New Product Marketing Plan for an Organic Coffee Drink Apple-Cofi Premium - Case Study Example

New Product Marketing Plan for an Organic Coffee Drink: ‘Apple-cofi premium’ Name Course/ Code Instructor 19 September 2012 Table of Contents Table of Contents 1 Executive Summary 3 Situation Analysis 4 The Product 4 Product description 4 The market 5 Value proposition of the product 5 Mission 6 Marketing Objectives 6 Financial Objectives 6 Sales Objectives 7 Market Analysis 7 Overall Market in the country 7 Market summary 8 Target Markets 8 Market demographics 9 Market needs 10 Market trend and growth 10 Competitive Assessment 11 Industry’s five competitive forces 12 Marketing Strategy 14 Target markets 15 Marketing mix strategy 16 Product 16 Pricing 16 Positioning 16 Distribution 17 Promotion 17 Financial Forecasts 19 Sales forecasts 19 Contingency Plan 19 Possible difficulties to be experienced 19 The plan 20 References 21 Executive Summary Coffy Taste Café is a new business to be established in Wollongong city, in New South Wales of Australia. The business aims to introduce a new product in the city known as Apple-cofi premium. This is a new organic coffee drink with numerous nutritional and health values for all demographic groups of people. The market prospects for the new product are informed by the fact that few business in the city specialise in organic drinks; the few available have concentrated in herbal tea products. The population of the city provides a good and ready market for the new product. Given the nature of competition from established brands in the hot drinks industry, Coffy Taste café aims to use appropriate marketing strategies that include penetration pricing strategy, quality design of the organic coffee drinks, convenience use of marketing and advertisement channels, and enhanced customer services. The marketing strategy is to be implemented in a span of 12 months and key objectives to be achieved include: To achieve 80 percent advertisement of the business in the next 12 months. To achieve 60 per cent product awareness of Apple-cofi premium in the next 12 months. To ensure the returns in the business in the next 12 months accounts for 23%. To operating costs by about 20 percent by the end of 12 months. Increase sales by 50 percent in the next six months and to double in the next 12 months. To ensure product sales in key demographic aspects operate above 50 percent. Situation Analysis Coffy Taste Café is a new coffee café that is to be established in the heart city of Wollongong, in the state of New South Wales of Australia. The new Coffy Taste Café is to specialise in a new organic coffee named ‘Apple-cofi premium’. The new organic coffee drink is to exploit on the rich coffee-drinking culture among Australians, which for decades has become the pride of the Australian people (Rose, 2010). Motivated by the increasing health-consciousness among the population, Apple-cofi premium, constitute an organic coffee drink with numerous health benefits that many people will find appealing. At the moment, few businesses have discovered this opportunity in the city of Wollongong. Given that it is a new business entity in the city, Coffy Taste Café requires a comprehensive marketing plan for its new product in order to set the business in the mood to reach profitability and ensure success in the future. The Product Coffy Taste Café as a new business entity in the city of Wollongong has conducted a market research whereby a business opportunity in the coffee drinking market has been identified. The company has designed a new product known as ‘Apple-cofi premium’, which is an organic coffee drink. Product description ‘Apple-cofi premium’ is a new coffee organic drink to that Coffy Taste Café aims to introduce in the city of Wollongong. This unique drink departs from the usual non-organic coffee drinks that have characterised the Australian culture for a long time. The organic coffee drink to be offered to the market combines almost all aspects and characteristics that constitute and define herbal drinks. The new herbal coffee drink contains a blend of herbal ingredients that are designed to bring about specific health purposes such as relaxation, rejuvenation, relief, stress-free, soothing, and many more health benefits. Besides, the new Apple-cofi premium is designed to be an organic drink that is fresh, taste, fragrant, last longer and economical to all groups of people. Apart from being a business opportunity, the desire at Coffy Taste Café is to establish a new and unique sub-culture of organic coffee drinking among various demographic groups in the city of Wollongong. The market Australia has a rich culture of coffee drinking, which has been evident for many years. Almost all demographic aspects explains why there is increase in coffee drinking in the country; whereby, the increasing lifestyles in the country is characterised by many people studying, working, or even holding their business and formal meetings in cafes (Barista Coffee Academy, 2006). While going about their activities, majority of people prefer to have a drink, where coffee and tea are the favourites. Value proposition of the product The new organic drink aims to fill the identified need for an organic drink in a society that in recent times has witnessed increased level of consciousness towards health issues. As a result, many people in recent times have embraced herbal tea and other products, which is a clear indication that organic and herbal products in the country are gaining positive acceptance. Despite this realisation, many businesses, whether small or big, remain lukewarm to the idea of herbal coffee drinks. There is an ingrained culture of non-organic coffee drink in the country that no one is ready to challenge. Therefore, Coffy Taste Café is determined to travel this rather untested journey in the city of Wollongong. Mission The primary mission of Coffy Taste Café is to provide the best quality organic coffee drinks to the Wollongong market. The business aims to realise this by participating in creating a unique organic coffee drinking sub-culture among different demographics in the town of Wollongong. In order to achieve the mission, Coffy Taste Café has established objectives in key areas of marketing, financial and sales, for the next 12 months the business aims to establish itself in the market. Marketing Objectives The primary marketing objectives for Coffy Taste Café include; To achieve 80 percent advertisement of the business in the next 12 months. To use 40 per cent of the major advertisements channels in the city for the next 12 months. To achieve 60 per cent product awareness of Apple-cofi premium in the next 12 months. Financial Objectives To realise 10 per cent profit growth of the business in the next six months. To ensure the returns in the business in the next 12 months accounts for 23%. To operating costs by about 20 percent by the end of 12 months. Sales Objectives Increase sales by 50 percent in the next six months and to double in the next 12 months. To ensure product sales in key demographic aspects operate above 50 percent. Market Analysis Overall Market in the country Australia has been described to be a nation of coffee drinkers and this is as a result of numerous research studies that confirm that the ‘café culture’ in Australia continues to expand, eclipsing the tea sales in the country (Rose, 2010). For instance, estimates shows that Australians spend over $773.5 million to buy coffee beans and instant coffee to brew at home (Rose, 2010). On the other hand, amount spend on tea during the same period has been estimated to be about $452.6 million; a clear indication as to how coffee drinking culture continues to be established among the Australians. Forecasts in the coming years show that coffee consumptions as reflected in sales will increase, with statistics showing that by the year 2013, coffee sales will hit the $800 million mark (Rose, 2010). Coffee drinking in Australia is not a new phenomenon since the country is known for having an established coffee drinking culture that was started by the European immigrants in the country. As a result, Australia, unlike other Asian countries, has become a unique country that exhibit an established and celebrated culture of coffee drinking. Due to this enriched culture of coffee drinking, Australia continues to experience explosion of numerous coffee shops that specialise in wide array of coffee varieties that satisfy diverse needs of the population. On overall, statistics generated for the 2012 show that Australians are like to buy about 23 million kilograms of coffee products, which will increase to 23.4 million by the year 2013 (Rose, 2010). Market summary Coffy Taste Café has adequately captured the appropriate market information in the city of Wollongong, and is convinced this market idea will have great success as it reflects the attributes the current customers in the market are looking for: healthy herbal drinks. As a result, Coffy Taste Café is determined to use the market information acquired to leverage better understanding of the consumers in terms of how they should be served, their particular unique needs and how effective communication with the customers can be enhanced. Target Markets The target market for Coffy Taste Café is the coffee drinking market in the city of Wollongong. The city has a population estimated to be 284,169 people (Australian Bureau of Statistics, 2010). These are statistics generated in the year 2008. This makes the city the third largest in the state of New South Wales after Sydney and Newcastle. Moreover, the population of the city makes it the ninth largest city in the entire country of Australia (Australian Bureau of Statistics, 2010). Besides, Wollongong is known for its numerous industries, a fact that makes the city a hub for many people from other regions looking for jobs. This is to add the fact that Wollongong remains one of the best tourist destinations, given its unique climate and physical environment (The Sydney Morning Herald, 2008). Furthermore, the city is home to numerous education facilities, where one of the largest universities in the country, Wollongong University, is located in this city. Therefore, there is available large market prospect for the new product being developed by Coffy Taste Café. Market demographics Coffy Taste Café profiles its customers in three critical demographic aspects: geography, demographic and behaviour factors. In terms of geography, Coffy Taste Café is to be based in a relative location on the outskirts of Wollongong city. The location of the business is motivated by the city’s population, which is estimated to be about 292,190 people. Therefore, about 30-mile radius of the population in the city can be said to be in need of the product or have ability to embrace the product when introduced. In this gesture, Coffy Taste Café targets about 25,000 customers in the next 12 months. In terms of demographics, the new product targets people in the city aged 18 to 65 years. The business estimates that more that 60 percent of its market is going to be occupied by professionals in the city, students, industry workers, tourists and business people. This is informed by the fact that more people in Australia are today embracing cafes as appropriate places to relax, research, study, work and conduct business and formal meetings. The increasing level of technology adoption is linked to this new trend among Australians, which is informed by high number of people owning computers thus being able to work anywhere at their convenience. Besides, these professionals and students are regarded to have more money in terms of earning, part-time job or pocket money to spend in social events. The last demographic aspects concerns consumer behaviour in the area of business. Nationally, Australia is known for its ‘coffee drinking culture’ which has become established in the society. Moreover, many people are embracing, ‘café culture’ that has seen many people relax and spend most of their time in cafes (Bean Scene Magazine, 2011). Lastly, the recent times have seen more Australians become conscious of their health issues, a situation that has led to many to embrace herbal drinks and products such as herbal tea (Bean Scene Magazine, 2011). Market needs At the market, the Australian coffee market is characterised by non-organic coffee products and drinks. Few people have expressed the desire to venture in this form of business idea, even when statistics show that more people are increasing shifting towards herbal products and drinks (Bean Scene Magazine, 2011). As a result, many people at the moment are only introduced and provided with non-organic coffee drinks especially in the city of Wollongong. Motivated by this market opportunity, Coffy Taste Café seeks to fulfil the consumer needs by introducing Apple-cofi premium. Besides, the business aims to fulfil the following benefits that are important to customers in the city. Provision of an enhance health coffee drink to the customer is the first benefit, accessibility and availability of the product to wide range of customers, increased level of customer service and competitive pricing of the new product to establish and maintain loyal customer base. Market trend and growth Research conduct by market research company, Datamonitor, indicates that the market for hot drinks in Australia shows both signs of growth and expansion in the coming years (Wong, 2010). For instance, sales generated from hot drinks in the country increased from A-$1350 million, in the year 2008, to an estimated figure of A-$1473 million in the year 2013 (Wong, 2010). The coffee category, as compared to tea category, is the one identified to be increasing at a faster rate. Nevertheless, the tea drink market also shows signs of exponential growth especially with increasing consumer preference for specialty tea products such as green tea and herbal tea (Wong, 2010). These organic and herbal products are being favoured by consumers due to their perceived value of health and wellness benefits. The current market trend and growth prospects are explained by what Wong (2010) considers, an increasing culture of out-of-home coffee drinking. According to the author, many Australians have embraced the idea of café culture, as compared to other people from Asian region. As a result, Datamonitor establishes that about 15 percent of people in the country, who consume coffee drinks, consume it out-of-home (Wong, 2010). Besides these findings, it is further established that consumers in Australia appear to be mature in their tastes and preferences for hot drinks; a situation that has resulted in a new market trend where customers are demanding premium coffee and tea products (Wong, 2010). At the same time, the consumers have expressed that the new premium products should have unique features such as organic, antioxidants, and so on (Wong, 2010). As a result of the current market trend, predictions show that Australia’s market for hot drinks in the coming five years may hit a level of A-$1.5 billion (Wong, 2010). Competitive Assessment Hot drinks market in Australia is largely characterised by increasing level of tea and coffee drinks. Hot drink market in Australia is at the moment perceived to be growing at a rate of 5 percent each year. Key player in this industry is Nestle S.A., which has a control base of about 50 percent (European Supermarket Magazine, 2010). The top seven hot drinks brands in 2009 across the world generated sales that exceeded $ 1 billion (European Supermarket Magazine, 2010). On the other hand, it required 53 soft drinks players in the world to account for a figure approximate to the one generated by hot drinks. The figures and disparity across the two key industries show how hot drinks industry has become. On overall, competition in hot drinks in Australia is recognised with key brands stealing the show from the smaller companies. Nevertheless, with little effort among big brands to exploit opportunities in organic coffee brands, especially in the city of Wollongong, gives the business opportunity to identify its strengths and critical available opportunities to exploit. Industry’s five competitive forces Michael Porter identified five forces that determine competitive environment for the industry or individual business (Porter, 1980). Accordingly, success or failure of any industry or business depends on five forces: threat of new entrants, bargaining power of suppliers, bargaining power of buyers, and intensity of rivalry and threat of substitution (Porter, 1980). Evaluating the Australian hot drinks industry using Porter’s five forces, it becomes important for Coffy Taste Café. The hot drink in the country has relatively loose restrictive factors that make it possible for new entrants. The capital required is relatively low. Government regulations are also few making it easy for new start-up businesses to gain ground. At the same time, switching costs are seen to be relatively low; a fact that makes the nature of business to remain flexible (Porter, 1985). As a result, threats from new entrants are normally felt by established key players in the industry. Bargaining power of suppliers is also another important factor developed by Michael Porter. In Australia, hot drinks industry is characterised by numerous suppliers, who remain key to the success of the industry. Given that quality remains paramount, there is great competition among suppliers to provide quality products for the numerous products. This has in turn eroded the bargaining power of suppliers (Porter, 1985). On the other hand, supply of organic coffee is still underdeveloped in the country and this aspect may give the few suppliers available some power of control in short-term, but such powers may diminish in long-term. Bargaining power of consumers in the hot drinks industry is relatively high, given the nature of intensified competition and availability of substitutes. The coffee drinking culture in Australia is responsible for the high concentration of coffee cafes in major cities of the country. Moreover, availability of numerous varieties of hot coffee drinks, gives the customers opportunity to sample many samples. Besides, apart from coffee, customers are bombarded with numerous samples of other drinks such as tea, milkshakes and even soft drinks. All these give customers opportunity to access at any time since costs associated with switching are relatively low. As a result, consumers bargaining power is high. Threat of substitutes is also another factor to consider. For Coffy Taste Café, a new organic coffee drink faces threats from available substitutes in the market. Some of these substitutes include non-organic coffee drinks that majority of businesses continue to produce, organic or herbal tea products that are gaining acceptance among the people, milkshakes, and soft drinks (Australian News Online, 2006). As a result, Apple-cofi premium is likely to face competition from this other substitutes, but key strategy for the business will be to device appropriate pricing strategy, coupled with efficient marketing strategy and customer care services. Intensity of rivalry in the Australia’s hot drinks market is high. The hot drinks is characterised by high number of players, some with established brands like Nestle, Kraft, and many more (Australian News Online, 2006). More rivals means availability of numerous varieties at varying prices. Therefore, key success factor in the market with high number of rivals depends on pricing strategy, brand awareness, quality and customer service. As a result, an elaborate marketing strategy is adopted by Coffy Taste Café in terms of entering the market with ease, establishing a brand name and increased level of promotion. Analysis of the market in the city of Wollongong, shows that majority of competitors have specialised in non-organic coffee drinks. Furthermore, a number having been embracing herbal tea, but the vacuum in the market is not fully filled, giving opportunity for new businesses aiming at exploiting herbal drink market. With this realisation, Coffy Taste Café aims to build and establish itself based on key aspects like increasing demand for herbal drinks as health consciousness among people increase, availability of few organic cafes, and inability of available coffee cafes to address needs of students and increasing number of tourists. Marketing Strategy An effective marketing strategy is developed and implemented by Coffy Taste Café for its new organic coffee product known as Apple-cofi premium. The marketing strategy indicates how the business is to be positioned in the next 12 months in achieving its goals and objectives. To achieve 80 percent advertisement of the business in the next 12 months. To use 40 per cent of the major advertisements channels in the city for the next 12 months. To achieve 60 per cent product awareness of Apple-cofi premium in the next 12 months. To realise 10 per cent profit growth of the business in the next six months. To ensure the returns in the business in the next 12 months accounts for 23%. To operating costs by about 20 percent by the end of 12 months. Increase sales by 50 percent in the next six months and to double in the next 12 months. To ensure product sales in key demographic aspects operate above 50 percent. Target markets Target markets that Coffy Taste Café aims to exploit are identified with regard to key demographic aspects of age, gender, ethnic, education, economic, and residence. Moreover, identifying markets is influenced by discovery that Australians are fast embracing café culture, characterised by increased consumption of hot drinks. In this regard, the business targets the following markets; Students in education institutions in the city of Wollongong, especially from the Wollongong University. Professionals working in the city Tourists Couples and family members on leisure in the city Business people Marketing mix strategy Product Coffy Taste Café aims to introduce a new organic coffee drink known as Apple-cofi premium. The drink is a blend of key herbal ingredients that are good for health of people of all ages. The drink provides benefits such as relaxation of the mind, stress relief, rejuvenation, soothing, and many more health benefits. Moreover, it is a unique product that has not been tested in the Wollongong city, although numerous varieties of herbal tea are available. Therefore, this is a unique product consumers will find appropriate for their lifestyle, as well as health. Pricing According to Kotler and Armstrong (2004) pricing in essence involves setting a precise price as value for a product or service being offered by the company (Beamish & Ashford, 2005). At the same time, Paley (2006) observes that pricing strategies for new products in the market can range from skim pricing, penetration pricing, psychological pricing, follow pricing and cost-plus pricing. Given the competitive environment and the low capacity of the business at the moment, it is prudent that price strategy implemented gives the business opportunity to gain ground in the market, while being slightly below what established competitors offer. As a result, price penetration strategy will be implemented for Apple-cofi premium. Positioning Coffy Taste Café will position itself as a premium coffee café that provides unique, celebrated and healthy organic coffee to the population of Wollongong city. The café with design its Apple-cofi premium as a rich and quality product that rival other market players especially those offering herbal tea. The café will specialise in preparing Apple-cofi premium in numerous quantities. They will be served in special designed cups that have descriptions of the benefits of drinking the organic coffee. Also, the in-door television will be available to show the process of designing the organic coffee and its special health features. Lastly, the location of the business makes it a central place where positioning strategy for the product has wide access to many people in the city (Hill & Jones, 2009). Distribution Apple-cofi premium is precisely produced and distributed within the café in Wollongong city. Raw materials are sourced from specific suppliers and brought to the premise (café). After the drink is prepared, the customers can buy it over the counter and drink it inside the cafe. Nevertheless, customers can still carry the drink, but still it has to be bought in the café. Promotion Coffy Taste Café adopts an integrated marketing and communication strategy to carry out advertisement and promotion of the new product. Both direct and indirect marketing and communication tools are adopted (Smith, Pulford, Berry & Smith, 1999). In this case, the café aims to communicate to customers both at the point of selling (café) and outside from the selling point. Therefore, personal selling, in door and out-door advertisement strategies are adopted. In door product promotion include using television in the café that details the features of the new product and how it is prepared. Out-door strategies incorporate billboards at strategic locations in the city, advertisement in the local entertainment and family magazines, and distribution of banners and leaflets to strategic points like university and colleges. Apart from these, word-of-mouth will also be incorporated as a method of promotion, point-of-sale promotion, and use of price-off coupons. The increasing level of social media gives the café opportunity to use these new technologies for marketing. As a result, Facebook will be adopted in promotion activities (Zarrella, 2009). Financial Forecasts Sales forecasts Sales 2012 2013 2014 M/Segments Professionals $ 7000 $ 15,000 $ 20,000 Students $ 3000 $ 8,000 $ 12,000 Tourists $ 10,000 $ 21,000 $ 35,000 Couple and families $ 8,000 $ 17,000 $ 23,000 TOTAL $ 28,000 $ 61,000 $ 90,000 Contingency Plan Possible difficulties to be experienced Few suppliers of organic coffee products. Few experienced coffee mixers for the quality blend of organic herbal drink. Marketing in the first few months may be challenging in terms of realising targets. Adaptation of workforce to environment in the initial stages. Few customers know about organic market. The plan The management to identify key suppliers who can be relied upon at all times. The café to seek and employ services of at least three qualified mixers, while continuously remaining ready to employ the best and skilful in the café. Training workforce before they embark on work, and also set in place a customer service unit. References Australian Bureau of Statistics. (2010). National Regional Profile: Wollongong. Retrieved September 19, 2012, from http://www.abs.gov.au/AUSSTATS/abs@.nsf/Previousproducts/11505Population/People12004-2008?opendocument&tabname=Summary&prodno=11505&issue=2004-2008 Australian News Online. (2006). The Australian Coffee War. 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Retrieved September 19, 2012, from AFN: http://www.ausfoodnews.com.au/2010/03/04/aussie-cafe-culture-accounts-for-biggest-growth-in-coffee.html Zarrella, D. (2009). The Social Media Marketing Book. Sebastopol: O'Reilly Media, Inc. Read More