These new consumers may then try other drinks and products if the brand-swap encourages variety-seeking buying behaviour. We take the logarithm of annual average prices paid by a mill according to coffee type and production region (logDPi (rc)t) as the dependent variable. The value added by the uniqueness of the product may allow the firm to charge a premium price for it. With the advancements in technology, the company also updates its equipment accordingly. These companies are often vertically integrated, in the sense that different stages in the production process take place in a single firm, and/or are horizontally integrated, insofar as they establish the same or similar production processes in different locations, mainly to gain market access or because of tariffs and transportation costs (Borga and Zeile, Reference Borga and Zeile2004). Following is the distribution strategy in the Costa Coffee marketing mix: Costa Coffee operates in nearly 3000 outlets spread over 30 countries. They are an example of a marketing mix, or the combined tools and methodologies used by marketers to achieve their marketing objectives. A sound prediction strategy would involve continuous monitoring of international coffee prices, by studying the main stock exchanges and the use of statistical forecasting models. These strategies are prone to put MCCs in an advantageous position when it comes to negotiating prices. The average revenue per customer of Costa Coffee is much less than its competitors. Contrary to our hypothesis H5, FT coffee millsFootnote 2 do not appear to have reported a higher annual average price for coffee berries than non-certified mills. Some part of the FT price premium is used to generate indirect benefits to producers and their relatives, such as technical assistance, credit facilities, or social projects in the communities, and these actions are not reflected in the final price of coffee berries; see, e.g., Sick (Reference Sick2008) and Dragusanu et al. The company has 1552 outlets compared to its competitors Starbucks Coffee Company that has 757 stores and caffe Nero that owns 530. The basis of forecasting is on time series. What Do You Look For In A Creative Agency? The promotional and advertising strategy in the Costa Coffee marketing strategy is as follows: Costa coffee is a premium brand which does not rely much on advertisement on TV, print media etc. IvyPanda. Also its employees all over the world wear same color uniform which is deep black in color. They need to keep expanding to broaden their consumer base and profitability. 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. The most important marketing strategy followed by the company is to get word of mouth publicity from its customers as the brand Costa coffee not just provides coffee but also the experience. Coefficient 4 refers to the Western Valley region, which is between 800 and 1,700 masl and yields Strictly Hard Bean, Good Hard Bean and Hard Bean coffees. This shows how its people strategy in its marketing mix has been important in its success. The companies are not associated with MBA Skool in any way. In addition, Snider et al. 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). We use cookies to distinguish you from other users and to provide you with a better experience on our websites. 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. Costa Coffee has been a leader in product development (Costa, 2013). Render date: 2023-05-01T08:41:28.579Z Therefore, the process designs help the company to produce products that are unique and specific to various customer needs. Confronting the coffee crisis: can fair trade, organic, and specialty coffees reduce small-scale farmer vulnerability in Northern Nicaragua? According to the Costa Rican Coffee Institute (ICAFE, 2017), 43,035 coffee growers, 246 coffee milling companies, 76 exporting firms and 65 roasting firms were operating in Costa Rica in 2017. 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. Marketing mix Here is the Marketing mix of Costa Coffee. Varangis et al. Costa Coffee has its long term projections and the goals that it needs to achieve in the long run. In the agricultural sector, some special focus has been given to coffee and livestock (ngel-Valds and Pintor-Pirzkall, Reference ngel-Valds and Pintor-Pirzkall2017; Birkenberg and Birner, Reference Birkenberg and Birner2018). A complete analysis must also consider that OC production is more environmentally sustainable than conventional production. Costa Coffee Costa Coffee was founded by Italian brother Bruno and Sergio Costa in Lambeth London in 1971. 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. (Reference Castro, Montes and Raine2004), in Central America coffee production supports 291,000 farmers and provides around 1 million seasonal jobs. Costa Coffee produces coffee based on the needs of its customers. 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). a Breusch-Pagan Lagrange Multiplier Tests. 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. The employees in the organization are trained well. Babin (Reference Babin2015: 99) concluded that when addressing agricultural development crises, the promotion of agroecological practices that cut costs may be as good a strategy or better than one that focuses on enhancing yields or establishing price supports. Costa Coffee marketing strategy helps the brand/company to position itself competitively in the market and achieve its business goals & objectives. Figure 1. Section 2 presents the conceptual framework and the hypotheses to be tested, and section 3 explains the methodological aspects, including the econometric approach, the variables considered, and the data sources used. Were also exploring new ways to partner with farmers to tackle the effects of climate change and support their livelihoods. Accordingly, we formulate the following hypothesis: H1: MCCs pay lower prices to coffee growers than other types of coffee mills. Each outlet of Costa Coffee has very nice sitting arrangement. We find that organic coffee berries received higher prices, but Fairtrade mills report lower average prices than other, non-certified, buyers. In addition, we conducted a bibliographic review on the participation of Costa Rican cooperatives in the FT market (see, e.g., Ronchi, Reference Ronchi2002; Luetchford, Reference Luetchford2008; Senz-Segura and Ziga-Arias, Reference Senz-Segura, Ziga-Arias and Ruben2009; Babin, Reference Babin2012, Reference Babin2015; Daz and Hartley, Reference Daz and Hartley2014; Snider et al., Reference Snider, Gutirrez, Sibelet and Faure2017b, among other studies). We do not reject our third hypothesis either, since we find that coffee growers located in the Tarraz region (coefficient 7), have received a higher average price for their berries than that paid in the rest of the regions, as stated in hypothesis H3. Is Costa owned by Coke. Quality control refers to measures that are taken to reduce or to eradicate errors in production completely. Therefore the price is relatively high in comparison to smaller coffee shops. Actually, the first company in the world to produce CN certified coffee is a cooperative in Costa Rica (Birkenberg and Birner, Reference Birkenberg and Birner2018; Birkenberg et al., Reference Birkenberg, Narjes, Weinmann and Birner2021). The high product quality and design make the coffeehouse receive a number of awards. This is important as it helps in creating a good image for the company, a move that gives it a competitive advantage. The domestic prices were originally in the domestic currency (colon). Lewin et al. The employee makes sure that each customer is treated politely and with a smile. Unbalanced Panel: years=9, n=2,415, groups=426. Table 3. WebThe four strategies are summarised in the figure below: The differentiation and cost leadership strategies seek competitive advantage in a broad range of market or industry Strategic management. Company Name. Ive been reading through some coffee blogs and it seems to me, all the pro Starbucks punters seem to prefer the banoffyknickerbockerglorymarshmallowcremedelightlattes, whilst Costa appears to be favoured by grown ups, who actually like the taste of the coffee and probably dont drink WKDs at the weekend. There are clearly benefits and drawbacks with both of their strategies. The resulting product is called green coffee or parchment coffee. Bamford, C. E., & West, G. P. (2010). For example, Mexican OC growers received, on average, 19 per cent more per kilogram than conventional growers in the period from 1995 to 2004 (Barham et al., Reference Barham, Callenes, Gitter, Lewis and Weber2011). Therefore, the company will need more human resource, more assets, and more equipment in the future. Coffee growers of higher altitude production regions, such as Tarraz, have a comparative national and international advantage that allows them to obtain a higher quality of coffee, which ensures higher prices. Annual average prices of coffee berries reported by mills in US$ per bushel from 20072008 to 20152016 coffee harvests. (Reference Jena, Stellmacher and Grote2015) show that FT certification does not necessarily imply better prices for coffee growers (see also Bacon, Reference Bacon2005; Haight, Reference Haight2007; Weber, Reference Weber2007; Omidvar and Giannakas, Reference Omidvar and Giannakas2015). Some MCCs are often able to go around distributors and reach final consumers directly. Since Tarraz is between 1,100 and 1,900masl, this variable can be interpreted, to some extent, as a proxy for altitude. In all cases, the results of Hausman Tests and Breusch-Pagan Lagrange Multiplier Tests confirm that a General Least Square Estimator with an RE regression is the most appropriate model for estimating these equations, as shown in table 3. View all Google Scholar citations Market analysis in the Marketing Strategy of Cafe Coffee Day . March 5, 2018 By Hitesh Bhasin Filed Under: Brand Strategies. More specifically, we consider two particularly relevant certifications, which are Fairtrade mills and organic coffee. Change). Coefficient 8 reveals that MCCs have paid, on average, 16.8 per cent less than other types of coffee mills. Your email address will not be published. However, previous analyses focus on the influence of individual variables such as quality, environmental certifications, or regional differences in coffee prices. In addition, Talbot (Reference Talbot2002), Faure and Le Coq (Reference Faure and Le Coq2009) and Garca and Valenciano-Salazar (Reference Garca and Valenciano-Salazar2016) identified MCCs operating in Costa Rica. Costa Coffee focuses on creating an inviting environment to entice customers to enter its stores and stay for longer periods of time. Valenciano-Salazar acknowledges support from the Scholarship Department of the National University of Costa Rica (grant JB-C-1106-2016). 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. It has positioned itself on the product basis, where it ensures that quality wise every cup of coffee leaves a lasting impression on the customer. WebMarketing Mix of Costa Coffee is the research topic for emphasizing on the marketing strategies developed by the firm. Among such forces, we identify three groups. In recent years, Dunkin Donuts has also been focusing on making its products more health-conscious. (2020, March 27). Specifically, the former has been sold for an average price 29 per cent higher than the latter. In terms of standard, Costa Coffee is highly flexible and able to adjust according to customer needs. This also happens to be the major factor why Costa Coffee has been able to thrive in Europe. Some variables, such as the coffee production region r, type of coffee c, and multinational coffee company mcc, are time invariant, although they vary across the groups of the panel. Secondly, Sick (Reference Sick2008: 201) argued that although FT guarantees a minimum price above average world market prices, this is not necessarily the best available price. They have decided to lengthen their product line by using an upward stretch, where high quality and more expensive items are introduced: the company is introducing coffee made using rare, luxurious coffee beans. 1 An additional reason to choose these certifications is based on data availability for the period under study. (2020, March 27). Stevenson, W. J. Two alternative lineal models were considered. First, the vertical integration strategy of MCCs allows them to merge the production, processing, and exporting links in the coffee value chain. The remainder of the paper has the following structure. Additional paths for future research include the consideration and comparison of a wider variety of differentiation strategies and checking to what extent the results obtained in Costa Rica can be extrapolated to other coffee producing countries. F.J. Andre acknowledges funding from the Spanish Ministry of Science and Innovation (project PID2019-105517RB-I00). where there is high footfall. Nominal coffee prices. Costa Coffee is a subsidiary of Coca Cola company, which purchased it from Whitbread company which owns multinational hotels and coffee shops. The price is also directly proportional to the quantity ordered. 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). Need a custom Research Paper sample written from scratch by 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. No. They are measures that ensure products are produced to the highest level of perfection to ensure high quality. Samper (Reference Samper2010) claims that while growers in highlands tend to produce higher-quality coffee and earn significant price premiums, those in lower areas offer lower quality and focus on output volume instead. Therefore, organizations need to keep up with the changes to remain in the competition. This coefficient is also positive, providing some additional evidence in favor of H3, although we consider this evidence weaker than the evidence about Tarraz, which has a higher proportion of SHB coffee region. In addition, it owns about 1100 outlets in the overseas countries (Costa, 2013). This article has been researched & authored by the Content & Research Team. Regarding the group of intrinsic quality variables, note first that yield (the amount of green coffee obtained from a bushel of coffee berries) is positively related to berry prices (coefficient 2), as suggested in hypothesis H2, which cannot be rejected either. 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. Unequally spaced panel data regressions with AR(1) disturbances, Fair trade/organic coffee, rural livelihoods, and the Agrarian Question: Southern Mexican coffee families in transition, Instrumental variables and GMM: estimation and testing, What to do (and not to do) with time-series cross-section data, The world's first carbon neutral coffee: lessons on certification and innovation from a pioneer case in Costa Rica, The potential of Carbon Neutral Labeling to engage coffee consumers in climate change mitigation, Does eco-certification have environmental benefits? The location of a business is very essential for its success. Costa introduced the first Costa Skip to document Ask an Expert Sign inRegister Sign inRegister Home Ask an ExpertNew My Library Discovery Institutions University of London King's College London University of Reading Costa Coffee has more than 3000 outlets and 4200 Costa Express outlets spread across 29 countries globally. Then in 1995 Costa was sold to Whitbread A five-year extension of the partnership was announced in August 2021. The names and other brand information used in the Marketing Strategy & Mix section are properties of their respective companies. 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. As the customer enters the outlet and make themselves comfortable, the menu card is presented to them by the employee working at Costa coffee outlet. 1. 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. Secondly, we cannot reject our first hypothesis (H1) regarding the coffee berry prices reported by multinationals. Each Costa coffee treats every customer with high regards and the overall experience of the cafe is majorly dependent on its employees. 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. People, regardless of different ages, ethnicity and income, are welcomed to enjoy Krispy Kreme. London, UK: Pearson Education. Starbucks aims to deliver the best possible coffee to customers, regardless of time. We structure our discussion according to external variables, intrinsic quality variables and differentiation strategies available for growers. Second, the horizontal integration strategy through the purchase and processing of coffee berries in several producing countries and in the specific case of Costa Rica, in most producing regions provide MCCs a stronger bargaining power. Tea and other Beverages of Costa Coffee are the question mark in the BCG matrix. It should embrace innovation and encourage the development of new products that meet the needs of the customers. Costa coffee uses a wide range of mechanism to process fee from customers like cash payment, online payment, credit/debit cards etc. Traditionally, most Costa Rican growers and coffee mills follow a low-cost production approach. The process design of Costa Coffee is designed based on its strategy, which is differentiation. March 27, 2020. https://ivypanda.com/essays/costa-coffee-company-analysis/. Since there is not a unified source of FT-certified firms by year, we built this indicator from several sources. It should have the equipment that is sufficient to sustain the future increase in productivity. In what follows, we detail each of the factors under consideration. The Costa Coffee is a UK based firm that has spread its wings worldwide. Some of the ice blended products offered by costa coffee are: coffee cream, Mocha cream Frostino, Lemonade etc. Has data issue: false 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. Check out these detailed articles on. According to ICAFE (2017), Costa Rica has eight coffee producing regions, which differ with respect to altitude, rainfall volume and soil characteristics. Coca-Cola just purchased British coffee-shop chain Costa Coffee for $5.1 billion. Marketing Strategy of Costa Coffee analyzes the brand with the marketing mix framework which covers the 4Ps (Product, Price, Place, Promotion). Our survey of cooperative managers reveals that the proportion of coffee sold in the FT market varies widely, ranging from cooperatives that were not able to sell anything in the FT market during the period covered in this study, to others that placed 67 per cent of their production in that market. In fact, the reverse was true: on average, they reported around 11 per cent less than non-certified mills, ceteris paribus (coefficient 9). COSTA COFFEE Coffee & Tea Palladium Alveri Merkezi No: 8 D: 115 K: 2, stanbul, Turkey Restaurant Reviews Phone Number Yelp. Also Costa Coffee uses its logo on the cups that are served to the customers. This result can be explained as the combined effect of different factors. We focus on two environmental certifications that we consider to be particularly relevant in the Costa Rican coffee sector: FT and OC. This study investigates the determinants of coffee prices received by growers in Costa Rica, paying attention to the impact of environmental, regional, quality, and international aspects in a panel data set for the period 20082016. Pelupessy and Daz (Reference Pelupessy and Daz2008) argued that the optimal growing altitude in Central America is between 1,200 and 2,100m above sea level (masl). Therefore, the OC certification is exclusively awarded at the farm level. High quality production is the main objective of Costa Coffee. In Costa Rica, coffee production is an important economic activity for many rural cantons (Pelupessy and Daz, Reference Pelupessy and Daz2008), where primary production is mostly carried out by small farms. The company leads the park in most of the countries in Europe where it operates. Why have a target market? Evidently, a premium price tag will be used to cover these large labour expenses. Setting up a small roastery in Fenchurch Street, they committed to crafting the finest quality coffee. Limited presence in the developed or developing nations is helping the company to remain focused on what they have and control its operational cost thereby increasing the profit. The channel value chain deals with the strategies used by the Costa Coffee to deal with the outlets to reach the customers.