Price of playing poker - Adolph Coors Co. marketing - interview

Modern Brewery Age, July 10, 1989

Price of Playing Poker

With national expansion complete, Coors Brewing Co. finds the beer-marketing game challenging but the stakes rewarding, Peter Coors, president, says. MBA: In contrast to the company's five-percent increase in 1988, Coors Brewing Co. sales declined 5 1/2 percent in the first quarter of 1989. To what do you attribute the volume decline? COORS: A combination of factors. First of all, we completed our marketing expansion into the East in 1988. We had the benefit of some pipeline filling in the first quarter of 1988 which, of course, we were cycling against this year. We also began our national expansion of the Extra Gold brand during the first quarter of last year and I think that accounted for a little bit of the slackening early this year. In addition, I think the industry in total in the first quarter looks to be a bit soft. Frankly, now that we've completed our expansion we're seeing a stabilizing of our market. MBA: Do you expect this trend to continue for the remainder of 1989? COORS: I can't answer that. It's very difficult to know what's going to happen in the industry. We see lots of new products being introduced by the competition. We have new advertising campaigns that are just now entering the marketplace. We are looking at some new product possibilities between now and the end of the year. When you put all of those factors together it's very difficult to understand exactly what might happen. If we were to look at a one-quarter trend line, I think you could extrapolate that and say Coors might have a five-percent-or-so decline in 1989. That's certainly not what we have in our plans and not what we expect for the rest of the year. What it's going to do--based on competitive activity, as well as things we're doing to counteract--is a question that probably everyone in the industry is asking themselves. MBA: In reporting on the first-quarter loss, chairman Bill Coors stated, `Our challenge is to maintain market share now that our national expansion is complete.' How is the company attempting to maintain and even gain market share? COORS: We're doing alot of things, some of which have been successful and some of which have not, over the past few years, to try and stabilize our brands. Our growth, as is evident from our sales experience, has been in the Coors Light product. The Coors brand is where we have seen significant slippage in our volume. But it is still a significant brand, number eight or nine, I believe, in the domestic beer rankings. However, the trends on that brand are not very good. We did a number of things last year to try to stabilize the trends of that brand, including a packaging change which has been described as a major marketing flop. But I think that's an indication that our company is willing to take risks and do whatever we can to make things happen in the marketplace. When you have a brand that's off double digits, you do some things that you wouldn't do with a brand that's growing or even flat.

The brand is just going through its life cycle. I don't think there's anything unusual about that. It's not something we enjoy seeing happen. But we'll continue to work on ways to change the trends on the Coors brand. We have new advertising for the brand and we're trying to build the Coors Extra Gold brand to capture some of the people who are switching away from Coors, who are looking for a little bit different taste, a little different product, or even a new product. This, again, is the kind of thing that some of our competitors are doing.

An operating philosophy Coors recently adopted is customer satisfaction improvement. This philosophy empowers our employees to make decisions at levels we frankly didn't allow in the past; to speed up our decision-making process; to force focus on consumer needs, whether that be consumers internally at the company, including inter-departmentally or consumers external to the company, distributors, retailers and ultimately, consumers.

Between October, 1988 and April, 1989, we trained all 6,700 of our people on one full-day seminar on the concepts of customer satisfaction improvement. We think this is going to be a key as we look at how we manage, operate and address problems in the industry. While this is a relatively new concept and will take some time to work, we think it will give us, in many respects, a competitive edge as we look down the road long-range. This concept may not make a big difference in 1989, but will position us, from a management and operational sense, in a very positive way, longer range.

CSI is partly a result of the needs of the marketplace. The marketplace is clearly becoming more regionalized and localized. Our ability to respond to the needs in one market have become totally different than, perhaps, the old days when brewers used a major national advertising campaign for one product. This brewery is a perfect example of the way things have changed as it was designed to make 12-ounce cans of Coors beer, period. As Coors and the industry is learning, the consumer is asking for variety. We've consolidated breweries and brands have begun to drop out, and consumers are still looking for new and different things. So, the need for different brands hasn't changed; they just have to be provided by a fewer number of breweries. Being able to deal in that environment really changes how we look at the decision-making process. Being able to regionalize, in terms of marketing and sales activities, moving the decisions to the marketplace where decisions have to be made more rapidly, is key. MBA: Does this mean CSI carries over to the local marketplace, at the distributor level? COORS: Yes. We have begun to develop some training of distributors in the concepts of customer satisfaction improvement and some of the philosophies that go along with it and we're finding that to be very fruitful. As we develop this thing, it will really be a very comprehensive process. MBA: What types of challenges has the movement from a regional to a national brewer--absent of merger or acquisition--brought to Coors? COORS: Probably the biggest challenge has been an expanded distributor organization. When we had 11 states 12 years ago, we were looking at about 170 distributors. Today we have close to 700. Most of them are multi-brand distributors. The challenge for us is competing for their attention.