Risk Analysis and Marketing Strategy for Coffee Roasting Business

The assignment analyzes the risks associated with starting a coffee roasting business, including market competition from existing businesses and new entrants. It also discusses the importance of product quality and innovation in meeting customer demands. Additionally, it touches on marketing strategies such as target marketing and promotional activities to promote the business.

BUSINESS PLAN: A COFFEE
ROASTING BUSINESS

TABLE OF CONTENTS
BACKGROUND.............................................................................................................................1
STEPS INVOLVED IN COFFEE ROASTING PROCESS............................................................1
IMPORT OF COFFEE BEANS .....................................................................................................2
MARKET ANALYSIS....................................................................................................................2
A) Industry Analysis...............................................................................................................2
B) Competitor Analysis..........................................................................................................3
TARGET MARKET........................................................................................................................3
MARKETING..................................................................................................................................4
A) Product..............................................................................................................................4
B) Pricing................................................................................................................................4
C) Distribution........................................................................................................................5
D) Promotion..........................................................................................................................5
STRATEGIES AND TACTICS......................................................................................................5
Funding Strategies..................................................................................................................5
Promotional Tactics................................................................................................................6
Target Market Strategies........................................................................................................7
FINANCIAL PLAN.........................................................................................................................7
Assumptions...........................................................................................................................7
A) Cash flow statement..........................................................................................................7
B) Income statement...............................................................................................................8
CRITICAL RISKS...........................................................................................................................9
REFERENCES..............................................................................................................................10

BACKGROUND
The business in which coffee beans are roasted into the products in form of powdered
coffee and then used by people for drinking or consuming is known as coffee roasting business.
In the Australian market coffee is highly consumed by the local community along with visitors.
In addition to this, coffee product of Australia is known for the best quality in the world. In the
present study, a new business of coffee roasting is focused which will be established by an
entrepreneur. The reason for considering this particular sector is that, in Australia demand of
coffee products is growing rapidly (Australia Coffee Market - Growth, Trends and Forecasts
(2017 – 2022), 2017). It helps to the entrepreneur for increasing sales and revenue with the
higher rate as compared to other kind of businesses. Further, it will be able to enhance market
share and become highly profitable from the coffee products. The present proposed coffee
roasting business will be opened in the Brisbane market of Queensland, Australia. This city is
located near to Brisbane river due to which high number of visitors come there. It one of the
highly attractive tourist place of Australia where chances of raising customers are high. Due to
this particular situation coffee roasting business will be established in Brisbane city.
The report gives outline about the coffee market of Australian economy along with
competitor analysis. Apart from this, product which will be offered by the proposed coffee
roasting company along with the promotion techniques are mentioned in the study. Financial is
one of the important resource for new firm and plan related to this aspect is mentioned in the
present business plan. As of now, the entrepreneur will establish firm in Brisbane city where it
has opportunity to enter in another state and country in the future.
STEPS INVOLVED IN COFFEE ROASTING PROCESS
Process of toffee roasting has to be applied in the proposed business and steps of this
procedure are listed below:
11 Place the coffee beans in roaster in small batches11 If the beans are very hard then use flames11 Rotated in the roaster machine consistently11 Beans checked within few seconds11 Cool the coffee beans
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11 After cooling natural gases are released on it (Adams, 2016)11 At the end preserved and protected
IMPORT OF COFFEE BEANS
In order to roast the coffee and run the business in the market with profitable situation,
higher quality of the raw materials required. Along with this, coffee beans which are raw
material for proposed business which must be of the lower costs. Nepal country is basically
known for the high quality of coffee beans along with wide range of products worldwide.
Further, it provides coffee beans at the cheaper prices in comparison to other countries.
Therefore, coffee beans for the proposed roasting business will be imported from Nepal. Another
justification behind considering this country for importing raw materials is that, low cost will
support to the firm for raising profit and contributing in GDP of Australian economy with high
rate.
MARKET ANALYSIS
A) Industry Analysis
Coffee market in Australia is one of the rapidly growing in the economy and contributes
better amount in the growth rate. According to the Australian coffee industry analysis it has been
found that revenue generated by coffee shops within fiscal period 2012-2017 is worth of $8
Billion. When looking at the annual growth rate between 2012-17 then it is 7.0% and it is
expected that it will grow with the higher rate. Therefore, the entrepreneur select business of
coffee roasting. When considering to the bargaining power of buyers in the coffee industry then
it is moderate to low where proposed firm able to generate high revenue. On the basis of survey
report in February 2017, it can be analysed that demand of coffee items will increase on
consistent basis within next periods (Cafes and Coffee Shops in Australia, 2017). Apart from
this, coffee market of Brisbane area is growing continuously in Australian economy as compared
to another markets. The reason behind this is that Brisbane is one of the tourist place where huge
number of people tourists visit. After looking at the above industry condition of coffee within
Australia the proposed company will be able to earn higher sales and profit.
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B) Competitor Analysis
In the coffee industry wide range of companies operating and provide products and
services to the people. Due to this particular situation, level of competition within Australian
coffee market is moderate to high. When the entrepreneur establish coffee roasting business in
Brisbane market then has to face competition but not cut-throat. Along with this, number of
substitute products of coffee are moderate to high level in the industry. After considering such all
the aspects the proposed company will adopt effective competitive and other strategies. In order
to meet requirements of the coffee consumers the entrepreneur will provide products at the lower
cost as compared to rivals. On the basis of this, it will able to attract more customers and enhance
revenue. For this, it will import coffee beans for roasting from Nepal which is known for the best
quality of beans.
In each and every market customers always concern towards the high quality of product
along with the lower prices. Therefore, the potential coffee roasting company will offer coffee
products up with the higher quality and lowest prices up to users. Under the quality it will
consider unique flavour, sweetness and body or mouth-feel. On the basis of this, it will able to
gain huge sales and meet needs of them. Apart from this, it will consider cost leadership as well
as product differentiation tactic within workplace. The reason is that it will support to the
upcoming business in order to achieve objective of competitive advantages.
TARGET MARKET
The area or factor or specific group of people to which company makes aim in order to
provide or sale goods and services is known as the target market (Berthon and et. al, 2012). The
company determines its target market after considering segmentation term where customers
aimed on the basis of geographic, demographic etc. In the Australia coffee market, majority of
the users belong from young age group. Apart from this, middle and high level of income of the
people consume coffee products as compared to others. On the basis of this particular analysis,
target market for the proposed business will be selected on the basis of the demographic factor.
Under this, age and income level these two factors will be considered for selling coffee products.
Therefore, target market for the upcoming coffee roasting business will be middle to high
income level of group and young people. Primary needs of the coffee customers are high quality,
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greeting services, friendly environment and attractive price. In order to select the target market
the entrepreneur considered these all the requirements and wants of the consumers.
MARKETING
The action taken into business in order to advertise and promote goods and services in the
market is known as marketing activities. Under this concept various kinds of aspects included
and having pivotal role for the proposed coffee business. Further, several elements of marketing
with reference to proposed company are stated below:
A) Product
The coffee roasting business will provide different kinds of the goods to the customers
after establish at Brisbane market of Australia. List of coffee items which will be offered by the
new business is such as follows:
 Black coffee
 Espresso
 Brandy coffee
 Caffe Late
 Irish coffee
 Nitro coffee
In the Australian coffee industry, most of the customers prefer the above stated products
due to which only these will be offered. Nitro coffee is one of the highly consumed by high
income level of the people so it will be provided to them. Apart from this, Brandy and Espresso
is preferred by the young age of customers. Hence, the coffee roasting firm will offer the above
stated products to the consumers.
B) Pricing
In each firm whether it is existing or potential, price is one of the highly concerned aspect
within working environment. It is used by the management in order to sale the products and
services (Fifield, 2012). Further, in order to determine price of the coffee product there are list of
strategies included. The entrepreneur will use competitive based pricing method in proposed
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coffee roasting business. As per this tool, entrepreneur will assess price after analysing charges
of the competitors.
C) Distribution
The process of delivering goods and services by a company up to the customers is known
as distribution system. Basically two methods are available for distributing the coffee products
among users which include online and physical stores. In the present study, the firm will target to
the young and high income level of people due to which online distribution method will be used.
Along with this, it will consider the offline way also where attractive store will be designed by
the entrepreneur to deliver coffee products.
D) Promotion
The strategy through which company advertising and promoting its products and services
is known as the promotion. Various kinds of the techniques available in order to promote the
coffee products with the entrepreneur like social media, digital, newspaper, articles, radio, other
traditional etc (Weisberg, 2016). Further, through social network, newspaper, direct mail order
and Facebook Ads coffee products of upcoming business will be promoted in the market.
STRATEGIES AND TACTICS
Funding Strategies
In order to establish a company, operate in the market and generate incomes different
number of strategies used by the entrepreneur. Very first and foremost resource which will
require in the proposed firm is financials for come into existence in the Australian coffee market.
In the present scenario, the entrepreneur has fund worth of $1,00,000 and needs more amount
which is $1,00,000. For raising the required capital, various kinds of the internal and external
sources of finance are available. In the current case of coffee roasting company, personal savings
of the entrepreneur will be considered which is part of internal financing source. The reason for
using this is that, any kind of cost not imposed on the proposed business and will not create cost
burden. Apart from this, bank loan will be used to raise capital where entrepreneur will take
loans from the external source i.e. commercial bank. It is one of the helpful source where
entrepreneur easily able to raise fund. In exchange to raising capital, the bank will impose cost of
finance on the coffee roasting business in form of interest charges.
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Promotional Tactics
Social network: In this method of promotion different types of the social sites and applications
are considered. In the proposed coffee business, the entrepreneur will use Facebook, Twitter,
Pinterest and Instagram networks. Further, young and high income level of people always use
social networks continuously due to which it will be more profitable.
Newspaper: As per this technique of promotion, advertisement about the coffee roasting
business and its list of products will be given in newspapers. The reason is that, each and every
people read newspaper on daily basis.
Direct mail order: Apart from this, the entrepreneur of proposed business will send direct mail
to people in order to aware them about coffee products which will be provided by it.
Facebook Ads: According to this, one page with the coffee roasting business name will be
created using attractive designs for advertising in the market. Facebook is social network where
huge number of people connected due to which it will be undertaken.
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Target Market Strategies
In order to attract group of customers targeted towards the business there are basically
four strategies included like customised, differentiated, undifferentiated and concentrated
(Chand, 2016). For the present upcoming business of coffee roasting, differentiated target market
tactic will be considered by the entrepreneur. The reason is that, it helps to focus on both
segments like income and age group with the specific marketing mix. Further, when the
company will target to other segment then also will be supportive and due to which it known as
multi-segment strategy. Apart from this, the differentiated technique involves greater and
attractive level of promotional methods and products design which will be beneficial for it. It has
potential in order to earn higher sales, profit, market share as well as economies of scale in the
roasting. Hence, the differentiated target market strategy will seem suitable and consider for the
proposed coffee roasting business.
FINANCIAL PLAN
Assumptions
Particulars Value
Average price per coffee $4.5
Number of customers (daily) 15
Number of customers (monthly) 450
Interest rate
1.50% (Australian Interest
Rate, 2017)
Tax rate
12.75% (Company tax
rates, 2017)
COGS 30% of sales
A) Cash flow statement
Cash flow statement
Particulars Pre – Operating year (in $) Year 1 (in $)
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Opening balance 20000
Cash sales 24300
Owner's capital 100000
Bank loan 100000
Total cash inflows 200000 44300
Cash outflows
Fixed assets 75000
Research of market 3000
Legal permits 6000
Salary to staff 6480
Administration expenses 1400
Marketing costs 3500 1000
Maintenance charges 360
Selling and distribution 800
Rent on property 2150
Insurance premium 1300
Utility expenses 530
Interest expenses 1500
Tax expenses 743.9
Total cash outflows 87500 16263.9
Closing balance 112500 28036.13
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B) Income statement
Income statement of coffee roasting business
Particulars Amount (in $)
Sales 24300
Cost of goods sold 6075
Gross profit 18225
Less: Operating expenses
Salary to staff 6480
Administration expenses 1400
Marketing costs 1000
Maintenance charges 360
Selling and distribution 800
Rent on property 2150
Insurance premium 1300
Utility expenses 530
Total operating expenses 14020
Earning before interest and taxes
(Operating profit) 4205
Less: interest expenses 1500
Profit before taxes 2705
Less: tax expenses 743.875
Net profit 1961
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CRITICAL RISKS
With the company different number of risks and issues associated which create negative
impact on it. Such problems can be related with both the aspects like financial and non-financial
and affect adversely on the business performance (Morgan and et.al., 2012). If the level of
employee's efficiency within working environment of coffee roasting business will reduce then
unable to satisfy the customers in an appropriate direction. Apart from this, if the staff not go
through all the steps of coffee beans roasting, then quality and productivity both affects
negatively. When product quality influenced in adverse direction then become major concern for
the management. In the market, if income level of the people increases then demand innovative
coffee products along with the additional needs. In order to fulfil their wants and requirements,
the entrepreneur has to make changes which will incur additional expenses and create issue.
In addition to this, in the Brisbane market if new coffee roasting business will enter with
the unique flavour and product then existing customers will switch towards it. Along with this, if
it provides coffee items at the lower price as compared to the present proposed firm then its all
the users will like to prefer new entrants. In this condition, the entrepreneur has to make huge
changes in the products and prices both with the greater level. Due to this, additional expenses
will be incurred which is one of the major risk for it. Hence, these all the critical risks can be
occur and affect to the proposed coffee roasting business negatively.
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