Source: Authors' elaboration based on ICO statistics. b The Non-Fair-Trade Producer that bought non-organic coffee (NftpNocof) is the point of comparison of cross effects. The value added by the uniqueness of the product may allow the firm to charge a premium price for it. (Reference Donnet, Weatherspoon and Hoehn2008) estimated a hedonic pricing function using data from e-auctions in Central and South America and found that market clearing prices are influenced by sensory characteristics and reputation, including third-party quality rankings, country of origin, coffee variety, and quantity. US Dollar Cents per pound. Hence, the firm wishes to rebrand these self-service points as Costa Express. Costa Coffee Marketing Mix and Expansion - UKEssays.com Sick (Reference Sick2008) suggested that Costa Rican FT cooperatives or associations incur costs related to certification, processing, financing to buy coffee from its members, traceability, and export logistics. And when I say low-volume I mean low; the beans were grown by just 12 farmers, and there is no telling when the next harvest will be. This has made it a popular choice for budget-conscious consumers who are looking for a quick and tasty snack. d Rho is the fraction of total variance due to uit.. Lewin et al. Around 8 million tons of coffee were exported from producing countries in 2019 (International Coffee Organization, 2020), which makes coffee one of the most traded food commodities worldwide (Girotto et al., Reference Girotto, Pivato, Cossu, Nkeng and Lavagnolo2018). (Reference Naranjo, Pieters and Alpzar2019) point out insurance as a relevant channel to foster private investment, and also to reduce the vulnerability of coffee farmers to shocks. The drink will literally move from introduction into decline, with no scope for extension strategies. Your email address will not be published. We find that organic coffee berries received higher prices, but Fairtrade mills report lower average prices than other, non-certified, buyers. To prevent estimation biases, we also control for other elements that may have an influence on the coffee price, such as the international price and the power of multinationals. The names and other brand information used in the Marketing Strategy & Mix section are properties of their respective companies. On the other hand, Sick (Reference Sick2008) and Jena et al. Consistent with this insight, Haight (Reference Haight2007) and Sick (Reference Sick2008) claimed that most FT coffee mills in Costa Rica sell much of their coffee to roasters or brokers in conventional markets. May I ask what country you are referring to? The Wooldridge test and the Wald test reveal the presence of autocorrelation and heteroscedasticity in our data. In the United Kingdom, Costa Coffee owns about 1750 restaurants and approximately 3500 Costa Express. US Dollar Cents per pound. Although I am not a drinker of coffee myself, I thought that Starbucks and Costa are considered to be equally good in terms of quality. The The division of income and surplus along the coffee commodity chain, Studies in Comparative International Development, Tropical commodity chains, forward integration strategies and international inequality: coffee, cocoa and tea, Review of International Political Economy, Multinational enterprise, internal governance, and industrial organization, Sustainability and firms mission in a developing country: the case of voluntary certifications and programs in Costa Rica, Journal of Environmental Planning and Management, A critical analysis of the agronomic and economic sustainability of organic coffee production, Fair trade coffee enthusiasts should confront reality. Our study confirms that coffee prices, which are key for growers' profitability in developing regions, depend on the one hand, on a set of external variables that are beyond the control of farmers but, on the other hand, on their differentiation strategies. These features encourage customer loyalty and increase customer spend. Table 1 shows basic statistical information about the domestic price and the international price. The Costa Coffee website also allows its users to place orders online which can be delivered via a delivery partner in that region. Coca-Cola just purchased British coffee-shop chain Costa Coffee for $5.1 billion. It also means that the company has a wide variety of products that vary based on the cultures and the needs of the different countries in which it operates. Similarly, Dunning and Lundan (Reference Dunning and Lundan2008) consider that MCs can use their dominant position to gain competitive advantages in the form of cheaper inputs in different countries (see also Markusen, Reference Markusen1995). These new consumers may then try other drinks and products if the brand-swap encourages variety-seeking buying behaviour. This article has been researched & authored by the Content & Research Team. The use of a multi-brand strategy, moreover, emphasises this contrast. A complete analysis must also consider that OC production is more environmentally sustainable than conventional production. https://ivypanda.com/essays/costa-coffee-company-analysis/, IvyPanda. Nominal coffee prices. People, regardless of different ages, ethnicity and income, are welcomed to enjoy Krispy Kreme. This institution provides the average annual prices paid to growers as reported by the coffee mills to the Costa Rican regulatory agency. View all Google Scholar citations Regarding coffee growers' strategies, it is important that they become fully aware of the expected responses of prices with respect to different factors and which of those factors are under their control or not. This apparently surprising result merits further discussion. (Reference Varangis, Siegel, Giovannucci and Lewin2003), Pelupessy and Daz (Reference Pelupessy and Daz2008), and Samper (Reference Samper2010). Search this website. Wheelen, T. L., & Hunger, J. D. (2012). Mission- To save the world from mediocre coffee. Therefore, FT certification can be one additional channel of coffee sales in international markets, which may complete the cooperatives' portfolio of clients, mainly when the world production rises. Costa Coffee is a subsidiary of Coca Cola company, which purchased it from Whitbread company which owns multinational hotels and coffee shops. Marketing Strategy of Nescafe - Nescafe Marketing Strategy. Figure 1. (LogOut/ COSTA Coffee. Two alternative lineal models were considered. Costa coffee produces coffee based on the needs of its customers. For example, Ruben (Reference Ruben and Ruben2009) claimed that in the current dynamic framework of quality upgrading and higher coffee prices, FT comparative advantage can become eroded in the Costa Rican coffee market (see also Senz-Segura and Ziga-Arias, Reference Senz-Segura, Ziga-Arias and Ruben2009). Costa coffee cost leadership or differentiation Free Essays They presented three cases; two cooperatives sold only 40 per cent of their coffee at FT prices in Costa Rica, while another cooperative sold only 23 per cent of its coffee in the FT market in Guatemala. Specification and diagnosis tests. Published by Cambridge University Press. Your privacy is extremely important to us. Feature Flags: { It has been reviewed & published by the MBA Skool Team. The company also engages in product development, which is a very significant factor for the future performance of Costa. Costa's marketing strategy will focus on the product, price, place, and promotion. c Given that logIP does not vary between the groups of the panel, controlling for temporal effects was not carried out because the international price (logIPt) captures these effects. Also, using a good strategy of marketing mix and identify the goals, aim long-term interests and be able develop a great social media stand. Coffee in its product portfolio is what it is known for and thats why it is a star in the BCG matrix. You are free to use it for research and reference purposes in order to write your own paper; however, you Your email address will not be published. The high product quality and design make the coffeehouse receive a number of awards. Costa Coffee is the largest coffeehouse company in Britain and second largest coffee chain in the world. Costa coffee also sells its products to businesses and caterers for example the company sells its vending machines to corporate offices and colleges under the brand name of Costa express. To have them in the same unit as the international price, they were converted to US$ using the annual average exchange rate of the Costa Rican Central Bank (Banco Central de Costa Rica, 2019). (ii) implementing soil conservation practices such as planting shade trees, planting cover crops and mulching. On the other hand, the goals of the organization are an integral part of its strategic management. Costa Coffee Costa Coffee operates in over 31 countries with a total outlet count of more than 3300. In the sample period, 20 buyers were FT-certified at least in 2 years; nine of them belonged to the COCAFE consortium, while 11 were independent cooperatives or growers' associations. Costa Coffee Differentiation | Manifested Marketing document.getElementById( "ak_js_1" ).setAttribute( "value", ( new Date() ).getTime() ); Click to email a link to a friend (Opens in new window), Click to share on Twitter (Opens in new window), Click to share on Facebook (Opens in new window), Click to share on Reddit (Opens in new window), Click to share on LinkedIn (Opens in new window), Costa Coffee Differentiation Manifested Marketing, Starbucks Relationship & Services Marketing Manifested Marketing Marketing Blog, Starbucks Related Diversification | Manifested Marketing - Marketing Blog. Also Costa Coffee uses its logo on the cups that are served to the customers. The business world today is highly dynamic, and so should the organizations and employees be. Likewise, Wollni and Zeller (Reference Wollni and Zeller2007) found that farmers participating in the specialty coffee segment in three coffee regions of Costa Rica received higher prices than those participating in conventional channels. This being tied in with the firms 40th Birthday to align quality to its corporate image. Knowing your customers will help you to target customers who are willing to pay for your product or service. coffe shop EXPANSION France.docx - Course Hero The coffee berry prices are denoted as DP i (rc)t, where the unit of analysis is the buyer i who bought a type of coffee c in a production region r at time t (from 2008 to 2016). The price of this vending machine is competitive as compared to its other competitors like Starbucks, Cafe Coffee Day. The price of coffee also varies according to the supplement added to coffee like extra chocolate, cream etc. WebA differentiation strategy calls for the development of a product or service that offers unique attributes that are valued by customers and that customers perceive to be better than or different from the products of the competition. Most famous offering of Costa coffee are: Cappuccino, Latte, Flat white, Americano, Mocha, Expresso etc. https://core.ac.uk/download/pdf/58825562.pdf, How Is Costa Coffee Differentiation Strategy, https://www.gopromotional.co.uk/blog/how-to-identify-market-segments-and-select-target-markets/, https://core.ac.uk/download/pdf/58825562.pdf, What Are The Three Main Areas Of Hospitality Management, What Organization Gives The Most To Charity. In other words, the products are semi- standardized. Regarding the variables that refer to signaling and differentiation strategies, OC and FT, they result in very different outcomes. Price drops affect both short-term and long-term profitability for growers by discouraging investment in coffee plantations, making plots more vulnerable to pests and diseases (Avelino et al., Reference Avelino, Cristancho, Georgiou, Imbach, Aguilar, Bornemann, Lderach, Anzueto, Hruska and Morales2015). Costa Coffee ensures the best taste for its coffee. Do farmers benefit from participating in specialty markets and cooperatives? Product design is significant because it helps the organization in differentiating its products. Other products include tea, Costa ice, specialty drinks, and food. Varangis, et al. J.A. WebAll of the machines were turned into Costa Coffee machines and as a result, the change in brand immediately led to sales jumping up around 20% (Strategic Management, pg69). Making such information available to coffee producers would help them prepare for downward trends in prices. Thus, they hope the presence of self-service machines will not affect their cafes brand equity if they can convince their consumers to position the two services separately. As a part of its customer well-being process, it sources all its raw materials like coffee beans, tea leaves and many others from Rainforest Alliance Certified farms. To this aim, public authorities should carry out agroecological studies to determine the products that best suit the climatic and soil conditions of each region. (v) minimizing pollution during postharvest handling. Generally, Costa Coffee is a big company and has been highly successful in its operation, a feat that can be attributed to its excellent management and leadership (Costa, 2013). We use a panel data analysis, which has the advantage of allowing us to control for the effect of omitted variables and to test more complicated behavioral hypotheses than is possible using data from a single cross-section or time series (see Hsiao, Reference Hsiao2007). We took the information from these studies and double-checked it through the MCCs' webpages. For example, in a study of coffee production in the district of Agua Buena, Costa Rica; Babin (Reference Babin2015: 99) concluded that Fairtrade price premiums were inconsequential in providing support for smallholder resistance to land-use change out of coffee production. Coffee consumption in globally is growing at the rate of 2%. WebCosta Coffee has successfully implemented the differentiation strategy by offering a wide range of high-quality coffee blends, food items, and customer service experience. After starting as a distributor of roasted coffee, Costa Coffee started retailing coffee in the year 1978. Employee satisfaction is also important to Costas continued success. On the other hand, smaller local mills and cooperatives can typically pay higher prices but only after they have sold the coffee in the international market, when they are certain about their revenues. Based on these arguments, the following hypothesis is proposed: H2: Berry yield is positively related to coffee berry price. Costa coffee outlets are mainly targeted at upper middle class and rich people. George Mason University, European Union agri-food quality schemes for the protection and promotion of geographical indications and traditional specialities: an economic perspective, Econometric Methods with Applications in Business and Economics, Revitalizing rural communities in Costa Rica through sustainable tourism, Tourism, Health, Wellbeing and Protected Areas, Ecotourism and sustainable rural development in Prez Zeledn, Costa Rica, Journal of Rural and Community Development, Panel data analysis advantages and challenges, Market power in international commodity trade: the case of coffee, Inter-American Development Bank, USAID and The World Bank, The welfare implications of Brazil's coffee export price subsidies during the ICA. The same coffee mill could appear in several groups of the panel if it bought more than one type of coffee or from more than one region in the sample period. In the case of Costa Rican coffee plantations, Lyngbk et al. https://www.costacareers.co.uk/culture/ San Francisco, CA: Jossey-Bass. "Costa Coffee Company Analysis." Like other commodities in developing countries, it has been shown that domestic coffee berry prices are strongly influenced by international prices (Worako et al., Reference Worako, van Schalkwyk, Alemu and Ayele2008; Mofya-Mukuka and Abdulai, Reference Mofya-Mukuka and Abdulai2013). Quality control refers to measures that are taken to reduce or to eradicate errors in production completely. The major factor why the food industry is big in the United Kingdom is because it is easy to enter. It is highly innovative, thus it continues to position itself for future competition. The results are not quite as staggering, Caffe Nero is a close contender at 84MG. As in previous studies, we conclude that there is a strong direct relationship between international and domestic coffee prices, and multinationals tend to pay lower prices. Starbucks, on the other hand, are aiming to differentiate based on quality. This is IvyPanda's free database of academic paper samples. Hence, create long-term customer loyalty. Therefore, if FT mills operate inefficiently, these expenses can overcome the FT price premium before it reaches coffee growers. Since there is not a unified source of FT-certified firms by year, we built this indicator from several sources. The European Union aims to be climate-neutral, which involves zero net greenhouse gas emissions, by 2050 (European Commission, 2021). Marketing Strategy of Costa Coffee - Costa Coffee On the other hand, the international green coffee price variable, IP, only varies with time, but not across the groups of the panel (therefore, IPi (rc)t=IPt). Its brand of coffee has an Italian origin, which is a differentiation strategy. Figure 2. The largest coffeehouse chain being Starbucks and then followed by Costa Coffee. student. Weaknesses of Costa Coffee Costa Coffee is a premium brand. It has banked on innovation to help it develop its products accordingly. This helps it to maintain quality production. The differentiation strategy helps the company to design products that are suited for the various customers. a Breusch-Pagan Lagrange Multiplier Tests. In reference to Porters Matrix of Generic Competitive Strategies (See Fig, 2), Costas current target scope is broad and focus is on Product Uniqueness and volume, Hence Differentiation Strategy. Table 4. It has been noted that these phenomena are clearly present in the coffee sector, as well as in other strategic activities dependent on absolute advantages linked to natural resources, such as soil productivity or climate. Costa Coffee (2014). Following is the distribution strategy in the Costa Coffee marketing mix: Costa Coffee operates in nearly 3000 outlets spread over 30 countries. The authors would like to thank Elena Huergo, Tania Osejo and Guillermo Arenas, as well as the editors and two anonymous referees, for valuable feedback. Just shows how quickly things can change. Initially, Costa Coffee started as a wholesale supplier of roasted coffee. The operations that an organization engages in are all geared towards achieving its goals. Despite what one might expect, empirical results regarding the effect of FT on price are mixed. It should ensure that the organization has the capacity to hold the future growth. There are clearly benefits and drawbacks with both of their strategies. Were also exploring new ways to partner with farmers to tackle the effects of climate change and support their livelihoods. WebThe adoption of differentiation as a secondary generic strategy allows Costa Coffee A proposal to build the next generation self-serve Espresso Bar to expand the customer base by emphasizing over the unique product features. A five-year extension of the partnership was announced in August 2021. In the short-term, Starbucks is also able to generate hype around their exclusivity that can create a short influx of customers, at the expense of Costa Coffees sales. ensure the integrity of our platform while keeping your private information safe. This includes their presence and amount of activity on different platforms, such as Twitter and Facebook. Note the growth potential of your market as well as your competition and the potential risk they may represent to your company. Costa Coffee is a business that operates in a highly competitive environment. Despite this, the product will never be profitable there are not sufficient supplies of coffee beans to allow the drink to reach the maturity stage of the product life-cycle. Marketing mix Here is the Marketing mix of Costa Coffee.