Based on the assessment of the five forces, industry attractiveness and profitability will also be examined. A summary of the analysis will conclude this piece of the report.
POTENTIAL ENTRANTS (RW)
Potential entrants into the instant coffee market are faced with some barriers to entry which include industry incumbent’s defensive maneuvers, capital requirements, technology, consumer brand preference, and cost advantages for industry incumbents. High barriers of entry reduce the risk of new entrants into the market, and low barriers increase this risk.
COST ADVANTAGES FOR INDUSTRY INCUMBENTS – HIGH (RW)
Industry incumbents are able to enjoy better cost advantages in the instant coffee industry because they have already been in business for a while and have learned to reduce their costs in critical areas. Also, because companies have been in operation, they automatically have learned greater efficiency in operation than a new entrant into the market. Larger producers in the market also enjoy better economy of scale due to the sheer size of their operation. This means those companies can sell product at lower prices with equal or better profit margins per unit. A new entrant would be hard pressed to meet these economies of scale. New entrants into this market will face higher costs initially than industry incumbents which makes this barrier to entry high.
STRONG BRAND PREFERENCE – HIGH (RW)
There is a strong presence of brand preference when it comes to consumer taste in the coffee industry. Most consumers drink the same brand to which they were first introduced. This might be the brand of coffee their parents drank or even the brand that their work provides in the office. When brand switching does occur, it usually is to anoth...
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..., the price of the good fluctuates. To help with this, Kraft’s risk management team monitors the external factors to purchase this raw material when it is most favorable, (Kraft Foods Group, Inc.).
STRENGTHS
• Strategic partnership with farmers.
• Risk management team partnering up with procurement team.
WEAKNESSES
• Fluctuation in currency rates.
• Competition for coffee beans.
OPERATIONS (PRODUCTION)
Kraft has a total of 36 manufacturing facilities, 34 located in the United States and 2 in Canada. Eight of these facilities are specifically designated for beverages production; coffee is manufactured throughout North America. Although not all facilities are specifically designed for production of coffee, various facilities can be modified to produce multiple products. By having more than one production facility focused on producing coffee more of a demand can be
Kraft Foods was founded as a cheese manufacturer in 1903. They had evolved into North America’s largest food and beverage company and the number two player in the world. They grew to have operations in more than 155 countries by 2004. Kraft consisted of two operations, Kraft Foods North America and Kraft Foods International, and its business was divided into five product categories. These categories are beverages, convenience meals, cheese, grocery, and snacks. The Kraft brand portfolio was among the strongest of the global consumer packaged goods with 50 $100-million brands and 5 $1 billion dollar brands. Kraft also has a strong distribution network and well-earned reputation for developing innovative new products and food applications.
Ideally, you would like to be in a market where there are few substitutes for the product or service you offer. It is true that a potential customer can ultimately make their own sandwich or cup of coffee. Yet do these customers have the time and resources to do it? Most likely this will not be the case. The Café can reduce the threat of substitute products by lowering its switching costs. Customers may be more reluctant to switch to a different product if the competitors sandwiches are not as fresh or homemade. Customers place a higher value on fresh, homemade breads and ingredients.
The larger serving size of Great Cups of Coffee is perhaps the most apparent gage that will improve appeal for the company’s customers. Receiving extra of a proportionately quality product for a comparable price obviously works as an enticement for customers to prefer Great Cups more than the opposition. While customers identify with a better quality and superior taste with fresher coffee, Great Cups supports its effective model of serving coffee that has been roasted no more 72 hours ago and that is blended and ground right at the store. Great Cups also provides as an unintended marketing method community bulletin boards and assists with book club gatherings as well as
For recent years, Chipotle has already raised prices for several times to make up the expected costs. The competitors who use conventional raised meat can even achieve half price of the same products of Chipotle. Cheaper prices do provide a great incentive for customers to purchase, however, the overall quality and taste of Chipotle still has competitive advantages. The idea of food with integrity differentiated Chipotle from other competitors. In the meantime, Chipotle already got the brand identification building up high switching costs.
Coffee is a growing part of people’s daily lives. Just before the 9-5 weekdays, and even during the 9-5, it is common for the working class to drink a cup of coffee. To support this accustomed part of our culture, it involves a complex supply chain that allows those coffee beans to turn into a cup that can be consumed. This paper is structured on how Starbucks, the top coffee supplier in the world, can supply its stores, from raw materials to manufacturing, right to the start of someone’s day.
Coffee, one of the world’s most known beverages. Seen being drinking at work places, colleges, or in the convenience of your own home. There are a variety of companies that provide us the people with coffee. It can be your local market, bakeries, or even fast food places. 3 places that stand out and our known very well for supplying Americans with coffee is Starbucks, Dunkin Donuts, and McDonald’s. From their strategic advertising, deals, and even straight down to the design of their cups, they meet the definition of marketing. We will be examining these 3 companies using the marketing mix which consist of product, price, place, promotion and also cover value based marketing and see how these companies meet these definitions and how they satisfy their customers as well.
Green Mountain Coffee Roasters initially got started in 1981 as a small café in Waitsfield Vermont and united with Keurig later in 2006. The company produces specialty coffee as well as coffee makers with the help of Keurig whom produces single-cup coffee and tea makers; it is now among their product list. The company roasts 100% Arabica type of coffee transforming it into more than a hundred different coffee products available for selection. Green Mountain Coffee Roasters and Keurig coffee no longer retains ownership of the original café. However, the company still has its headquarters situated in Waitsfield Vermont on a vase land of about 90,000 square feet. (8,400 square meters). The company also prides on having other regional centers which are located in various cities including: Upstate New York, Washington, Maine, Massachusetts and Connecticut. According to the case study, “Exhibit 6 shows the net sales and growth in reference to the year 2008, 2009 and 2010” (C36 in the book, [Dess et al, 2012]). From that data, we can see how the company has developed. The rest of the 2010 annual report also helps in examining the performance of the company which can be seen in Exhibits 3, 4 and 5.
Advantages involved with pursuing this venture include a decrease in shipping costs since the retailer they distribute to will be in charge of delivering the product to the consumers, higher inventory turnover, and MMC will be a brand consumers associate with high quality and praise because of their location within respectable coffee shops. Since they are new within the coffee industry, the negotiations process may become a disadvantage for them as buyers may attempt to control the entire process, causing MMC to lose potential profits. The coffee shops have a high level of bargaining power, making it difficult to have all your needs met in the process. The costs associated with these negotiations can become significant and make possible deals not as profitable as simply keeping the business within their own location.
The company started its activity in 1971 as small coffee shop located in Seattle specialized in selling whole arabica coffee beans. After being taken over by Howard Schultz in 1982, following a rapid and impressive growth, by mid 2002 the company was the dominant specialty-coffee brand in North America, running about 4,500 stores, 400 international stores and 930 licenses.
This strategic capitalises on weaknesses since will decrease the cost of coffee beans/beverages but also Starbucks operating cost which they regularly ship across the world to various stores. Starbucks can capitalise on this weakness to improve their brand options. It adds value in the inbound logistics activities, operations and procurements. Starbucks should consider this option since it will decrease their operating cost and therefore will reduce the prices on their menu. The attractiveness is the exact same as mentioned in option 1.
The founders of Keurig Inc. created the company to develop an innovative technique which allows customers to brew one perfect cup of gourmet coffee at a time. In this case, the CEO Nick Lazaris along with the other leaders of Keurig Inc. must determine how to successfully enter the at-home-market for use at customers’ homes, while maintaining a healthy relationship with Green Mountain Coffee Roasters, Inc. (GMCR) and Van Houtte. GMCR and Van Houtte are two of the company’s main roaster partners that own a 70% stake in Keurig, so they want the business to succeed but are a little apprehensive about the company’s marketing and pricing strategies.
In the United States, coffee is the second largest import (Roosevelt, 2004). Furthermore, the United States, consumes one-fifth of all the worlds¡¦ coffee (Global Exchange, 2004). The present industry is expanding. It is estimated that North America¡¦s sector will reach saturation levels within 5 year (Datamonitor. n.d.). According to National Coffee Association (NCA), 8 out of 10 Americans consume coffee. In addition, it is estimated that half of the American population drinks coffee daily. The international market remains highly competitive. It is estimated that 3,300 cups of coffee are consumed every second of the day worldwide (Ecomall, n.d.). The latest trends included dual drinkers, an increase in senior citizens...
Coffee market in Taiwan is also important. Since 1998, Starbucks enter the Taiwan coffee market, more people have adapted the habit of drinking coffee (De Pelsmacker, Driessen and Rayp, 2005). Taiwanese consumers have more opportunities to face different types of coffee options. Consumers usually have positive attitudes for ethically made products. Most of consumer would be willing to pay a higher price for fair trade coffee, but they care more about the brand, label, and taste of the coffee
Starbucks is the world’s largest specialty coffee retailer, Starbucks has more than 16,000 retail outlets in more than 35 countries. Starbucks owns more than 8,500 of its outlets, while licensees and franchisees operate more than 6,500 units worldwide, primarily in shopping centers and airports. The outlets offer coffee drinks and food items such as pastries and confections, as well as roasted beans, coffee accessories, teas and a line of compact discs. The company also owns the Seattle's Best Coffee and Torrefazione Italia coffee brands. In addition, Starbucks markets its coffee through grocery stores and licenses its brand for other food and beverage products. Starbucks Corporation was founded in 1985 and is based in Seattle, Washington. (Bramhall)
accessories and equipment, a selection of quality teas and a line of compact discs. Starbucks has over 8,700 retail locations in North America, Latin America, Europe, the Middle East, the Pacific Rim and is continuing to grow. When coffee is considered Starbucks has developed a worldwide name for itself and has become a huge success.