Situational Analysis for a Chocolate Cafe in Canberra, Australia - Case Study Example

Situational Analysis for a Chocolate Café Student’s Name Institutional Affiliation Situational Analysis for a Chocolate Café Introduction The following report is a situation analysis for the chocolate café market in Canberra Australia. The analysis focuses on evaluating the important market environments aspects linked to launching a new chocolate café in Canberra. It will focus on analyzing the uncontrollable environment (PESTEL), competition and competitor analysis, consumer behavior in the café industry as well as the geo-demographic data in Canberra to find a suitable location for the business. Overall, the situational analysis is meant to offer a precise marketing strategy by analyzing the market environment in the chocolate café industry in Canberra. The chocolate café industry has illustrated slowed growth in the past year in Australia. Despite the increased health awareness among Australians, chocolate consumption has still risen considerably in Australia. Chocolate lovers are now moving to premium chocolate products and a new taste for hand-crafted chocolate flavors (DONNELLY, et al., 2016). Many chocolate shops and manufactures are extending their innovations and enhancing customer experience by opening up chocolate cafes. These cafes offer different types of chocolate delicacies, beverages, specialties, and pastries among other chocolate assorted products. The chocolate café industry is still competitive with most brands in Australia having established numerous outlets around the country. In Canberra, the chocolate café industry is not new and is competitive with numerous standalone chocolate cafes as well as popular chocolate café chains having presence in the city. The new chocolate café aims at understanding the market environment surrounding Canberra to establish a successful and differentiated business. Industry Analysis The chocolate industry is the biggest segment in Australia accounting for over 60% in the confectionary industry. The chocolate industry in Australia is divided in numerous categories including retail, wholesale, and in the form of cafés or chocolate shops. The retail segment is the largest means that chocolate products are consumed. Nonetheless, in recent years, numerous specialty and gourmet chocolate cafés have been opened up in major cities around Australia. The chocolate café industry has grown due to the increased consumer demand for health conscious chocolate products (KPMG, 2014). Chocolate cafes around Australia and Canberra offer different specialty chocolate products that include chocolate beverages, pastries, flavors, cocktails, and even snacks among others. The whole idea of chocolate cafes is offering chocolate with an added experience far from that of purchasing ready-made or manufactured chocolate from a retail store or supermarket. For instance, Guylian a chocolate manufacturer and retail café indicated that the products available in its cafés were not available in the supermarket (Evans, 2015). Again, the chocolate café industry has seen increased growth over the past few years based on the rising consumer concern on health by consuming manufactured chocolate from retail stores. According to Franchise business (2013), over half of the chocolate industry’s revenues are generated by artisan chocolates or chocolatiers that has seen franchise chains such as Chocolateria San Churro and Ma Brenner expand into the chocolate café industry with a focus of retailing specialty and premium chocolate products. In the industry overall, chocolate retail industry in Australia is valued at around $800 million while the café industry is expected to grow by 2.7% in the next five years reaching an estimated $400 million in revenues (M2 Presswire, 2015). Factors of uncontrollable Environment (PESTEL) Political The major political aspect of the chocolate café business is supply. West Africa supplies about 70% of cocoa beans needed for making chocolate (Australian Food News, 2016). This means that political instabilities in the region could trigger supply risks. According to Australian Food News (2016), the price of cocoa beans has gone up due to the political instability and lack of skilled labor in the West African region. This is likely to drive up supply prices, thus affecting the chocolate café business. Moreover, Australia recently began planting a new variety of cocoa beans, but on a small scale that is expected to rise (Queensland Government, 2016). Australia has already stepped up its political policies by signing the fair trade agreements that ensure that businesses do not exploit producers. The issue on terrorism is also a major political factor in the chocolate café business since terrorist siege inside the Lindt Chocolate café in Martin Place occurred (Evans, 2015). Cafés have now been identified as possible target areas for terrorist and the governments or political assurance to fight such terrorism can increasingly affect the business. Economic In 2011, the world economic outlook started changing upwards where developed economies such as Australia continue to grow. Australia’s GDP has seen significant growth over the past few years indicating a strong economic outlook. Moreover, according to the Reserve Bank of Australia, income per capita has reduced in recent years but has been balanced by increased productivity in terms of price and wage development (Reserve Bank of Australia, 2015). The population growth has also decelerated, which has led to minimal rise in household consumption. The RBA also expects that household consumption will grow slowly due to increasing wealth and reduced interest rates. Unemployment has relative reduced and is expected to reduce slowly in the coming years. Consumer confidence in the economy has also risen based on the optimal performance of the economy in recent years. According to Euromonitor, (2015) the current economic environment in Australia has resulted in the consumption confectionary and chocolate products as most Australians choose to treat themselves as a way of escapism. Consumer spending in chocolate cafés is expected to rise given that about 7 million Australians aged 14 and above consumed at least one chocolate bar in a month in 2013 (Langley, 2013). Sociocultural Australians are growing more health conscious with the increased cases of obesity and other related disorders (Miletic, 2011). There is an increase in low-fat diets in the food and beverage market that has influenced confectionary and chocolate sales. According to the Confectionery Industry Profile: Australia (2014), the rising popularity of low-fat diets is causing reduced chocolate sales because the average chocolate bar holds high fat content. Nonetheless, the chocolate industry has responded through different means including the focus on dark chocolate as well as health-conscious chocolate that comes with additional healthy offerings such as fruit, nuts, and cereals (Miletic, 2011). The healthy awareness among Australians is a perfect opportunity for the chocolate café industry since it allows chocolate artisans to offer healthier chocolate combination rather than manufactured products KPMG, (2014). There is also a new outlook for chocolate lovers to indulge in new experiences that include hand-made or artisan chocolates and other products such as waffles, drinks, snacks, and pastries. Technological The chocolate café industry does not have significant technological factors. The main technological factor is that of new technologies for chocolate artisans on how to make chocolate. The other technological aspect involves marketing that has advanced significantly. Chocolate cafés will require adopting latest digital marketing strategies including integrated marketing technologies such as social media and smartphone technologies. Environmental The environmental factors likely to affect the chocolate café industry include the carbon emission of cafes due to their daily operations. Nonetheless, the café business is less of an environmental polluter. Chocolate production and consumption especially for cafes is also low in terms of environmental impact. Nonetheless, offering greener solutions such as energy saving lighting and natural air conditioning could enhance the image and costs of the chocolate café business. Legal The main legal forces in the chocolate café industry revolve around use of fair-trade chocolate or cocoa beans. The Australian government has a strict policy and compliance policy for ensuring that all supplied chocolate products or raw materials are from fair trade countries or suppliers. Moreover, the Australian government also expects chocolate cafes to comply with health and safety regulations. All these compliances are necessary to growing a successful business. Competition Analysis The chocolate café industry is fairly new to the Australian market. Nonetheless, it is still competitive with a monopolistic type of competition (Elliot, et al., (2014). This is where different competitors offer similar products and they compete by differentiating themselves from others. Most of the competitors in this industry are premium and specialty chocolate cafes. Additionally, the top competitors are leading chocolate café chains or manufacturers. The top chocolate café competitors in the chocolate café industry in Canberra are listed in the table below. Brand Comments Max Brenner A well-established chocolate café chain with about 31 stores in Australia and 3 in Canberra located in New Acton, Kingston Foreshore, and Belconnen (Rudra, 2016). Its menu includes chocolates, waffles, hot chocolate, milkshakes, and ice cream. The company also owns a chocolate brand in its original country, Israel (Franchise business, 2013). This is the biggest brand in terms of market share in the Canberra market. It offers specialty and premium products as its competitive advantage (Franchise business, 2013). CHOCOLATERIA SAN CHURRO It is a Spanish inspired café with about 30 chocolate café’s in Australia and one in Canberra. The company offers churros, desserts, and artisan chocolates among others. It is located at the corner of Westfield Wooden shopping plaza and offers an amazing ambience for chocolate lovers (Rudra, 2016). Moreover, it also serves premium and specialty chocolate products (Franchise business, 2013). Oliver Brown Oliver Brown is a Belgian brown chocolate café that has three cafes in Canberra located at Dickson, Civic, and Manuka (Rudra, 2016). It offers chocolate fondue, waffles, and crepes among others. The café is popular among locals for its numerous types of differentiated and low-priced products. Customer Analysis The chocolate café is specialty product that does not appeal to the mass market. This means that it is only for the chocolate lovers or people who like to indulge in chocolate products with a different experience. It is estimated that about 49% of Australians aged 14 years and above ate at least one chocolate bar within an estimated period of one month in 2013 (Roy Morgan, 2016). Chocolate consumption demographic statistics show that the number of chocolate consumers aged 25 years and below has reduced (Langley, 2013). The same case is for those aged between 35 and 49 years. Roy Morgan research, (2016) suggests that the most likely age group to indulge in chocolate is those aged between 25 and 34 years of age. Therefore, the chocolate café in Canberra should target consumers aged between 25 and 34 years. The target market is composed of working individuals, young couples, and even students (Australian Bureau of Statistics, 2015). Therefore, the main location of this target market is in the urban areas or the business district where the population is well educated and earn higher incomes especially in Canberra (World Population Review, 2016). Moreover, there is also increase appeal for women in terms of chocolate consumption. Women or females tend to consume chocolate more often than males. This means that the business should also be appealing to women to enable success. Chocolate lovers in Australia are focused on premium and specialty products. This means providing new and innovative chocolate flavors or tastes that cannot be found anywhere else. Therefore, there is increased need for product and service innovation to ensure customer needs and wants are met. SWOT analysis Strengths Fairly new industry with reduced competition and potential for growth. Increased demand for specialty and artisan developed chocolate products and experiences. Low investments costs for starting up chocolate café. Competitive advantage over mainstream chocolate distribution channels such as supermarket or retail stores. Weaknesses Gaining customer loyalty and meeting their demand is based on the skills and innovativeness of the chocolatier. The ability to keep the business running is also based on sales. Choosing a bad location may be bad for the business. Opportunities Offering healthier, fresh, and appealing chocolate products. Branding and new experiences of enjoying chocolate. New café concept that is different from that of competitors. Increased demand for artisan chocolate experiences. Developing and patenting new chocolate recipes that can be sold to competitors. Threats Already well-established chocolate cafes in Canberra. The presence of similar, but smaller café’s in Canberra may also be challenging based on customer loyalty and differentiation of products. Fast food or other major café chains and restaurants may start offering chocolate products saturating the market. Conclusion In conclusion, the chocolate café industry in Canberra is fairly new as it is in Australia. Nonetheless, it is expected to grow as the demand for conventional chocolate bars shifts to premium and specialty/unique chocolate products. For the chocolate café to be successful in Canberra, it requires to offer differentiated and unique products. Moreover, the business should also target people aged between 25 and 34 years. Overall, there is a great opportunity in setting up a chocolate café in Canberra. References ABS, (2012). Consumer Spending. 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