Expresso Espresso Essay

The specialty coffee industry had seen steady growth for years and the trend was expected to continue until at least 2015. Of the various segments within the specialty coffee industry, most of the growth was attributable to beverage retailers â€Å"Coffee and kiosks†. In 1979 there were approximately 250 specialty coffee retailers. The number quadrupled by 1989 to approx 1000 outlets, and it exploded to roughly 15000 by 2002. Nationally, specialty coffee sales totaled over $ 10 billion in 2005. For specialty coffee beverage services, including coffee, espresso, tea, chai and granite the leading drinks in 2004 were espresso-based beverages with average with an average of $50395/store. The second best selling drinks were drip-brewed coffee beverages at $ 333336 / Store, and the third were cold and iced coffee beverages with an average of $22061 / Store. b- The Industry According to the national coffee association, 54 % of adults in America consumed coffee daily, with over 18 % buying specialty coffee beverages. Specialty coffee buyers were generally more affluent, well educated, and worked in urban areas. Research indicates that individuals with college degrees purchased almost 50 % more specialty coffee more than those without college degrees. The link to education was even greater for people with some postgraduate education. In addition to education, households with two working parents and kids were more likely to purchase specialty coffee. Accordingly the market was an educated urban resident with disposable income to spend on fine coffee. 1- Rival of competitors Starbucks cooperation was the premier coffee retailer in the USA. Industry analysis generally credited it for popularizing specialty coffee and legitimizing higher drink prices. Starbucks expect revenues to grow 20 % / year and to increase its dominating 40 % market share. Starbucks has strong profits and cash flow that it planned to use to open company owned and licensed stores domestically and abroad. Diedrich coffee roasted and sold various brands of coffee through company retail stores and through  distributors, restaurants, mail order, and specialty stores. It is a company with revenue of 52.5 M in 2005 with growth 3 % more than 2004. Caribou coffee went public in 2005 reporting sales of $ 191 M in 2005. The firm expects to add 40 new outlets in 2005 and another 130 in 2006. Coffee Beanery was a franchise; with over 200 branches in 2005 expect 40 new stores in 2006. Peet coffee & Tea was another competitor with 111 retail stores. Also there were large restaurants trying to fin d ways to capitalize on the specialty coffee industry i.e.: Macdonalds, Krisspy, Dunkin, Donuts †¦.. 2- Threat of substitute product As mentioned above, the specialty coffee industry had seen steady growth for years and the trend was expected to continue. 3- Bargaining power of Suppliers There is no mention of suppliers in the case 4- Threat of new entrants Entering the market requires heavy investment in establishing a name and make lots of outlets. It is a growing market with lots of pioneers that can make branches anywhere and threat the other chain in there selling areas. 5- Bargaining power of buyers There is a threat of bargaining power of buyers as there is a lot of competitors, which give the choice to convert from one chain to another. Moreover, chains are working strongly in the promotion, price, opening branches everywhere, developing the product, and cares regarding quality. It is a hard competition. c- The Organization The specialty coffee industry had seen steady growth for years and the trend was expected to continue until at least 2015. Of the various segments within the specialty coffee industry, most of the growth was attributable to beverage retailers â€Å"Coffee and kiosks†. In 1979 there were approximately 250 specialty coffee retailers. The number quadrupled by 1989 to approx 1000 outlets, and it exploded to roughly 15000 by 2002. Nationally, specialty coffee sales totaled over $ 10 billion in 2005. For specialty coffee beverage services, including coffee, espresso, tea, chai and granite the leading drinks in 2004 were espresso-based beverages with average with an  average of $50395/store. The second best selling drinks were drip-brewed coffee beverages at $ 333336 / Store, and the third were cold and iced coffee beverages with an average of $22061 / Store. d- The marketing strategy 1- Product Todd tried to remain the purist in developing his product. He preferred to make fresh drinks from Espresso instead of drip-brewed coffee although it is less cost. Expresso menu offered traditional European style which is half caramel and half chocolate. Todd was following starbucks new product developments since people use to come and ask him for the same. i.e.; green tea cappuccino, iced tea, spiced cappuccino, pumpkin cappuccino and eggnog cappuccino. In addition to traditional coffee drinks, the shop also sold teas, smoothies and muffins, lemon bars, cookies and brownies. Todd did not present sandwiches or soups. Also he presented retail items such as T-shirts and coffee mugs with humorous coffee related sayings on them. 2- Prices Todd went looking at everyone else’s prices. He made sure that his prices were 10 % lower than any competitor. He believed that having a low price was important in attracting new customers. 3- Promotion Todd offered product with prices 10 % less than competitors as he thinks it is more direct than using a â€Å"buyer cards† used by competitors. He says to customers â€Å"Our prices are already 10 % lower than everybody so I am giving you a discount now† Other promotion, Expresso Espresso advertised on the local radio station that Todd believed it had a strong student’s audience. In addition the company placed ads in the campus. Flyers typically showed the menu and contained a 10 % off coupons. Another promotion idea , Todd was having live music. Band play was on Fridays and Saturdays nights during summer. 4- Publicity Todd created a policy whereby he would give away all tips. A huge coffee cup sat on the front counter with a sign indicating the charity of the week. Todd would collect whatever people chose to give and pass it on to good cause. The local paper considered this approach so novel that it ran an article on the practice. Customers had the opportunity to help others as they treated themselves. This had a considerable Feel good value for those participating. e- Primary Problem The specialty coffee industry had seen steady growth for years and the trend was expected to continue until at least 2015. Of the various segments within the specialty coffee industry, most of the growth was attributable to beverage retailers â€Å"Coffee and kiosks†. f- Secondary Problem There is a huge competition, and competitors such as Starbucks and other big companies are getting outlets everywhere expanding to get a higher market share. Expresso Espresso got another competitor â€Å"Satori Coffee House† half a mile away, also Carpe Diem is another competitor near to it, third one is Daily Gring which is very near to the University of South Alabama, Beaners is a franchise operation competing with Expresso Espresso. Perhaps the competitor that worried Todd the most was Starbucks. It is located in the busiest road in Mobil, which announced plans to build a drive through store on old shell road about 400 feet east of Expresso Espresso. Todd was concerned that Starbucks would take customers from Expresso’s drive through window. g- Alternative Solutions The importance of complete the order within 45 sec. for the drive through. The consistent of serving high quality drinks, although the expensive ingredients they put but better taste. The kitchen should support making items like breakfast foods and sandwiches; expected spending on kitchen development can increase by 30% of fixed asset. The expected increase in sales would be from 15 to 20% as of the increase in the current market. Todd must start work in financials to understand what sales he need to reach profitability. Keep invest in advertising and PR.