Adolph Coors In The Brewing Industry

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Adolph Coors In the Brewing Industry According to the National Beer Wholesalers Association, the United States ranks No. 1 in world beer production. More than 84 million Americans consume beer, and beer represents 88 percent of all licensed beverages sold in the United States. The strategy of the Brewing Industry had changed drastically over the 1975-1985 period. The brewing industry in 1985 can be analyzed using Porter's five competitive forces: threat of new entrants, bargaining power of suppliers, bargaining power of buyers, substitutes and rivalry among existing competitors. In the brewing industry, barriers to entry were high. Fixed costs increased as a percentage of revenue necessitating brewers to have higher production capacities/minimal efficient production scale to achieve economies of scale. This could be achieved by doubling brewery production, which decreased unit capital costs by 25 percent. In addition, high capital requirements existed since $35-$45 million was required in launch costs and advertising for a new brand. An entering firm had limited access to distribution channels as the wholesalers who served the largest brewers did not carry other brewer's beer.The bargaining power of suppliers is medium since the removal of price controls for aluminum led to sharp increase in can prices and therefore raised cost of packaging materials and for the brewers. Coors, reduced these costs by starting can recycling programs to decrease their dependence on new raw materials. Bargaining power of buyers was high as the independent wholesalers who purchased the beer, and sold and delivered to retail accounts earned low profits. the rivalry among existing competitors was high as the number of brewers making less than one million barrels per year decreased from 90 percent in 1959 to 45 percent in 1983. Furthermore, since the domestic beer consumption was

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