E-Malt.com News article: Australia: Coopers Brewery says an excellently tuned supply chain is a driving force behind its business

Coopers Brewery, the last of Australia's major independent brewers, might be in trouble today if it had not found a better distribution pipeline, Smart Company published on May, 14.

The Adelaide-based Coopers was right to team up with a specialist supply-chain manager to grow its business at a time when bigger rivals are struggling, analysts assert.

Tim Cooper, managing director of the family-controlled brewer, says the 80%-owned Premium Beverages joint venture had become a driving force behind the 147-year-old Coopers business.

"From being a relatively small part of our business when it started in 2002, Premium Beverages has grown to account for 52% of our sales."

What Coopers discovered is that it is good at making beer, and that former Foster's Brewery marketing executive, Bruce Siney, knows how to get beer to customers.

It was Siney who came to Coopers with a joint venture distribution plan to bolster his business, American Beverage Distributors, which supplies Budweiser beer in Australia.

Apart from a better-managed pipeline, Coopers discovered something that its giant rivals Lion Nathan and Foster's Group have only just realised - beer and wine are a bad mix, and trying to distribute the two drinks down the same pipeline is nothing but trouble. Thus, the family brewer did not persist with a do-it-yourself approach and an arrangement with the wine maker Yalumba Wines.

A much better result is being achieved by working with a beer specialist. By reaching more outlets, Coopers has been able to grow its business in a difficult market. Overall beer sales rose by 1.6% in the first 10 months of the current financial year, while sales through the Premium Beverages joint venture rose by 6.7%.

"Premium Beverages has been an absolute winner for us," Cooper says. "It means we have been able to get our pipeline right."

For the big brewers, the sight of Coopers prospering while they struggle is more of an annoyance than a threat. In the beer business, which is dominated by giant brewers, Coopers is a flea, accounting for about 3.6% of the national brew with annual sales rising steadily to around AU$161 million this year, with profit of around AU$20 million.

But without a better pipeline Coopers might not be growing at all. The company has invested close to AU$100 million since 2001 in a new brewery in its home town of Adelaide, and retains a large share of the beer market in South Australia, a low-growth state for the past two decades.

Expansion for Coopers could only come from spreading its national footprint. Overseas sales, while useful for promotional advertising, have been marginal, with profits eaten by transport costs.

"Selling overseas gives us some credibility, but it's more a case of trying to not lose money rather than make any," Cooper says.

"We're keen to grow overseas, but international sales represent just 2.5% of the business."

Having found a better way to reach more customers, Coopers now seems set to continue its life as an independent thorn in the side of Foster's and Lion Nathan.

Efficiency gains from the new brewery have been substantial, with much more beer coming from a modern facility that employs fewer people. At the peak when working from its previous site, Coopers employed 160 people. Today, it is down to 118.

In comparison, the 80%-owned Premium Beverages distribution business has grown from a handful of employees to 45 in just seven years, a growth rate that shows how an efficient supply-chain management can drive a business.

Other opportunities are also growing from being part of a business that distributes Budweiser, one of the world's biggest brands.

Earlier this year, Coopers announced plans to spend an additional $6 million upgrading its brewing and product handling facilities in preparation for possibly brewing Budweiser in Adelaide.

"We have a target of reaching 500,000 cases of Budweiser through Premium Beverages before a decision might be made on brewing here," Tim Cooper says.

"At the rate sales are progressing we should reach that (target) around the middle of the year."

If, or more likely when, Coopers adds Budweiser to its brewing operations, there is also likely to be a fresh burst of speculation about whether Coopers can stay independent.

Repeated attempts have been made by bigger brewers to buy Coopers. The most recent was when Lion Nathan found a way on to the share register of the tightly-held business, which has just 122 shareholders, 30% of them with the surname of Cooper, and about 90% descendants of the founder, Thomas Cooper.

Beating off Lion Nathan was a grinding affair, which ended when Coopers bought out dissident shareholders and cancelled their shares. Today it is Lion Nathan being acquired as Japan's Kirin brewery moves to acquire the 53% of the New Zealand-based brewer it does not already own.

With ownership settled, and a slick new distribution pipeline creating growth opportunities, the last trick for Coopers Brewery is to fine-tune its beer - arguably the most delicate act of all, but one close to the heart of Tim Cooper, who found time in his medical career to pick up a brewing science degree in Britain in the late 1980s.

"What we're aiming for is to have less sugar in some of our beers, and to get back to the purest beer recipe of all, which is malt, hops, water and yeast," he says.

"We can't say that makes beer a meal in a bottle, but it is much healthier to cut back the sugar content."

One simple example illustrates how traditional beer making is - the same yeast strain was used to brew Coopers beer from 1910 right until 1998, when a new strain was introduced.

A once-in-a-century change to a beer recipe is one way to keep customers happy, the brewer says.

And knowing when to change the way a business operates, such as finding a better distribution pipeline, is a way to keep the shareholders happy.


15 May, 2009