strategic-management

230 AMIT J. SHAH
liquors can take some of the credit for this improvement as well. A-B is now emphasizing
its on-premise marketing to develop the beer brand image, especially among “contemporary
adults,” and they are also introducing new brands and packaging, much like Molson
Coors.
Boston Beer Company
The Boston Beer Company, Inc. is the largest craft brewer and the fourth largest brewer
overall in the United States. The company sold over 20 beers under the Samuel Adams or
the Sam Adams brand names, 7 flavored malt beverage products under the Twisted Tea
brand name, and 1 hard cider product under the HardCore brand name during 2008.
Boston Beer produces malt beverages and hard cider products at company-owned breweries
and under contract arrangements at other brewery locations. The company-owned
breweries are located in Cincinnati, Ohio; Lehigh Valley, Pennsylvania; and Boston,
Massachusetts. During 2008, the company brewed certain products under contract at
breweries located in Eden, North Carolina; Rochester, New York; Latrobe, Pennsylvania;
and LaCrosse, Wisconsin (Boston Beer Company, Annual Report, 2009).
Boston Beer products are also distributed through a network of some 400 distributors
and are available at pubs, restaurants, stadiums, grocery chains, package stores, and
other retail outlets. Boston Beer offers Extreme Beers, those with 25 percent alcohol, and
seasonal brews to keep adventurous drinkers brand-loyal (Hoover’s Boston Beer
Company, 2009).
Challenges
The biggest challenge facing Molson Coors is the problem faced by every brewer:
declining sales, changing tastes, and increased competition. So far, A-B is winning the
competition and marketing battle over Molson Coors, but Coors is also doing very well
in its share of the market, given its past sales volume and new potential for growth with
the combined strengths and geographic diversification of Molson Coors.
The current economic conditions pose a challenge for Molson Coors because it is
directly affected by the fluctuations in the foreign exchange rate. In addition to the
economic turmoil, Molson Coors may not realize the cost savings and other benefits from
MillerCoors. The integration of the two operations is a complex undertaking and may
result in operational problems, expenses and liabilities, and diversion of management’s
attention.
Other challenges include A-B and Bud Light being able to outspend Molson Coors
on advertising for the highly competitive summer season. The combined company will
likely not be able to out-discount its top competitors either. Anheuser-Busch can afford to
deeply discount across the board, whereas Molson Coors will rely on its marketing to bring
home sales without competing primarily through discounting.
The Future
For the three-month period ending in June, 2009, Molson Coors Brewing Co. earned
$187.3 million, or $1.01 a share, up from earnings of $91.8 million or 49 cents a share in
the same period last year, before Molson Coors and SABMiller PLC formed their joint
venture MillerCoors.
Net sales fell 55 percent to $798.9 million in the quarter, down from $1.76 billion in
the same period last year, before the MillerCoors joint venture started. The results beat the
estimates of analysts, who predicted revenue of $750.66 million.
Molson Coors said the current quarter’s results were hurt by unfavorable foreign
exchange rates. A strong U.S. dollar weighs down international sales once they are
converted back into dollars. The company has sizable business in Canada and Britain.
Net sales for the MillerCoors joint venture rose about 1 percent to $2.14 billion in the
quarter. The venture in the U.S. and Puerto Rico, which began last summer, aims to cut $500
million in costs in three years and better compete against industry leader Anheuser-Busch.
As the recession lingers, economy beers are selling much better nationwide than
premium beers. For example, Busch Light and MillerCoors’s Keystone Light generally