Coopers Business Case Essay
Coopers Business Case
Coopers Brewery has had a successful journey from its humble beginnings to it third tier position in duopolistic competing market. Coopers has not existed without its share of disturbances and risk of been taken over by a larger global player, however Coopers managed to defend itself. Coopers has positioned itself in a highly competitive market with a differentiated brand and product that has captured a niche market. Coopers has also successfully integrated a high value chain which in turn captures the essence of Coopers at the same time delivering value at multiple stages. In order for Coopers to stay competitive in the future, Cooper’s differentiation strategy can translate into new emerging markets and changing customer tastes for beer and deliver beer to new niche market segment.
2. Company Background
Established in 1862 by Thomas Cooper, Coopers is a 5th generation family owned business that manufactures and sells beer, home brew and malt extract. In 1997, the business purchased a $40 million state of the art manufacturing, bottling and distribution plant in Regency Park South Australia. With advanced robotics and a commitment to an eco friendly plant and processes to reduce their carbon footprint, Coopers has never lost sight of their mission.
Coopers mission statement for its beer as stated in the case study was “to provide natural beverages and food ingredients which satisfy tastes and nutritional needs, and create enjoyment” (Hubbard 2008, pg7)
3. Company Analysis – Porters five Forces
To assess the competitive landscape and to understand where Coopers Brewery is positioned a number of assessment models or framework can be used. To assess Coopers Brewery current competitive position Porters five forces model (see Appendix 2) can be used to analyse its current state. a) Threat of the new entrants is Low. There are two types of operations i. one is the craft-brewing , also known as miro-brewing, market and the other ii. Large scale production.
Entry in the Craft-brewing is somewhat increasing, however larger scale production requires large capital outlay and continuous investment whilst been maintained by significant cash flow (Kaczanowska 2010). In addition incumbent beer producers are known to the consumers due the history and the accumulated advertising of the brand. This high cost for brand awareness creates a barrier for new players (Kaczanowska 2010). Imported products are present although the threat to the Australian market appears low. b) Threat of substitute products: This can be described as medium for the beer industry. There are always beer substitutes such as wine, ready to drink mixers and soft drinks to name a few. Increasingly health-conscious and knowledgeable consumers are looking at higher quality products (Kaczanowska 2010).
This can be reflected in the trend toward craft and premium beers. c) Bargaining power of buyers is Medium: Brand loyalty is strong among beer consumers as appose to wine consumers (Richardson 2012). Richardson (2012, pg 24) summed this up as “Wine consumers are driven by choice rather than loyalty and wine brands are easily substituted, but beer is a branded product and consumers drink the label.” However consumers are price sensitive and may switch to another brand if the situation is presented. d) Bargaining power of the suppliers Medium: Raw Material is the largest cost to breweries. IBISWorld estimate approximately 58.3% of industry revenue (Kaczanowska 2010), these raw materials include, cardboard boxes, glass, aluminium, packaging. Other Raw materials would include sugar, malt, hops, wheat, rice, water, barley all of which are critical ingredients for
brewing. All of which have a supply risk, which in turn can have a direct impact on the cost of the supplies good. Coopers have initiated some efforts to reduce some of these risks such as:
i. Water supply to the operations is from a deep aquifer,
ii. Power supplied by a Gas co-generated turbine
iii. Chemical and Preservative Free
iv. Waste minimisation
e) Rivalry among existing organisation is medium but increasing. There are three main players in the Australian beer market, Foster’s and Lion Nathan with Coopers being in third place, by market share (see Appendix 1). Foster’s and Lion Nathan are both Global conglomerates with Coopers being the Family owned Australian brewer. It could be said that Coopers is the David to the two goliaths being Foster’s and Lion Nathan (Byrom and Lehman 2009). i. Price-based rivalry: Pricing does have a part to play in rivalry, however price wars in not evident in this segment. ii. Non-priced based rivalry: The beer industry sits primarily in this space, where each company focus’s efforts in branding, packaging and quality to target their demographic. iii. Product differentiation: Cooper has a unique or niche market segment (Byrom and Lehman 2009) based on a Family owned and distinctive “cloudy” beer.
In addition to the beer portfolio Coopers also has major interests in Home Brew kits and Malt extraction and has about 80% of the kit market (Byrom and Lehman 2009). Porter (1985) suggests that having a differentiated product strategy does not necessarily equate to high market share, this can been seen in the competitive market share analysis as seen in the appendix figure 1. However a point of differentiation can be replaced or replicated by a competing company and may reduce the competitive advantage Coopers currently has in the market. Continuous competitive analysis is needed to keep this a differentiated strategy.
4.Coopers Value Chain
The value chain model as described by Porter (1985) indicates that gaining a competitive advantage, an organisation focuses efforts to the internal activities of the value chain and attempt to strength these activities to add to the competitiveness of the firm. Coopers Brewery value chain could be reflected in the below diagram;
Source: ISO case study 2013
Coopers have made improvements in some of the value chain as seen in the case study, malt extraction for resale,
Machinery and new processing operations to brew beer in the bottle or the keg rather than the tank without preservatives and chemicals. Water supply from deep aquifers with sale extract and then reuse of salt in the brewing process. Energy, having their own power generation system that feeds non-used emery back into the grid. Coopers use energy efficient lighting to reduce consumption. These improvements form part of the value chain activities that add to Coopers achieving a competitive advantage in the market. There are many parts to the value chain as reflected in Appendix 4 (Porters Value Chain model) and efforts to manage and maintain each element is ideal. However a strategic view and focus may harness high results, it is suggested that aligning value chain efforts with the core direction of the business. In Cooper’s case by having a differentiation strategy efforts should be aligned with this strategy including product innovation, R&D and quality.
4. Current position
Positioning in this paper refers to the Porters model of “Three Generic Strategies” (1985). Cooper’s can be recognised as Differentiation in the Porters model, seen in Appendix 5. In this cluster Coopers can easily differentiate itself from its competitors. Cooper’s has an Australian History with a family heritage that still exists today, additionally having a product that has a distinctive cloudy appearance separates itself from the globalised conglomerates in the Australian beer industry. Coopers leverages this differentiator and applies this to marketing campaigns.
5. Future direction for Coopers
To suggest and recommend future options to Coopers, a reflection of Cooper’s mission statement “to provide natural beverages and food ingredients which satisfy tastes and nutritional needs, and create enjoyment” (Hubbard 2008, pg7). This mission statement can be used for the future direction of the business, as marketed as a family owned business and continue to capture the premium niche market it is positioned in. The future has a changing landscape with regards to consumer’s tastes, Cooper’s also captures taste in the mission statement. With the changing taste and desire of Generation Y consumers, Coopers competitive edge could be erode by imported premium beers and or the emergence of micro breweries that specialise in premium craft beers. Options can be summarised as follows: Continue to leverage the Family owned business brand.
Exporting the unique beer overseas
Continually improving the value chain and seek further opportunities to capture value. Continually focusing on changing consumer tastes and reviewing whether or not to compete in those markets. This will create new product life cycles, in a declining market (Nwabueze 2001). The future challenge for Coopers would be identifying new market opportunities, both on product and geographic level, whilst still achieving the family ownership which has been seen as an advantage since Coopers started.
6. APPENDI XES
Appendix 1: Competitive Market Share Australia and South Australia.
Appendix 2: Porters Five Forces Model
Source:Harvard Business Review(Porter 2008)
Appendix 3: Beer production Value Chain:
Source: (ISO 2013)
Source: (Porter 2008)
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