United Kingdom Coffee Industry Analysis - Case Study Example

United Kingdom Coffee Industry Analysis Report

Introduction

The current economic and business world demands that optimal understanding of the contemporary trends and expectations that a firm is subject to, especially regarding the industry in which it operates. Based on this simple but essential assertion, this report intends to provide a detailed overview of the Coffee industry. Particularly, the report will assess the structure of the coffee industry in the context of its historical evolution of operational trends and the outstanding companies in the industry. Further, it will assess the outstanding logistical characteristics, the ethical perspective, and context of the coffee industry and the extent in which the leading company in the industry satisfies its role in sustaining ethics, the corporate social responsibility, and sustainability (Nestlé Corporate Social Responsibility 2016). Further, the report will focus on addressing the climate issues and the manner in which the leading company addresses or responds to them. Hence, the report is an overview of the coffee industry especially in the context of the demeanor and nature of operations by the leading company in the United Kingdom industry.

Industry Analysis

Size/Importance of The Industry

The industry in question is the coffee industry in the United Kingdom. There are myriad inferences that have been made regarding the coffee industry in the United Kingdom. However, the most reliable one is that it is the one with the most outstanding one is that coffee industry comprises some of the major globally recognized coffee producers. That means that the UK industry stands a position to serve a very large market. From a scholarly perspective, it is stipulated that even after more than one decade of rapid growth in the industry, the UK branded coffee products are satisfactory of every expectation regarding the coffee brands. Further, it still financially friendly to most of the consumers within the European and global arena. (Intile 2007) The United Kingdom has a history of consuming coffee as compared to any other beverage (Partington 2009). Production of the coffee product consumption. It is influenced by the fact that there are fair trade schemes that are determined to be of some special appeal to the consumers (Consumer Trends 2011).

Structure of The Industry

In comparison with the rest of the European states, there is an average level of consumption. From a statistical perspective, approximately 1.7 billion cups of coffee are sold on an annual basis. The number of outlets is expected to rise from the current number by the year 2020 as stipulated by the Allegra Strategies consultancy. The demand for coffee in the United Kingdom is deemed to be sixth from the largest regarding the importation of the green coffee beans in the European context (Nestlé UK 2016). That accounts for approximately 4.5 percent of the entire percentage of imports in the year 2014. The total volume imported was approximately 152 thousand tons. There are myriad brands and retailers in the United Kingdom that have been committing increasingly to seek the purchasing of the coffee products despite the fact there is an opposing beverage that is more consumed as compared to coffee, tea. Over the years, the most outstanding company in the coffee market is Nescafe (Kolk and Pinkse 2004). It is the dominant player in the market regarding the retail value share of 43 percent as registered in the year 2014. Further, the company had a retail volume share of 33 percent.

The rate of employment is also increasing gradually as the logistics channel expands. Arguably, after the United Kingdom market embraced the consumption cultures such as the café culture, there has been an increase in the demand for the services and products affiliated with the coffee products. As such, the level of employment in the sector has increased substantially. Some of the most important aspects of any industry in a bid to determine the success rates include the historical trends in consumption and the potential to produce quality and reliable products to the market (Kolk and Pinkse 2004). As such, the report provides an overview of the historical trends as from the 1950s to date regarding the coffee market in the United Kingdom (Espresso revolution 2016). From a historical perspective, the coffee product was still produced and efficiently traded in the 1950s through the coffee shops. The first coffee shops were generated in the year 1952 in the Fifth Street, Soho. However, today, these coffee shops do not exist. Better coffee shops that were part of the strong logistic strategy were no longer in place (Espresso revolution 2016

In the 1960s, better approaches were used in the production and marketing of the coffee product. For instance, the consumers commenced seeking better products of coffee including the instant coffee that was developed using the process of agglomeration (History of Instant Coffee 2011). It is these years that outstanding coffee companies such as the Nestle introduced new approaches such as designing of new packaging methods (History of Instant Coffee 2011). However, the coffee industry administration, within a decade, ensured that the use of tins was completely abolished.

Global Operations

As stipulated in the UK coffee industry, it is clear that the products processed are consumed both domestically and internationally. Further, the company engages in international trade especially in the context of trading the coffee bean. Arguably, coffee is one most popular beverage in the European context, as well as, other parts of the world. From a global perspective, the coffee industry employs approximately 100 million people. From Whitbread’s perspective, the company that owns the fast-growing coffee chain termed as the coffee chain Costa, the Britons always consume approximately 2.8 kilograms of the coffee per capital annually (UK coffee 2013). That rate of consumption, however, varies from one state to the other. The plant, coffee is produced in almost 70 countries across the world. That includes countries in the Americas and Africa.

Supply Chains

The coffee supply chain in the United Kingdom market, like in any other market, embraces a series of phases or cycles (Blowfield 2003). Arguably, the supply chain is in cycles because there are several trading activities that occur before the final coffee product is consumed as a beverage. The first phase is that of the agricultural phase where the green coffee is cultivated. The second phase is that of the roasted coffee production phase. Then, there is the production phase where the products are processed and then packed. The other phase is that of transportation and distribution. Finally, there is the consumption phase. That constitutes all the process and trading activities that are incorporated in the coffee industry whether within the United Kingdom or internationally.

Ethical and Social Responsibility Issues

There are myriad challenges that are likely to affect the coffee industry irrespective of the season of production. However, the approach used to deal with these issues is what has become contentious. From a statistical perspective, approximately 90 percent of the coffee production activities takes place in the developing nations. However, the consumption of these products occurs in the modern countries. That implies that there is a north-south relationship. However, the central question is how this relationship features or the nature of this relationship. From a responsibility perspective, it is imperative to study the economic, social and environmental issues that may arise from the relationship. For instance, it is becoming a contentious issue that the producers of the raw material do not benefit effectively from their toil. Concurrently, the sustainability of the sector is becoming a problem (Raynolds Murray and Heller 2007). Similar challenges are calling for an assessment of the ethical trade activities in the coffee industry. From a definitive perspective, this regards to any trade that demands the installation of socially and environmentally and economically responsible considerations. Most players in the coffee industry are being called upon to embrace ethical practice regarding trading and production of the coffee products. For instance, according to ICO, Fairtrade, eco-friendly and organic coffee is a perfect example of the sustainable coffee trends (Weber 2007). The need to address the challenges of all the stakeholders, therefore, can be considered to be the central interest of the ethical practices in the coffee industry (Kolk 2005).

Company Analysis

There are many outstanding companies in the UK coffee market. Arguably, there are several outstanding companies that engage competitively in the coffee industry, particularly in the United Kingdom market. In a bid to determine some of the outstanding and demanding trends in the coffee industry, this section of the report provides an overview of the Nestle Company Limited, an outstanding market leader in the coffee industry, United Kingdom.

Company Operations

The center of any company’s operations in the management team. The operations, therefore, refer to the stakes and priorities that the management team takes into consideration in a bid to run the company (Davies 2007). The Nestle management team has made the Nestle company an outstanding company concerning quality production and proper service delivery. That is being influenced by the dedication of the entire stakeholders to ensure that the business activities do not get derailed. First, the company hires competence and competitive employees by passing them through a comprehensive recruitment process. Further, in the context of updating and reducing the rate of employee turnover, the company ensures that it monitors the employee and industry trends. That means that the management team often organizes the trading and business readiness training sessions to ensure that the employees are optimally updated to deal with the challenges as they emerge (Nestlé 2016).

Further, the company operates under the Business to Business and the Business to consumer basis where other stakeholder companies and the consumers are also essential to the company’s progress (Consumer Trends 2011). Nestle company has a universal network as far as production and marketing are concerned. The company, from that perspective, aims at being competitive with the external firms. That includes incorporating professional approaches that will foster all dimensions of competitiveness. For instance, the company focuses on investing in services and areas such as the actuarial services, the investment advisory, performance benchmarking and the risk budgeting measures. That means that the management intends to alienate any cases of loss. There company’s policies demand that the company focuses both on internal and outsourced intelligence on how to run competitively in the industry.

Production Activities

The Nestle Company Ltd, UK uses a series of professional production techniques in a bid to determine a reliable level of excellence coffee industry. First, the company employs the lean production approach. From a scholarly perspective, a lean production approach is a Japan-oriented approach that aims at reducing waste (Shah and Ward 2007). In this case, waste is not argued out regarding tangible things only. Instead, it focuses on elements such as money, time and the quantity of the resources that are used for production. Arguably, reduction of waste means that there is the high feasibility of improving the efficiency of production. For instance, the reducing products defects are likely to deplete the costs via making savings on the inputs used.

The company also focuses on adding value to all the aspects of production. Addition of value means that the production process and even the products themselves gain quality that is competitive in the market. That means that the cost equates to the revenue that the company is likely to receive. The company also embraces the Just-In-Time approach within the context of the lean approach in a bid to save time and cost (Shah and Ward 2007). As such, the central objective is to attain absolute or quality value at relevant costs.

Markets

The company’s market trends are quite similar to those of the coffee market in the United Kingdom. For instance, it is subjected to the challenge that coffee is not the only highly consumed beverage in the market. Instead, there is tea that most consumers also prefer to coffee (Consumer Trends 2011). In the year 2014, Nestle was rated to be the most outstanding company as compared to the competitor firms as far as quality of products and the market share were concerned. In the market, the company deals with both the in home and out-of-home consumption. In consideration of the fact that the company has a market share of approximately 30 percent, the company is the leading coffee company in the United Kingdom. However, that does not desist from the fact that the company faces stiff competition from the wide variety of coffee roasters who tend to have captured a wide market scope. Different coffee shops are offering a wide range of high quality coffee (UK coffee shop trends 2014). However, the company applies its lean production approach to produce high quality products. In a bid to capture a wide range of the market, the company focuses on diversity of products and ensure that it manages to capture a large number of potential consumers.

Products

Nestle, in this report, is considered from the perspective that it is a high profile coffee producing company. That does not deviate from the fact that the company deals with a wide range of products including bottled water, breakfast, breakfast cereals, dairy products, chocolate and confectionery amongst other products. That means that besides being a top notch producer in the coffee industry, the company also deals with other products that assist it to maneuver the demand forces that vary in the four seasons.

Supply Chains

The Nestle Company has a first class supply chain. It has very tight ties especially in the context of promoting the sales in the European and international market (Hickman, 2010). In a bid to determine its competitive position in the market (Drinks Insight Network 2014). For instance, the Nestle food manufacturer has attempted to promote its position in the European and UK zone supply chain. Through these attempts, the company has been trying to lay a strong foundation for gaining global relevance. The company has state-based supply chains. These supply chains are developed in a manner that they befit the market nature of that particular country. The supply chain of this company navigates from the growers, through the intermediaries, the processors, the retailers and finally reaching the consumers.

Stakeholder Management

Stakeholders

The Nestle Company has a wide scope of stakeholders. These stakeholders include the growers, the customers, and the members of staff, the investors and the government. However, there are other subsidiary stakeholders including the dealers. These stakeholders are an essential constituent of the company in that they assist in promoting successful operations of the company (Davies 2007). For instance, the growers contribute in delivering the raw material, coffee beans, for the production of coffee beverages. The employees are the ones who facilitate the conducting of normal company business from the management, to the production and marketing activities.

Analysis of The Stakeholders

According to the management, the Nestle Company focuses on the element of honesty in engaging the stakeholders. The company ensures that the stakeholders are addressed with utmost transparency and honesty in terms of reporting and communication to them on the essential business trends of the company. It believes that effective engagement with the stakeholders makes it a global leader in terms of the public affairs. In the UK market, the company has demonstrated outstanding potential in creating a shared value initiative that will assist in the management of the relationship that the company has with the stakeholders (Davies 2007).

Climate Change

The Dangers of Climate Change

The current adverse trends in terms of climate change are posing a challenge to the future of the coffee industry. Climate change is likely to lead to the depletion of the raw material for the coffee plantation. The raging changes in the climate are affiliated with the rapid changes in the seasons. That means that there are either extended seasons of wetness or extended seasons of hotness and drought (Harris 2007). The irregular climate is becoming an unmanageable challenge. Climate change, in this case, refers to the increase in the environmental temperatures including the global warming, increase in the greenhouse gases amongst other severe outcomes of the change in the climate.

Impacts of Climate Change

The climate change is having a very severe impact on the stakeholders of the Nestle Company, as well as, the resources that the company overlies on to engage in productive economic activities (Haggar and Schepp 2012). These impacts include the increased depletion of the coffee plants especially because the weather can no longer support proper growth of the coffee beans (UK coffee 2013). That means that the quality of coffee is gradually depleting. The aftermath of these agricultural impacts includes reduced prices for these coffee beans as paid to the farmers. Further, the soil is losing fertility and is affecting the quality of the output. Finally, the climate change is affecting the companies by inducing a burden of dealing with the climatic impacts from a financial perspective.

How The Company Responds to Climate Change

Climate change is becoming a challenge to both the internal and external stakeholders of the company. The Nestle company, therefore, has the mandate to ensure that it protects them accordingly considering that the stakeholders are affected differently by the climate change. The company is under corporate social responsibility requirement to protect the interests of its stakeholders (Smith 2003). Nestle company is committed to providing climate change leadership. It is a leader in the context of climate change adaptation and mitigation (Sussman and Freed 2008). As such, it integrates the climate change assessment and resolution approaches through incorporating these approaches into the risk management processes. Despite the fact that the company has a history of illegal harvesting of trees, it has made efforts to participate in the world Wildlife Fund. The company may be trying to reverse from the recent unfriendly practices that harm the environment.

Conclusion and Recommendations

Conclusion

The Coffee industry is one amongst the thriving beverage companies in the United Kingdom and globally. The level of competition in the industry is also relatively high. The difference between the competitive companies in the coffee industry revolves around a level of competence and effectiveness concerning the production approaches, market approach, response to the challenges such as climate change, and management practices such as risk management. Out of all these aspects of company performance, the discussed company, Nestle, is an outstanding player except for the poor response mechanism to the climate change.

Recommendation

From an industrial perspective, it is recommendable that adjustments and enhancements be made regarding the manner in which the coffee industry participants compete with the producers of other industries such as tea and carbonic industries. It is imperative to strategize on how to engage competitively with the tea industry, particularly, in the context of seeking consumer preference. Further, in the context of Nestle Company, it will be essential for the company to institute a risk mitigation plan that will assist in acting on the climate change implications (Metz et.al 2001). In a bid to ensure that the coffee industry is successful in the UK market it is imperative to ensure that these propositions are enacted.