International Hospitality Project: Costa Coffee - Case Study Example

International Hospitality Project: Costa Coffee International Hospitality Project: Costa Coffee History: Costa Coffee traces its history back to 1971 when two brothers named Sergio and Bruno Costa created the Mocha Italia blend of coffee (Costa Coffee, 2015). The coffee was sold to businesses within the United Kingdom. A few years later in 1978, they opened their first coffee shop in Vauxhall, Bridge Road, London (Costa Coffee, 2015). A decade later the company moved its roastery to Old Paradise street in Lambeth (Costa Coffee, 2015). The company made its first international move by opening its outlet in The Aviation Mall, Dubai in 1999 (Costa Coffee, 2015). Costa Coffee soon made an impact and grew its international outlets in United Arab Emirates. Currently, Costa Coffee operates 79 outlets in the UAE with its reach expanding to other countries through its international franchises (Costa Coffee, 2015). In fact, Costa expanded to Moscow in 2008. The company presently has over 1000 outlets around the world and 1700 coffee shops within the UK (ZAP, 2014). Costa Coffee used a unique way of roasting their coffee which is why their Italian blend of coffee was a great success. Costa Coffee claims that it still uses the same slow-roasting method of preparing coffee (Mrđa, Nikić & Baturan, 2013). The company still uses the proportion of coffee beans as it was used by its pioneers – 6 Arabica coffee beans: 1 Robusta coffee bean (Mrđa, Nikić & Baturan, 2013). The company’s philosophy holds that four M’s make the perfect cup of coffee. These include Miscela, Macinatura, Macchina, and Manna. Miscela refers to Costa Coffee’s signature blend of coffee as it was initially introduced – the Mocha Italia. Macinatura refers to the grinding of coffee beans to a special consistency reminiscent of Costa Coffee’s brand identity. Macchina refers to the use of Italian espresso machines that brews the perfect Italian coffee. Then lastly Manna refers to the handling done by the barista which adds to the creation of the perfect cup. This is why Costa Coffee’s Coffee Academy trains its baristas extensively so that they can create the perfect cup of Costa Coffee (Mrđa, Nikić & Baturan, 2013). With its presence in more than 28 countries and rapid growth in the coffee brewing industry, Costa Coffee aims to drive up its sales. However, despite consumers’ preference for coffee, the coffee brewing industry is becoming increasingly competitive. Costa Coffee is additionally facing challenges with its strategic positioning as its competitors – particularly Starbucks – are capitalizing on their diverse market offerings. Past and Current Problems Past Problems In the past, Costa Coffee has experienced issues with its financial reporting system which impacted timely availability of business intelligence. The issue has been documented by ZAP (2014) which highlighted the challenges faced by the company due to lack of consistent financial data. The storage of financial data in several spreadsheets created problems for analyzing the information so as to draw conclusions. Financial transactions were also scattered in different spreadsheets and since analysis took a great amount of time to finish, this causes a delay in business intelligence reporting and hence, strategic decision-making (ZAP, 2014). The issue was resolved by implementing business intelligence software that integrated Costa Coffee’s electronic system and provided a tool quick data analysis and visualization. Current Problem: The coffee market is rapidly growing within the UK as noted by Allegra Strategies (2013). More and more British consumers prefer to drink coffee. This trend towards coffee is reflected by the increase in coffee shops and outlets of coffee house chains across the UK. In terms of the number of outlets, Costa Coffee leads with 1,552 outlets while Starbucks Coffee Company has 757outlets in the UK (Allegra Strategies, 2013). Mrđa, Nikić and Baturan (2013) point out that Starbucks is the market leader in the coffee brewing industry however Costa Coffee has also shown a rapid rise in the number of its outlets across the UK. However, the problem is that the number of outlets is not an accurate indicator of market share. And Starbucks still continues to attract more consumers due to its wide variety of market offerings ranging from Frappuccino to other blended drinks. Costa Coffee on the other hand lacks the range of market offerings that are present in Starbucks. Coupled with issues with the market offerings and product portfolio of Costa Coffee, the company also faces issues with customer service management. Consumers often have to turn to Costa Coffee’s competitors especially Starbucks because Starbucks provides an ambience that Costa Coffee does not offer. Customer service has a great influence on the overall environment of a coffee shop. While Costa Coffee stresses on providing a friendly environment to its customers in an effort to provide value, the Costa Coffee staff is not as organized to serve customers well. In an ethnographic or observational case study comparing Starbucks and Costa Coffee, Malik (2014) explained that while Costa Coffee tastes better, the author prefers to go to Starbucks instead because it provides a pleasant environment that makes a remarkable customer experience. Costa Coffee lags behind in terms of providing a pleasant customer experience to its customers; the baristas often forget the order details, counters are often messy, and the high frequency of when the staff seems indifferent. Two issues have therefore been highlighted including Costa Coffee’s limited market offerings and products and the poor quality of customer service. This is why despite having more outlets than Starbucks across the UK, Starbucks still continues to remain the market leader in the coffee market. Solution: In order to address the issue of limited market offerings, the company must revisit its marketing mix. The company currently over-focuses on its signature product, the Mocha Italia. Mrđa, Nikić and Baturan (2013) point out that Costa Coffee’s product is meant to signify its identity as a brand which customers associate with Costa Coffee. In contrast, Starbucks has an extended product line with a wide range of beverages, drinks, and other eatables. The proposed solution is to expand the range of available products along the line of Italian brewed coffee as customers identify with Costa Coffee. Additionally, Costa Coffee should diversify its market offerings to include other hot and cold beverages that go with the theme. Costa Coffee can do this by having its connoisseurs experiment with new product designs that combine coffee with cold deserts. Costa Coffee could also work to create a lasting customer experience by redesign in its outlets to include a variety of services. Costa Coffee currently lays less emphasis on building a lasting impression on the customer. Its outlets are designed nicely but not as well as that of Starbucks. Further, the limited availability of in-store services and ambience does not make Costa Coffee outlets a good place for reading a book or surfing the web using one’s mobile. The company can address the issue by adding value-added services such as books corner, music streaming, and so on. Additionally the company should try to reposition itself away from the luxury brand and open its outlets in non-high-end areas so that customers can grab a coffee more conveniently. Finally, to address the issue of customer service management, the company should introduce trainee licenses. While Costa Coffee presently does train its baristas extensively, many customers complain about the poor quality of customer service. In order to ensure that the training is in fact having an impact, the training program should introduce trainee licenses that are valid for a limited period of time – for example, 2 years – before staff is trained again for their licenses are renewed. Additionally, the company should expand its training budget to train not only its baristas but also its staff in welcoming its customers, greeting them, and handling customer issues in a compassionate manner. Conflicts with customers can be quite common but to handle the situation rationally in the key. Hence, the staff should be trained so that they better meet the needs of the customers. Impact and Improvements for Costa Coffee: The redefinition of Costa Coffee’s marketing mix will enable customers to have a greater choice for consuming coffee at their café. Customers will o longer be turned away due to limited range of coffees. This will result in an increase in Costa Coffee’s sales as new products will cater to different segments of coffee loving consumers. Additionally, the redesign of its outlets will allow customer retention by offering them value-added services. Not only will the company save up on its costs but it will cater to varying needs of the customers. Creating a books corner will engage those who like to read books while music streaming service will allow customers to listen to songs while enjoying a cup of coffee. The trained staff will be more competent to cater to the needs of the customers. The baristas will be more efficient and there will be lesser chances of mistakes in orders. Staff training will allow a pleasant customer experience for consumers and it will impact the company’s ROI (return on investments) eventually. Satisfied customers are more likely to return to the store hence staff training will help retain loyal customers thereby increasing sales. In the end, staff training and marketing repositioning and redesign will allow the company to provide value to customers. The friendly environment of the stores will promote a better customer experience. Therefore, customers will be more likely to return thus increasing Costa Coffee’s sales. References Allegra Strategies,. (2013). UK coffee: market grows and to grow strongly. Hospitality & Catering News. Retrieved 13 January 2015, from http://www.hospitalityandcateringnews.com/2013/01/uk-coffee-market-grows-and-to-grow-strongly/ Case Study: Costa Coffee. (2014) (1st ed.). London. Retrieved from http://www.zapbi.com/Portals/1/pdf/Costa%20Coffee%20-%20ZAP%20Case%20Study%20Web.pdf Costa Coffee,. (2015). History. Retrieved 13 January 2015, from http://www.costacoffee.ae/costa-coffee/the-costa-way/history/ Malik, K. (2014). The Key Marketing Metric: Costa Coffee vs Starbucks - An observational case study.The Strategist. Retrieved 13 January 2015, from http://blog.krmmalik.com/the-key-marketing-metric Mrđa, I., Nikić, S., & Baturan, S. (2013). Costa Coffee vs Starbucks Business Intelligence (1st ed.). Retrieved from http://www.rodenberg.nl/publications/publications/COSTA_COFFEE_vs_STARBUCKS.pdf Read More