Receiver Coffee - Case study analysis and recommendations PDF

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Case study analysis and recommendations...

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Table of Contents Pages

Executive Summary

2

Introduction

3

Business Analysis: Market Analysis

4

Competitive Analysis

6

SWOT

6

Target Market

7

Financial Analysis

7

Problem Identification & Definition

7

Solutions to the key problems

8

Implementation Plan

9

Project Management Plan

11

Measurement/Tracking & Contingency Plan

12

Executive Summary Receiver Coffee has been in operations for eight years, primarily in Prince Edward Island (PEI). The company prides itself in the quality of coffee it provides to its customers on both a retail and wholesale basis. The business was analyzed using: 1. PEST 2. Porter FIVE forces 3. Competitive analysis 4. SWOT 5. Financial analysis 6. Target market analysis. The result of this shows that Receiver Coffee is in a competitive market, but their unique, high quality beans and process gives them a competitive edge over their competitors. The main problem that is affecting Receiver Coffee is expanding into new markets in Ontario and Quebec and increasing wholesale revenue. The best solution for Receiver Coffee is to seek outside investors or bank loans for further expansion into these markets. You will find below the relevant decision criteria that led to this solution, as well as all of the potential benefits. An implementation plan was also prepared for: 1. Operations 2. Finance 3. Human resources 4. Marketing Finally, a GANT chart was utilized to outline the key project milestones and the duration of the project. The project will last approximately 150 days and can be completed by May 18th, 2021 if it is started on October 21st, 2020. This timeline is key as the project will be completed in time for the busy season (June-October). Should Plan A fail, a viable Plan B for Receiver Coffee will be to Franchise. Page | 1

Introduction Receiver coffee was founded in June 2012, in Charlottetown, Prince Edward Island. They offer specialty coffee that was not previously available in PEI. The company had three key goals: 

To provide coffee that is sweet, exciting, and ethically sourced.

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To create unique, delicious food and baked goods.

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To cultivate community.

The company grew from a small coffee processing firm to its current size due to its commitment to achieving these objectives. Other key facts about Receiver Coffee: 

The company was first named Row 142 when it was established in 2012.

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In 2014 Row 142 moved their location to Victoria Row, Charlottetown’s main tourist attraction, and changed their name to Receiver Coffee.

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A second location was opened in June 2017. Here, Receiver Coffee could both run a café, and roast the coffee for both locations.

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Receiver Coffee also acquired Breadworks in 2017. Breadworks was one of the only organic bakeries in PEI, and Receiver Coffee accounted for 55% of their annual revenue.

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Receiver Coffee saw year-over-year revenue increases on 100-150 percent in 2017 and 2018.

As a result of their rapid growth, Receiver Coffee was looking at a third phase of growth around May or June 2019 that would include: 

A new location



A bakery storefront, and

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More importantly, increasing capacity for greater wholesale revenue.

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Business Analysis Market Analysis

  

P

E

S

T

Political

Economic

Social

Technological

Import



Taxes



Location



POS Systems

restrictions



Exchange rate

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Social Classes

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Wireless

fluctuations

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Cultures

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Health



Cybersecurity

Consciousness

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Online

Health and safety laws



Interest Rates

FDA



Supply/Demand

Technology

regulations 

Employment

databases 

laws



Debit/Credit Machines

Import restrictions placed by the government is very important to Receiver Coffee because they import their beams from Central and South America, as well as East Africa.

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Exchange rate fluctuations are equally important to Receiver Coffee as it causes their cost of coffee beans imported from Central and South America, and East Africa to fluctuate.

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Location is also an important factor because Receiver Coffee currently only has two locations.

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From a technological point of view, online databases for customers that enroll to the subscription services is key. Debit/credit machines in stores is also important to give customers different payment options.

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Threat of new entrants is high. The startup costs to acquire a store could be high for a new business, but overall the costs for new businesses are low therefore the threat of new entrants is high.

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Power of buyers: Overall the bargaining power power of buyers is medium. There are opportunities for wholesale sales, however due to brand loyalty penetrating the retail market will be difficult for new businesses.

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Threat of substitutes: There are no substitutes for high quality coffee. Consumers can opt for lower class of beans but its not in the same category as the coffee offered by the existing companies. Therefore the threat of substitutes is low.

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Power of Suppliers: There are a large number of suppliers for coffee beans and no substitute for the high quality beans. The power of supplier is high.

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Competitive Rivalry: There are only a handful of competitors in the specialty coffee market, but the competition for the quality and customer loyalty is high. Rivalry among competitors is high.

Overall, the specialty coffee industry is very attacractive for new companies. The overall forces are medium, that means there is room for high returns.

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Competitive Analysis



Receiver Coffee has a distinct edge over its competitors with their competitive prices, quality of coffee, and their excellent reputation with customers.

Receiver Coffee’s SWOT analysis STRENGHTS

WEAKNESSES

1. Location in the heart of Charlottetown

1. Inadequate funds

2. Focus on unique single-origin beans, flavor,

2. Poor utilization of communication

and quality

channels

3. Available capital resources

3. Seasonal sales

4. High-quality bread, creative menus

4. Poor marketing strategy

5. The company’s values

5. Size: with only two stores in operation

OPPORTUNITIES 1. Huge opportunities to establish in Ontario, Quebec, and other Canadian Provinces 2. Good opportunities to convince existing wholesalers to switch to them

THREATS 1. The biggest competitors: Anchored Coffee, and Java Blend located in Nova Scotia, as well as Kettle Black, and Samuel’s coffeehouse

3. Good opportunities to wholesale their beans to their competitors

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Target Market Receiver Coffee’s target market is made up of wholesale customers that consists of local cafes and markets, as well as the residents and tourists to PEI. Being a highly seasonal business, Receiver Coffee’s retail revenues are driven mainly by tourists from June to October each year. Approximately 75% of their wholesale revenue comes from PEI, with the remainder being attributed to sales from its website, and coffee subscription services. Financial Analysis Receiver Coffee’s revenues are: 

Wholesale coffee (2.5 kg bags) $55.00 to $95.00 per bag

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Retail coffee for personal use (340-gram bags) $15.50 to $20.00 per bag

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Average revenue per cup of coffee in the cafes $2.00

Receiver Coffee’s Expenses are: 

Salaries for their employees

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The cost of their specialty beans and roasting

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Marketing cost of $10,000 to $15,000

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Rent/Mortgage payment for their two cafes

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Depreciation of their roasting machine etc.

Problem Identification and Definition The problems/challenges of Receiver Coffee are: 

Sales are highly seasonal.

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Increase their wholesale revenues.

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Establishing a diverse wholesale customer base, outside of PEI.

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Getting their product into more cafes in the Maritimes, as well as Ontario and Quebec.

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Tight marketing budget.

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No interest in franchising. Page | 6

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Lack of marketing activities.

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Incorporating Receiver’s brand identity with other cafes .

The two key problems that are mission critical, immediate, larger and must take priority are: 

Establishing a diverse wholesale customer base, outside of PEI.



No interest in franchising.

Solutions to the key Problems Possible alternative solutions to the key problems: 1. Opening new cafes outside of PEI, in Ontario and Quebec. 2. Hire a salesperson. 3. Partner with other specialty coffee companies outside of PEI to reach a more diverse customer base. 4. Open new stores in Ontario and Quebec to sell wholesale coffee only. 5. Consider franchising with strict rules on the quality of coffee. Relevant decision criteria to select the best solution: 1. Increase the marketing budget. 2. Acquiring partners outside PEI will eliminate the need for capital for expansion. 3. Offer free samples in key cities in Ontario and Quebec. 4. Increase social media marketing. 5. Seek outside investors or bank loans for expansion. The best solution for Receiver Coffee based on the above decision criteria is to seek outside investors or bank loans for further expansion into other markets. The benefits of this include: 1. Receiver Coffee can maintain their strategy not to franchise and continue to grow. 2. With the capital from bank loans or outside investors, Receiver Coffee will be able to grow further by opening new cafes in Ontario and Quebec. 3. They will maintain full control over the quality of the coffee beans in the new market. Page | 7

4. Receiver Coffee will be able to reach new customers through the new cafes, and this will ultimately allow them to increase wholesale coffee sales. 5. The new investment would allow Receiver Coffee to open wholesale only stores in Ontario and Quebec if they do not want to open cafes. 6. The marketing budget could be increased as well, and a salesperson could be hired. 7. If the current expansion is successful, it could evolve by further opening new cafes/wholesale stores in Ontario and Quebec, or other provinces in Canada. For Receiver Coffee, this solution will work for all of the above reasons and also because it allows them to maintain the high standard of quality. The quality of their coffee beans is the key reason behind Receiver Coffee not wanting to franchise. As a result, opening new cafes of their own would allow them to reach new customers and maintain the quality that is so important. Increasing the marketing budget will also be very beneficial to Receiver Coffee. 1. A salesperson will be able to bring in new wholesale customers if Receiver Coffee chooses not to open new cafes or wholesale locations in Ontario and Quebec. 2. Advertisements can be created and promoted in Ontario and Quebec to alert customers that this product is available in their region. 3. More promotions on their social media platforms will also be beneficial. Receiver coffee could hire a social media marketing person to keep on top of promotions through those mediums.

Implementation Plan To expand into Ontario and Quebec, Receiver Coffee will need to plan for the following. Operations: 1. Buildings in Ontario and Quebec for the new cafes. 2. Shipping of the coffee beans to these new locations. 3. Roasting of the beans.

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4. Layout of the cafes. 5. Furniture and point of sale technology. Finance: 1. Funds can be acquired from the bank through bank loans, or from private investors for a stake in the company. 2. The capital acquired can be used for acquiring premises for new cafes, purchasing of furniture and fixtures, store design, marketing promotions, and salaries at the beginning. 3. Receiver Coffee will have to prepare financial forecasts and budgets for business operations in the new locations. 4. They will also have to determine what return on investments they require. Human Resources: 1. Hiring and training of new personnel to work in the cafes. 2. Hiring of a salesperson to seek wholesale business. 3. Hiring of a manager in Ontario and Quebec to oversee the operations. Marketing: 1. A social media marketing personnel can also be hired to control Receiver Coffee’s social media platforms. 2. Product price can be similar to that in the PEI locations to maintain consistency. 3. Wholesale packages of the coffee beans can be placed on shelves in the cafes. 4. Creating video advertisements to post on social media as well as through television ads.

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Project Management Plan

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The GANT Chart above shows the key milestones and the timeline to be implemented. The project has a start date of October 21, 2020 and will take approximately 150 days to complete.

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Project Definition and planning involves defining the scope of the project, acquiring investors or bank loans, scouting appropriate locations, designing the layout of the stores etc.

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Project execution is the construction and modification of the stores to the appropriate layout of Receiver coffee, whilst simultaneously promoting the business and hiring and training new staff to start on May 18, 2021.

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Project delivery is the end of the project and Receiver Coffee will be able to open their new cafes.

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Measurement/Tracking and Contingency Plan Performance can be tracked monthly or weekly by Receiver Coffee. Some of the metrics to track are: 

Cash flows

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Cost of goods sold

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Average spends per customer

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Online reviews

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Social media engagement with customers

Should Plan A fail, a viable Plan B for Receiver Coffee will be to Franchise. Franchising can be very successful. Receiver Coffee will have to outline and enforce strict rules in regard to the coffee quality. In Addition, Receiver Coffee can increase wholesale revenue through sales of the packaged beans in the franchise locations.

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