Costa Rican Coffee Industry - Essay Example

Costa Rican Coffee Industry 1.0 Introduction UK is among the top ten coffee importing countries worldwide. Coffee maintains its third position as the most preferred non-alcoholic drink within the community. Coffee Shop entails any kind of restaurant offering beverages such as tea and coffee. UK has many chain and independent coffee shops. Chain coffee shops hold considerable share in the coffee market within UK, with the main players being Costa, Caffe Nero and Starbucks. The Coffee markets within UK remain competitive in terms of quality, service, coffee shops’ atmosphere and prices. These affect the consumer buying behaviour. The effects of the external environment affect coffee markets at relatively low rates. Despite adverse economic trends in UK, statistics indicate that UK recorded relatively high GDP growth rate of 4.5%. Most of the English provinces saw the risk weighted adequacy ratio for the capital improve as well as progress of financial improvements and reconstruction. The current paper analyzes the external and internal marketing environment for Costa Coffee. This considers both micro and macro marketing environment as well as the major events and trends that impact the marketing in Costa Coffee. The essay focuses on both future and current occurrences within the micro and macro marketing environments through analysis of strength, weaknesses, opportunities and threats to the market. The paper gives the strategic recommendations on how to improve marketing in Costa Coffee (Adams & Ghaly 2007, p. 1716). 2.0 Introduction to Costa coffee Costa Coffee refers to a British Multinational coffeehouse in United Kingdom, a subsidiary of Whitbread PLC. It forms the second largest coffeehouse chain worldwide after Starbucks (Allegra Strategies, 2004). The Italian brothers; Bruno and Sergio Costa started the coffeehouse in 1971 as a wholesale supplier of roasted coffee to specialist and caterers in Italian shops. Currently, the business operates 1375 restaurants in UK and 2500 vending facilities, in Costa Coffee, as well as 800 overseas outlets. The Costa Coffee outlets can be found in airports, cinemas, Tesco stores, bookstores, hospitals and in motorway services. Some subunits can be found in railway stations as well as in the airport throughout UK. Most of the branches within airports, hospitals and cinema halls are owned by either corporate franchise or individuals. Some outlets can also be found outside the business parks, often, among most leading companies and food retailers. The Costa Express created by coffee chain from the self-service coffee bars anticipates rebranding Coffee Nation Machine to see the expansion to 3000 locations. The Coffee Nation operates in motorway services and within the Tesco stores. The company aims to target hospitals, transport interchanges and universities. The company’s roaster is in UK and is operated by three master roasters from Italy. The retail stores sell Mocha Italia coffee; six parts Arabica and four parts Robusta and use Gennaro Pelliccia as the coffee taster. The company sponsors awards such as Costa Book Awards that began in 2006 (Allegra Strategies, 2009). Some of the controversies surrounding the Costa Coffee include the opening of Bristol outlet in 2011 without appropriate planning permission leading to planning appeals against any enforcement action in 2012. The company also faced opposition from residents who restricted them from opening up an outlet in Totnes making the company withdraw. Despite of opposition from resident and protests against opening up of the outlets, Costa Coffee managed to open some coffee shop, such as in Southwold, after getting the planning permission on the appeal. The Costa coffee possesses four characteristics. First is the miscela where the coffee is made from the unique blend called Mocha Italia. The other characteristic is grind, macinatura where each Costa cup contains freshly ground beans with appropriate consistency that ensures perfect aroma and flavours. The Mazzer comprises of Ferrari of grinders that ensure ‘perfect cup’. The third characteristic is macchina that entails design of Costa shops by Italian espresso machines, tuned and perfected to achieve huge volumes of the perfect espresso. The fourth characteristic entails the manna which describes the skills related with Barista influences to the ‘perfect cup’ achieved from holding extensive trainings to reach the excellence of Costa. The internal and external analysis of the marketing environment in Costa Coffee maximizes the potential for strengths and opportunities as well as minimizes weakness and threats (Allegra Strategies, 2007). 3.0 External Analysis 3.1 Legal/ political factors The growth of coffee beans has been increasing in other countries. This triggers debates on child labour, taxes and tariffs and working conditions influenced by legal and political conditions. Legal and political business environments tremendously affect the performance of the business and facilitate the achievement of long-term goals (Financial Times 2007). 3.2 Economic factors The economic downturn in 2008 challenged the business tremendously. The coffee consumers became more cautious in their spending flexibility due to high levels of unemployment and personal debt. 3.3 Social/ cultural People normally spend a lot of money on coffee. Their visit to the coffee house acts as a mode of relaxation. 3.4 Technological The introduction of the latest technology saw the invention of better and cheaper machines in the market for use at home. The computer and information technology acted as the leading forces providing innovative opportunities in modernizing technology. Currently, Costa Coffee uses latest and innovative technology in dealing with external forces affecting marketing. 3.5 Environment The increased environmental awareness compels the coffee players to be concerned on production methods for coffee beans, the supply chain, preparation and selling of both products and services. For instance, Costa Coffee set up a mark that guaranteed customers of responsible growth and ethical trade for espresso-based beverages in Africa, Europe and Middle East. The espresso roast from Starbucks was used previously in all the espresso-based beverages since late seventies, with the key development aimed at meeting the guidelines formulated by Conservation International. All the details on Shared Planet espresso remained obscure deliberately. Starbucks argued that it was a blend from Asia/Pacific and Latin American regions and that it featured the soft acidity and rich aroma with caramelly and dense sweetness. The coffee making the blend was grown under Conservation International guidelines that advocated on climatic changes. Based on CI statistics, an estimate of 20% of the carbon emissions emanated from the tropical deforestation. Starbucks pledged it support for the launch of conservation projects of two rainforests in Mexico (Financial Times, 2007). 3.6 The External Environment Threats The greatest threat experienced by Costa Coffee is possibility for the increased competition or excess expansion for Starbucks. This requires Costa Coffee maintain its consistency throughout the world in all its stores. This is especially important even as Costa Coffee seeks to expand geographically. This creates the need to maintain effective chain management for the supplies to curb all the operational risks. The cost of expansion must not be translated to increased prices for the coffee. Coffee market faces extensive competition since the large number of players offer similar products in the same market segment. Starbucks and Costa Coffee are the main competitors’ coffeehouses in UK. The two compete in terms of quality offerings and products. Some other competitors for Costa Coffee are Coffee Republic and Café Nero as well as other independent coffee shops. There is the threat for new entries leading to high economies of scale caused by importation of coffee. The increased brand awareness requires no special knowledge. The suppliers have low bargaining power due to the increased number of coffee producers. There is also threat of substitution like tea and hot chocolate. The buyer’s power is relatively low especially for single buyers. In addition, the price sensitivity remains medium with switching costs being relatively low. In competitive rivalry, the overall coffee market remains mature with several competitors having little differentiation. The competition within the coffee market remains considerably high hence the need for innovative technologies in attracting new customers (Lorenzetti & Daniel 2000, p.34). 3.7 External Environment Opportunities The global expansion offers the most appropriate opportunity for Costa Coffee; hence the need to move into big emerging markets like India. The big emerging markets provide new markets and cheap cost for labour. 4.0 Internal Environmental Analysis 4.1 The Internal Environment Strengths Employee orientation in Costa Coffee is among the major source of internal strength for the firm. Consistency in operations allows Costa Coffee increase the sales. The company articulated a positive culture in the organization that increased the motivation for the workforce. The CEO of Starbuck in one of his speech said that they built Costa Coffee brand first with their employees rather than consumers. They believed the most appropriate way of meeting and exceeding expectations of their customers was through hiring and training of people, hence investment in their employees. 4.2 The Internal Environment Weakness Some of the weakness included inappropriate expansion and planning for the Costa Coffee stores. This resulted in the stores being close to each other. The current challenges and issues result from their competitors. Prices for the products remain relatively high since most of the stores are found within high middle class target markets (Macdonald 2007, p. 793). 5.0 SWOT Analysis 5.1. Strengths Costa coffee brand is famous and relates to high quality People prefer the Costa atmosphere The company operates several outlets in high class locations Consist of well treated and trained employees The products have powerful retail reception Has the reputation for value of money, wide range of products as well as convenience Increased growth over the years as well as experienced expansion 5.2 Weaknesses The high prices for the products The quality of coffee may not be as good as the reputation of the company The availability of unhealthy products The aggressive expansion Weak control of the empire despite the IT advantages Global operation with location on few countries Inadequate flexibility 5.3 Opportunities Launching of new products as well as product extensions such as tea and premium Expansion into the new markets Selling of equipment and whole coffee beans Development in the non-high street areas Formation of strategic alliances with other coffee producing companies Expansion of the various consumer markets especially those in India and China Diversification of the branches from supercenters to the locally-based sites Continuous expansion 5.4 Threats Increased competition, especially from other coffee shops such as Starbucks Insufficient ownership for the coffee firms The global financial crisis affects prices Prone to political problems in some countries Intense competition in prices Latest developments within the information technology with a high likelihood of changing the markets 6.0 Strategic Recommendations The first step in Costa Coffee must be the review of their business plan. This must focus on the goals and objective of the business, and the expenses, projected sales, business volumes and monthly expenses should be detailed appropriately. Also, when setting up for new stores, Costa Coffee experiences many challenges with residents (Samper 2010, p. 72). Therefore, the company should look for a great location for their stores. This should be guided by preference of the customers and strategic point that is easily accessible by all customers. The location must be based on the concept. A different location will be required for upscale and proximity to a large population with potential of becoming coffee drinkers. Right location might sometime become worth for waiting, and the business must establish the right location. Normally, the most appropriate location for a coffee house would be in captive audience locations as well as in high migratory locations. The high migratory locations may include the malls, performing arts centres, tourist attraction sites, amusement parts and shopping centres among others. The captive audience locations include business and industrial parks, medical centres, university and campuses, large office building and down town sites among others. The company must also consider layout and ambience of their stores. Poorly designed operations affect the sales. Small design deficiencies may have great impacts on the bottom line. The biggest errors in design may prevent a company from making profits. The ambience created forms the best marketing tool, with the feel and look of the business brand creating one’s signature. The coffeehouse must strive for originality to be outstanding among their competitors. Great ambience starts with a good layout. There must be a clear sense of welcome as people enter the shop with easy to read and understand menus. People must be served efficiently, and the design must ensure that every customer is served promptly even during the busiest times while making them relax and feel welcomed at the same time. The equipment and company chosen by the company must be right. When planning for purchase of equipment, there must be a consideration for service network. The business must work with companies which may provide services required beyond the initial sales (Samper 2010, p. 73). The menu planning must be carefully considered. The chances of success will be maximized by dedicating plenty of time in planning and development of a perfect menu based on the location of the shop the type of location identified, space limitations and cost restraints must be considered when developing the menu. Mostly, hot coffee does well during mornings, before 10am. The strategy for profit must be clear with the plan being open throughout the day. The company must ensure creativity of the employees on meals ideas. Regardless of extensiveness of the menu, the business major offer is coffee operations, with coffee being the primary identity. The shop must, therefore, aim at offering the best coffee through careful understanding of the nuances of the product. This forms a tall order and requires thorough education. The company must hire right employees as well as train them appropriately. The employee can either break or make the business. Right employees own up the ideas of the business. Not all attractive and eager people do well in businesses. When hiring, the employer must look for people with the ability of preparing the products with perfection and flair and with personality of the face of the business. People can be trained on how to perfect their skill set though changing the ingrained attitude may be challenging (Su & Wen-Bin 2006, p. 177). The importance of employees in the business must never be underestimated. Training forms the most important asset for a business. Despite the extensive trainings, the employees may not be completely acquitted in their service to customers, hence the need for constant trainings. Turnover in food industries remains relatively high creating the need for a structured program. The employees learn and practice excellence whenever they get appropriate trainings. This may cost time and efforts bring new people onboard and making them solve the customer issues with urgency and make them feel relaxed and welcomed. The company must also aim at providing excellent customer service to attract new customers as well as retain the existing ones. The success of the operation depends on overall knowledge of the staff regarding the menu and coffee offered. A customer oriented, and knowledgeable staff makes the customer feel the need for frequenting an establishment which stresses on quality. Offer for good customer service acts as the first step towards good marketing. Most customers expect great thing from the business. They mostly count on special treatment and high quality products for their money. Next to selling great coffee is the provision for excellent service where right employees create an experience that instils in customers the desire to come again as well as tell their friends about their great experience (Su & Wen-Bin 2006, p. 178). Finally, the management must ensure good leadership. Leading people on a daily basis requires for planning and organization to provide direction to the subordinates. Every employee must know the expectations of the company. This may earn respect as the management displays their skills and passion in inspiring people from their personal goals. A leader possessing good leadership skills must attract and retain talented employees committed to the organizational goals. A goods leader aims at creating people with common goals. The selection of the goals must reflect the true priorities and which make the difference with the least effort. In conclusion, the Costa Coffee remains one of the leading coffeehouse in UK for over a century primarily due to execution of the positioning ad branding strategies towards perfection. The company is dedicated to high quality service with the success formula at hand. The use of appropriate tools in management helps the business in reaching out to customers from different cultures. Due to the relatively high income, Costa Coffee must implement their knowledge management tools to enable them move towards a dominance and stability in coffee brewing industry (Allegra Strategies 2009). References List Adams, M., & Ghaly, A. (2007). Maximizing Sustainability of the Costa Rican Coffee Industry, Journal of Cleaner Production 15(17), pp. 1716-729. Allegra Strategies (2004). UK Coffee Bar Market. [Online] Accessed 31 Oct 2013. Available at: http://www.allegra.co.uk/pdf-files/2004-12-00-fs.pdf Allegra Strategies (2009). UK coffee bar market still growing despite recession. [Online] Accessed 31 Oct 2013. Available at: http://www.foodbev.com/report/uk-coffee-bar-market-still-growing-despite-recession Financial Times (2007). Costa tops table of coffee outlets. [Online] Accessed 31 Oct 2013. Available at: http://www.allegra.co.uk/pdf-files/2007-05-28-ft.pdf Lorenzetti, L., & Daniel, L. (2000). The Birth of Coffee, New York, Clarkson Potter. Macdonald, K. (2007). Globalising Justice within Coffee Supply Chains? Fair Trade, Starbucks and the Transformation of Supply Chain Governance, Third World Quarterly 28(4), pp. 793-812. Samper, M. (2010). Costa Rica's Response to the Coffee Crisis, Latin American Perspectives 37(2), pp. 72-92. Su, A., & Wen-Bin, C. (2006). The Impact of Western Culture Adoration on the Coffee Consumption of Taiwan: A Case Study of Starbuck, Asia Pacific Journal of Tourism Research 11(2), pp. 177-87. Read More