Coopers brewery - Strategic Analysis

Strategic Management - Coopers Brewery First Case Assignment

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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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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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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 3rd 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

Friendly TM” 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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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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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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Bigalk, Erik. (2008) Better tasting beer. Food Magazine, p16-16, 1/2p.

Blair Speedy. (2010). Coopers Brewery keeps a cool head on global suitors. Available:

http://www.theaustralian.com.au/business/coopers-brewery-keeps-a-cool-head-on-global-

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Donnar, Ryan and Jakee, Keith. (2004). Australian Beer Wars and Pub Demand: How Vertical

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ekonomická fakulta.

Michael E. Porter (1998). Competitive Advantage: Creating and Sustaining Superior Performance.

New York: Simon and Schuster.

Pyper, Wendy. (2009). Golden nectar gone green. Ecos, Issue 147, p18-19, 2p.

Selvanathan, E. A. and Selvanathan. (2004). S. Economic and Demographic Factors in Australian

Alcohol Demand. Applied Economics, v. 36, iss. 21, pp. 2405-17.

Unknown. (.). Australian Beer History. Available:

http://www.australianbeers.com/history/history.htm. Last accessed 7 March 2011.

Unknown. (2010). Ansoff's product / market matrix. Available:

http://tutor2u.net/business/strategy/ansoff_matrix.htm. Last accessed 6th March 2011

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Coopers brewery - Strategic Analysis

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