Reference no: EM133357715

Case: In August 2022, Molson Coors Canada ("Molson") announced it was investing $60 million in its Toronto plant to try something different - the production of carbonated soft drinks.i Last year, in 2021, Molson also spent $600 million on a new brewery in Quebec. Frederic Landmeters, the president of Molson, was optimistic this was the right course of action to take. Like other breweries around the globe, Molson is trying to adapt to a new reality - falling beer sales. During its 2nd quarter ending June 30, 2022, Molson's profit dropped to $47.3 million (US), from $388.6 million in the previous year. ii According to one report, Canadian beer sales has been declining since 1973.iii Beer Canada, an industry group, reported a 7.3% drop in 2021.iv Provincially, sales have varied across Canada. While beer sales were up by 20.1% in Newfoundland and Labrador, beer sales were down significantly across the rest of Canada. For example, the province of Quebec had the largest beer sales drop of 13.3% compared to last year. Saskatchewan had a 12.6% drop and in Alberta, about a 10.7% drop. v In recent years, demand has increased for hard lemonade, seltzers (carbonated water), and other ready-to-drink beverages. vi According to one industry analyst, "in the beer business, a simple -1% is massive, so the -3.3% in Ontario is considered a disaster. These drops are in addition to a disastrous 2021 when lockdowns were the norm to combat COVID. When things started to open..., this is not the scenario the beer industry was expecting-far from it." vii Molson recently rebranded itself and took "brewing" out of its name. This would have been a surprise to its original owner, John Molson, who founded the company in 1786. Today, the company is turning to new market segments such as seltzers, whiskey, and cannabis drinks to increase sales and to manage changes in consumer drink preferences. viii The $60 million investment is at the country's largest brewery, just off Highway 427 in Toronto, Ontario. ix According to Morningstar stock analyst David Swartz, the brands and trademarks which were once a strength are now roadblocks to change and are diminishing in relevance. x In the marketplace, consumers are looking for different options and demanding more variety and novelty when it comes to alcoholic beverages. xi In 2021, Miller lite, a brand of Molson Coors Beverage Company, introduced "Beernaments", a first-ever drinkable [Christmas] ornament. The company partnered with actor and comedian Jimmy O. Yang to look for a new way to engage consumers and maintain a dominant position in the industry.xii By January 2022, Molson partnered with Coca-Cola to produce Simply alcohol drinks, a line of spiked alcohol lemonade beverages.xiii Another reason for change is that younger demographics are drinking less. Younger consumers aged 18 to 24 years only made up 7% of alcohol consumers in 2020, compared with 27% in 2013.xiv Today, "younger customers are less interested in traditional alcoholic beverages and demand low and alcohol-free beverages (an expansion of the mocktail programs at many bars and restaurants has been seen in the market). A 2021 study by IWR Global found that 60 per cent of respondents reported an intention to try new no- or low-alcohol brands and predicted 3.6 per cent growth in the category in Canada by 2024." xv "Another growing beverage segment, especially for younger customers, is alcoholic beverages that include ingredients and supplements with health benefits, including hard kombucha and botanical spirits, allowing consumers to enjoy drinks that are flavourful without the use of sugars and syrups. Beverages with adaptogens (herbal pharmaceuticals stemming from roots and herbs from Chinese and Ayurvedic healing traditions) are also increasing in popularity." xvi In the last few years, the global pandemic has had a further impact. Working from home created changes in eating behaviors' and drinking habits. xvii For example, many Canadians went from drinking beer in-person to drinking more wine and spirits at home.xviii Rising prices of food and other essential goods have also deterred some consumers of spending money on non-essential goods like beer. For example, beer prices rose by 10% to 15% over the past year. xix Rocketing prices has become such a public concern that by October 2022, the Bank of Canada raised interest rates six times to try to stall inflation across the country.xx Health reasons are another factor for Molson diversifying into other beverage markets. Today, health-conscious consumers are also reducing their beer consumption to live healthier and more active lifestyles. While alcoholism has been a serious disease for many years, the Centre for Addiction and Mental Health (CAMH) has now also found links between alcohol and thousands of cancer cases across Canada.xxi According to one research study, "alcohol use was linked to 7,000 new cancer cases in 2020, including 24 per cent of breast cancer cases, 20 per cent of colon cancers, 15 per cent of rectal cancers, and 13 per cent of oral and liver cancers." xxii Yet, many alcohol drinkers are still not aware of these risks.xxiii In 2017, Yukon became the first Canadian jurisdiction to put warning labels on wine, beer, and liquor to educate consumers about the risk of cancer. xxiv According to Statistics Canada and a report from Yukon Health and Social Services, "Yukon [had] the highest alcohol sales per capita in Canada. It also [had] one of the highest cancer rates."xxv "Erin Hobin, a scientist at Public Health Ontario who [was] involved in the study, says previous research has found that only about 20 per cent of Canadians are aware of the link between alcohol and cancer - particularly colon and breast cancer." xxvi However, by 2020, the Yukon government discontinued the labelling due to complaints from the industry and the fear of a lawsuit.xxvii Researchers concluded the labels were so effective in communicating the risks to consumers that the labels caused a reduction to alcohol sales; thus, harming the industry. Yukon consumers who saw the labels were more likely to read and remember what the labels said and were better informed about the health risks.xxviii Currently, no Canadian province legally requires cancer-risk labelling on any alcohol products. And similarly, no alcohol companies are voluntarily disclosing the risks. One doctor, Dr. Paradis, argued that no different from the risks of tobacco (and cancer risks labelled on packages of cigarettes and other tobacco products) people have a right to know about the risks of alcohol and how it may impact their health.xxix This would allow all consumers the power to make an informed choice who may otherwise be unaware of the cancer risks of drinking. In 2022, a report by the Canadian Centre on Substance Use and Addiction (CCSA) linked alcohol to many fatal illnesses including heart disease, cardiovascular disease, breast cancer, colon cancer, and a number of other cancers. xxx According to Oxford Population Health, in January 2022, new research data from a large-scale genetic study also confirmed that alcohol directly caused cancer. Globally, it was estimated that alcohol was responsible for approximately 3 million deaths each year, including over 400,000 from cancer. xxxi Clearly, drinking alcohol brings economic costs to Canadian taxpayers. "In 2017, according to the CCSA report, alcohol contributed to 18,000 deaths in Canada and that same year, $5.4- billion was spent on health care related to alcohol consumption." xxxii Mothers Against Drunk Drivers (MADD), a non-profit group, continues to promote more transparency to educate consumers about the risks of alcohol, noting that alcohol continues to be a factor in fatal car crashes every day in Canada. In 2010, drunk driving crashes cost the country an estimated $20.62 billion including fatalities, injuries, property damage, etc.xxxiii Nonetheless, Beer Canada, a beer industry group supporting beer companies, explained that beer continues to have an important impact on Canada's economy. The Conference Board of Canada data shows that the beer industry in Canada supports 149,000 jobs and contributes $13.6 billion annually to Canada's GDP.xxxiv According to the Chamber of Commerce, beer and other alcohol drinks are also an important tax revenue generator for both Federal and Provincial governments. For example, "Canada has some of the highest alcohol taxes in the world. On average, 47 per cent of the price of beer in Canada is from federal or provincial taxes. Approximately 65 per cent of the price of wine is due to taxes and on average 80 percent of the price of spirits is taxes. In sum, Canadians already pay about $20 billion per year in alcohol taxes." xxxv Restaurants and bars also depend on alcohol sales in order to remain profitable. About 30% of restaurant revenues come directly from alcohol sales.xxxvi As a result, many restaurants are calling on the government to reduce alcohol taxes and make alcohol more affordable for all Canadians. Currently, Molson is working on trying to improve water-use efficiencies and to produce beer in more sustainable ways. For many years, Molson has been a leader in re-using its bottles and cutting down on waste.xxxvii Molson recognizes the importance of water to the communities it operates in. And in 2022, Molson donated bottles of water to hurricane and flood victims in Florida and elsewhere.

Questions:

1. Explain how the six (6) external environmental forces are impacting the company Molson. Provide a detailed analysis using all case examples.

2. Explain how the Behavioural Management Philosophy may help Molson and why? Provide a detailed explanation using examples from the case.