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Strategic Management - Coopers Brewery

First Case Assignment

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Strategic Management - Coopers Brewery
First Case Assignment

Introduction ............................................................................................................................................ 2
1. Australian brewing industry and its key driving forces ................................................................. 3
2. Coopers’ business strategy ............................................................................................................. 6
3. Coopers’ Strategic Capability ......................................................................................................... 7
4. Coopers’ performance and position in 2007 ................................................................................. 9
5. Issues, options and recommendation to Coopers ....................................................................... 10
References............................................................................................................................................. 13

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Strategic Management - Coopers Brewery
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Introduction

About Coopers Brewery

Coopers Brewery is considered to be a small family-run beer company originally located in Adelaide,
South Australia and in 2001 moved to a brand new facility at Regency Park. Coopers Brewery is the
third largest brewer in Australia and exports to about 26 countries locally and overseas. Coopers
accounts for about 3% of the total Australian beer market, but around 13% of the premium beer
market. The attribute “small” Is derived from the number of employees and shareholders as it was
mentioned to be 115 and 132 in 2007. It is an unlisted public company where the majority (95%) of
shareholders is created by members of Coopers’ family and you can also find the fifth generation of
Coopers in leadership of this company. As for shares the company has A, B, C, D class shares.
Although there is the greatest amount of C class shares, the rules are set up in a way that just holders
of the classes A, B, D have the crucial voting rights such as to appoint members of Board of Directors.

Coopers is engaged in production of lagers as well as ales and stouts. The process of top
fermentation and usage of just natural ingredients impart its products their unique characteristics
such as their cloudy appearance. Among the main products belong Coopers Sparkling Ale, Coopers
Original Pale Ale, Coopers Dark Ale, Coopers Mild Ale, Coopers Best Extra Stout, Coopers Premium
Lager and Coopers Premium Light. Each of them is highly differentiated and targeted to meet
requirements of specific groups of drinkers.

Coopers belongs also to very active marketers and sponsors. Its activities range from supporting
basketball team (Adelaide 36er basketball team), over various games and races (Balaklava and
Kangaroo Island horseraces) to such events as music and art festivals (Adelaide Festival of Arts, the
Cabaret Festival).

If you want to share your passion for everything relating to Coopers you have a special opportunity
to join “The Coopers Club” that enables you to enjoy free entertainment, preview of new products
releases, you can even meet personally with the Coopers staff and who knows maybe even Glen or
Tim Cooper on their own or to get a discount voucher for dining, accommodation and travelling.

Brief View to History

Coopers Brewery was established by Thomas Cooper in 1862. The structure of beer turned up quite
accidentally when he tried to cure his sick wife. The first brewery was then founded in Leabrook,
Adelaine and Thomas managed it with his 4 sons. In 1962 Coopers Brewery formed an alliance with
SA Brewing, the dominant leader of South Australian brewing industry. In the same year it also began

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Strategic Management - Coopers Brewery
First Case Assignment
to export to USA and to produce a home brewing kits as an answer to falling on tap sales due to
higher beer taxes. The period from 1979 to 1989 is mostly connected with Cooper rapid expansion in
international sales and also in other Australian states. However, 1990s and beginning of the new
millennium were the crucial years for Coopers Brewery because of Lion Nathan and its takeover bid.
It started in 1993 when Lion Nathan acquired SA Brewing and sold certain shares back to Cooper in
exchange for a right to purchase Coopers shares before any other prospective buyer. But in 1998 a
change of control came over the Lion Nathan with Japanese brewer Kirin and Coopers called for
removal of Lion Nathan’s third tier rights. It ended in two takeover offers which were both denied,
consequently in a trial won by Coopers Brewery and so in removal of Lion Nathans right. Meanwhile
Glen Cooper became a marketing director and started a huge marketing campaign to bring near the
coopers products also to younger generation and make it more available also for all sorts of
consumers always stressing the image of difference between Coopers beers and the others. Despite
of the attractiveness and high quality of Leabrook location it reached its capacity in 1998. The
decision was made to expand to a new facility at Regency Park in 2001. That enabled enlargement of
brewing capacity from 90 million litres to 225 million litres. In 2002, they discussed the possibility to
brewing US beer Budweiser there. 2003, the new company, Premium Beverages, run by Bruce Siney
started operations with Coopers having 80% of the equity and ABD having 20%.

1. Australian brewing industry and its key driving forces

To find the very beginning of beer brewing in Australia we have to look back to colonial history.
Captain James Cook (1728-1779) believed that beer maintained health of his seamen. For this reason
there were tonnes of beer on the board of his boat Endeavour. And later, they took ingredients to
brew beer on the boat (Australian Beer History).

There were about 294 breweries in 1890 but this number was decreasing during the years as a result
of economies of scale and scope. And in 1990 there were only 11 breweries.

In Australia, there are two dominant breweries: Foster’s Brewing Group and Lion Nathan which had
together about 94% of Australian market in 2006. In the table it is seen the Coopers in on 3 rd place
with increasing share of Australian market from 2.9 in 2002 to 3.6 in 2006.

Australian Market Share (volume percentage)

Company 2002 2003 2004 2005 2006


Foster’s 54.0 53.6 54.3 53.9 53.7
Lion Nathan 41.4 41.5 40.4 39.8 39.6
Coopers 1.7 1.9 2.3 2.8 3.1
Other 2.9 3.0 3.0 3.5 3.6

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Source: Coopers Brewery

The origin of Foster’s Brewing Group is in 19th century when William and Ralph Foster created the
first beer (simply called Foster’s). About 120 years later, the beer is sold in 150 countries all over the
world and the company is the largest Australian beer producer. The group operates internationally
and include beer and wine production. The strong position of the company is based on successful
development and maintenance of wide brands range in both sectors.

Lion Nathan is the second largest beer producer in Australia. It was originally New Zealand company
which expanded into Australia in 1990. Since 2009 it has been owned by Japanese Kirin Holdings
Company Limited. Its production includes beer, wine and spirits. The company focuses on local beer
brands for example Swan and Emu Brewery situated in Perth, West End, Southwark. On the other
hand it runs national brands too: Tooheys and Hahn).

During last years, Foster’s (Carlton and United Breweries) and Lion Nathan were fighting for the first
place on the market. In this effort they were purchasing pubs and imposing restraints in the form of
agreements with retailers. This strategy was especially implemented in and around Melbourne
metropolitan area. It led to renovation of many pubs to attract customers, supply them special
environment (Applied Economics, 2004).

The Australians consume 95L of beer per person in the year and it ranked the on the eighteen place
in the world comparison. The general tendencies in Australian society are:

 Beer is more popular among single persons, men, students and unemployed individuals.
 Wine and spirits are preferred by women, married people, and employed.

Another interesting point is that the higher educated individuals are more likely to drink wine. As it is
seen on example of Coopers which is much stronger in South Australia where it has it base or Lion
Nathan, the drinkers are loyal to local brands.

South Australian Market Share (volume percentage)

2002 2003 2004 2005 2006 2007


Foster’s 31.8 32.8 33.6 32.9 32.8 31.4
Lion Nathan 47.0 44.5 43.1 42.9 43.0 44.7
Coopers 18.4 20.1 20.9 21.3 20.3 20.9
Other 2.8 2.6 2.4 2.9 2.9 3.0
Source: Coopers Brewery

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“Green” beer

Last years are characteristic by environmental thinking reflection in brewing. Breweries trying to be
“green” and hope that their effort will be perceived by customers positively. And it looks the way is
right and the effort has its results. If the results of this policy cannot be measured in consumption,
they are seen in production costs lowering.

Lion Nathan Bare Cove Radler Beer and Foster’s Cascade Green received certificates “Greenhouse
TM
Friendly ” from Australian Government in 2007 and in 2008. This certificate labelled the good
environmental practice, emissions reduction and contribution to less Australia’s greenhouse gas
emissions during the production process. But the environmental non-governmental organization
alerts it can be misleading. In the case of beer production the whole process begin by growing of
barley and hops, through use of water or production of bottles and etiquettes. And usually it is not
possible to monitor whole process and then the product cannot be labelled as the “green” one.

The companies seek the way how to be close to the customers, their way of thinking, life style etc.
The breweries follow the global trends and they use “green approach” in advertising and marketing
communication. But it is necessary to be careful and clear in information sharing because confusing
claims could damage company’s credibility (Ecos, 2009).

New trends in consumption

The segment of small breweries is growing despite the consumption of net alcohol is decreasing.
Nowadays it has about 8% of the beer industry. Although, the world economic crises (in years 2007-
2010) affected most of the economics sectors, the craft breweries noted a raise in consumers
demand for their products.

Kevin O’Neill, the founder of Snowy Mountains Brewery, imputes this fact to the consumers
behaviour change. He says that the growth is caused by appreciation of differences between
standard beer from mass production and uniqueness of crafted boutique beer.

His brewery is one of the newest. When he started operating in 2004, he decided to follow the
“German Reinheits Gebot” from 1516 which permits four basic ingredients for brewing (barley, hops,
yeast and water) to offer the best quality and taste. He refuses usage of adjuncts, chemical additives
or preservatives which are ordinarily used in mass production. The mass production of beer usually
use corn or rice which increase fermentable sugars and reflect in higher yields but they lower the
quality and taste.

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The significant changes in drinking habits reflected in consumption of premium, craft and low-carb
brew production. The advantage of smaller breweries is their focus on quality and better taste. The
trend is the people tend to require enjoyment and quality; they do not want to pay only for alcohol
and quantity (Food magazine, 2008).

2. Coopers’ business strategy

Perhaps every book dealing with economic themes provides us with information that only good
strategy is a key presumption for successful and profitable future of each company. Following lines
are engaged in finding what is Coopers’ business strategy and how it can work. Analysis of a
document about Coopers Brewery offers us some clues to answer our question:

One of them is the Coopers mission statement that tells us about their desire to “provide natural
beverages and food ingredients which satisfy tastes and nutritional needs, and create enjoyment” or
the information such as about promotion action through KWPI with an aim to create “cloudy but fine
image” always stressing the difference between Coopers beer and national mainstream beers”.

For recognition of a firm’s strategy is important to know its specific qualities compared to their
competitors. As for Coopers they considered following items to be their source of difference:

 Natural product – ales do not contain any additives or preservatives

 Different appearance – the cloudy appearance of ales

 Historical and family background of the firm – over 140 years, 5th generation of family
members in leadership

 Its branding

 Its focus on premium market

What we should also mention is their specific way how they work with their employees. According to
one of the employees the atmosphere at workplace is very special, full of energy. Each employee is
chosen based on three ordinary interviews and one special with CEO. The effort of leaders generates
a feeling that people care, know each other, your opinions count and then you feel like a member of
great and functional family.

Also the firm’s approach to their customers works at similar principle. For example establishment of
“The Coopers Club” is a kind of evidence for that. It serves to people not only to show that they like
this family company and its products but in fact to also become a part of that family. It provides the

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First Case Assignment
members various possibilities how to inform, entertain, get some advantages or to socialize
themselves with Coopers staff.

All above mentioned aspects imply in focus of Coopers Brewery on the strategy of differentiation
(division according to M. E. Porter). The company creates its value added by production and
distribution of very unique “cloudy” beers in connection with high-levelled services and feeling of a
special relationship to the firm. They build on the loyalty of their customers as well as employees.
Lowered price sensitivity of customers and higher entry barriers to competitors on the other side are
very advantageous for the company. On the other hand differentiated features themselves in
combination with price level and pressure from imitators can be risky aspects of that approach. To
secure the success of such strategy we have to know very deeply needs and requirements of our
customers and also possibilities of our competitors (Tichá, Strategic Management) (Strateg.cz).

3. Coopers’ Strategic Capability

Before analyzing Coopers strategic capabilities we will firstly need to understand the definition and
basis to achieving strategic capability in any organization, and this is quite simply, the capacity of a
business to survive, prosper and deliver future value using resources, and skills to create a long-term
competitive advantage for the organization. Coopers was successful in this, when they moved their
location in 2001 and also in 2006 when there was a very visible export beer sales growth with the
two new product releases - Coopers Premium Light and Coopers Premium Lager.
They aimed their focus on competence, knowledge, and skills inside of the organization and applied
it to their strategy to achieve success in the competitive environment by keeping it a family business.
Part of this focus also applied to the fact that they considered it best if family members first got
experience outside of Coopers brewery before joining the family business. The fact that they were
able to keep it as a family business for so long was a key element of their capabilities framework and
identification of the foundations on which their distinctive and difficult–to–replicate advantages was
built, maintained and enhanced.
Later Coopers expanded their international sales but, soon realised those were not profitable,
decided to focus only on expanding inside of Australian states, which seemed to be producing more
size-able profit percentages thus understanding the importance of strategic capability from another
perspective. Coopers soon realised there was a concentration on economies of scale and national
branding, and that the taste of most of the mainstream beer brands became quite similar, with only
small differences like branding, origin and image, which stressed the fact that consumer loyalty
played one of the most important roles. What Coopers then saw as an opportunity for introducing to
the market was its very different “cloudy” beers. Thus the brewery discovered the capability of

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First Case Assignment
having the leading edge in strategic developments, in the sense that they saw new opportunities
being created through stretching and exploiting the brewery’s capability. Either in ways which their
competitors (Lion Nathan or SA Brewing) found difficult to match or in genuinely new directions like
putting their focus on targeting the universities bars and trendy outlets, to get its beer on tap and
more available for their consumers.
Some of the characteristics of their strategic capabilities were the following: They placed emphasis
on new knowledge that was brought in by the experience new family members entering the business
gained on the outside. Besides that, they're other strength was creating the element of uncertainty
through constantly changing and also through a kind of team-building strategy, involving diverse
individuals (family members) with a variety of knowledge and stimulating communication, as an
important mediator.
In 1998, Coopers’ Leabrook brewery reached capacity. The brewery was in an attractive, high quality
residential area with no option for expansion, this involved the need to adjust and change in order to
"fit" the changing environment and the need to "stretch" to exploit the brewery’s resources in ways
that were innovative, so they moved to a brand new facility and their enlarging brewing capacity. The
reason why an understanding of strategic capability is so important concerned with whether the
brewery’s strategy continues to fit the environment and the opportunities and threats that exist.
However, it was the critical success factors in other words the product features that are particularly
valued by their customers who play the bigger role, and therefore, where Coopers had to excel to
outperform their competition.
Coopers had a mission statement for its beers and that was, to provide natural beverages and food
ingredients which would satisfy tastes and nutritional needs and create enjoyment. The company
believed that its point of difference was somewhat its key driving forces and knowing they had
number distinct components. All of which contribute in the building blocks of strategic capability,
such as their clarity of thinking and action in objectives and strategy.
The strategic progress in operational achievement and also their sensitivity to the future and to the
impact of controllable and uncontrollable trends and factors built their future performance.
Investing in their resources also played a big role when it came to their strategic capabilities, for
instance the plant where they brewed the beer had many environmentally friendly features.
Including sound, its gas-fired power plant which co-generated all its electricity and steam
requirements, also that it used waste heat to produce steam that was used in the brewing process.
These were all part of their strengths and less tangible drivers of value and an approach to social
ethical and environmental matters that was integral to the strategy of the brewery.
Gaining new found glory, and new consumers that appreciated their acceptable ways of getting
things done. They soon realised the potential of parallel approach to reach out to their target

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audience and used many complementing platforms to communicate with them such as the “The
Coopers Club” which gave Coopers the opportunity gain better access to market information, whilst
contributing above and beyond basic capabilities, through giving added value to the customer
(externally focused).
Also benefits included member-only nights to enjoy free entertainment, previews of new product
releases, the opportunity to socialize with the Coopers staff, a discount voucher system for dining,
accommodation and travel and many other aspects which were better than that of the majority of
other competitors, difficult to imitate or replicate. Again adding to their strategic advantage, and
stating that they had the competencies, knowledge, and skills that an organization can apply to
achieve success in a competitive environment they focused on the ability to provide products that
their customers valued or will value. All of the above mentioned statements is proof of their
successful strategic capabilities en their ability to use and maintain them.

4. Coopers’ performance and position in 2007

Coopers are performing great, giving their size at place in the market. The previous financial year
was a defining year in the history of Coopers Brewery Ltd. Now that Brewers fought off the hostile
takeover bid by Lion Nathan it surely emerged a stronger organization.

After winning the court battle in December 2005, at which 93 per cent of shareholder voted in favour
of the resolution to remove Lion Nathan’s third tier pre-emptive rights, Coopers gone from strength
to strength. Winning award after award, repaying them for all the hardships they had in keeping
Coopers independent.

In 2006, Coopers established the Coopers Brewery Foundation to raise funds for community projects.
Coopers met all the administration costs so all money raised would go directly to the community
projects.

In 2007 “The Coopers Club” grew to 6000 financial members, giving Coopers the opportunity to get
access to market information. It is also offering the members with great unique advantages. Money
was raised from plant tours and sale of some scrap products, but it was just getting under way within
this year. These all are not just promoting the community but also creating a great view of Coopers
and serving to be a great marketing tool. Coopers was a very active marketer and sponsor. Apart
from its own shop at the Adelaide Airport, it was a sponsor of the Adelaide Festival of Arts, the
Adelaide 36er basketball team, the Cabaret Festival, the Balaklava and Kangaroo Island horseraces,
Womadelaide - the world music festival - and, again in 2007, the Adelaide-based World Fire and
Police Games. Thus all is creating a marketing force to contend with.

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Given all the above positive I know the road ahead for Coopers will not always be smooth
sailing. Given the declining national market, Coopers are doing great, but many challenges lie ahead.
Focussing on the premium segment may be one solution, but will there be other plans if this fails??

Cooper would have to strongly consider becoming a strong player outside South Australia. It is
necessary to be open-minded towards new trends.

Given all this the court case was a great building block in Coopers’ future prosperity. It should
continue to stand up against its giant competitors and define themselves as a force to be counted
with in the future.

Coopers are now very well placed against it “bullies” in the industry. It emerged from a small family
business that was tied to old natural ways of brewing beer, to a upcoming giant in the industry still
using the old unique ways but also following new trends. Thus making Coopers one‘s of the safest
bets in the industry.

With the future waiting to bloom for them and with managing and advertising systems well in place
as ever before this Coopers will be a brewery to contend with for as long as the world drinks beer.

5. Issues, options and recommendation to Coopers

In order to answer this question, we feel it is important to sum up what are the issues that lead to
Coopers’ current situation. The tools we used to perform our analysis are the Ansoff product/market
matrix, the business compass, the boston consulting group matrix and the porter’s
cost/differentiation focus diagram.

Issues:

- Lack of leadership: Family too involved in the company. Hidden interests/duplicity. Shares
are only shared within it.
- Globalization: Willing to stay local whatever it costs instead of Nathan Lion who succeeded to
do both (expand overseas and be perceived as a local brewer for local people)
- Human resources: missing expertise to hire people that could enhance the company’s
profitability.
- Competition: fierce, late reaction to it. Losing market share.
- Corporate culture: should improve the traditional importance of the company within the
workers.

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As we said, even though Coopers’ is facing huge competition it still has a good brand image amongst
its customers and continues to strengthen it by a good marketing, a differentiated product and a
really traditional corporate culture dear to its Australian consumers.

When we took a big picture, we agreed that Coopers is doing well but considering the competition
that surrounds it, Coopers’ board should do some improvement to keep its market share and try to
expand it. Indeed, Tim Cooper does not know what he is up against in terms of competition because
international players have an even greater ability to bring products from different places in the world
to compete in this marketplace. The recent split of giant Foster’s into separate brewing and
winemaking companies will focus international intention on the Australian sector and could also
switch the balance of power between retailers and suppliers who have been pushing brewers to save
price promotion (Wall Street Journal, 2010).

The improvements that should be taken are the following:

Options:

- Hire other people from outside the company and not part of the family to lower the family’s
ownership strength (maybe steal competitors’ expertise by recruiting in their top
management).
- Spread the share by going on the financial market while keeping the control of it, that means
they should keep at least 51% of the company by modifying the company’s constitution
- Globalize the brand by copying Nathan Lion’s strategy and developing its product overseas
(BRICs?) as the Australian beer market is saturated.
- Continue to insist on the corporate culture and its “cloudy” beer to even more differentiate
compared to competitors which means to keep its marketing locally to keep its local
customers and the faith they have in the brand and export it abroad. It is really its spearhead.
- Catch up on competitors to reduce the gap
- Do a joint venture with Foster’s

Giving these elements we decided to put forward some that seem the most important to us for
Coopers’ sustainability and growth. First of all, Coopers has to lower the family’s ownership by hiring
people from outside to handle its strategic planning. Indeed, according to Tim Cooper, there are
emotional issues in terms of the connection to the family and the heritage of the company. So, it will
allow them to balance their activity in a better way and expand the brand overseas by defining the
best differentiation to overcome competitors. The differentiation strategy should take into account
the selecting of one or more characteristics that are widely valued by buyers, selectively add costs in

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areas important to the buyer and achieve and sustain superior performance relative to any
competitor in satisfying those buyer needs. Also, it needs to determine true buyer’s identity and
purchase criteria, identify buyer’s value chain and impact of Coopers’ product and assess sources of
uniqueness within the company and strengthen them.

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