Question:

Explain the report for Coffee Retailer Operations.

Answer:

Introduction

Second Cup Coffee is an established coffee retailer in Canada that operates in multiple places all over the country. It has its headquarters in Ontario, and the company sells both cold and hot beverages along with snack items, sandwiches, pastries, cakes and drinkware including tumblers and mugs. The major competitors of the coffee retailing company have been Starbucks, McDonald’s, Tim Hortons, etc. that sell espresso-based drinks to fulfill the needs and requirements of the customers. Due to existing store design, lack of availability of different coffee products and more benefits offered by the competitors, the company has faced a decline in growth and sales as well (Armstrong et al., 2015). To overcome this problem, Second Cup will introduce a new product line including the Caffetine, which is a flavored coffee item for managing the expansion of selections and choices made by customers and ensure that their needs and preferences are fulfilled. The company aims to renovate the brand name and image and furthermore increase brand awareness among the customers by delivering them high quality flavored coffee and gain better growth (Secondcup.com, 2017).

Problem Statement

From the case study, it can be seen that the Second Cup has faced huge competition in the market due to the presence of competitors like Starbucks and McDonalds. The competitors have launched other brands such as Seattle’s Best Coffee and have more than 1000 outlets all over the country whereas Second Cup has operated just 400 stores. The market share for Second Cup is also low, i.e., 19 %, which is quite less than the 60 percent market share of Starbucks (Baker, 2014). This happened because of losing focus on expansion, and this created more opportunities for the foreign coffee retailers to enter the market and gain a good amount of market share.

The competitors like Starbucks, Seattle’s best coffee, etc. have not only provided good ambience and proper environment where the customers can enjoy a relaxing time while sipping up a cup of hot flavored coffee, but also provided them with free Wi-Fi accessibility. This is an added advantage for them because they can share their photos, videos of the company products on social media and remain connected.  These coffee retailers have also provided premium coffee to Subway and Burger King because coffee serves as a good beverage item while having a burger, fried items, and other snacks (Berthon et al., 2012). Second Cup on the other hand, though provided good quality coffee products, still left out with the existing business operations and this resulted in the decline of sales, furthermore staying far behind the revenue level achieved by the competitors, which had sales around $600 million range with 60% market share. Therefore, the main problem is the decline in sales that has resulted due to failure in attracting customers, who have been fetched by the competitors. To overcome this problem, Second Cup needs to implement a proper marketing strategy and plan by introducing a new product named Caffetine, which is a flavored coffee with health related benefits and can enable the company to gain a competitive edge as well (Ferrell & Hartline, 2012).

Situation Analysis (SWOT)

From the case study, it could be understood that Second Cup had been facing a lot of issues, because of the immense competition in business. The major problem was the decrease in sales and failing to attract more customers because of huge competition in the market, poor organizational design and less diversification of products that had been offered. Thus, the company needs to develop a proper marketing strategy and plan for overcoming these problems and ensure that the newly launched product launched can bring the company a competitive edge over its competitors in business (Hollensen, 2015). To develop a proper marketing plan, it is important to use the SWOT analysis tool for determining the strengths, weaknesses, opportunities, and threats linked to the marketing strategy developed by the company. The internal components represent the strengths that include the resources, expertise, and commitment of workers whereas the opportunities and threats are external components such as economic and demographic trends, market features, competition level and technology used (Miles, 2013).

Strengths

Second Cup has introduced a new coffee item named Caffeine, which is a flavored beverage product that can meet the changing demands and preferences of the customers and create a positive mindset among them. The company’s new product is created by extracting the ingredients from the best quality coffee beans that can add some extra taste and value for keeping the customers satisfied (Secondcup.com, 2017). The company’s strengths lie in the fact that it has further plans of including some dessert items and fried items just like its competitors do because it goes well with coffee. Other strengths include improvement in the infrastructure and making Wi-Fi available for the customers to access (Morgan, Katsikeas & Vorhies, 2012). Thus, the addition of some product lines and setting up few more stores all around the world will be beneficial for enhancing brand awareness and spread a positive message to its customers. Reward coupons will be provided to customers while making any purchase, based on which, they can get discounts on their next purchase. The marketing strategy involving the launch of Caffetine is a major strength of the company to regain the sustainable position again because the beverage tastes awesome and can even create a positive impact on the health of people (Mullins, Walker & Boyd, 2012).

Weaknesses

Few weaknesses are lack of diversification of products and absence of a good ambience at Second Cup. The market share has gone down as well due to the emergence of competitors, which have offered a wider range of products along with other benefits (Secondcup.com, 2017).

Opportunities

According to various surveys, it is found that the people of Canada prefer coffee as a good beverage and thus the consumption of coffee has increased consistently every year. There has been growth of new market segments consisting of the young adults, who have also shown their interest in coffee. Thus, it is a good opportunity for Second Cup to introduce Caffetine, a flavored coffee item, which is something different from the regular beverages available at an affordable price. Caffetine has an astonishing taste due to the presence of various flavors, and it has some major health benefits too that can easily create a positive mindset among the customers (Sørensen, 2012).  This will not only influence the buying behaviors of consumers but will also make them purchase the beverage and other newly launched snacks of Second Cup consistently. With the use of new technological equipments, the best quality coffee can be extracted, and the addition of flavors will further add some premium value to the beverage. The social media inclusion could help in reaching more customers and enhance brand image and awareness among people too (Armstrong et al., 2015).

Threats

The major threats were the continuous change in consumer tastes and buying behaviors and immense competition in the market. The consumers nowadays prefer to sip a cup of home brewed coffee rather than wasting money by visiting a shop. The presence of Starbucks, Seattle’ Best coffee, which has good market share has been major threats of Second Cup in terms of attracting customers and sales revenue (Baker, 2014).

Alternatives

The various alternatives for resolving the problem are:

1. Introducing the new coffee product named Caffetine, which is a flavored beverage

Advantages: Attract both new and existing customers due to the extensive flavor added to the coffee.

Disadvantages: Many customers might not be familiar with the flavored coffee, and immense competition might not enable Second Cup to gain the sustainable position again like before (Miles, 2013).

2. Improving the organizational infrastructure and creating a good ambience

Advantages: This would make the customers enjoy and relax while enjoying the new flavored coffee and they would like to visit the shop more often

Disadvantages: Customers might think that with improvements in infrastructure and other facilities, the prices could get higher for the new products launched (Berthon et al., 2012).

3. Expanding the product line to attract the young adults of Canada and penetrate new markets with ease

Advantages: Coffee goes well with snacks and fried items, so Second Cup can include some new range of snacks along with the flavored coffee to attract more customers

Disadvantages: The costs can get higher with the introduction of new products in the market, and it may even go beyond the actual budget (Hollensen, 2015).

Recommendations

The closer attention to the proposed alternatives provided in this study indicate that the company can be benefitted by launching the new product line. The company aims to offer the best coffee experience to the consumers who would like to purchase such coffee products in future as well. As per the suggested alternatives, it is quite clear that if the company can acquire the strategic decision of launching a new product line in the market, it would be beneficial enough to attract new target market and earn profitability. In this case scenario, it can be suggested that launching the new product line called Caffetine, which is a flavored coffee product. The product can be launched for the people who prefer the light coffee with different flavours. The difference in the colour, taste, and quality would help in creating positive impact on consumers’ minds. This alternative is selected since the time is quite limited. Within a short span of time, the implementation of this new product would be much feasible for the company. Moreover, introducing a new product line would be much preferable to attract new target customers. In addition to this, the company cam increase the profit rate by introducing this new type of coffee products that may eventually secure the competitive edge of the company.

Caffetine is the special flavored coffee that consists of the different flavours, purified coffee grains, and light ingredients. People who mostly prefer the light energetic coffee, Caffetine is the best flavored coffee option. Along with offering this product, some of the snacks products are also needed to be offered to the potential customers. The extra products or services would create the positive word of mouth, which is much opportune for the business to maintain the long-term sustainability by attracting more customers. The effective product line and appropriate pricing strategy would be helpful for Second Cup to determine the strengthened customer base.

Summary Plan

Corporate Objectives

Second Cup has captured the largest position among the other coffee retailers in Canada. The major focus of the company is to provide the high quality and finest coffee to the potential customers every day. The company focuses on achieving the remarkable market share in the upcoming years. Therefore, the corporate focus of Second Cup is to increase the market share from 20% to 50% by the year of 2022 (Secondcup.com. 2017). It is thus necessary for the company to enhance the current sales revenues through developing effective customer relationships and innovations by improving the business functionalities.

Marketing Objectives

While formulating a structured market plan, it is necessary to align the business objectives with the marketing objectives. Second Cup requires focusing on developing 50% of the market share in the coffee retail market by following the mentioned activities.

• The establishment of the destination marketing for the coffee products would be beneficial in making the products available to the potential customers.
• The company has the opportunity to bring more innovations for acquiring new customer base and retain the existing consumers.
• Communicating with the customers to understand their basic needs and requirements is also the major function to be considered.

These activities would be much beneficial for the company to strengthen the market position in a competitive landscape. Following these functionalities would create the opportunity to develop the clear understanding of the business requirements. However, identification of the customers’ requirements and needs is the primary step that is needed to be undertaken by the company.

Target Market Profile

Caffetine is focusing on offering the new type of coffee experiences for the people around Canada who prefer the light energetic drink. The product includes the healthy ingredients and flavours with unique essence. However, in order to develop the structured marketing plan, it is essential to determine the target customer base (Boyle, 2015). Accordingly, the business would be able to understand the preferences of the target customers. In order to launch Caffetine flavored coffee, Second Cup needs to focus on young professionals, students, and young parents. It is notable that the young people usually prefer to consume the healthy ingredients since they are much concerned about their health. Therefore, selecting the young group of people would be preferable for selling the products at the initial stage.

The target customers are selected by concentrating on the current preferences of the customers (Gabrielsson, Gabrielsson & Seppälä, 2015). It is noticed that in current times, the consumers are much concerned about living a healthy life in which they are much inclined towards consuming the healthy energetic drinks and foods. On the other hand, it is also notable that the customers prefer the products, which are easily accessible to their geographical place. Hence, while fixing the target customers, the company requires paying attention to these factors. The detailed characteristics of the customers is structured below:

Table 1: Target Customer Characteristics

(Source: Created by the Author)

Focus on this customer base would be much preferable for the company to launch the new coffee products and the snacks or cookies.

Positioning Strategy Statement

The positioning of the new flavored coffee depends on the preferences for the quality and healthy coffee products by the young group of people. Caffetine, presented by Second Cup offers the coffee lovers a unique flavored and healthy coffee for strengthening the strategic position of the business. It is notable that the company is concentrating on maintaining the healthy ingredients and unique taste of the coffee that can be fruitful enough in attracting the customers’ responses (Secondcup.com. 2017). The unique and healthier coffee products would be offered to ensure you the better experience in the world of coffee.

Marketing Mix

While formulating the effective marketing plan, it is essential to gather the insightful ideas about the needs and preferences of the customers in the world of competition (Menguc & Dean, 2015). The development of the structured marketing mix is much preferable to identify the initiatives undertaken by the company in terms of fulfilling the expectations of the target customers. The detailed understanding of the marketing components would be beneficial to initiate the ideas about the business potentiality in the market. The marketing mix for launching the new coffee product Caffetine is explained further:

Product

            Second Cup is focusing on offering the unique experiences to the coffee lovers. Caffetine is the flavored coffee, which is prepared by healthy ingredients, flavored essence, and purified coffee beans. Caffetine is the best option for those who prefer the light essence of the energy drinks that can refresh their minds. It is notable that in current time, the young group of people is much inclined towards the refreshing drinks since they have been engaged in the daily busy schedule (Schmidt, Spann & Zeithammer, 2014). In fact, the young students, they prefer the flavored coffee that is quite refreshing for their minds and body. The company aims to offer the best coffee experience to the consumers who would like to purchase such coffee products in future as well. The unique style, product design, attracting packaging, and remarkable quality of the products are the major considerations that are needed to be taken into account.

Price

It is important for the company to determine that launching new product in the market should not affect the pricing structure (Huang & Sarigöllü, 2014). In usual scenario, it has been recognized that the high prices of the products create the negative impact on the consumers’ minds. It is thus essential for Second Cup to select the pricing structure wisely. It can be suggested that staying in the current pricing structure would be much preferable at the initial stage. Accordingly, it is even required to monitor the growing demands of the coffee. If the company can measure the success, there would the probability of increasing the price in future. However, it is essential for the company to strengthen the customer relationship in a commendable way. The current pricing position would be much preferable for introducing a new product in the market.

Place

The geographic location of the products is much important for the company. The availability of the products would be much preferable to the customers to purchase as per their convenience (Pavlou & Stewart, 2015). The main objective of the company is to offer the unique experience to the coffee lovers. Hence, it is quite necessary for the company to ensure that the customers are receiving the proper access to the coffee from their convenient place. Hence, the company is establishing the different outlets in different location for making the products available to the potential customers.

Promotions

Launching a new product to the customer require structuring the effective promotion strategy. It is notable that the effective promotional strategy is much favorable for the business to attract new customers and retain the existing ones. Hence, it is essential for Second Cup to establish the effective promotional strategy to develop two-way and transparent relationship with the customers (Mintz & Currim, 2013).). The customers would be much interested in purchasing such unique beverages from the company. In order to develop the most effective promotional strategy, Second Cup may focus on establishing the In-store promotions or use social media platforms. Extending the brand awareness would be much preferable for managing the entire customer base through well-developed promotional activity (Hanssens et al., 2014). In addition to this, it is even necessary for the company to concentrate on the structured budget planning and allocation.

Marketing Budget

The budget allocation is the integral part of the entire marketing plan. It is notable that the structured marketing plan depends on the proper allocation of the budget. In this case, almost $1M is estimated for launching new product. The budget expenses are structured below:

Table 2: Marketing Budget

(Source: Created by the Author)

The above table signifies the assumed expenses for preparing this marketing plan. The company requires investing more on the advertising process and the associated staffs. Managing this budget structure would be helpful for ensuring profit from this newly launched coffee product.

Time Schedule

Table 3: Time Schedule

(Source: Created by the Author)

Conclusion

The study provides the clear and structured marketing plan of launching new product Caffetine by Second Cup. The company focuses on achieving the remarkable market share in the upcoming years due to which the product launch strategy is much necessary. Due to existing store design, lack of availability of different coffee products and more benefits offered by the competitors, the company has faced a decline in growth and sales as well. The marketing strategy was developed by identifying the strengths, weaknesses, opportunities, and threats that could arise while launching the new product. Managing the systematic time schedule and structured budget would be much beneficial for developing this marketing plan.

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There was a time when Second Cup was the undisputed leader in the retail specialty coffee market. It was 1990 and Second Cup operated 160 stores coast to coast. At the time company chairman and CEO Michael Bregman boasted “the specialty coffee retailing business in Canada was much further developed than in the U.S.”

Over the past twenty years things have changed drastically. In Canada, Starbucks is the undisputed leader in the $1-billion a year premium café field. Starbucks now operates 1,070 outlets in Canada compared to only 340 for Second Cup. Second Cup has actually gotten smaller over the past decade. In 2000 Second Cup operated 400 outlets.

To put it bluntly, Second Cup has been languishing in a market that has virtually exploded over the past ten years. Now the stakes are even higher. Starbucks leads by a wide margin, largely based on its strong brand image and popularity across age groups. Starbucks offers the ambience and convenience that customers are looking for. As well, Starbuck’s is constantly bringing out new products and adding new services to keep the traffic flowing in stores—free Wi-Fi Internet access is just one example of how they keep customers content.

To compound Second Cup’s situation, a second brand owned by Starbucks has entered Canada. Seattle’s Best coffee has moved into western Canada and has aggressive plans for expansion. Utilizing a different strategy Seattle’s Best is offering their premium coffee to other chains like Subway and Burger King.

McDonald’s is aggressively pursuing coffee customers with its upgraded coffee offerings. McDonald’s has focused more on McDonald’s as its key competitor. Presently, McDonald’s now accounts for 10% of coffee sales in fast food restaurants. That figure is making all competitors squirm a bit! Week long free coffee promotions played a role in getting people to try the coffee. Apparently, many liked it and are now loyal customers.

Sales at Second Cup in 2009 were $190.4 million and accounts for approximately 19% market share in the premium segment of the market. In comparison Starbuck’s Canadian sales are in the $600 million range and hold a 60% market share.

The premium segment of the market is growing faster than the total coffee market. In the past two years the annual rate of growth has been in the 10% range. Retail sales are forecast to be $1.1 billion in the premium segment in 2010.

Former CEO, Bregman is very critical of his former company. “They just fell asleep…They’re just waking up now” he says. He says the Second Cup store design could be more alluring. “Now when I walk into Second Cup, I want to take a nap. I’m so bored.” In his day he tried to make his shops look quirky by customizing neighborhood locations, partly with an artist’s original creations. As corporations grow, local market strategies typically fall by the wayside. Corporations want consistency and uniformity—its easier to control.

Right now Second Cup offers 24 varieties of coffee every day. The coffee is good but there aren’t enough customers drinking it. Just recently, the company expanded its tea offerings as many consumers are moving in that direction. Second Cup serves English teas, a selection of flavored teas, Chai Tea, Green Teas and Green Tea lattes.  A light menu of food items (dessert-oriented) is also available. The company offers customers a Café Card (similar to a Tim’s card) which offers some convenience when paying. It is not a loyalty card but Second Cup will give a customer a free latte for every $30.00 load.

The current CEO, Stacey Mowbray, wants to return Second Cup to its former glory but is in somewhat of a quandary about how to do so.  She has many questions to answer. What product lines should Second Cup concentrate on? Should they add or delete products? Should Second Cup be looking at new types of locations? Tim’s is available in colleges and universities. Finally, does Second Cup need a new advertising campaign to differentiate itself from competitors?

Growth is the immediate expectation for Second Cup. New marketing strategies are urgently needed. For the purposes of developing a solution do not be concerned with the capital costs of any expansion activity. Assume that kind of money will come from a different budget. If marketing communications plays a role assume a budget of around $1,000,000.

Adapted from “Canadian Specialty Retailing: Coup for Second Cup,” Entrepreneur, August 1990, www.entrepreneur.com, Marina Strauss, “A second shot for Second Cup,” The Globe and Mail, December 27, 2010, p. B3, “Coffee: Good for Business and Good for You,” Canadian Grocer, special promotional supplement, date unavailable, “Canada pursues coffee marketing ideas,” Entrepreneur, September 1990, www.entrepreneur.com, “The Canadian Tea and Coffee Industry,” Agriculture and Agri-Food Canada,” www.agri.gc.ca.