Analyzing Business Plan of Brown Beans - Case Study Example

Business plan of Brown Beans Table of Contents Executive Summary 4 Company 5 Market analysis 6 Industry and outlook 6 Distinguishing characteristics 6 Size of the primary target market 7 Expected market share 7 Pricing and gross margin targets 8 Competitive analysis 8 Market share 8 Strength and weakness 8 Regulatory restrictions 9 Organization and management 10 Organizational Structure 10 Ownership information 10 Management Team 10 Product Line 11 Description of products 11 Marketing and sales 12 Marketing strategy 12 Market penetration strategy 12 Growth strategy 12 Sales strategy 12 Sales force strategy 12 Funding request 13 Financial projections 13 Reference list 15 Executive Summary The demand for coffee consumption in the UK has increased over the past few decades with the increase in successful coffee chain giants. The new drinking habit of the consumers have encouraged establishment of small coffee shops in the UK, as a result, the competition have intensified. In such a situation, establishment of a new coffee shop, Brown Beans is quite challenging in London, where the coffee chain giants such as Starbucks and Costa Coffee is earning revenue in billions. However, a business plan for Brown Beans is developed so as to deliver a successful business in London. Company description The coffee culture in the UK has brought changes in the taste and preferences of the population. The demand for coffee has grown 7.5% in 2012 from 2011 and the sales turnover is observed to be £ 5.8 billion (Hospitality & Catering News, 2013). However, the coffee shop market is predicted to grow to £ 8 billion by 2017 (Hospitality & Catering News, 2013). Identifying the needs and preferences of population in the UK, it is a wise decision to open a coffee shop in the heart of the country, London; this market is taken to be target market for coffee shop. A new coffee shop, named Brown Beans, will be set up in London so as to satisfy the demands of the coffee addicted population. Brown Beans will be a new invention; the speciality of the coffee shop is its coffee items and snacks. The coffee items will be freshly brewed and the smell of the coffee beans will be the main USP of the coffee shop. The coffee and snacks will be prepared in an open kitchen, so that the customers get an idea regarding the preparation of coffee and the snacks. The coffee shop will provide different flavours of hot and cold coffee to the customers, according to their preference. With the rise in income level of the individuals in the UK, people are more concentrated on luxury items, which can satisfy their needs. The change in drinking habit from tea to coffee is experienced in Londoners. In order to satisfy the demand of the coffee drinker, Brown Beans will offer the best quality coffee beans, which will attract the customers to visit the coffee shop repeatedly (Pettinger, 2010). The location of the coffee shop will be such that it will be near to college and office; as a result, it can attract both professionals and students. The competitive advantage of Brown Beans is that it will cater to the needs of low income earners and students, as the price of the products sold in the coffee shop are less than the competitors. Another special feature of the coffee shop is that it will provide access to a small library, where the customers can chose their favourite book and enjoy cups of coffee, pastry and snacks. Market analysis Industry description and outlook It is observed that there is lowest coffee consumption in Europe and there the amount has presently decreased than in 2006 (Thomas, 2013). However, the coffee shop giants such as Costa Coffee and Starbucks have revived the decreasing trend in the consumption pattern of the UK population. The overall sales of coffee in the UK have increased by 6.4% during 2013 as compared to previous years. About 16501, coffee shops were established across the country during the end of 2013 (Thomas, 2013; Young, 2013). The distributors of coffee beans are looking forward to growth in the coffee industry as there has been increase in supply of coffee machines. There are about 18,832 coffee outlets in the UK and it has continued to outperform the retail sector in the sales with respect to growth in sales. The total turnover of the industry during 2013 was £7.2 billion and the sales growth rate was 10.7% (Promedia Publishing Ltd., 2015; Young, 2013). Distinguishing characteristics The critical needs of potential customers in UK good quality coffee products, which will make them content. The customers of coffee products are found all across the globe; however, there has been increase in consumption of coffee in the UK with the change in drinking habit of the consumers. Size of the primary target market According to the report published by Allegra World Coffee Portal, the coffee shop market in the UK is observed to be robust and the nations are gradually becoming coffee connoisseur. The report has also highlighted that the sales turnover of the branded coffee shops in 2014 was £2.9 billion and it had grown by 4.9% from 2013 (Promedia Publishing Ltd., 2015; Foottit, 2015). The major customer group for the industry was the whole population in the UK as coffee is preferred by all age group. Allegra has assumed that the total coffee shop market in the UK will have about 27,000 outlets and earn £16.5 billion turnover by 2020 (Promedia Publishing Ltd., 2015; Guardian News and Media Limited, 2015). The sales turnover in the coffee industry has doubled over the past 6 years and has increased by 10 times in the past 15 years. However, it is observed to have become saturated at some point of time (William Reed Business Media Ltd., 2015). Expected market share In the highly competitive market in the UK, Brown Beans has the desire to capture at least 2% of the market in London in the early stage. Despite recession and other financial crisis in the UK economy, the coffee shop has remained one of the most successful sectors and it has continued to expand continuously. In such a situation, Brown Beans has to encounter tough competition from the coffee chain giants such as Costa coffee and Starbucks and balance its sales turnover so as to sustain in the long run. Pricing and gross margin targets The price of the coffee and snack items of Brown Bean will be kept in such a manner that it provides attractive margin to the coffee shop. However, the prices will be reasonable so that it can be afforded by low income earners and students. Competitive analysis Market share The present market share of the leading coffee chains in the UK are detailed in the figure provided below: Figure 1: Market share of coffee chains in the UK (Source: Thomas, 2013) It is evident from the figure that Costa Coffee is the leading brand in the UK market with the highest market share, followed by Starbucks and Caffe Nero (Thomas, 2013). These three coffee chain giants have brought revolutionary change in the drinking habit of the consumers in the UK with the help of different coffee products and snacks that have forced the consumer to visit the shops repeatedly. Strength and weakness The main strength of Brown Beans will be its range of coffee products and the type of ambience offered to the customers in the coffee shop. The customers are even provided with a well managed library where they can find their favourite books and spend the time by reading those books over cups of coffee. The main weakness of Brown Beans is the tough competition that will be experienced by the coffee shop in the UK market. The target customers for Brown Beans is the whole population in London and this customers are quite aware of the coffee products offered by the coffee chain giants such as Starbucks and Costa Coffee. The main hindrance for Brown Beans in the London market will be barriers to entry as there are many powerful competitors (Platt, 2013). The main opportunity for Brown Beans in the London is innovation and new product developments. There are ample of scopes for inventing new coffee products that can be accepted by the consumers in London. Apart from the coffee chain giants operating in the UK, there are other secondary coffee outlets, who may affect the sales of Brown Beans to a great extent. Regulatory restrictions The regulators requirements that can affect the business of Brown Beans are the changing government rules, which are imposed on increasing the quality of products. The change in government regulations are difficult factor to overcome as it is accompanied by increase in cost. Organization and management Organizational Structure Brown Beans will have a flat organisational structure as initially there will lesser number of employees in the coffee shop. The coffee shop will be owned by Thomas Patton and his friend David Conner. Apart from the owners, the coffee shop will be operated with the help of 10 staffs. This includes two managers (one for operation and marketing and other for managing finance), four attendants for serving coffee and food products to the consumers, two cleaning staffs and two dishwashers. Ownership information The owners, David Conner and Thomas Patton are experienced in this market as they have both worked for Starbucks as the attendants. Later, they are promoted as store manager after five years of experience. Both have their graduation from renowned college in London and they joined the coffee chain giant. After gathering enough information regarding the coffee shop business from the operation in Starbucks, they both planned for opening their own coffee shop in the heart of London, where the demand for coffee has increased over the years. Above all, both have achieved best performer reward for consecutive years as an attendant; hence, they are quite aware of greeting the customers and how to satisfy their needs. Management Team The management of the coffee shop includes 10 employees, who will be recruited by the owners. The salary structure of the employees is depicted in the table provided below: Position Numbers Salary (£) per month Total Managers 2 2000 4000 Attendants 4 1000 4000 Cleaning staffs 2 250 500 Dishwashers 2 100 200 Total 19000 Product Line Description of products Brown Beans aims at selling the best quality coffee products and snacks to the consumers in London. The drinking habit of the consumers in London has changed over the years and the nation has gradually become coffee connoisseur. The ranges of coffee products that will be available to the coffee shop are as follows (Time Out Digital Ltd, 2015): 1) Espresso and variations Café Zorro Espresso Romano Ristretto Café Cubano 2) Espresso with milk Breve Latte Antocinno Cartoda 3) Coffee with milk Ca phe sua da Egg Coffee Eiskafee White coffee 4) Coffee with whipped cream Espresso con panna Marketing and sales Marketing strategy Market penetration strategy The market penetration strategy that will be used by Brown Beans is low pricing strategy. The low pricing strategy will be employed so as to fulfil the needs and preferences of the low income earners and students. Growth strategy In the long run, Brown Beans may increase the number of branches so as to fulfil the needs of higher customer base. This will help the coffee shop to grow in future. However, Brown Bean can also increase the number of human resource so as to attend the customers more efficiently. The increase in number of coffee products will also assist Brown Beans to become successful in the long run. Sales strategy Sales force strategy The sales persons are the attendants of the coffee shop in this case. The attendants should be well trained so as to manage the queries and problems of the customers. The skills of the attendants should be developed in such a manner that they have the ability to solve the problems and serve the customers efficiently. The customer’s service will be excellent and thus the sales force will be selected very carefully. Funding request The total fund required for starting the coffee shop is £2, 50, 000. Within this amount, 25% is financed by the owner and the rest is taken from the bank as loan. Financial projections The financial projection of Brown Beans includes income statement, balance sheet and cash flow statement. The following income statement highlights the income and expenditure of Brown Beans during the period 2016 to 2018. From the above table, it is evident that Brown Beans will incur profit from the second year of operation as in the first year there are additional expenses, which are required for establishing the coffee shop. The following table highlights the balance sheet of Brown Beans. The following table depicts the cash flow statement of Brown Beans. Reference list Foottit, L., 2015. UK Coffee Shops Outperform Retail. [online] Available at: < http://www.bakeryinfo.co.uk/news/fullstory.php/aid/13502/UK_coffee_shops_outperform_retail.html > [Accessed 20 April 2015]. Guardian News and Media Limited, 2015. 10 Of The Best Coffee Shops In London: Readers Tips. [online] Available at: < http://www.theguardian.com/travel/2014/jun/30/london-best-coffee-shops-readers-tips > [Accessed 20 April 2015]. Hospitality & Catering News, 2013. UK Coffee: Market Grows And To Grow Strongly. [online] Available at: < http://www.hospitalityandcateringnews.com/2013/01/uk-coffee-market-grows-and-to-grow-strongly/ > [Accessed 20 April 2015]. Pettinger, T., 2010. Growth of Coffee Shops. [online] Available at: < http://www.economicshelp.org/blog/2377/economics/growth-of-coffee-shops/ > [Accessed 20 April 2015]. Platt, G., 2013. What business to start in 2012: Independent coffee shops. [online] Available at: < http://startups.co.uk/what-business-to-start-in-2012-independent-coffee-shops/ > [Accessed 20 April 2015]. Promedia Publishing Ltd., 2015. Coffee Shops Key To Growth In Market Spend. [online] Available at: < http://www.cateringinsight.com/16341-coffee-shops-key-to-growth-in-market-spend/ > [Accessed 20 April 2015]. Thomas, N., 2013. Why Coffee Shops Are Replacing Pubs In Britain. [online] Available at: < http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/leisure/11084328/Why-coffee-shops-are-replacing-pubs-in-Britain.html > [Accessed 20 April 2015]. Time Out Digital Ltd, 2015. Best Coffee Shops In Central London. [online] Available at: < http://www.timeout.com/london/food-drink/londons-best-cafes-and-coffee-shops > [Accessed 20 April 2015]. William Reed Business Media Ltd., 2015. Bright Future For Coffee Shops. [online] Available at: < http://mobile.bighospitality.co.uk/Business/Allegra-coffee-shop-growth-report#.VTScmNyUde8 > [Accessed 20 April 2015]. Young, J., 2013. Bucking the Trend: Why Does the Thriving UK Coffee Shop Market Just Keep Growing? [online] Available at: < http://www.huffingtonpost.co.uk/jeffrey-s-young/uk-coffee-market-growing_b_2715639.html > [Accessed 20 April 2015]. Read More