Adolph Coors Company Business Information, Profile, and History

Company Perspectives:

Coors--it's a name that conjures up an image of cool mountain streams, clear blue skies and all that is inspiring about the Rocky Mountain West.

It is a name associated with an uncompromising commitment to quality--a reputation that began more than 100 years ago and thrives to this day.

It is the name of an ambitious 19th-century pioneer whose humble dream grew into the world's largest single-site brewery.

But more than anything else, the name Coors is one held dear in the hearts of beer lovers across the country and, increasingly, around the globe.

History of Adolph Coors Company

Adolph Coors Company is the only family-owned brewery in the United States that was able to survive the late 20th-century consolidation of the American beer industry without relinquishing family control. The regional brewer gained national prominence in the 1960s and 1970s, but only officially achieved national distribution in 1986. Prodded from its conservative management tendencies by stagnant sales and meager profits in the late 1980s, a new generation of Coors family (and nonfamily) leaders sought to revitalize the business in the 1990s. Coors entered the 21st century ranked a distant third to market leaders Anheuser-Busch Companies, Inc. and Miller Brewing Company. Coors operates the world's largest brewery at its headquarters in Golden, Colorado, and distributes its 13 branded malt beverages in 30 countries worldwide--although 98 percent of revenues are generated in the United States. In addition to its brewing and distribution activities, which are conducted through a subsidiary, Coors Brewing Company, Adolph Coors Company also owns and/or operates aluminum can and glass manufacturing facilities in Colorado.

The Foundation of the Brewery

Adolph Herman Joseph Coors emigrated to the United States from Germany in 1868 at the age of 21. After purchasing a Denver bottling company in 1872, Coors formed a partnership with Jacob Schueler in 1873. Although Schueler invested the lion's share of the $20,000 necessary to purchase and convert an old tannery in nearby Golden into a brewery, Coors was able to buy out his partner in 1880. His acquisition inaugurated more than a century of Coors family control.

The fledgling brewery's sales increased steadily in the ensuing decades. In 1887 the brewery sold 7,049 barrels of beer (31 gallons per barrel). Three years later that figure more than doubled, reaching 17,600 barrels. Over the years Adolph Coors slowly expanded his market. By the time he officially incorporated his brewery in 1913 as Adolph Coors Brewing and Manufacturing Company, Coors beer was being distributed throughout Colorado.

Even at this early point in the company's history, the distinctive Coors philosophy was emerging. The main tenets of this philosophy adhered to by four successive generations of Coors beermakers, each generation further refining the knowledge inherited from the preceding generation, were the following: Adolph Coors believed in sparing no effort or expense in producing the best beer possible. To this end, he believed that only Colorado spring water was good enough for his beer. He also commissioned farmers to grow the barley and hops that he needed for his brewing process. The second tenet of the philosophy was that his family always came first, without exception; the Coors family brewery remained a tight-knit, protective, almost secretive enterprise. The last tenet was that 'a good beer sells itself.' Until 1980 Coors spent substantially less on advertising than any other brewer.

Prohibition came early to Colorado. In 1916 the state's legislature passed a law banning the production and consumption of alcoholic beverages within the state. Obviously, Prohibition was detrimental to Adolph Coors's brewery; some business historians assert, however, that the legislation strengthened the burgeoning company. The obvious changes in product offerings--Coors manufactured 'near beer' and malted milk during this period--were reflected in a name change, in 1920, to Adolph Coors Company. Adolph Coors and his son, Adolph, Jr., also used the opportunity to diversify their company, creating what was eventually to become a small-scale vertical monopoly: Coors acquired all that it needed to produce its beer, from the oil wells that created the energy necessary to run the brewery to the farms that grew the ingredients, and from the bottling plant that made the containers to the trucks used for distribution. This expansion was financed entirely with family money.

Astounding Post-Prohibition Growth

The repeal of Prohibition in 1933 did not result in as dramatic a sales increase for Coors as it did for many other producers of alcoholic beverages. Instead, the Adolph Coors Company, under the direction of Adolph, Jr., and his two brothers, expanded its market slowly in the 1930s. Their insistence on the use of all natural ingredients and no preservatives--in accordance with the brewery's founding tenets--made wider distribution prohibitively expensive. The beer had to be brewed, transported, and stored under refrigeration, and its shelf life was limited to one month. But if Coors's growth and development in the decades following the repeal of Prohibition was less dramatic than that of brewing powerhouses such as Anheuser-Busch and Miller, it was no less amazing. For while other regional breweries were squeezed out of the market--the number of independents shrank from 450 in 1947 to 120 in 1967--Coors grew steadily into one of America's leading beer brands. Coors's production increased 20-fold, from 123,000 barrels in 1930 to 3.5 million barrels in 1960, as the brewer expanded its reach into 11 western states. Coors's ranking among the nation's beer companies advanced accordingly, from 14th in 1959 to fourth by 1969.

How did Coors grow 1,500 percent between 1947 and 1967, with only one product, made in a single brewery, and sold in only ten states? A quality product was certainly one reason for Coors's success. The company's technological innovations, including the development of both the first cold-filtered beer and the first aluminum can in 1959, also placed it in the vanguard of the beer industry. Another reason was a unique marketing ploy that Coors perfected during the 1960s. When Coors entered a new market, it would lead with draft beer only. The company would sell kegs to taverns and bars at a price under that of its lowest competition. Then Coors would encourage the barkeepers to sell the beer at a premium price. Once Coors's premium image was established, the company would then introduce the beer in retail stores. Since Coors spent so little on advertising, the company was able to offer a better profit margin to its wholesalers. These profit incentives to both wholesalers and retailers worked well. Through the 1970s Coors was the leading beer in nine of the 11 western states in which it was sold. In California, the second largest beer market in the country (New York was first), Coors at one time held an astonishing 43 percent of the market.

1970s Through Mid-1980s: Cult Status, Controversies, and Declining Fortunes

Marketing, innovation, and product quality, however, could not account for what was later considered one of the strangest phenomena in American business history. Beginning in the late 1960s and culminating in the mid-1970s Coors developed, without any effort by the company, an unusual reputation as a 'cult' beer. Limited availability created intense demand on the East Coast. Westerners, keen to flaunt their perceived superiority to Easterners, got caught up in a 'we have what you want' syndrome and unwittingly became the company's unpaid advertisers. As a result, Coors virtually eliminated its competition in nine western states. Those nine states provided Coors with all the market it needed to become the fourth largest brewery in the nation.

But all was not well with the company and its enigmatic founding family. The 1960 kidnapping and murder of Adolph III had intensified the clan's already strong tendency toward secrecy. Their cautious, elusive nature produced circumspect hiring practices, including polygraphs and sworn statements of loyalty. Outsiders saw these practices as both unfair and as a means of enforcing racial discrimination: the limited numbers of African Americans and Hispanics employed by the company seemed to support this view. Lawsuits were filed alleging discrimination and, more important, a coalition of minority and labor groups organized a boycott, which intensified the negative publicity surrounding the company. The boycott and lawsuits provoked more public scrutiny of the Coors dynasty. A series of articles appeared in the Washington Post in May 1975 documenting Joe Coors's ultraconservative political philosophy. Not only did these revelations exacerbate the boycott, they also influenced the average consumer and generally undermined Coors's market position.

At first, the Coors family's response was retrenchment and litigation. But when sales dropped ten percent in California in 1975 (at the time that state accounted for 49 percent of total sales), the family changed its tactics. They settled the lawsuits, agreed to a minority hiring plan, and launched advertising campaigns aimed at showing the company's 'good side.' Television advertisements showed that minorities were happily employed in the brewery. Bill Coors took the initiative on environmental issues and proclaimed that the company was well ahead of the industry and the government in keeping the environment clean. The replacement of pull-tabs with 'pop-down' tabs and the first aluminum recycling program were cited as proof of Coors's commitment.

After a decrease in sales through the late 1970s, the company appeared to revive in 1980. Sales volume dropped by one million barrels between 1976 and 1978, bottoming out at 12.5 million barrels before rebounding in 1980 to 13.7 million. Bill and Joe Coors, the third generation of the family to take charge, concluded that their sales problem emanated from their image problem and that they had successfully solved both.

Two separate situations, one in 1975 and the other in 1976, should have signaled that the company's problems went beyond that of image. In 1975 the Coors family was forced for the first time to offer shares to the public to raise $50 million to pay inheritance tax for a family member. The original offering was successful, raising more than $130 million. The stock sold was of a nonvoting class, so the family did not relinquish any control over the company. Analysts suggested, however, that the reluctance with which the company undertook the offering disclosed a disdain for modern methods of capitalization. The second situation involved a Federal Trade Commission ruling, later upheld by the U.S. Supreme Court, striking down Coors's strong-arm distribution tactics. Coors refused to sell its product to distributors that the company regarded as unable to handle the beer properly. Once again, many industry analysts remarked that the company exhibited a disdain for mass marketing techniques.

Indeed, Coors remained committed to its founder's decidedly outdated idea that 'a good beer sells itself.' In 1975 William Coors claimed, 'We don't need marketing. We know we make the best beer in the world.' Throughout its entire history, Coors had spent far less than its competitors on advertising. In the 1970s, Coors's ad budget amounted to about $.65 per barrel, compared with the $3.50 per barrel promoting the leading beers. Anheuser-Busch and Miller spent billions of dollars on promotion in a market that they continually expanded with new products. Coors, on the other hand, only reluctantly joined the light beer movement--introducing Coors Light in 1978--and grudgingly increased its meager marketing outlay. As a result, Coors's 1982 sales volume declined to less than 12 million barrels for the first time in ten years, and the company relinquished its third-place ranking to Stroh Brewing Company. This decline came in spite of the expansion of Coors's distribution area across the Mississippi for the first time in 1981, when the company began selling its beer in Louisiana, Mississippi, and Tennessee.

Although Coors's sales increased from $1.1 billion in 1983 to $1.8 billion in 1989, profits declined from $89 million to $13 million, and the company's return on sales dropped from eight percent to less than one percent. Some observers blamed the brewery's entrenched family management, which they characterized as reactionary. But larger industrywide trends also contributed to the low earnings. The beer market's customer base began to stagnate in the mid-1980s, forcing brewers to use margin-lowering tactics to build volume and share. These included brand segmentation, increased (and increasingly malicious) advertising, international expansion, and heavy discounting.

Late 1980s into the 21st Century: Changing Times Under Peter Coors

Under the direction of Peter Coors, the brewery eagerly sought to catch up with its larger rivals. In 1987 Peter Coors, a great-grandson of the founder, was named vice-chairman, president, and CEO of Coors Brewing Company, a new beer-focused subsidiary of Adolph Coors Company (Bill Coors remained chairman of the parent company). The new leader was a driving force behind Coors's groundswell of change and continued on that course in the late 1980s into the early 1990s. Under his direction, the brewery completely reversed its advertising course: by the early 1990s, Coors began to spend more--in terms of advertising per barrel of beer sold--than its bigger rivals. Coors Light became the company's best-selling beer, America's third-ranking light beer, and the number one light beer in Canada. The company embraced the concept of brand segmentation and discounting, introducing the 'economy' or 'popularly priced' Keystone and Keystone Light in 1989. Ostensibly offering 'bottled-beer taste in a can,' these beers boosted sales volume, raising overall Coors sales to ten percent of the beer market and winning back the number three spot. But at the same time, such new products took market share away from other Coors brands, including the family's original label, which lost one-third of its sales volume from the mid-1980s to the mid-1990s.

While Keystone appealed to the budget-minded beer drinker, other new beverages targeted the higher-margin 'specialty' and 'boutique' markets. The domestic company craftily entered the fast-growing import market with the introduction of 'George Killian's Irish Red,' a defunct Irish brand licensed by Coors and produced in the United States. Even without the support of television advertising, the faux import was able to compete with the Boston Beer Company, Inc.'s domestically microbrewed Samuel Adams brand for leadership of the specialty beer segment.

In 1992, Coors launched Zima, one of the beer industry's most creative new beverages. The clear, foam-free malted brew created a whole new beverage category. The drink's novelty won it instant popularity that fizzled even before Coors could introduce its first derivative, Zima Gold, in 1995. Analysts noted the telling fact that neither Anheuser-Busch nor Miller, both savvy marketers, followed Coors's lead into the clearmalt category. Zima Gold was pulled from the market after six weeks of disappointing sales.

Peter Coors was not afraid to buck decades of family tradition, chalking up several firsts that had previously been renounced. With Coors running up against its lone brewery's 20-million-barrel annual capacity, Peter floated the company's first long-term debt offering in 1990. Later in 1990, he tried to negotiate a $425 million acquisition of Stroh Brewing, but ended up buying its three-million-barrel-capacity Memphis, Tennessee brewery for about $50 million. If, as Peter Coors hinted to a reporter in a March 1991 Forbes article, the company wanted to mount a challenge to second-ranking Miller Brewing, it would still need to double its U.S. brewing capacity. Meanwhile, in 1991, the company's distribution area covered all 50 states for the first time.

In 1992 Coors spun off the company's nonbeer assets--including the high-tech ceramics division, as well as the aluminum and packaging businesses&mdash ACX Technologies, Inc. Coors shareholders received one share of ACX for every three shares of the brewing company. The divestment was considered successful: ACX's sales increased from $544 million in 1991 to $732 million in 1994, and profits multiplied from $1.3 million to $20 million over the same period.

In 1993, Peter Coors broke with 121 years of history by hiring the first nonfamily member to the presidency of the brewing business. His choice, W. Leo Kiely, reflected Coors's new emphasis on marketing. Kiely had been a top marketing executive with Frito-Lay Company, a division of PepsiCo, Inc. The new president was given a straightforward, but arduous mandate: increase Coors's return on investment from less than five percent to ten percent by 1997. A significant cost-cutting move came in the form of a 1993 workforce reduction of 700, which was accompanied by a $70 million charge that led to the company's first full-year loss in ten years.

With the Zima brand faltering, Coors looked for growth from overseas markets and from a new specialty brewing venture. In 1994 the company purchased the El Aquila brewery in Zaragoza, Spain, to manufacture Coors Gold for the Spanish market and Coors Extra Gold and Coors Light for several markets in Europe. That same year Jinro-Coors brewery in Cheong-Won, South Korea--which was one-third owned by Coors--began operation. Coors's partner in the venture, Jinro Limited, ran into financial difficulties later in the decade, leading to the sale of the brewery to another company and ending Coors's involvement. In 1995 Coors entered the microbrewery market with the opening of the SandLot Brewery located at Coors Field in Denver, the home of Major League Baseball's Colorado Rockies. Specialty beers under the Blue Moon label began to be crafted at this 4,000-barrel-capacity facility. In 1997 the company entered into a partnership with Foster's Brewing Group Limited of Australia and the Molson Companies Limited of Canada for the distribution of Coors brands in Canada. The following year Molson gained Foster's stake, giving Molson a 49.9 percent stake and Coors a 50.1 percent stake.

From 1988 to 1997 Coors increased its share of the U.S. market from 8.8 percent to 10.7 percent. Production increased over the same period from 16.5 million barrels to 20.4 million. Coors remained a distant third to Anheuser-Busch and Miller, but it had made strides in improving profitability, in part from an overhaul of what had been a convoluted U.S. distribution system. In 1997 the company reported net income of $82.3 million on sales of $1.82 billion, which translated into a net profit margin of 4.5 percent--a significant increase over the previous year's figure of 2.5 percent.

By 1999 sales had surpassed the $2 billion mark for the first time, and net income reached $92.3 million. Return on average shareholders' equity reached 11.4 percent, a vast improvement over the low single-digit figures of the early 1990s. That year Coors sold 23 million barrels of malt beverages. Surprisingly, a comeback by Zima was a driving force behind the improving results. Zima was repositioning as a refreshing alcoholic beverage, and as an alternative to beer--and its taste was altered to make it less sweet and more tangy. Consequently, sales began rising in 1998 and 1999, although they failed to reattain the peak level of 1994. In 1999 Zima Citrus was introduced, offering a blend of natural citrus flavors. Among other late 1990s new product introductions was Coors Non-Alcoholic, a premium brew with less than 0.5 percent alcohol by volume.

In May 2000, on the heels of the record 1999 performance, Peter Coors was named chairman of Coors Brewing Company and president and CEO of Adolph Coors Company, with Bill Coors remaining chairman of the parent company. Kiely was promoted to president and CEO of Coors Brewing. Under the leadership of Peter Coors and Kiely, the company was likely to continue its increasing focus on profitability and growth. With only two percent of revenues being derived outside the United States, the management team was also likely to pursue overseas opportunities in a prudent manner, keeping a keen eye on the earnings potential of such ventures.

Principal Subsidiaries: Coors Brewing Company; Coors Brewing Company International, Inc.; Coors Brewing Iberica, S.A. (Spain); Coors Distributing Company; Coors Energy Company; Gap Run Pipeline Company; Coors Nova Scotia Co. (Canada); Coors Global, Inc.; Coors Intercontinental, Inc.; The Rocky Mountain Water Company; The Wannamaker Ditch Company; Coors Japan Company, Ltd.; Coors Brewing Company de Mexico, S. de R.L. de C.V.; Coors Brewing International, Ltd. (U.K.); Coors Export Ltd. (Barbados); Coors Canada, Inc.

Principal Competitors: Anheuser-Busch Companies, Inc.; Bass Brewers; The Boston Beer Company, Inc.; Brauerei Beck & Co.; Canandaigua Brands, Inc.; Carlsberg A/S; Foster's Brewing Group Limited; The Gambrinus Company; Genesee Corporation; Grupo Modelo, S.A. de C.V.; Guinness Ltd.; Heineken N.V.; Interbrew S.A.; Kirin Brewery Company, Limited; Miller Brewing Company; S & P Company; Scottish & Newcastle plc.

Chronology

• Key Dates:

• 1873: Adolph Herman Joseph Coors forms a partnership with Jacob Schueler to convert a tannery in Golden, Colorado, into a brewery.
• 1880: Coors buys out Schueler.
• 1913: Company is incorporated as Adolph Coors Brewing and Manufacturing Company.
• 1916: Prohibition is enacted into law in Colorado.
• 1920: Company changes its name to Adolph Coors Company.
• 1933: Prohibition is repealed.
• 1959: Company develops the first aluminum can.
• 1969: Coors becomes the number four brewer in the United States.
• 1975: Company goes public, offering only nonvoting shares.
• 1978: Coors Light is introduced.
• 1981: Coors' distribution area expands across the Mississippi for the first time.
• 1987: Coors Brewing Company is created as a beer-focused subsidiary of Adolph Coors Company; Peter Coors is named vice-chairman, president, and CEO of Coors Brewing.
• 1989: Keystone and Keystone Light brands make their debut.
• 1990: A brewery in Memphis, Tennessee, is purchased from Stroh Brewing.
• 1991: Coors beer is now available in all 50 states.
• 1992: Coors introduces Zima, a clear, foam-free malted brew; the company's nonbeer assets are spun off to shareholders as ACX Technologies, Inc.
• 1993: For the first time, a nonfamily member, W. Leo Kiely, is selected as president of the brewing business.
• 1995: The SandLot Brewery opens at Denver's Coors Field; the Blue Moon specialty brand is launched.
• 1997: Coors Non-Alcoholic is introduced.
• 2000: Peter Coors is named chairman of Coors Brewing and president and CEO of Adolph Coors Company.