2nd Brewery Planned in Virginia : Coors Says Mystique Will Survive Trip East

Since 1873, Adolph Coors Co. has thrived on the romantic image of a high-country company blanketing the West with one product brewed with “pure Rocky Mountain spring water.”

The company basked in free publicity when its Colorado Kool-Aid was smuggled east of the Mississippi and sold at a premium. The company boasted about its home here, which is the largest single brewery in the world.

Those days are gone. The brewing industry has changed and so has Coors.

Five Other Products

Now the company has five other products in addition to the flagship brand, Coors Banquet beer. Recently Coors helped form Masters Brewing Co., a joint venture with Canadian and German brewers.

Last month, the company took a giant step toward the most revolutionary change of all--the eventual construction of a second brewery in the Shenandoah Valley near Elkton, Va.

That new Shenandoah Valley site boasts spring water from the Blue Ridge Mountains. But the Blue Ridge Mountains aren’t the Rockies. How will that affect the Coors mystique?

“There’s a lot of controversy about what the Coors mystique is,” said Peter Coors, great-grandson of the founder and president of the Brewing division of Adolph Coors Co.

“Many attribute the mystique to the inaccessibility of the beer. We believe the mystique lies in the way we do things. I think people buy Coors beer because they like it. If you can’t deliver, you’re not going to sell beer.”

Coors said that the company hasn’t yet dealt with replacing that “pure Rocky Mountain spring water” slogan because initially the company is building only a $70-million packaging facility in Virginia. Beer will be brewed in Golden and afterward shipped East in refrigerated railroad tank cars.

The packaging facility, to be completed in the early spring of 1987, will be able to handle 2.5 million barrels of beer annually.

If the company forges ahead with a Virginia brewery, which could be built in increments of 2.5-million barrel capacity, Coors doesn’t think there will be a major image problem. Neither do beverage industry analysts.

“It looks like they are getting their act together,” said Joseph Doyle of Smith Barney in New York.

“It’s a better image for Coors because it shows them as growing rather than retrenching,” said Jerry Steinman of West Nyack, N.Y., editor and publisher of Beer Marketer’s Insights, an industry publication.

Change is vital to the company, Peter Coors said, because the entire brewing industry has changed dramatically over the past 10 years.

One of those changes, he said, is the increasing dominance of St. Louis-based Anheuser-Busch, which now has 36% of the beer market. Another is the “rather intense involvement in community affairs” by brewers today.

Money for Advertising

Still another is the vast amount of money breweries are pouring into advertising. In 1975, Coors spent $7.1 million for advertising. Last year it spent $138.7 million, a remarkable 12.25% of net sales.

Industry leader Anheuser-Busch spent $245 million on advertising in 1984, about 3.8% of sales. Coors said that his company’s per-barrel advertising expense leads the industry.

“It seems obvious there are not going to be too many successful survivors in the beer industry,” Coors said. “If we are going to be a longtime survivor, we’ve got to act like one.”

Brewing excellence long has been the company’s forte. “Among brewers, they are viewed as very strong in production and packaging sense, good quality,” Doyle said. “I think many feel their marketing has not been strong.”

Our competitors “geared up faster than we did” to deal with industry changes, Coors said. “We could have thrown more money at the problem 10 years ago, but I think we would have been doing just that--throwing money at the problem, and not solving it.

“It has taken us this period of time to develop the staff to spend the money wisely.”

Analysts called Coors’ decision to start with just a packaging plant in Virginia a prudent move.

“They are--wisely, I think--not going directly to the big bucks of building a brewery,” said Doyle. “It is smart to go only to a packaging plant to assess East Coast sales trends.”

So far this year, said publisher Steinman, industrywide beer shipments are up about 1.5%. “Bud Light is flying, and Coors Light is doing very well. In fact, Coors Light is probably doing even better than Bud Light,” he said.

“It could very well be that those two brands together could, by the end of the year, account for the entire industry’s gain.”

Peter Coors, who said that the company’s beer sales increased 18.6% in 1985’s first half, noted that not all of the increase is coming from new marketing territories.

“We have definitely changed the trends in our base markets, which to us is very exciting and very encouraging,” he said. “Clearly, Coors Light brand is driving that overall,” but “this year we have been able to flatten out” the declining curve in Coors Banquet beer sales.

The new Masters company will help Coors decide whether to build a brewery in Virginia. Masters, a joint project of Coors, Molson Breweries of Canada and Kaltenberg Castle Brewery of West Germany, announced a month ago that their first product might hit test markets late this year.

But Joseph Coors, company vice chairman, said recently that it would be “impractical to be introduced by the end of the year.” The Masters beer, a super-premium product, “could be brewed at several locations” eventually, but initially will be brewed by Coors, he said.

“Where it will be brewed in the long-term depends on capacity considerations,” Chairman William K. Coors said. Success or failure of Masters beer could significantly affect the decision on when to build the Shenandoah brewery, he added.

Coors, which now sells its beer in 44 states plus the District of Columbia, hopes to add the other six (New York, Michigan, Indiana, New Jersey, Pennsylvania and Delaware) by 1990.

Steinman questioned whether Coors has the capacity to meet that goal. “A lot depends on growth in their basic areas, from the Rockies west and Texas,” he said. “If sales continue to grow in the West, they may not be able to handle six additional states without the Virginia brewery.”

In Golden, the packaging capacity is 15 million to 15.5 million barrels a year and the brewing capacity about 18 million barrels, with the present product mix.

“That includes doing some additional work within the brewery,” said Coors. “We have room for two more brew lines in Golden. The question will be whether we will build them there or go to Virginia.”