Feasibility-Study PDF

Preview

Summary

Feasibility Studyof Cozy CaféByWendy Caryl CanonoArnel BatomalaqueJea Jeniffer AyopJessamie LoyolaRachel VillotesI. Summary of ProjectA. Name of Firm Cozy Café: Not Your Ordinary Café B. Location: Head office/factory Roxas Extension, Digos City (Near UMDC) C. Brief description of the project History...

Description

Feasibility Study of Cozy Café

By Wendy Caryl Canono Arnel Batomalaque Jea Jeniffer Ayop Jessamie Loyola Rachel Villotes

I.

Summary of Project A. Name of Firm Cozy Café: Not Your Ordinary Café B. Location: Head office/factory Roxas Extension, Digos City (Near UMDC) C. Brief description of the project

1. History of business Established in 2010 by Arnel Batomalaque. Cozy Café is probably one of the newest coffee shops in Digos City at that time. The name Cozy was derived from their idea of establishing a warm and comfortable atmosphere for everybody. The shop originally sells milk tea (one of the most popular drinking tea for Filipinos). Realizing that the business was seasonal, they opted to focus on coffee which was their passion in the first place. Throughout the years, they have decided to improve their business by adding more delicious and affordable specialties likebrewed coffees, locally grown coffee beans, special coffee preparation, pastries, desserts and light snacks. The industry had a decade of growth consistent. 2. Nature or kind of industry The coffee shop is a service industry. It buys coffee in bulk from its supplier the Balutakay Coffee Farmers Association (BACOFA) that delivers highest quality single-origin Arabica coffee. It makes special type of coffee out from raw ingredients and serves it to customers. 3. Type of organization The coffee shop will be a sole proprietorship. This type of organization is faster and has easier creation of the business, the legal restrictions are minimal and the owner will be having a free hand in the decision making. Also, he will not be sharing the income with anybody and enjoy its tax advantages. 4. Officers of the business and their qualifications Jobs in Production •

Production Assistant

•

Production Manager

•

Coffee Roaster

•

Coffee Taster / Cupper

•

Mechanical & Roaster Technician

Jobs in Sales & Marketing •

Green – Coffee Buyer

•

Sales Representative

•

Marketing

Jobs in Hospitality •

Barista

•

Coffee Store Manager

•

Assistant Store Manager

Jobs in General Administration To become a café officers, the qualifications are;       II.

a welcoming, friendly and polite manner good customer service skills the ability to work as part of a team flexibility to cover for sickness and holidays high standards of personal hygiene the ability to work under pressure.

Economic Aspects A. General Market Description 1. Market description a. Areas of dispersion Cozy Cafe will be located in the newly opened New Building constructed near University of Mindanao Digos College. The business will offer and serve a wider selection of coffee products, offering a relatively lower price, and location to lure its target market near the location. The target market audience is a mix of students, teachers, intown residents, and workers.

b. Methods of transportation and existing rate of transportation The primary line of business of Cozy Cafe is to serve customers variety of coffee. Cozy Cafe will also operate with a delivery van to distribute coffee products to retailers. For delivery services which only takes place on weekdays, Cozy Cafe still uses delivery van to maintain maximum efficiency. On average, Cozy Cafe will service 10-20 accounts per day, with deliveries to each customer twice a month. As the number of customers increase, the need for additional delivery van will continue to be appraise. c. Channels of distribution and general trade practices The Cozy Café channels of distribution is through direct channels. We are directly selling the goods to the customers without involving any middlemen, and it is known as direct channel or zero level channel. It is the simplest and the shortest mode of distribution. Methods of Direct Channel are; Internet selling and mail order selling. Our daily business practices include integrity, courteous, and helpful towards customers. It means that we always work to the highest professional and ethical standards and establish trust by being open, honest and responsible. It is a fulfilment of our high standards of responsibility to the customers in which we operate. 2. Demand a . Consumption for the past ten years The demand for coffee is mainly driven by a number of factors which include income, per capita coffee consumption, attitudes towards customers, and pricing of coffee. One of the crucial factors for analyzing the demand in the industry is the per capita coffee consumption where the increase in coffee consumption increases the revenue of the café. For the past ten years, approximately 55% of our major customers consume our product every day, mainly for its delicious and affordable price, which makes it salable and attracting to them. Over those years, customer’s consumption of our product increased. Our best selling hot drinks are very prevalent and accounts for most of the daily profit of our café. Considering these data, because of high consumption of hot drinks, it is considered as the major contributor or the most selling product of our café over the past ten years. It is accounted for as the main source of the increase of our sales and hot drinks were the predominant source of income on those years. To compute for the total consumption for the past ten years, we have the following computation; {[weekly demand (availed) x operating weeks]} + {weekly demand (willing) x operating weeks} multiplied by ten.

b. Major consumers of the product

The Cozy Café is targeting three primary groups residing in their direct marketing area, which are the students, teachers, in town residents, and working people. These individuals prefer unique near venues. They prefer their local neighborhood and will be a loyal customer if the business will provide a unique experience for coffee aficionado by offering a quiet and cozy yet sophisticated café and offer a sense of refinement and peace in an otherwise hectic and fast paced world. c. Projected consumptions for the next five years For the next five years, coffee consumption is projected to increase, which will likely translate into higher profitability. There is an expected shift towards the booming of going in a café, and this could be a potential opportunity to the industry as they become more known than other business. This growth would be mainly driven by an improving economy, increase in consumer consumption and expanding menu offerings within the industry. The industry is now forecasted to grow at an annualized rate of 3.9% over the next five years. To determine the projected consumption of our product for the next five years, we’ve asked a follow up question to those people who admit buying our product if how many times they will buy a product like ours. 55% of them said, they are willing to buy our product every day, 30% said every other day, and 15% stated that they would be trying to buy once a week. For the computation, we get the average weekly buyer multiplied to the percentage of the people who admits they buy our products. 3. Supply a. Supply for past ten years The supplier of Cozy Café is the Balutakay Coffee Farmers Association (BACOFA) which is a group of smallholder coffee farmers in Sitio Pluto, Balutakay, Bansalan, Davao del Sur, Philippines. Planting up to a height of 1,700 meters above sea level, we deliver only the highest quality single-origin Arabica coffee for our customers. Bacofa has hundred coffee farmers with 500 hectares of production area and it has seven graded coffee beans at present. The market share of BACOFA ranges from 20% to 32%. b. Factors affecting trends and future supply 

Environmental Impacts There are a lot of environmental issues that can relate with the

consumption of coffee, however, coffee naturally grows, but deforestation is taking places, as the trees are affected, water pollution is also there, there are serious environmental threats taking place. .



Vulnerability to the Economic Factors Coffee production is related to the climate variables so, economic factors

include the ecological damages, which can relate to the coffee industry, according to the farmer’s survey, the climatic events may result in the vulnerability of the economic factors, example, droughts, heat waves, forest, strong wind, worrisome climatic events etc. 

Risks Analysis There can be many risks associated with the coffee industry, the business,

in this case, need to identify the priorities. There is the need to identify the resources and retailers form that the company can buy the coffee at the good cost, however, if the coffee shop does not understand the proactive risk related to the consumer choices, taste, and preferences, then there could be long-term issues and financial losses. 

Seasonal Factors There is a need to consider the coffee as a seasonal produce, as in

summers very few people drink coffee. Coffee beans should be roasted otherwise should be used with 4-6 months.



Barriers to Entry For the coffee shop, there are the barriers to entry in the market, however,

there are many other recognizable brands of the coffee in the industry, there is need of the marketing for the new brand or major players, people may not have the brand awareness, people or customers concentration on the major brands. 

Technological Factors There are the technological factors that are affecting the industry, as

people are buying sophisticated home brewing machines and making the coffee at home, however, companies like Starbucks, have increased the customer

efficiency by using automatic espresso machines, the coffee is given in 3 minutes. 

Supply and Distribution

The supply of the coffee is based on the frequency of the customers purchases the coffee, however, the customers have the power, coffee shop chains need to secure the price stability as there are the dairy products, the suppliers need to meet the differentiate demands, from the customers, consequently suppliers need to maintain the quality. 

Taste and preference

Coffee is much consumed because of its taste. Customers have a strong preference on quality coffee and change would greatly lead to change to it demand. Consumers have adopted a culture of taking good cup coffee from the top brands in the market. 4. Competitive Position a. Selling Price Based on recent report, the price behavior of the coffee shop last 2019 was mainly affected by supplier, non-coffee commodity costs, and season. As supplier increases its price on Arabica coffee obviously the coffee price of the entity will be affected. Moreover, expenses like compensation to workers and payment of bills also affects the pricing. The entity's most numbered consumers are students and workers, students as the top consumer followed by the business workers, selling price is increased starting from the month of June until March of the next year. b. Competitiveness of the quality of the product The cafe is popular because of its one of the best selling brewed coffees the Pangga (P250), made of 100% high-altitude Arabica, sustainably-grown and handpicked from Balutakay, Bansalan, Davao del Sur. Brewed in a chocolatey coffee cup with caramelized vanilla and muscovado notes. Cozy Café is a place to go to visit with friends or cozy up in a quiet corner with a good book to relax. We serve better coffee than others, its brand and the product will be noticeable, we offer free reliable wifi, comfortable seats and community tables, baristas are friendly, we also provide music which serve a

purpose as well as we bring an ambiance that is great for having a conversation or focusing on work.

B. MARKETING PROGRAM 1. Description of presenting marketing practices of competitors Among other establishments that offer coffee drinks to their customers, Cozy Café’s direct competitors will be other coffee shops especially the Coffee Mate and Milk Tea Cafe located near at University of Mindanao Digos College campus. A food service establishments that offers coffee and a milk tea cafe that offers food services as good as other coffee shops. Coffee Mate and Milk Tea Cafe will definitely be one of the major competitors because of its strong financial position and established marketing and operational practices. However, despite of Coffee Mate’s entrenched market position as well as the Milk Tea Cafe strong marketing strategy, many customers favor smaller, independent establishments that offer cozy atmosphere and good coffee affordable prices. Cozy Café is a good example of such competition. We estimate that Coffee Mate’s hold approximately 26% and Milk Tea Cafe with approximately 21% market share in the neighborhood, Coffee Mate and Milk Tea Cafe’s appeals 25% of customer’s, with the remaining market shares split among other establishments. With this analysis, Cozy Café will position itself as a unique coffee shop that not only offers the best tasting coffee and pastries but also provide home-like cozy and comfortable environment, which established corporate establishment’s lack. We will cater to customer’s bodies and minds, which will help us grow our market shares in this competitive market. INDIRECT COMPETITOR S Coffee Mate

STRENGTH

WEAKNESS

Well-known

Milk Tea Cafe

Well-known

Very expensive prices of products not affordable by the students Limited space for

OPPORTUNIT Y

THREAT

Accessible location of our target markets

Located near UMDC

Accessible location of our

Located near

Coffee House

Good location

customers Too expensive food items No parking area

target markets Location wise

UMDC Changing market tastes Intense competition

Along high way Good customer service 2. Proposed marketing program of the project describing the selling organization, the terms of sales, channels of distribution, location of sales outlets, transportation and warehousing arrangements, and their corresponding costs. Clock Café



Selling organization The green coffee buyer has the essential role in cafe business. He/she is trained in the sourcing of coffee from origin countries, evaluating coffee, setting an appropriate prices, and understanding the commodity of coffee products. The marketing develops marketing strategies in order for the product to be sold. The sales representative will be trained well to serve and keeping the customers satisfied. The selling organization will serve to their best for customers to know that they truly matter to us. Employee salaries for the selling organization are as follows: Marketing - Php 15,000 per month Sales Representative - Php 10,000 per month Green-Coffee Buyer - Php 8,500 per month



Terms of sale Payment - Cozy Coffee will be selling directly to customers. As for credit card payments, Cozy Coffee will charge the credit card account when the order is received. Cozy Coffee will accept cash on delivery payments for individual customers. Discounts - A promotional discount will be available only for more than 5 purchases coffee products. A available only for the first order from new customers. For the first order of coffee products in Cozy Coffee made by new customer p will be discounted. Delivery - Cozy Coffee will deliver goods to the address specified by the purchaser. The delivery time is aimed to the date quoted, although the delivery time are not guaranteed due to unexpected events. Cozy Coffee will not be liable for any delivery due to failure to submit paymetnt details.



Channels of distribution

For the distribution of products Cozy Coffee sells directly to the customer. Selling through intermediaries will also be implemented through the help of wholesalers and retailers.



Location of Sales Outlets The primary location of Cozy Coffee is located in Roxas Extension Digos City. In order to maximize the sales in products Cozy Coffee will also be selling and promoting through retailers. Cozy Coffee retail stores will be located in places where most target customers are located such as in Malls, downtown areas, and nearby college schools.



Transportation and Warehousing Arrangements The warehouse for storing the products of Cozy Coffee is located at Roxas Extension Digos City. The warehouse area provides the best storage for coffee and non-coffee products. The rent for the warehouse costs Php 45,000. With the convenient distance of the warehouse Cozy Coffee will incur less cost for the transportation of products.

3. Promotion and advertising plans, including costs Strategically, the Cozy Café has a very convenient location in a great ease of access. The shop will be implementing a low cost advertising/promotion campaign which could involve distributing flyers and also word of mouth that has always proven to be the greatest advertising program a company can instill. There will also be banners, and tarpaulins installed in a number of strategic parts of the UMDC and if possible also inside the campus. By giving coupons to regular clients, the shop will also give free drinks to clients who will purchase 30 different or same coffee beverages within a month. The client can avail the free drink by presenting the coupon, registered to his/her name on the coupon which will be marked or signed by any of the Barista assigned every time the drinks are purchased. The shop will also explore window sales techniques such as the Baristas asking if the customer would like a freshlybaked product to go with their coffee. In order to maximize daily purchases, advertisements will focus on the need for a cup of coffee everyday matched together with the empowerment of students, teachers, in town residents and people at work, as a daily endeavor. To further boost presence online, a social media page in Facebook or Instagram can be setup to highlight the same advertisements. Promotional activities that highlight shares and likes of Cozy

Café’s products will also be conducted. Moreover, visibility of products and services around the UMDC can be boosted by providing the price list in each building or office. This can lead potential customers to try out the products and remind current customers to make daily purchases. 4. Packaging For individual coffee products, Cozy Coffee uses the most economical product packaging which is the PILLOW BAG packaging style. Cozy Coffee uses this style of packaging for lesser cost. This type of packaging is good for single-served coffee. With the packaging flat surface its design is also feasible for product display. For delivering multiple purchases, the goods will be sealed in boxes to protect the product and for maintaining the product’s quality. C. PROJECTED SALES 1. The proposed coffee shop has a strong demand among the market segment of the affluent middle class, young professionals, students, foreign expatriates, and Filipino nationals who are returning from travel/living overseas. It is projected that its sales will grow along with the growth of the population, progress of the city including a booming tourism and commerce, and the prospects of the coffee industry. Its 5Ps –product quality, competitive price, good location and effective marketing strategies will surely attract the target customers. D. CONTRIBUTIONS TO THE PHILIPPINE ECONOMY 1. Net annual amount of dollars earned or saved, and basis used The net annual amount of dollars earned or saved, and the basis used by Cozy Café is presented below. We have the following computation: Sales Cost of Sales (15%) Gross Profit

135,000.00 765,000.00

Less: Operating Expenses Supplies

5,078.00