Retailing Coffee Brands in the UK - Essay Example

? Coffee Shop Retailing Introduction For nearly decade, coffee market in the UK nearly doubled according to a research done on the consumption of the product. The brands with chain market command over 3,000 outlets allover the country and a turnover exceeding ?1.3b. It experienced an average growth of 4.4% for nearly a decade since the year 2000. The market extension has reached smaller town with more outlets being projected to be opened. The branded coffee shops are more visited and have more customers than other shops which do not have the coffee brand. The Starbuck coffee still leads its competitor, Costa in the market share. A survey conducted on the market performance of the two brands showed that Starbucks commanded a market share of 27% compared to Costa which commands 15 % of the market while the rest of the market is being shared between the small companies. In rating the market of the coffee with the substitute beverages, coffee in general comes third behind tea and Juice. 70% of the adults in UK takes coffee, 81% take juice while 83 % of the adult population takes tea (Kolk 2012). 2011 is a year where coffee experienced more innovations in its brands. The culture of taking coffee has been entrenched among the UK consumers and it is considered as the luxury which is affordable to all users. The quality of the product has been greatly improved by innovation through product development. The leading manufacturer of coffee is Nestle UK. The company’s product enjoys a market share of 42%. Basically the presence of instant coffee is the major reason behind success of the Nestle Company in the manufacturing sector. The coffee pods also have contributed to the growth of coffee consumption in general (Kolk 2012). Findings A coffee shop serves not only coffee but also tea, light lunch and some deserts. A local coffee shop can attract a large market by ensuring the frequent customers remains loyal. Commitment is required in order to accomplish a successful marketing. Usually most of the marketing and is done through the interaction with customers. Existing customers invite new customers; coffee shops provide a good social experience among the customers thus it is ideal for interaction. Some common coffee brands in the UK markets includes, Maxwell House coffee, Nescafe, Lavazza, Starbucks, Melitta, Kenco coffee among others. The market of these brands has depended mainly on the marketing of the brand. Retailers benefit from brands which have already established in the market. The main coffee brands in the UK market are Starbucks and the Costa brand. The famously world brand (Starbucks) carries the larger coffee market as compared to the Costa brand. The brand has several outlets throughout the country (Kolk 2012). A part from the coffee business, the coffee offers food together with the coffee, in order to increase income and also increase convenience to the customers. Though selling of food stuffs have been expanding among the coffee shop, the challenge is competitions from the established bakers and other competitors in selling the foodstuffs. Research shows that selling of foodstuffs within the coffee shops has been on the increase in the UK market and therefore the trend in coffee shop development has changed the marketing strategies shops rendering the services Quality of services A successful marketing would start with the kind of products and services being offered. Development of a variety of services would beneficial to the coffee shops than sticking to just offering coffee. Variety of services that are customer friendly benefits in expansion since advertisements is more efficient when done orally. Some the benefits that would ensure more customer base is ensuring the customers comfort. Ensuring that every table has a supply of electricity enables the customers to have a comfortable cup of coffee while using the laptops. Other services which are essential in increasing the customers include introducing live entertainment and uniqueness in provision of services. Programmes for loyalty Coffee shops ought to have loyalty programmes to them to be competitive. The programmes may include offering cards for a certain limit of coffee cup or so. Such programmes are beneficial to the coffee takers who frequent the shop. Incentives however can be increase depending on the competition and what the competitors offer. A more close consideration should be taken on the spending by customer. Such considerations are necessary in offering incentives. Free products may be provided after a certain limit of spending is reached. It will act as a motivation to the frequent customers in shop. Advertisement of the premises Location of the coffee should be well known by the customers. Advertisement therefore will be crucial in increasing the market share. A typical coffee shop should display a clear establishment that can be easily be traced by the customers, it should be clear that it is a coffee shop. Such establishments can be achieved through a good setup of the premise which may include transparent windows showing the activities inside the shop. Inside should display a good set up of tables, chairs some being in the outside. Menu should also be placed outside to attract the potential customers passing by. Signs leading to the premise should also be considered (Kolk 2012). There must clear signs showing the direction of the premise. The premise should be at least isolated so that it can be easily be traced. The movable sign can be advisable to be used in order to give clearer directions. These signs can be placed in the sidewalks for easier visibility. Name selection is also an important decision that may affect the marketing of the shop. The name should always reflect a coffee shop when interpreted. Advertisement through promotion In order to maintain a constant gain in the market, promotion is important. Sales promotions frequently increase the popularity of the shop. Some of the ways of accomplishing sales promotions is advertisement coupons in the printed media or through electronic adverts. Social media such as facebook and twitter offers excellent opportunities for reaching out to more customers. Social sites provide services such as facebook groups that can be the platform of promotion coupons in the current and the potential customers. Taking this initiative would ensure a more competitive business. The growth of the coffee market in the UK was estimated at 4.4 %in November and December 2011. The growth was crucial in surveying the market and in making decisions pertaining expansion and strategies of marketing. Market analysis of the UK coffee market The major player in the market is the Starbuck brand; it entered the UK market through acquisition of the Seattle Coffee. The company expanded to 450 Starbucks shops in 2005. Expansion was catalysed by high profits from the sales of the coffee products. The high profits that the Starbuck Company gained attracted more competition and participation in the market. Costa Coffee also joined the market with the aim of competing with Starbuck in the high profit coffee market. Its expansion has been rapid and has surpassed Starbuck in the number of outlets. Due the recession experienced in 2010, the coffee market neither spared. The coffee consumption went down forcing the Starbuck to shut down some of its branches that did not perform above the threshold. Some small companies also collapsed and became bankrupt. Contrary to the development, Costa was instead expanding in its business. The phenomenon might not be usual but it happened because of the shift in the favour of Costa. The coffee market in 2011 was 55.3 million kg of coffee, this translated to ?831 million. In terms of the volume sold, the growth in sales did not increase compared to the year before. The value of the products was increase due to the price increase in the commodity market. Basically the stagnation in the growth of the volume sales may have been contributed by poor marketing of the product in the market. Some strategies may fuel the growth (Kolk 2012). To ensure high growth, the manufactures have to take the initiative of promoting the benefits of using the coffee products. The benefits of coffee include health benefits; the instant coffee has some health benefits which should be presented to the old members of the society to ensure the older market is not lost. The trend in the UK market shows that the consumption of instant coffee drops in the consumers with the age of above 65. The drop accounts to several millions loss in pounds (Kolk 2012). There is little concentration by the coffee shop on the youth coffee market. More innovations on the target market should be considered to ensure the youth market is achieved. The youth of the age between 16 years and 24 would prefer the coffee prepared by the coffee shops such as Starbuck and Costa rather than the brands found in the supermarkets. Basically that would increase sales volume which has not been impressive enough in the market. The benefits associated with energy can be beneficial in promoting the coffee products in a youth dominated environment. The sports associated drinks have been doing well in promoting the products in the energy/sport category. There is a belief that coffee is basically an energy booster; it is common among the coffee users who prefer in-home coffee. There is also a concern on the growth of the market and several options have been laid down. Initiating a business model to expand the market would be an important step in arriving an increase in the market of coffee, a typical example is the provision of the pod machine to the consumers so that they receive pods from the shop in a monthly basis or so. The coffee pod machine is a bit expensive to the consumers therefore most of them just surrender from buying the machine basically because of the price thus contributing to the low consumption. Most of the youth living in the urban areas; in London for instance, the youth would prefer owning the pod machine but the price of the machine might betook thus very few afford. It is estimated that over 47 % of the current youth in London would have preferred to have the own the pods machine but some might be afraid that the machine would more especially in the kitchen thus being in effective in general. Basically this can be used as the basis of exploiting the market which has not been attended. A design of a smaller pod machine would be a solution in ensuring the market is well attended to in a minimal time possible (Otim 2011). The pod should be targeted on the working population since they have more spending power is high. Estimates of 30 million of the adults in the UK are in the working class and just 8 million take coffee while working. Most of them take the instant coffee but most of them would prefer the roasted coffee to the instant coffee. Therefore an investment toward the improving the production of the roasted coffee would increase the market. Basically the coffee market in the UK varies and more so the effects of a variety of demands would give the new retailers a platform to establish themselves in a market where the competition is already quite high (Otim 2011). Potential challenges to the retailers The retailers who plan to own a coffee shop in the UK faces a challenge of penetrating the market which is already established by the companies such as the Starbuck and Costa (Otim 2011). The estimate on the growth is low thus expansion or penetration in the market means the new retailers must offer more than what the preferred shops offer. Statistics shows that the current retainers own a greater trust from the consumers more that the manufacturing companies such as the Nestle. Therefore they would; prefer to take the copper at the coffee shop rather than going for it at the supermarket. The trend therefore can be viewed as a challenge to the new player although the companies that are already established would prefer it that way. The coffee business like any other can be adversely is affected by the escalation of price in the market as well as economic recession. When such happens, it is likely that the consumers may not be ready to spend more on drinks such as the coffee. Thus the spending per person may go down. During a recession witnessed in 2009, the coffee market in the UK was adversely affected thus forcing some companies close down completely while the more established such as the Starbuck were forced to close some of it branches (Otim 2011). Costa however in unlikely scenario expanded its branches. Basically the preferences by the consumers not ne well understood and shift at some point. Therefore the major challenge in the coffee shop business would be to retain the existing customers. Conclusion Chain coffee retail shops in UK have been facing problems majorly relating to marketing, notably are the chain retail stores where most of the have no well established marketing strategies resulting into poor performance in the UK local markets. They have not established brand recognition strategies all over the country, this implies that the levels of brand awareness is very low hence the have lost popularity among the population. Most of the chain retail shops in UK do not have well established departments such as the customer relations and customer care departments; this has resulted into achievement of low levels of customer satisfaction, and poor maintenance of customer loyalty and trust translating into low profitability in among small and medium size coffee shop retailers. The level of competition in this market industry is relatively high as compared to other markets; there is emergence of small and medium size retailer shops where they compete with the large and established chain coffee shops which are considered to have a higher competitive advantage. This has led to improved provision of services and better pricing to the consumers. Coffee market in UK is facing the threat of substitutes where tea is considered to being the major threat , at the moment tea is the leading most preferred beverage in UK therefore the potential of coffee retail shops and chains in expanding into the larger UK markets is limited by this threats of substitutes. The general overview of the performance of coffee retail shops and stores in UK is enhanced by its competitive nature and the threats of substitutes, therefore each an everyday these businesses come up with strategies and designs of expanding their activities in the larger less exploited UK markets. Recommendations There various notable and identifiable ways in which retail and chain coffee shops in UK should adopt in order to consolidate their position in the beverage market in UK. First of all is that they should try as much as possible to eliminate the threats of the substitutes, this can be done by adopting pricing systems that will have a competitive advantage over their competitors more specifically the substitutes. Secondly is that they should conduct product and brand awareness to sustain and maintain the loyalty and trust of the customers this enhancing the maximization of profits in the market. Finally is that they should ensure that they practice efficient customer relations management in their business activities. As the markets increase and becoming attractive, new entrants will take into effect hence there may be tendency of poor service provision. Tough rules and regulations set by the various governing authorities should be followed to the latter; this will enhance the customer satisfaction as well as their trust and loyalty. References bakeryinfo.co.uk, 2009, UK coffee shops set to grow despite recent casualties. London: William Reeds Business Media . Doherty, B., Foster, G., Meehan, J., Meehan, K., & Mason, C, 2009, Management for Social Enterprise. London : SAGE Publications Ltd. Kolk, A, 2012, Towards a Sustainable Coffee Market: Paradoxes Faced by a Multinational Company. Corporate Social Responsibility and Environmental Management , 19: 2, pg 79–89 . Manson, E, 2007, UK coffee market set to double over the next 10 years. Retrieved 04 18, 2012, from caterersearch.com: http://www.caterersearch.com/Articles/24/05/2007/313851/UK-coffee-market- set-to-double-over-the-next-10-years.htm Otim, N 2011, Uganda Coffee Supply Response and Export Demand: An Economic Analysis. African Crop Science Journal , Vol 1, No 2 pp 1993. Read More