

allocation through duopoly or oligopoly”.

The political and legal environment has shown concerning practices and trends

encompassing AB-InBev, Heineken, SABMiller, and Coors. Since their behaviors and history

are similar, how do the world’s three largest brewers compete differently? Moreover, are there

any competitive advantages or trends within other environmental segments?


Sociocultural Segment

The sociocultural segment encompasses diversity, women, attitudes, and other societal

issues or topics. As mentioned earlier, each of these competitors has differing leadership with

women having limited exposure on the executive level. However, Molson Coors is the only

competitor to have an overall diverse team encompassing ethnicity, gender, education and career

progression. Given the facts and research, the beer industry is a relatively male dominant

industry. This trend might be appalling to some, but personally, I believe this is not only a trend

in the industry but a significant weakness for each of the competitors.

Like different alcohols, there are different customer groups segmented based on gender

and ethnicity. The most exciting figures and information within this industry’s sociocultural

segment encompass women, generations, ethnicity and their relation to craft beer. These three

sociocultural aspects provide substantial influence that is impacting each of the top three

breweries’ performance and strategy.

In a recent article written by Caroline Southern from Hop Culture, she reported on some

interesting trends that the Brewer’s Association and Auburn University found. Per (Southern,

2017), “women comprise 25 percent of all craft beer drinkers. The demographics within the

industry is only slightly better; a study by Auburn University indicates that women represent 29

percent of all brewery workers.” Additionally, women who drink beer on a weekly basis are

likely to choose craft beer at the same probability as men (Herz, 2016). Interestingly,

approximately 45% of beer drinkers choose craft beer opposed to national and international

brands (Herz, 2016).

Of the 45% craft beer drinkers, four generations comprise of the overall beer

consumption in the U.S., Millennials, Gen Xers, Boomers and Matures (Herz, 2016). Figure 1.6


illustrates each generations’ market share and compares weekly beer drinkers to weekly craft

beer drinkers (Herz, 2016). Furthermore, Figure 1.6 shows that Millennials make up 29% of the

drinking age, and prefer craft beer 57% of the time compared to 41% of non-craft beers.

According to (Herz, 2016), Boomers represent 35% of the market, and the margin of difference

between craft and non-craft beer drinkers is only a 10% difference; 27% of weekly Boomer beer

drinkers prefer non-craft beers.

Ethnic data also showed some trends in the sociocultural segment. According to (Herz,

2016) Hispanics who account for 15% of the beer drinking market prefer craft beer more than

non-craft by 1% while Asians who account for only 6% of the market prefer craft beer 3% more

than non-craft. See Figure 1.7 for ethnic comparison, provided by (Herz, 2016).

Julia Herz provided some very in-depth data into the sociocultural segment. According to

(Herz, 2016), “At the Craft Brewers Conference, held in May in Philadelphia, Mike Kallenberger

(Troposbrand.com) and Lindsay Kunkle (The Futures Company) presented one of the most in-

depth talks on demographic data for the craft beer lover I’ve seen to date.” Julia ended her article

and reporting with some key takeaways that I believe are key to the beer industry’s sociocultural

segment.

▪ “Many purchasers of craft beer identify with brands that are independent and local, and

that align with core concepts including authenticity, community, and sustainability.

▪ Individual identity is more fluid and flexible than ever before and consequently, values

have become a more critical means for consumers to connect with brands.

▪ Overt targeting of women or Hispanics may be less effective than eliminating perceived

barriers to entry into the world of craft beer.

▪ For both women and Hispanics, social media aren’t used for brand decisions as much.


▪ Mike and Lindsay emphasized that current Hispanic craft drinkers are much more in

touch with their American side than potential new drinkers, yet they aspire to

biculturalism” (Herz, 2016).

Each of these takeaways provides further insight into the beer industry’s sociocultural

forces and areas that impact Molson Coors, AB-InBev and Heineken’s current strategy and

potential market adaptability.

Physical Environment Segment

The physical environment segment within the beer industry is very critical as referenced

earlier. Beer is the world’s third most consumed beverage after water and tea. However, water is

used to make beer. Each of these competitors has made strides to become more sustainable by

implementing new initiatives to reduce waste, conserve water and reduce their overall

environmental impact. Research has not shown substantial differences between the three

competitors. Therefore, their efforts in this capacity are not considered competitive advantages.

The general environment and the three segments have shown crucial factors that Molson

Coors must consider. There is an apparent demographic trend that is presenting emerging market

opportunities between craft breweries, gender, ethnicity, and age. Diversity, industry

consolidation, craft beer, sustainability and consumer trends have proved to be a significant

discussion within the environment. The Industry Environment section will explore other strategic

considerations as it pertains to Porter’s Five Forces.

Industry Environment

The industry environment is segmented into five categories that represent Porter’s Five

Forces Model: threat of new entrants, rivalry among competing firms, threat of substitute

products, bargaining power of suppliers and bargaining power of buyers. See Appendix A for


Porter’s Five Forces Model.

The threat of new entrants into the beer industry has forced each of these companies to

rethink their strategies. Economies of scale have always posed a threat to new entrants, but this

has not deterred nor dissuaded new entrants into the beer market. The rise of craft breweries has

made its impact on the beer industry and does not show signs of slowing down.

According to (Brewers Association, n.d.), there was a 717% increase in the number of

craft breweries that opened between 2006 and 2016, for a total of 826 new openings in 2016. See

Figure 1.8 for graphical illustration. This rapid increase has transcended into a cultural trend

which poses a significant threat. “Craft breweries have a few things working in their favor,

perhaps the most important of which is a customer base that's culturally diverse. Brewers will

also focus their marketing efforts on capturing the expanding consumer base represented by

female consumers. Craft beer lovers also tend to stay abreast of local trends in the market and are

generally eager to try something new. If they like what they taste, they quickly spread the word,

meaning hometown customers can quickly become evangelists for a brewery's product as they

visit and move to different cities” (Brewers Association; The Futures Company; Statista, n.d.).

Research has shown that millennials account for 57% of the craft beer demand (Brewers

Association; The Futures Company; Statista, n.d.). Furthermore, with the aging population of the

Baby Boomer generation, it should be assumed craft beer demand will increase year over year,

presenting a significant threat to Molson Coors, AB-InBev, and Heineken. Craft beer is not the

only threat to this industry. Substitute products also pose a risk.

The threat of substitute products is a broad scope regarding various alcoholic beverages.

This category includes wine coolers, spritzers, tea, lemonade, and several other product

innovations such as hard cider. However, the recent rise in cannabis/THC drinks could

https://www-statista-com.jwupvdz.idm.oclc.org/statistics/289538/us-craft-beer-drinkers-by-ethnicity/


potentially pose a threat, but given the legality and non-existent presence in alcoholic bars, this

topic is difficult to measure by impact. Additionally, avid or weekly beer drinkers could be

turning to legal cannabis in states such as Colorado and California. Beer and cannabis deliver a

“buzz” feeling. Therefore, cannabis and other alcoholic beverages such as cider are considered

substitute products.

Worldwide demand for cider has increased dramatically. According to (Demeter Group;

Euromonitor, n.d.), worldwide sales have increased 254% in the 2006 to 2016 interim. This

equates to an annual increase of approximately 25.4%. See Figure 1.9 for graphical illustration.

As mentioned earlier, millennials are the number one consumer of craft beer. This

demographical information has allowed cider producers to target beer and wine drinkers.

According to (Sally, 2016) from Wine & Craft Beverage News, “Carla Snyder,

Agricultural Entrepreneurship and Marketing Educator with Penn State University, calls hard

cider the fastest growing segment of the craft beverage market”. Over the past 10-years, cider

has been the fastest growing beverage segment in the world (Sally, 2016). Carla Snyder’s

research showed “52 percent of cider producers are marketing directly to beer or wine drinkers”

(Sally, 2016). Additionally, these cider makers are targeting 21 to 40-year old’s, and the demand

has shown equal consumption between men and women (Sally, 2016).

Molson Coors and its top two competitors compete globally, and with Europe accounting

for 66% of the market share for cider consumption (National Association of Cider Markets, n.d.);

this threat becomes more apparent while showing signs of emerging market opportunities.

Figure 2.0 illustrates 2014 worldwide consumption, by region (National Association of Cider

Markets, n.d.). Figure 2.0 provides an interesting data point as Africa, and the Middle East

accounted for 10% of the market share, tied with the United States (National Association of


Cider Markets, n.d.). Africa and the Middle East pose a question around the probability and

possibility of being a current or future emerging market.

Cannabis has proved to be another substitute threat to the beer industry for those drinkers

seeking the “buzz effect”. Empirical research has shown that approximately 24 million

Americans used cannabis in the past month during 2016 (SAMHSA, n.d.). For perspective

purposes, recreational and medical cannabis has grown into a multi-billion-dollar industry. In

Colorado alone, cannabis sales were approximately $1.3 billion in 2016 (The Cannabist;

Colorado Department of Revenue; Denver Post, n.d.).

Medical marijuana users use cannabis for assorted reasons. Standing at 18%, replacing

alcohol was the fourth leading reason behind relaxation, sleep, and mood elevation according to

(HelloMD, n.d.). HelloMD’s research provides a direct correlation and suggests that cannabis is

impacting the beer industry as an alternative or substitute product. This impact is quantified by

Jack Robertiello in his recent article where he reported on Cowen & Company’s financial

analysis. According to (Robertiello & Company, 2016), “sales volume of “below-premium”

beers is down 2.4% year-to-date in the three states; “premium domestic” beers are down 4.4%

year-to-date”.

Consumer trends and preferences are changing, and the threat of substitute products such

as cider and cannabis are encroaching on the beer industry’s revenue. These two substitute

products must be considered within Molson Coors’s strategy and any recommendations made.

Additionally, these two substitutes are creating areas of opportunities that must be considered

when examining the bargaining power of buyers.

The bargaining power of buyers is a critical component of the beer industry. Threats of

potential entrants and product substitutes have provided valuable insight, research and data that


is directly related to the bargaining power of buyers or customers. Molson Coors, Ab-InBev, and

Heineken are very diversified companies regarding product mix. They have managed to adapt by

acquiring craft breweries, but they have been unsuccessful addressing the threat of substitute

products such as cider. Given these company’s diverse product lines, their product’s prices are

not impacting their performance as their price points meet various demographics and target

markets.

Therefore, the bargaining power of buyers lies within their palates, and attraction to local

flavors and businesses. Craft breweries have increased their market share as pointed out earlier.

This trend can be interpreted as consumers’ desire to support local business, willingness to try

new flavors, and stay trendy. Consumer preferences have dictated the direction of the beer

industry and breweries’ growth strategies as the research and data as shown throughout this

analysis. Therefore, creating new products and new flavors add to the challenges these three

competitors must overcome.

Though their impressive growth through M&A’s is well-noted, any continued M&A

activity could present legal issues under antitrust laws. Additionally, this continued growth

strategy is not sustainable as their ability to innovate new products decreases when their focus is

on acquiring competition, and up-and-coming products.

The bargaining power of suppliers within the beer industry is another force that can

impact the industry. However, this factor varies within this industry depending on distribution.

Supermarkets, bars, liquor stores, and sponsored events are downstream outlets that impact the

bargaining power of suppliers within this industry. Arguably, bargaining power of suppliers

exists in upstream operations as agricultural supply chains and economies of scale can impact

commodity prices for hops, wheat, and barley. Such increases are usually absorbed more easily


with market leaders like Molson Coors, AB-InBev, and Heineken while other competitors such

as craft breweries would have to increase their prices to stay afloat.

Downstream outlets have seen the bargaining power of suppliers as mentioned in the

political and legal segment. Thanks to anti-competitive pricing enforcement in this particular

industry, the bargaining power of suppliers have decreased as one can walk into a supermarket

today and see a wide variety of domestic and imported beers including a plethora of craft beers.

Retail shelf space is still a competitive advantage, as many retailers sell shelf space.

However, consumer demand for craft beers has forced some retailers such as HEB in

Texas to carry a wide array of craft beers. Per (HEB, n.d.), they have 471 different kinds of

imported beer, 1,303 different craft beers, 381 domestic beers, 377 malt beverages including

ciders and coolers, 18 non-alcoholic beers, 57 seltzers, and 131 drink mixers. Based on HEB’s

product offering, the bargaining power of suppliers is very limited in downstream operations.

Each of these forces has proven to be intertwined, and they continue to increase the

competitive landscape within the industry by creating a rivalry among competitors.

The rivalry among competing breweries varies depending on the beer segment. Craft,

micro, regional, domestic, international, lager, ale, pale ale, IPA, bock, light, dark, and porter are

just some examples of different types of beer that can be found in a downstream outlet. Each of

these product categories creates tremendous competition among competing breweries, but the

sheer amount of choices can confuse consumers.

This rivalry has forced breweries to find new ways to market their different beers in a

grocery environment. HEB, as mentioned earlier, allows customers to build their own six-pack.

Breweries such as New Belgium offer a “Folly Pack”, variety pack with four different beers

(New Belgium, n.d.). Variety packs have become popular across the country, and as a Texan, I


have noted that the grocery stores always carry them from New Belgium to Shiner Bock. Variety

packs have been trendy for the past few years, but another rivalry has emerged -- seasonal beers.

From summer to October to winter, each of these seasons represents a time when consumers can

drink seasonal beers that include pumpkin, spices, and lemonade.

Overall, Porter’s Five Forces Model provides valuable insight into the beer industry’s

environment. Seasonal brews, variety packs, consumer pallets, and economies of scale bring

these five forces into focus as they show a necessity for breweries to create a differentiating

strategy that increases value, and seize opportunities that lie within product substitutes and

potential market entrants.

Competitor Environment

Future Objectives

Molson Coors, AB-InBev, and Heineken have various goals or objectives. However, as

mentioned earlier, there are very common objectives between the three. The most apparent

objective these competitors share is water conservation.

Heineken has three objectives outlined in their 2020 priorities: reduce brewery water

consumption, invest in water stewardship initiatives in water-stressed areas, and treat all

wastewater before discharged back into the environment (Heineken, n.d.). AB-InBev water

priorities focus on water use, watershed protection and their partnership with Water.org, an

initiative “Buy a Lady a Drink” (AB-InBev, n.d.). Per (MolsonCoors, n.d.), their water

objectives include: “improve water efficiency and manage wastewater in our breweries, lead

water conservation, improve soil health and biodiversity, and advance water restoration efforts in

our brewery watersheds; and, reduce water use in our agricultural supply chain”.

Water and sustainability are vital areas of focus for each of these competitors as their


actions emphasize their future objectives. However, other future objectives are aligned more

closely with their current strategies.

Current Strategy

Molson Coors’s current strategy encompasses many priorities that focus on sustainability

and financial growth. According to a Q2 2017 presentation, some of their 2017 global strategic

priorities include executing an integration-cost savings plan, driving global capability through

top line growth, increasing international performance, and making productivity improvements

(MolsonCoors, 2017). Their current strategy is relatively broad compared to Heineken’s.

Heineken’s current strategy is very specific and easy to find as they do not shy away from

explicitly displaying it on their website and in their 10K. Heineken’s current strategy

encompasses six business priorities: “win in premium led by Heineken, shape the cider category,

lead by cool marketing and innovation, be commercially assertive, drive end2end productivity,

and brewing a better world” (Heineken, n.d.).

“Grow global brands, generate more excitement around beer, raise the perception and

relevance of core beers, and enhance consumer experience by providing more choice” are AB-

InBev’s top four priorities and current strategy (AB-InBev, n.d.).

These three strategies appear to be aligned with similar direction and sustainability.

Growth strategies, however, are different. What is Molson Coors’s growth strategy? According

to a media presentation listed on their website, their growth strategy is supported by three pillars:

“maximizing the profitable growth opportunities in our core markets through focus on brands,

innovation, and cost management; accelerating our push into new and emerging markets to our

brands globally; looking for M&A opportunities that meet our criteria for generating shareholder

value and that provide solid growth platforms for our business brands” (MolsonCoors).


Overall, these competitors are employing similar strategies which lead to some

fundamental assumptions. On a side note, AB-InBev’s focus on enhancing consumer experience

is an outlier.

Assumptions

Many assumptions can be made within this competitive market. From sustainability and

water conservation plans to increasing sales and managing risk, these competitors acknowledge

several market conditions and factors within their current strategies. Volatility and generic

growth strategies are two fundamental assumptions affecting this industry and Molson Coors

specifically.

Volatility in this context is described as an evolving market, pertaining to consumer

preferences, craft brewery competition, industry consolidation and substitute products. Generic

growth strategies are described as mimicking or deploying similar strategies of the competition

such as M&A’s and sustainability.

Consumer preferences and the rise of craft breweries in the United States has forced

Molson Coors to adapt to these market conditions through M&A activity. Their reaction to these

conditions has been anything but generic. According to their 2016 Annual Report (10K) “we

have experienced vast expansion in the craft beer industry and have accordingly strategically

acquired several craft breweries in the recent year” (MolsonCoors, 2016).

Based on Porter’s Five Forces Model and Molson Coors’s acknowledgments and actions,

it is to be assumed that Molson Coors will continue with their current strategy. Additional

assumptions are listed below.

▪ Craft breweries will pose significant challenges for Molson Coors’s and other market

leaders.


▪ Consumer preferences will continue to change.

▪ M&A activity will continue.

▪ Water conservation and sustainability will remain to be a key focus within the industry.

These assumptions have been the year to year trend. Therefore, Molson Coors is

operating under the status quo. Assumptions as it relates to their competition and the industry are

considered the same.

Capabilities

Molson Coors has several capabilities that are strengths and competitive advantages in

the industry. Distribution, technology, and sustainability are functional areas that highlight their

capabilities.

Molson Coors has been recognized for their distribution from industry experts. Over the

years, they have made several gains in reducing their footprint. These three functional areas are

interconnected, which have increased their efficiency, thus resulting in environmental footprint

reductions. In 2013, Molson Coors set out to improve their distribution by implementing and

integrating a logistics software technology (Ortec’s LEO) into their ERP system, SAP (Marty,

2014). Their integrated approach and search for a logistics software had to achieve three goals:

“building routes, building pallets, and loading trucks efficiently” (Marty, 2014).

The logistics platform was unique as it possessed several technological advances. 3D

route planning, geocoding, and simultaneous dynamic route planning and load building were

some of the advancements within this logistics platform (Marty, 2014). Ortec’s software

program, Leo, optimized “routes, loads, and pallets; reducing load planning time; increasing

trailer utilization; and eliminating empty miles. Though this software helped them achieve

logistical goals, its ability to interface with future technology advancements helped pave the way


for their 2025 sustainability goals and new technological advancements.

Sustainability has been the overall trend with Molson Coors and its competitors.

However, this focused strategy has equated to operational savings that have increased their

manufacturing and sustainability capabilities. Water, energy and carbon, and waste are three

areas of sustainability that Molson Coors measures and tracks. Their sustainability has made

notable gains. According to (Marty, 2014), “the company announced that between 2008 and

2012, it saved $10 million per year due to increased efficiencies, including reduced energy and

water use, reduced waste fees and taxes, and sales of materials that it would otherwise have

disposed of”.

Their sustainability success is impressive, but the results can be attributed to their

technological advancements and human capital capabilities. Their 2017 Environmental, Social,

and Governance Report speaks to these capabilities. According to (MolsonCoors, 2017), “We are

also committed to investing in wastewater treatment facilities and generating clean energy from

this waste stream. This technology allows us to treat our wastewater and generate biogas that can

be used to produce heat and electricity needed in our breweries.” This technology might come

across as cutting edge, but biogas is nothing new as companies such as Mars have implemented

this technology in some of their production facilities like the one in Waco, Texas. In 2008, Mars

and the Waco, Texas landfill went live with a methane pipeline that captured the natural biogas

that fuels Mars’s energy needs (Waste-Management, 2008). According to (Waste-Management,

2008), “In addition to saving the company US $600,000 a year in energy costs, the project will

also reduce more than 10,000 tons of carbon dioxide equivalent, which has the same

environmental impact of avoiding the emissions of 1,900 cars.”

Overall, Molson Coors has many other capabilities not discussed herein, but their most


notable ones include distribution, technology, and sustainability. These are robust capabilities

that speak to their economies of scale and are aligned with their competitors’ capabilities.

Therefore, the Internal Environmental Analysis section will outline Molson Coors’s distinct

competencies as it relates to the Four Criteria Test of Sustainable Competitive Advantages,

subsequent with a financial overview and comparison, and strategic analysis.

Internal Environmental Analysis

Four Criteria Test of Sustainable Competitive Advantages

Valuable Capabilities. Molson Coors’s distribution and economies of scale allow them to adapt

to market conditions, and leverage their global supply chains, neutralizing market entrants’

ability to gain rapid market share or experience exponential global sales growth.

Rare Capabilities. Biogas technology and agricultural neural networks are considered rare

capabilities that Molson Coors possesses. These two capabilities have a high probability of

currently being used by their top two competitors, but an exponentially low probability among

smaller companies such as craft and regional breweries due to the initial cash outlay and ongoing

financial requirements.

Expensive-to-Imitate Capabilities. Biogas technology, advanced manufacturing technology

and penetrating emerging markets are not easy for competitors to develop, replicate or duplicate

other than their top competitors.

Non-substitutable Capabilities. Rocky Mountain water used to manufacture Coors, reduction in

greenhouse emissions, reduction in water consumption or usage, and the process of reducing

overall carbon and energy footprint are non-substitutable capabilities that Molson Coors

possesses as methods and processes are proprietary.

Overall, these capabilities meet or pass the criteria outlined in the test when examining


the industry as a whole. However, these capabilities resulting in core competencies are not all

competitive advantages. Molson Coors has several competitive advantages when compared to

smaller breweries. The applicability and competitor comparison drastically narrows this list of

competitive advantages, as their top two competitors AB-InBev and Heineken have the

resources, human capital, economies of scale, distribution, technology, and sustainability goals

and plans in place to compete and adapt accordingly.

Arguably, brand equity and marketing could be considered competitive advantages, but

measuring brand equity and performing a marketing analysis would require access to specific

data that is not public information. Human capital drives these core competencies and

capabilities, but financial insight provides the pathway of realizing and achieving sustainable

competitive advantages as it relates to Molson Coors’s potential competitive advantages,

potential threats, weaknesses and possible concerns.

Financials

The most active quantitative comparison this analysis can provide is financials. This

section provides an overview of financial positions and trends over the past five years: 2012 to

2016. All data is derived from www.morningstar.com.

Profitability. From 2012 to 2016 Molson Coors has outperformed both AB-InBev and Heineken

regarding profitable growth. Figure 2.1 illustrates a five-year interim across five measurements:

revenue, gross profit, EBITDA, ROA, and ROE.

Each competitor has increased their revenue and gross profit at a similar rate. However,

Molson Coors has drastically increased their EBITDA, ROA, and ROE by over 200% in the past

five years, whereas AB-InBev and Heineken show negative trends across these three categories.

This five-year performance shows that Molson Coors has been effectively leveraging their assets

http://www.morningstar.com/


and equity through sound operational improvements and initiatives.

Liquidity | Financial Health. The liquidity and overall financial health of these competitors are

widely different from one another. Figure 2.2 illustrates the five-year liquidity and financial

health of these competitors.

Figure 2.2 presents several areas of concern for Molson Coors and the other competitors.

The current ratio shows no signs of concerns, but Molson Coors’s quick ratio, financial leverage

and debt to equity ratio require additional insight. Molson Coors’s quick ratio has decreased by

18.87% over the past five years. This means that Molson Coors is either struggling to their meet

short-term obligations with liquid assets or - given the amount of M&A’s over the past five years

- they have been experiencing some A/R challenges with financial integration. A ratio higher

than one would be most ideal.

Figure 2.2’s illustration of financial leverage shows that Molson Coors’s financial

leverage has increased 26.60% over the past years. 2016 was the highest at 2.57. However, this

level is not concerning as their 2016 financial leverage is most likely contributed to the

SABMiller transaction. Their financial leverage is still less than AB-InBev and Heineken.

Furthermore, this ratio should be carefully monitored every quarter as it relates to EPS, earnings

per share, and how it affects their stock performance. Any decrease in Molson Coors’s EPS

could create a volatile stock performance.

Molson Coors’s debt to equity has increased 132.56% over the past five years according

to Figure 2.2. However, their current level of 1.00 is not concerning when compared to AB-

InBev’s 1.6 for 2016. Molson Coors’s debt to equity ratio of 1.00 shows signs of low financial

risk, but any return to past years’ levels could signal weak revenue growth. Furthermore, their

ability to manage their debt to equity shows signs of conservative growth outside of the


SABMiller transaction. Additionally, their low debt to equity positions them and provides the

ability to make future acquisitions or other capital investments by leveraging their equity. Any

substantial increase in their debt to equity would signal an immediate increase in interest

payments, reducing their bottom line.

Efficiency. The efficiency levels vastly differ between these competitors. Figure 2.3 illustrates

four 2016 efficiency measurements: receivables turnover, inventory turnover, day’s sales

outstanding and days inventory.

Molson Coors’s 2016 receivables turnover was 9.19 which translates into an average of

39.72 days before they receive payment from their accounts or clients. This is somewhat

concerning when the time value of money is taken into consideration. However, Molson Coors

has improved their efficiency within this measurement by 40.52% from 2012 to 2016. Figure 2.4

illustrates this trend over the past five years. Molson Coors has dramatically reduced their

receivables turnover by an aggregate of 16.09 days as Figure 2.3, and Figure 2.4 illustrates.

Inventory turnover tells a different story. Molson Coors’s inventory turnover has

decreased by 18.89% over the past years. There are assorted reasons that could be contributing to

this trend such as shrinkage, theft and perishable inventory that has expired. Miscommunication

between demand planning and sales forecasting are contributing factors that can create volatility

within this measurement. However, packaging design changes and printing changes can force a

company to destroy inventory. Refer to Figure 2.3 and 2.4 for 2016 data and the five-year trend.

Another improvement that Molson Coors has made over the past five years has been their

day's sales outstanding. Like their impressive receivables turnover, they have improved by

28.85% over the past five years. Their collections department has been improving, but their 2016

level approximately eight days more than AB-InBev. Refer to Figure 2.3 for comparison and


illustration.

The last measurement used to compare efficiency is day’s inventory. Molson Coors’s has

increased this by 23.34% over the past five years. See Figure 2.3 and 2.4 for data and

illustration. Day’s inventory is a critical measurement in this industry as beer is perishable and

carrying costs typically increase. The longer beer sits, the more susceptible a brewery is to

product returns or spoilage. Molson Coors’s day's inventory is acceptable at this time given AB-

InBev’s current level of 69.45 days, 20 more days than Molson Coors.

Overall, Molson Coors’s financials have shown a positive outlook on their operations.

The data and figures provided in this section have proved that Molson Coors has a sound

operations team that is consistently improving the company’s financial position year over year.

There are no immediate concerns regarding Molson Coors’s financial position. Furthermore,

given the rapid increases in profitability and efficiency, their improvements have helped save the

company money, but whether Molson Coors is too fiscally conservative is questionable. Their

five-year growth has been impressive, but further analysis has shown when the 2016 SABMiller

transaction is taken out of the equation, then Molson Coors’s growth is anything but impressive,

as they have shown stagnation. Lastly, their operational improvements over the past several

years are benefiting them now and will allow them to grow more efficiently moving forward.

Their systems and processes are creating value and potential competitive advantages that will be

realized in the years to come.

Strategic Analysis

Throughout this analysis, Molson Coors has been compared to AB-InBev and Heineken.

These competitors have several overlaps across products lines, distribution channels, global

markets, M&A activity, and sustainability initiatives. Research, analysis, and comparisons across


these three competitors have shown additional overlaps related to resource similarity and market

commonality.

According to (Michael, Duane, & Robert, 2015) market commonality includes “firms

competing against one another in several or many markets are said to be engaging in multimarket

competition.” Additionally, “firms with similar types and amounts or resources are likely to have

similar strengths and weaknesses and use similar strategies on the basis of their strengths to

pursue what may be similar opportunities in the external environment” (Michael, Duane, &

Robert, 2015).

These statements are significant as they provide insight into Molson Coors’s current

strategy and the overall competitive rivalry that exists within this market. All three competitors

have incorporated M&A activity into their competitive actions. Therefore, Molson Coors has

consistently reacted to AB-InBev and Heineken’s actions with competitive responses. Regardless

if Molson Coors is a first, second or late mover, each of these competitors at one time has been

either a first, second or late mover.

Molson Coors’s current strategy has been defined by market and competitive actions

throughout the years. For example, Molson Coors’s and AB-InBev have both acquired craft

breweries. However, research has not explicitly proven that one made an acquisition because the

competitor did, but given (Michael, Duane, & Robert, 2015)’s statement, “firms with similar

types and amounts or resources are likely to have similar strengths and weaknesses and use

similar strategies on the basis of their strengths to pursue what may be similar opportunities in

the external environment”, it should be assumed that it did play a significant role in Molson

Coors’ or the other competitors’ decision-making processes and strategy development.

The history of Molson Coors and their global expansion through M&A’s has forced their


strategies to change. Molson Coors’s growth is well noted throughout their history, but during

the 2002 to 2008 interim, they rapidly grew. “In 2002, Coors brought Bass under its aegis by

acquiring Bass Brewers' business in England and Wales. In 2005, Coors and Molson combined

forces in what the company termed as a merger of equals. And in 2008, Molson Coors began a

joint venture with SABMiller, called MillerCoors, to combine their businesses in the U.S. and

Puerto Rico” (Leslie, 2012).

This growth led to a new CEO in 2008, Peter Swinburn (Leslie, 2012). With Peter

Swinburn at the helm, he embarked on a new strategic plan that focused on “BHAGs – big,

hairy, audacious goals” (Leslie, 2012). According to (Leslie, 2012), his strategy was a global

vision that had four goals, “profit growth; strategic brand growth; having the most engaged

workforce in the beer industry; achieving recognition as being world class in corporate

responsibility.” Their CSR strategy did not go unnoticed.

Their newly adopted CSR strategy resulted in recognition from the Carbon Disclosure

Project’s Water Disclosure Program or CDP (Leslie, 2012). Additionally, “for the first time,

Molson Coors was included in the Dow Jones Sustainability Index for North America. Of 143

firms named to the list, Molson Coors was one of only six in the Food and Beverage category”

(Leslie, 2012).

Since 2008, Molson Coors has continued to be a leader in sustainability. Their strategy

has not deviated from the initial vision and goals that Peter Swinburn instilled in Molson Coors.

This early 2000 M&A activity helped shape Molson Coors’s strategy in 2008 and is still a

current strategy with the addition of augmenting their year over year environmental impact and

water stewardship initiatives through technological advances such as biogas.

This adopted strategy has proved to be a key success factor and competitive advantage


for Molson Coors. Today, their current strategy remains the same as it focuses on sustainability

and M&A’s. On a side note, it can be assumed that Molson Coors’s growth and sheer global

footprint helped them recognize the impact they can have on society, economies, agriculture, and

overall sustainability.

Final Analysis – Conclusions | Recommendations

Areas of Concern

There are several areas of concern regarding Molson Coors’s market, strategy, internal

management, product diversity, etc. The most specific and applicable areas of concern that

research has uncovered include strategy similarity, the rise of cannabis legalization, and global

management complexity as it relates to the complexity of managing international strategies and

product diversification.

Strategy similarity can be both a positive and a negative, depending on the industry and

market. However, strategy similarity is often a byproduct of resource similarity and market

commonality. Companies such as Molson Coors and their top two competitors have deployed

similar strategies as referenced earlier. Sustainability and M&A’s are generic and similar

strategies that each of this industry’s top competitors has adopted and continue to use.

This type of strategy is a behavior that is not sustainable as it creates an environment of

competitive responses. A competitive response “is a strategic or tactical action that the firm takes

to counter the effects of a competitor’s competitive action” (Michael, Duane, & Robert, 2015, p.

146). Arguably, whether it is sustainable or not depends on one’s overall philosophy and

perspective. However, is fighting over bread crumbs and limited consumers within a market a

viable strategy? According to (Chan & Renee, 2017, p. 59) “Blue ocean strategists focus on

creating and capturing new demand, not fighting over existing customers”.


“When managers are urged to secure a competitive advantage, what are they likely to do?

They automatically look to the competition, assess what their competitors do, and strive to do it

better. But, in doing, their strategic thinking unknowingly regresses toward the competition. The

competition becomes the defining variable of strategy, not buyer value. This narrows an

organization’s view to the competitive factors and shared assumptions held among existing

competitors, leading it to improve along the established trajectory” (Chan & Renee, 2017, p. 58).

Additionally, “focusing on building competitive advantages distracts you from reshaping

old industries and creating new ones. It blocks creativity and keeps you locked in the same way

of competing as everyone does” (Chan & Renee, 2017, p. 58).

Overall, Molson Coors’s current strategy and competitive responses seem problematic as

AB-InBev and Heineken’s strategies are nearly exact. Therefore, what are the competitive

advantages that separate Molson Coors from their competition and do they have the greatest

competitive advantage? Just because competitors are doing something does not make it the right

thing to do, i.e., jumping on the bandwagon.

The rise of cannabis legalization across the country is an additional area of concern that

poses a risk to Molson Coors and the industry. This analysis has proved that cannabis is

impacting the beer industry. As discussed earlier, 24 million Americans used cannabis in the past

month during 2016 (SAMHSA, n.d.). Furthermore, cannabis sales reached approximately $1.3

billion in 2016 (The Cannabist; Colorado Department of Revenue; Denver Post, n.d.). This data

is highly concerning because 18% of cannabis users are replacing alcohol with cannabis

(HelloMD, n.d.).

In the year 2016 in Colorado, this translated into $1.3 billion in sales multiplied by 18%

equals $234,000,000 in total revenue loss for beer companies. If this trend continues across the


country, it could become a severe threat. For example, if all 50 states legalized cannabis and

using a conservative number of $1 billion in sales per state, the financial loss would equate to

approximately $1 billion multiplied by 50 states multiplied by 18% equals $9 billion.

The last area of concern, global management complexity as it relates to the complexity of

managing international strategies and product diversification, is concerning due to several factors

of consideration. According to (Michael, Duane, & Robert, 2015, p. 168), there are three levels

of diversification: low, moderate to high and very high. Molson Coors is considered to have a

low level of diversification as the majority of their revenue comes from select beers. However,

their product portfolio is highly diversified in terms of number of beer brands.

This concern creates questions such as: How do they manage each brand? What does the

organizational chart look like? Is there internal competition between brand managers? How do

they determine marketing budgets for each brand? How do they determine what products to push

across the world? Do they suppress specific brands to increase other brand revenues?

These questions speak to the complexity that management faces every day, and having a

centralized strategy becomes highly debatable as each country’s market varies. How does

Molson Coors maintain synergy across their global footprint and operations? Molson Coors’s

M&A activity over the decades has allowed them to diversify beer products, but this has

produced a history of anticompetitive lawsuits and antitrust lawsuits. This continued trend is

highly concerning because it is generic, and it fosters an environment where managers are overly

focused on acquisitions. However, knowing the budget or personnel expenses for Molson

Coors’s due diligence department would provide more substance, and help determine whether

they are over leveraged in that capacity.

Overall, these three areas of concern are highly sophisticated and deserve attention.


Similar strategies, the rise of cannabis legalization, and managing the complexities of varying

international strategies, product diversification, and consumer trends provide essential insight

and will help develop recommendations. However, these applicable concerns are only one layer.

The second layer encompasses curiosity to specific questions that could recommend or

suggest a change in priorities or future recommendations. There are three specific areas of

curiosity encompassing internal competition, employee attrition, and management training

programs.

How prevalent is internal competition between brands and employees? This question is

asked because it relates to employee attrition. Additionally, the number of jobs that Molson

Coors has posted on their career page for the United States is 127 (Molson-Coors, 2017)

compared to AB-InBev’s 204 posted positions in the United States and not accounting for their

management programs (AB-InBev, 2017). AB-InBev and Heineken have specialized graduate-

level positions and programs that are highly respectable. Molson Coors does not have a long-

standing graduate level management program.

This is concerning because it can suggest there is an age gap issue within Molson Coors

which leads to a lack of innovation, ideas, creativity, highly conservative thinking, and

stagnation. According to (NaukriHub, n.d.), “new employees bring new ideas, approaches,

abilities and attitudes which can keep the organization from becoming stagnant.” This

information allows for a high correlation. According to (Glassdoor, 2017) Molson Coors’s senior

management has the lowest ranking, 2.9 out of 5 stars. There seems to be some possible issues or

concerns within management at Molson Coors.

Current Strategy Conclusions

Molson Coors’s current strategy has worked and is working regarding operational


efficiency and sustainability. They have made significant operational improvements, and have

proved to be an early adopter of technology and sustainability. It is challenging to argue their

success and year-over-year improvements from a financial perspective as well as a sustainability

perspective. However, there are some pressing concerns that question the sustainability of their

current strategy. These concerns not only pertain to Molson Coors but the industry as a whole.

My research has uncovered a very critical trend and concern, cannabis usage and more

specifically consumers replacing alcohol with cannabis. Throughout this analysis, there was a

correlation between beer consumption and cannabis usage. Reputable sources such as Hello MD

and Beer Advocate highlighted the beer industry’s most significant threat, in my opinion.

Though the studies and reports regarding cannabis’s impact on the beer industry were in 2015

and 2016, there has since been new developments that further support this trend and its impact

into 2017 and beyond.

On October 27, 2017, the reputable source known as Forbes reiterated my concern as it

relates to cannabis and millennials. According to (Pellechia, 2017), Goldman Sachs downgraded

Boston Beer Company (maker of Sam Adams) and Constellation Brands (maker of Corona) from

a neutral to sell position. Goldman Sachs research “expects a 0.7 percent drop in the U.S. beer

market in 2017” (Pellechia, 2017). Interestingly, it is not just cannabis that is affecting the beer

industry but also wine. “Millennials account for a striking 42% of all wines consumed in the

U.S., to the tune of nearly 160 million cases” (Pellechia, 2017).

Pellechia’s article doubled down on the concerns as he reported, “What may be worse for

beer — and also bad for wine — is the habits of the generation behind millennials, mainly the

21-to-25 age group prefers cannabis over alcohol” (Pellechia, 2017). How does this impact

Molson Coors though? Thanks to solid research and reporting; per (Pellechia, 2017),


“Anticipating marijuana legalization in California, the marijuana company OutCo partnered with

Monocle Research to survey the alcohol/marijuana landscape. It turns out 51 percent of survey

participants planned to replace alcohol with cannabis, and about one-third of them said beer

would have to go. Supporting the trend, equities researchers at Cowen and Company recently

reissued a hold on Molson Coors Brewing Company. Apparently, Cowen fears increased

marijuana usage by the age group that should drink Coors”.

Today’s business climate in the beer industry is stimulating to say the least. Strategies are

evolving, market assumptions are changing, and competitors are not taking action. This cannabis

trend has not only caught the industry off guard, but it has revealed a first mover into this space.

Today is October 30, 2017, and as of this morning, “Constellation Brands announced Monday

that it had agreed to take a 9.9% minority stake in the $2 billion Canadian medical marijuana

company Canopy Growth” (Shen, 2017). Constellation Brands is known for their diverse

portfolio of alcoholic beverages and brands such as Corona, Modelo, Svedka and several

wineries.

Constellation Brands CEO, Rob Sands said, “Canopy Growth has a seasoned leadership

team that understands the legal, regulatory and economic landscape for an emerging market that

is predicted to become a significant consumer category in the future; our company’s success is

the result of our focus on identifying early stage consumer trends, and this is another step in that

direction” (Shen, 2017). Lucinda Shen’s article from Fortune also noted that 27% of beer

drinkers have already replaced beer with cannabis (Shen, 2017).

Given my predictions and current developments, I would say that Molson Coors’s current

strategy is not a winning one at this point in time. Other supporting factors of this statement

include their deteriorating stock price. According to (MSN-Money, 2017), Molson Coors’s stock


price has declined from approximately $109 per share to the low $78’s per share. That is almost

a 40% decline over the past 52 weeks.

These new developments and Molson Coors’s stock performance pose significant

questions regarding their current strategy and will help refine my recommendations, ideas, and

areas worth exploring.

Recommendations

There are several recommendations that one can make regarding Molson Coors’s current

strategy and performance. Furthermore, a “strategic direction is framed within the context of the

conditions (i.e., opportunities and threats) strategic leaders expect their firm to face in roughly

the next three to five years” (Michael, Duane, & Robert, 2015, pp. 380-382). Throughout my

research, I have uncovered vital areas of concerns, opportunities and have posed questions to

myself encompassing product diversification, executive change or the heterogeneous top

management team, cannabis, B2C delivery, and several others.

Product diversification. There is no doubt that Molson Coors’s portfolio of products is diverse,

but product diversification encompasses beverages outside of Molson Coors’s current scope.

Consumer trends are continually changing as this analysis has shown which impacts revenues

and stock prices.

Wine and liquor should be added to Molson Coors’s portfolio in the future. Staying

abreast of consumer trends is not only challenging, but it requires a forward-looking strategy that

stays nimble with the ability to adapt to today’s trends and seizes tomorrow’s new market

demand. My research, analyses, and correlations have uncovered one constant factor: beer

consumption. Beer consumption has been declining industry-wide, and some companies like

Constellation Brands have adapted by adding wineries and liquor into their portfolio.


Liquor encompasses a wide array of products, but I believe whiskey is one liquor that

Molson Coors should add to their portfolio due to increased demand in the United States and

globally. According to (DISCUS, n.d.), whiskey sales volume increased approximately 31%

from 2010 to 2016. Additionally, whiskey consumption increased approximately 33% from

Spring 2008 to Spring 2017, equating to 9.5 million more people consuming any whiskey in the

United States (Nielsen Scarborough, n.d.).

Given Molson Coors’s culture and M&A activity over the years, there is one company

that I believe would complement Molson Coors’s rich history and Colorado roots - the 10th

Mountain Whiskey & Spirit Company located and manufactured in Vail, Colorado. Their

product line includes moonshine, rye, bourbon, vodka and cordial, all with a plethora of awards

(10th Whiskey, n.d.). Additionally, I have personally spoken with Ryan, one of the owners in the

past and their most prominent bottleneck has been distribution. Their products are in high

demand, but their distribution has limited their ability to grow into a nationally known brand

inside restaurants and liquor stores. An acquisition could not only solve their distribution issue,

but it would allow Molson Coors to gain new revenue streams across five distinct products.

Without financial information on 10th Whiskey, it is challenging to discern whether this

would be a sound acquisition without further analysis and access. Balcones Distillery located in

Waco, Texas, would be an additional acquisition worth exploring as their economies of scale far

surpass 10th Whiskey. Balcones Distillery has won some of the most impressive and noteworthy

awards, and demand is increasing across the world. 10th Whiskey and Balcones both have unique

market positioning and are growing year over year. I highly recommend that Molson Coors

explore both companies as potential acquisitions.

Executive change. This recommendation is not to be taken lightly. Executive change is a very


critical component of a company’s strategy, and depending on the situation and the board’s

preparedness, this can hurt the company just as much as it can help.

Executive change or more specifically, CEO change, has a lot of contributing factors

including timing. This recommendation is not a 100% backed suggestion to the board for a CEO

or executive change, but it should be explored given the current status of Molson Coors’s stock

performance. However, there seems to be a certain energy and indications that there will be some

changes coming soon. According to (Richard, 2011), boards can be just as guilty of a company’s

poor performance or strategy. There are six factors that boards do or don’t consider when

replacing a CEO, “boards underestimate the emotion and damage involved in CEO transitions;

boards underestimate how long it takes to replace a CEO; boards ignore succession plans; boards

wait too long before they pull the trigger; boards second-guess the decision after it is made;

sometimes, boards get talked out of it by the fired CEO” (Richard, 2011).

My recommendation to the board right now is to research and explore the executive

landscape at Molson Coors as well as the future direction. This recommendation is supported by

their abysmal stock performance as mentioned earlier, a 40% decline in the past 52 weeks, and

their weak revenue growth when the MillerCoors or the SABMiller transaction of 2016 is taken

out of the equation.

These two areas of concern are alarming and call into question whether Molson Coors’s

current strategy is sustainable or a viable one. A stock value decline of 40% over the past 52

weeks is not only surprising but can present additional questions to ask or assumptions to make.

For example, if a company’s stock price decreases at that rate, there are several questions to ask.

Is the board not concerned? Should they go private? Are they maintaining? Are their financials

poor?


Their financial performance is not weak by any means as the financial section outlined.

Going private is a wild assumption to make or insinuate. Overall, I cannot 100% assume or

suggest that any of these posed questions are accurate, but it makes me question the entire

situation.

I do not believe that Molson Coors or the board is ignorant to the current situation, but I

question their sagaciousness into the external environment as it relates to current developments

and trends. Therefore, I unequivocally recommend the board to have private and individual

conversations with all executives and senior leadership. These conversations should encompass

opinions, strategies, and suggestions for Molson Coors’s future direction. After these

conversations are held, the board should have a diverse perspective that will force them to either

change the narrative and direction or keep it the same.

I believe that there are other internal factors contributing to Molson Coors’s performance

such as internal politics, power plays, openness to ideas, synergies between departments, lack of

strategic planning, internal competition, and so on. These internal factors might be premature,

but my intuition is telling me that these internal factors are relevant and worth exploring.

Cannabis. This subject is very debatable as it walks a fine line between legality, market

acceptance, cultural acceptance, corporate image, philosophical opinions, and morality.

However, empirical research and evidence have shown that cannabis is not a fad but a trend that

is impacting the beer industry, challenging the legal system, generating new taxes and producing

positive medical applications.

Currently, there are 29 states and the District of Columbia that have legalized marijuana

(Governing, 2017). Colorado and Washington were the first states to legalize recreational

cannabis. Furthermore, there are additional states that have followed, California, Alaska,


Nevada, Oregon, Maine and Massachusetts (Governing, 2017).

It should be assumed that cannabis is not only becoming widely accepted in the United

States, but it is merely a matter of time before it is federally legal. I believe that Molson Coors

needs to decide whether they culturally accept cannabis.

This analysis has proved that cannabis is impacting the beer industry, but it is presenting

opportunities. Constellation Brands is one company that has made a strategic move into this

space. It is not too late for Molson Coors to do the same thing. However, there are ramifications

and insurmountable concerns to address if Molson Coors decides on culturally accepting

cannabis and making the decision to enter into this evolving market.

Given the scope of this subject, it is highly recommended that Molson Coors develop a

strategy or plan of action to enter this space. This strategy or plan of action will most likely have

to be voted on at the annual stockholders meeting in combination with a proxy vote. Beyond

these proceedings, my recommendation is for Molson Coors to enter the cannabis market.

However, there are several positions within the market. Whether its beverages, medical

applications, retail stores (dispensaries), confectionery products or even cultivation, Molson

Coors needs to develop a market entry strategy.

A newly defined strategy will provide them with a direction of market positioning. It is

my opinion that Molson Coors should focus on the possibilities within retail, cultivation,

beverages and confectionary applications.

Retail encompasses a wide array of profit centers, but for simplicity purposes, I have

combined all recreational and medical sales to illustrate perspective. According to (Ackrell

Capital, n.d.), “it is estimated that in 2024 the cannabis consumer market in the U.S. will reach

37.3 billion U.S. dollars”. See Figure 2.5 for estimated market growth. Figure 2.5 illustrates a


456% increase hovering around $37.3 billion by the year 2024 (Ackrell Capital, n.d.).

In 2016, Colorado generated over $1.3 billion in total sales (Colorado Department of

Revenue; The Cannabist; Denver Post, n.d.). See Figure 2.6 for visualization and segmented

sales from 2014 to 2016 comparing recreational and medical marijuana sales. From 2014 to

2016, Colorado marijuana sales increased by $614,000,000. Based on Lucinda’s article

published in Fortune, it could be estimated that Colorado beer companies lost approximately

$351,000,000 in revenue, 27% of beer drinkers that have already replaced alcohol with cannabis

x $1.3 billion (Shen, 2017).

These figures and facts depict the Colorado market and the United States. However, retail

has additional product categories. See Figure 2.7 for illustration on product segmentation in

terms of units sold (ArcView; New Frontier; WSLCB, n.d.).

Overall, cannabis has proved to be a severe threat to the industry, but it offers

opportunities at the same time. Molson Coors’s distribution, human capital, fiscal capital, and

agricultural technology could bring economies of scale to this industry and in return, generate

millions in new revenue in Colorado alone or billions across the United States.

Delivery. Heineken is not only a top competitor of Molson Coors, but they look for ways to

increase consumer value. For example, Heineken’s website allows consumers to have beer

delivered through Drizly (Heineken, n.d.). Drizly operates in select cities, and they deliver all

beers including Coors Light. The only difference between Molson Coors and Heineken

pertaining to this service is that Heineken promotes the service on their website whereas Molson

Coors does not.

I highly recommend that Molson Coors promote this service on their websites as it would

bring more value and increase brand loyalty. Further exploration with home delivery should be


researched. Whether it is Amazon or Uber Eats, there are rising platforms that are offering new

ways to target consumers, sell products, and reach more consumers. Home delivery is a

dangerous trend as it has impacted the grocery industry and numerous retailers. Online shopping

is an area that Molson Coors should focus on, and create new partnerships within.

Additional Ideas for Recommendation

The recommendations that have been presented up to this point are within the scope of

this analysis. However, there are additional ideas that I believe Molson Coors should explore.

Integrating hydroponic farming of hops into their supply chain, acquiring Yuengling, and

determining artificial intelligence capabilities with IBM Watson.

Hydroponic farming. Supply security has become a severe factor within supply chains and

continues to grow as globalization increases. In the environmental section of this analysis, I

referenced AB-InBev’s acknowledgment of population increases and the rising demand for food.

Many assumptions can be made in the agriculture market as well as the general

environment. Food and water shortages are on the rise across the world while population

increases every day. Natural disasters are occurring more often with more intensity, causing

volatile commodity prices. Viruses and bacteria are becoming more immune than ever, and their

ability to infect or spread across the human population is ever so increasing.

One can only assume that greenhouse gases will dramatically increase, and the rate will

coincide with the human population growth over the next several decades. Therefore, this

recommendation should account for the fact that “higher temperatures and shifting climate

patterns may change the areas where crops grow best and affect the makeup of natural plant

communities” (NASA, n.d.). In other terms, crops such as hops, barley, rice, and wheat will have

an increased probability of not being suitable for farming in their current geographical areas in


the future as climate change increases.

Sustainability has been a critical focus for each of these competitors, but it has been at the

forefront of procurement leader discussions and decision-making processes across the world for

some time. These leaders find themselves challenged with making balanced decisions that

deliver long-term solutions and financial gains. However, agricultural sourcing is a complex

component due to the unforeseen risks and market vicissitudes.

Given Molson Coors’s commitment to their 2025 sustainability goals, I believe that

sourcing and incorporating hydroponic farming facilities into their supply chains will help them

save money and achieve their 2025 sustainability goals. For example, traditional farming

requires 20 times more water than hydroponic farming, and even with a drip irrigation system, it

reduces flood irrigation by only one-fourth (Perry, 2014). Below are some recommended

objectives that could help guide this exploration and realize potential benefits.

▪ Reduce Molson Coors’s water usage by a minimum of 40% within their hops agricultural

supply chain.

▪ Reduce carbon emissions by reducing the number of miles between growing operations

and breweries.

▪ Reduce environmental impact by incorporating green energy into the hydroponic

facilities.

▪ Increase supply security.

▪ Reduce operating expenses such as fuel, electricity, and raw material costs.

▪ Achieve a year-round growing season across the world.

▪ Create a baseline of processes, procedures, systems, and metrics that can be used to

duplicate hops production into wheat and barley production.


▪ Explore vertical integration in emerging markets such as Africa, the Caribbean, and

South America.

▪ Achieve the first certified organic beer in the world.

▪ By 2040, achieve an utterly organic product line and supply chain.

These objectives and potential benefits are realistic given Molson Coors’s supplier base

comprised of 1,258 suppliers “including women and minority-owned businesses” (Molson

Coors, n.d.)

There are several factors of consideration within this recommendation and the

implementation of it. The most applicable factors include lack of suppliers, international trade

treaties such as NAFTA, scalability, and duplication across various markets.

Hydroponic farming as it relates to hops has a relatively small pool of suppliers to select

from. According to (Greenough-Johnson, 2016), “Hops are harvested once a year and grow best

in the optimal climates of Germany and America’s Pacific Northwest. In recent years, the hop

growing industry has been challenged by fires, weather, pests, and demand from new breweries

making more and more hop-focused beers. In fact, some are now sounding the alarm for an

impending hop shortage”.

In Colorado, there is only one hydroponic hops farmer, Colin Clark at Hydro Hops Farms

(Greenough-Johnson, 2016). Distribution is a crucial factor in developing new suppliers.

However, with Colin Clark at Hydro Farms and a second supplier, Round Table Hops of Forest

Lake, Minnesota (Greenough-Johnson, 2016), this integration can drastically reduce distribution

times, commodity costs as hops can be grown year-round, and will automatically reduce Molson

Coors’s carbon footprint.

One decision that will have to be made regarding these two suppliers is how much they


can produce given current capacity and how much should Molson Coors purchase year-round.

This question is critical because hydroponic farming is scalable, more efficient and yields more

per acre. Hops that are grown hydroponically increases yields and reduces the amount of acreage

needed. For example, 10 acres of traditional farming can be fit into one acre of hydroponic

farming and be grown year-round (Greenough-Johnson, 2016).

A lack of suppliers must be met with other considerations as it might be natural for an

organization like Molson Coors to venture out to other countries and import hops from additional

hydroponic farms. This is counteractive to this recommendation and scope as any importation

would not reduce Molson Coors’s carbon footprint or decrease distribution or lead times.

Additionally, this is a very critical matter in today’s business environment as the current

administration is threatening the future of international trade treaties such as NAFTA.

According to (Rodrigo & Krauskopf, 2017), “U.S. stocks with the most revenue exposure

to their NAFTA partners include Kansas City Southern, Molson Coors Brewing and Colgate-

Palmolive Co.” How critical is this? Four days after the past election, Molson Coors’s stock

price decreased 8.6% (Rodrigo & Krauskopf, 2017). This strategy should not be revised to allow

any importing of hydroponic hops from either Canada or Mexico given the volatility of NAFTA.

Scalability is the third consideration and must be addressed when determining future

growth and incorporation. Once these farms are incorporated into the supply chain and meet

metrics and production levels, the most significant decision to be made is the ongoing growth

and capital requirements these farms need to expand. Furthermore, if this strategy is successful, a

continued effort to search for and recruit additional hydroponic farmers will be needed.

Scalability leads to the final factor, duplication.

Ultimately, this recommendation like any strategy has the goal to be 100% successful.


However, due to early entry or becoming a first mover in this space compared to Molson Coors’s

top competitors poses significant growing pains and constraints. As this strategy is tested and

meets or exceeds expectations, there will be a need to duplicate this strategy across other

geographical markets across Asia, and Europe. Finding hydroponic farms that specialize in hops

production will be dramatically limited. Therefore, a decision will have to be made on how to

respond to this challenge.

One way to transition from traditional to hydroponic farming with a limited supplier base

could and most likely will involve in working with existing top-tier suppliers to transition their

operations from traditional to hydroponics. This strategic partnership will have its challenges.

Capital requirements, site studies, distribution distances, and new contracts would be the

immediate considerations. Who will fund the transition? What is the most optimal distance from

the brewery to the supplier? How much land should be transitioned? Will the contracts be

favorable and reduce risks for both Molson Coors and the suppliers?

Each of these questions will arise when the strategy wants to duplicate. Duplication

requires extensive processes, procedures, and controls that should not deviate. This will also

force a study to be conducted to determine tolerances.

This recommendation and integration come with a financial risk, but the growing need

for agricultural innovation is growing, and exploration into hydroponics could help Molson

Coors cut operating expenses tremendously and open new possibilities to solve water and food

shortages in the areas they operate.

Yuengling | Ywengling. I am not sure what criteria Molson Coors uses to determine viable

acquisitions, but Yuengling is a viable option for Molson Coors in my opinion. Yuengling is not

available nation-wide at this point in the United States, but they are growing. See Appendix B for


their current distribution map (Ywengling, 2017).

Yuengling, which is America’s oldest brewery, is a highly desired beer. Even though they

do not distribute nationwide, they will reduce Molson Coors’s market share once they expand

into other states. Yuengling currently has eight different brews (Yuengling, 2017), and according

to (Grocery Headquarters; IRI, n.d.), their traditional lager has generated $149.7 million in sales

in 2017 with two months left in the year across approximately 20 states.

I remember a couple of years ago when I went to Oxford, Mississippi for a wedding with

my sister, Yuengling just started distributing their beer there. As I enjoyed the nightlife, I could

not help but see that every drinker was drinking Yuengling. Every gas station was selling out,

and every bar had it on tap. I cannot help but wonder what the ramifications for Molson Coors

will be once Yuengling is available in Texas.

With beer consumption down in the United States and declining sales for top brands such

as Coors Light and Bud Light, Yuengling is an opportunity that should be explored either as a

potential acquisition or perhaps a 10-year licensing agreement. Both of these options are viable

and would generate profitable revenues immediately.

Artificial Intelligence. Technology is rapidly advancing across all sectors. Specifically, artificial

intelligence (AI) is gaining speed and realizing numerous applications. IBM Watson has been

one of the most notable players in this space.

I highly recommend that Molson Coors should explore the possibilities that IBM Watson

has to offer. It can be mystifying to understand the full capabilities that IBM Watson offers, but

some of the general highlights include predictive analytics, real-time insight into supply chains

accounting for weather patterns and demand/sales forecasting, compliance, HR, financial

analysis, and much more.


The more information you give IBM Watson, the smarter it gets. It is continuously

learning, scanning for trends, identifying potential threats or bottlenecks, running simulations,

and offering viable solutions that companies and their executives can act upon. This level of

cognitive learning is minimizing losses, spotting issues before a human can detect them,

eliminating supply chain distributions, and mitigating risks with both structured and unstructured

data.

I have personally followed AI for a couple of years now and studied IBM Watson. This

technology can be interfaced with SAP, which is a great platform, and it increases synergies

across all departments and functions. Overall, IBM Watson optimizes. Regardless if Molson

Coors is partial to particular technologies, I believe that technologies such as IBM Watson and

AI should be explored. To see this technology in action, watch this video

https://www.youtube.com/watch?v=JVxYbKLDasY or visit IBM’s website.

Concluding recommendations. My last thought and recommendation is for Molson Coors to,

“embrace a perspective that allows them to ask fundamentally different sets of questions, which,

in turn, enable them to perceive and appreciate the fallacies behind long-held assumptions and

the artificial boundaries we unknowingly impose upon ourselves” (Chan & Renee, 2017, p. 47).

This thinking will require “market-creating strategies that redefine and solve the problem

an industry focuses on” (Chan & Renee, 2017, p. 39). Lastly, per (Chan & Renee, 2017, p. 39),

“problem redefinition allows an organization to replace assumptions and reconstruct industry

boundaries in new and creative ways.”

I believe that the possibilities for Molson Coors are endless, but these possibilities can

only be realized if their leadership adapts quickly, makes decisions on apparent trends and facts,

and focuses on increasing value for consumers. Cannabis, home delivery, liquor diversification,

https://www.youtube.com/watch?v=JVxYbKLDasY


self-driving cars, electric semis by Tesla (in development), artificial intelligence, hydroponic

farming, and strategic partnerships with companies like Amazon, Uber Eats, and Drizly are

knocking at the door and presenting exponential opportunities for cost savings, new consumers,

and revenue.

Final Remarks

Molson Coors is a successful company as they have grown into one of the world’s largest

breweries. This strategic analysis uncovered competitive advantages, threats, opportunities and

concerns as it relates to their current strategy. The current strategy for Molson Coors has been

effective and is producing results. However, there are pressing issues and concerns facing

Molson Coors. Cannabis, declining beer consumption and consumer trends will require strategic

planning to combat or adapt to these threats and trends.

Molson Coors has proven to be an industry pioneer when it comes to sustainability. Their

success in this capacity has given them the necessary tools and resources to solve problems and

seize new opportunities. “Organizations that identify and solve brand-new problems or create

and seize brand-new opportunities unlock new markets beyond existing industry boundaries”

(Chan & Renee, 2017, p. 39).

I believe Molson Coors possesses the ability to capture more market share by adjusting

and improving their current strategy, fully exploring my recommendations and allocating the

resources to fully realize the untapped possibilities. They need to think beyond their competitors,

look for ways to increase consumer value, capture new customers, and take some risks that are

not only attractive to investors but benefit society and align with their 2025 goals.

The only way Molson Coors can effectively explore these possibilities is to foster an

authentic and pure culture of honesty, trustworthiness, willingness to listen, challenging the


status quo and creating an environment where employees can actively express opinions and ideas

without fear. What mountain will you climb, Molson Coors?


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Appendix

Appendix A.

This diagram illustrates Porter’s Five Forces Model.

Rivalry with Existing

Competitors

Bargaining Power of Buyers

(Customers)

Potential Entrants

Bargaining Power of Suppliers

Product Substitues


Appendix B.

Yuengling Distribution Footprint (Ywengling, 2017). This map illustrates the states where their

beer can be currently purchased.

Yuengling Distribution Footprint


Figures

Figure 1.1.

U.S. Beer Market: Leading Domestic Beer Brands 2017, based on sales. This figure illustrates

the top beer brands in 2017 based solely on sales. Data provided by (Grocery Headquarters, n.d.).

Bud Light’s sales are approximately double that of Coors Light.


Figure 1.2.

U.S. Beer Industry. This figure illustrates the United States’ top beer beer brands which are

owned by six companies. Information is derived from Figure 1.1.


Figure 1.3.

Executive Diversity. This figure illustrates and compares the trendlines and diversity across all

three company’s leadership teams. All data was sourced from (Molson Coors, n.d.); (ABInBev,

n.d.); (The Heineken Company, n.d.).


Figure 1.4.

Beer production worldwide from 1998 to 2016 (in billion hectoliters). This figure illustrates

global beer production from 1998 to 2016. Illustration and data provided by (Barth-Hass Group,

n.d.). 2012 to 2016 does shows stagnant production.


Figure 1.5.

Portion of announced U.S. M&A deals valued at more than $1 billion. This figure illustrates

M&A activity valued $1billion or more from 1995 to 2015 (Wells, Nick; Chemi, Eric, 2015).

Historically speaking, Monday proves to have the highest number of M&A’s.


Figure 1.6.

WHO ARE THE DRINKERS IN 2016? This figure illustrates four generations’ market share

compared to craft beer and non-craft beer preference based on weekly beer drinkers (Herz,

2016).


Figure 1.7.

WHO ARE THE DRINKERS IN 2016? This figure illustrates five ethnic groups’ market share,

and their craft beer preference (Herz, 2016).


Figure 1.8.

Number of craft brewery opening in the United States from 2006 to 2016. This figure illustrates

the number craft breweries that have opened over a 10-year interim (Brewers Association, n.d.).

The trend shows a 717% percent increase over a 10-year interim.


Figure 1.9.

Cider dollar sales worldwide from 2006 to 2016 (in million U.S. dollars). This figure illustrates a

10-year interim of global cider revenue (Demeter Group; Euromonitor, n.d.). This continuous

increase in global demand poses a threat to the beer industry as consumers are substituting beer

with cider.


Figure 2.0.

Share of cider consumption worldwide in 2014, by region. This figure illustrates worldwide

market share for cider consumption (National Association of Cider Markets, n.d.). Europe’s

share was the most impressive at 66% while Africa and the Middle East pose the question: are

they considered an emerging market, perhaps?


Figure 2.1.

5-Year Profitability. This figure illustrates a five-year trend across five profitability categories.

All data was provided by (Morning-Star, n.d.).


Figure 2.2.

5-Year Liquidity & Financial Health Measurements. This figure illustrates and compares each

company’s liquidity and overall financial health for the past five years. Data was derived from

(Morning-Star, n.d.).


Figure 2.3.

2016 Efficiency Comparison. This figure illustrates four efficiency ratios for 2016 across the

competitor landscape. Data provided by (Morning-Star, n.d.).


Figure 2.4.

5-Year Efficiency Trend. This figure illustrates the efficiency gains and losses for each of the

competitors between 2012 and 2016, a five-year interim. Data was derived from (Morning-Star,

n.d.).


Figure 2.5.

Projected combined recreational and medical marijuana consumer market in the U.S. from 2015

to 2024 (in billion U.S. dollars) (Ackrell Capital, n.d.). It is estimated to increase by 456% from

2017 to 2024.


Figure 2.6.

Total recreational and medical marijuana sales in Colorado from 2014 to 2016 (in million U.S.

dollars) (Colorado Department of Revenue; The Cannabist; Denver Post, n.d.). Marijuana sales

grew by $614,000,000 from 2014 to 2016.


Figure 2.7.

Marijuana concentrate and -infused product sales in Washington from July 2014 to June 2015,

by type (in units) (ArcView; New Frontier; WSLCB, n.d.). Liquid edibles unit sales are gaining

attraction.