Caffe Nero Five Year Marketing Perspectives - Coursework Example

? xxxxx No. 12345 CAFFE NERO FIVE YEAR MARKETING PLAN ABC Xxxxx xxxx College Department of XXXX XXXX 30 March, (Total Words: 2518) Table of Contents Contents Page No Executive Summary 03 Market Analysis 04 Situational Analysis 05 SWOT Analysis 05 PEST Analysis 06 Objectives 07 Market Segmentation Strategy 08 Marketing Strategy 08 Product 09 Price 09 Place 10 Promotion 10 Action Program 11 Control 11 Appendix-I: Products Caffe Nero 12 Works Cited 13 Student Name: xxxx Subject: Marketing Topic: Five Year Marketing Plan 30 March, 2013 Executive Summary Caffe Nero is primarily a UK based coffee house chain, founded by Gerry Ford in 1997. It has more than 500 outlets inside the UK while the company has also established its coffee shops in Turkey and United Arab Emirates. The firm has earned its reputation by conducting its business with integrity and respect. It has delivered many unique coffee brands worldwide and currently owns a portfolio of several distinguished brands. Today, millions of people across the globe enjoy a wide range of coffee products offered by Caffe Nero. The core value is to offer the customers with highest quality services and products to keep them staying again and again. Caffe Nero promoted a culture of progression and innovation and has generated around ?165.6 million GBP in 2011 (Caffe Nero website: Performance page). The company intends to grow its operations by setting up new outlets throughout the United Kingdom during next five years. Our vision is to entice locals from around the areas to come and try all the unique and delicious coffee and related food our shops have to offer. We want the atmosphere to be a family friendly environment in our coffee shops where people feel comfortable, hanging out, and having a good time, while having an up-class feel with different coffees and food available for customers to enjoy. This marketing plan has been prepared after analyzing various issues regarding the coffee industry in United Kingdom. The main objective of this marketing plan is to highlight the critical issues for successful launching of new outlets of Caffe Nero in UK during next five years and to attain a competitive edge against well-established rivalries in the market. We believe that by getting crucial financial support through the sale within first two years, Caffe Nero will be able to capture 17-23% of the coffee shop industry in UK. The project has estimated that it will enjoy a 25 to 30% market share by the end of 2017. Market Analysis United Kingdom is going to be a new growing country of coffee drinkers as its coffee industry is one of the most competitive coffee industries in the world. The industry had done a business of around ?5.8 billion in the market which was an increment of 7.5% to the preceding year. The role of UK coffee industry is quite substantial in the overall economic growth of United Kingdom as the coffee chains support the strength of shopping malls as well as attract the customers towards other surrounding businesses. The UK coffee market consists of independent coffee outlets, branded chains, and non-specialized operators, making a combined total of about 15,723 coffee outlets in UK (companiesandmarkets.com). The competition is quite severe between different competitors especially Costa Coffee, Starbucks, and Caffe Nero are the three leading chains in the industry. Costa Coffee is leading the industry having a market share of 40.4% while Starbucks stands two with a share of 30.7%. Caffe Nero has a market share of 14% and is facing great competition from the other two rivals. Costa Coffee, Starbucks, and Caffe Nero have 1552, 757, and 530 outlets respectively and thus have more than 80% combined share of coffee market (Peach Report, July 2012). The competition is getting stronger day by day because the products are of similar nature; therefore, customers have numbers of choices to switch over from one brand or taste to the other. It is estimated that UK coffee market will exceed 20,000 outlets mark by the end of 2017 with a market turnover of more than ?8 billions (companiesandmarkets.com). Situational Analysis SWOT Analysis Strengths: Caffe Nero: A rapidly growing chain Good amount of market share (14%, 3rd in the UK market) More than 530 outlets across the UK Strong brand name with valuable reputation regarding fresh and high quality coffee and food Diversified products with strong management Prominently located outlets like in shopping centers, main squares or high street (Key Note Market Reports, 2009) Weaknesses: Food sector is weaker than other competitors Highly dependent just on one supplier Mainly deals with Italian style Risk is not well spread because most of the chain outlets exist within UK There are some products which are not commonly known amongst customers Opportunities: Along with coffee, internet cafe units can be established within the premises of each outlet Can start franchising business Plan of opening new 400 to 500 outlets during next five years Several growth plans especially in foreign countries Product diversification by inducting Chinese and Asian brands Direct investments in tea or coffee cultivated or exporter countries Threats: Costa Coffee, Starbucks, BB’s Coffee, McDonalds, and Subway as major rivals having more than 3000 outlets only in UK High bargaining power of suppliers Permanent competition in terms of quality, price, and service Any future change in consumer behaviors like switching over of customers from coffee to tea Rising coffee prices Eternal threat of any new entrant PEST Analysis A macro-environment corresponds to those drivers which are either out of control or has least control by the company’s management. These drivers are basically associated with the opportunities and threats which the company faces (Ferrell & Hartline, 2007). The business world is always changing and therefore organizations require staying in balance with political, economic, cultural, and technological changes. Political Factors Today Caffe Nero operates in different countries as well, therefore, its operations are always affected by the political changes in those countries and since the company has no direct control on these changes, therefore, it has to adjust itself according to the situations. As far as UK is concerned, political situation is quite stable and government departments are working independently with full command and control.  Economic Factors Business operations of Caffe Nero are certainly influenced due to several financial parameters. These factors include inflation rates and income/expenditures of the customers within the operational area of Caffe Nero. Another significant factor is the exchange currency rates which has direct effects on coffee prices because most of the coffee is supplied from foreign countries. Since these economic changes are also out of the jurisdiction of the company, therefore, in order to grow and survive through the competition, it should regulate its operations with respect to these changes. Major set up of Caffe Nero is operating in UK, but due to stable and reliable economy of UK, the company has least reservations towards it. However, a fluctuation in interest rate is somewhat vulnerable area of concerns because it puts the Pound Sterling lower than the US Dollar. Eventually the cost of coffee is evidently rising because the suppliers mostly prefer to receive their payments in US Dollar.  Socio-Cultural Factors The socio-cultural environment is probably the challenge of highest gravity with respect to wide marketing perspective because each society has its particular norms, values, and beliefs and people get highly influenced by them. The major possible effect of socio-culture factors on Caffe Nero could be the changing behavior of the customers from one brand to the other in terms of preferences, tastes, and choices (Boddy, 2005). In Middle East and Asian countries, this trend has substantial impacts on coffee and soft drinks industry. Caffe Nero will be required to keep itself up-to-date with respect to changing behavior and preferences of the people. Technological Factors Management of any company is supposed to remain vigilant regarding the effects of technological developments because the major impacts of these factors are on the marketing department of the company. However, they also deal with production and operational departments as well as the overall lifestyle of the customers. Since, the field of coffee industry has no direct relevancy to the technological changes; therefore, top management of Caffe Nero will be involved with these changes just to compete the other rivals. Objectives The main financial, marketing, and societal objectives of this marketing plan are: To increase the brand image of Caffe Nero in the society To increase the market share of Caffe Nero without losing its current status To make the target market aware of the new brands and make sure to convince them to come and enjoy these brands time and again Objectives Establishing new outlets Market share 2013 to 2015 150 - 175 17-23% By the end of 2017 300 - 400 25-30% Market Segmentation Strategy The strategy basically deals with people having different characteristics, nature, and preferences which may change with respect to time, brand, and experience (Keller, 2009). Therefore, this marketing plan is made to deal with people with respect to their demographic features, age, and regional climates etc. Caffe Nero is going to make two unique target markets i.e. children and people suffering from diabetes. It is widely considered that caffeine must be strictly restricted to the children because their bodies don’t need any nutrition. Since, coffee acts as a stimulator, therefore, it could be required only for hyperactive children (Psych Central, 2010). In this situation, Caffee Nero will introduce a special brand of coffee for children to meet their nutritional requirements. If we successfully target this segment, we will automatically impress other age groups. According to the report of Diabetes UK (2011), almost 2.5 million people of UK have diabetes and there are almost 850,000 other people who are unaware of it or yet to be diagnosed. Due to this trend, it is expected that by the end of 2025, around 5 million people in UK would have diabetes (Nation of the State, 2012). Presently, the leading competitors are not focusing on this market segment, therefore, by offering sugar free hot chocolate and sweetness; Caffe Nero will put special emphasis to target this unique and unfortunately growing segment. Marketing Strategy The major point of marketing strategy of Caffe Nero is to let the task on the chain to speak for itself. However, strategy of detailing outdoor human billboard is necessary to keep on as it had shown some promising results in the past. Caffe Nero will invest heavily in research to discover and develop innovative trends and demands about the coffee products as well as some fast food through public surveys. These surveys will assist the managers to establish a record of information based on demographics, interests and comments of general users about the coffee products. Products Caffe Nero has a special plan to launch couple of exclusive coffees for children and diabetes people to gain some prominent place in UK coffee industry. The menu of Caffe Nero will be centered on a variety of coffee products and food items. The coffee and food products offered in all outlets are separately mentioned in Appendix-I. Caffe Nero will offer excellent customer services with the aim of ‘customer satisfaction’. In next five years, our coffee chain will believe on old slogan i.e. ‘customer is always right’. As far as some food items are concerned, both eat-in and take-out options will be available to the customers in a friendly and smooth environment. Further the grassy lawn and dining hall will be available on advance booking for any huge party or any social gathering. Pricing Due to fewer strategic assets, market share, resources and budget, Caffe Nero will set competitive prices for its high quality products. Presently Caffe Nero purchases high quality raw material from farmers and in turn pays them fair amount to boost up their life standards. The price formula will be different for different products. For food items profit margin will be of 15%, for coffee brands it would be 15 to 20% and for beer and wine it will be up to 40%. A special discount rate will offered to the children for the new variety of coffee. Similarly in order to gain popularity among diabetes patients, comparatively fewer prices will be set on sugar free coffee and hot chocolates. If the other competitors are not in this position to reduce their food cost, Caffe Nero will get a competitive advantage on the base of cost leadership. The company has decided to offer its various products at a special 5 to 10% discount rate for foreign tourists and for those orders having a cost more than ?1000. Placing The main aim of Caffe Nero is to facilitate the customers up to the maximum level. Like other competitive firms Costa Coffee and Starbucks, Caffe Nero will also not only to extend its chain by placing new outlets (300 to 400 outlets in next 5 years) but will also venture into franchise business as well. Caffe Nero will put a special focus on the selection of location which must be easily accessible to its customers. Promotion Caffe Nero will put its best efforts to enhance the customers’ awareness about its products and services. In order to gain its initial short terms goals, Caffe Nero will highly depend on its communication strategy to its target markets. During the initial phase of its new marketing plan, Caffe Nero will emphasize to keep itself present on regional basis. An electronic campaign will be launched that will include newspapers, radio, television, and online contact to know the trends of local customers. To make the communication more effective and productive, an advertising consultant will be arranged to carry out this important campaign. In order to monitor and observe the services, products, and market position, we will arrange a program to receive the feedback from the customers. Different techniques will be applied for this purpose such as telephonic conversation, direct mail, opinion through public surveys and online comments. Since internet is the most ready and widely used medium to communicate, therefore Caffe Nero will keep its website up-to-date for all business activities. Action Programs Caffe Nero is a well-established organization consisting of multiple departments which work effectively to achieve over all objectives of the organization. The above marketing plan will be executed and implemented through the involvement of different departments. First of all, a feasibility study will be made to examine the possible outcomes that will support the organization to attain its overall strategic goals during next five years. Feasibility report will be examined critically by mid-level management. After making several suggestions, a report will be put forward to the top management and by their final approval; the marketing plan will set off. Now in the second step, product, promotion, and pricing strategies will be executed by marketing department while manufacturing and preserving of coffee and food items will be done by production department. Finance department will look after the budget issues. The 3rd step will be involved with the tasks listed in 2nd step as well as their implementation. A lot of management and control theories will be applied to undertake these processes. Management staff will keep an eye on the controlling and marketing issues of Caffe Nero. Control This marketing plan of Caffe Nero is of five years; therefore, it will have to monitor all aspects of this marketing plan and the utilization of budget carefully. The controlling implementation will include the budget for marketing campaign, promotional expenses both on electronic and print media, travel expenses for trade exhibitions and shows, expenses on the market research and analysis, and some internal miscellaneous expenditures of the organization. We will be required to watch all these activities closely with the intention to reduce the spending cost and maximizing the revenue. This will enable us to keep our marketing plan within allotted budget and timeframe. Appendix-I Products Caffe Nero Coffee and Brands Food Espresso Espresso Ristretto Espresso Macchiato Espresso Con Panna Porridge Sandwiches and Maninis Pastries and Muffins Cappuccino Caffe Latte Americano Caffe Mocha Chocolates Hot Chocolate Milano White Chocolate Mocha Chai Latte Source: Caffe Nero, Official website. < http://www.caffenero.com/food/recipes.aspx> Works Cited Boddy, D. Management: An Introduction, 3rd Edition, Financial Times Management. 2005. Print. ‘Caffe Nero website: Performance page’. Retrieved 15 June 2012. http://www.caffenero.com/story/performance.aspx Caffe Nero, Official website. < http://www.caffenero.com/food/recipes.aspx> Companies and Markets.Com. UK coffee market dominated by Costa Coffee. 5 February, 2013. Diabetes UK. (2011). Diabetes in the UK 2011-12 Key Statistics on diabetes. Available: http://www.diabetes.org.uk/Professionals/Publications-reports-and-resources/Reports-statistics-and-case-studies/ Reports/Diabetes-in-the-UK-2011/ Last accessed 24th April 2012 Ferrell, O.C., & Hartline, M.D. Marketing Strategy, 4th Edition, Thomson South-Western, UK. 2007. Print. Keller, K.L. Challenges to Branding:  Five Secrets to Brand Success. Market Leader, Quarter 2, 45-47. 2009. Key Note. Coffee & Sandwich Shops 2009. Key Note Market Reports. 2009. Nation of the State - England. (2012). http://www.diabetes.org.uk/Documents/Reports/State-of-the-Nation-2012.pdf Peach Report. Coffee shop revolution goes on, 2 July, 2012. http://www.peach-report.com/Missed_This/1463272/coffee_shop_revolution_goes_on.html Psych Central. Caffeine's Effect on ADHD Symptoms; Jane Collingwood; April 2010 http://psychcentral.com/lib/2010/caffeines-effect-on-adhd-symptoms/ Read More