Café Direct Case Study: Analysis and Strategic Recommendations

This case study analyzes the challenges faced by Café Direct, a Fairtrade trading organization, including competition from private label products, brand relaunches, and financial difficulties. The study uses SWOT analysis to assess the company's position, highlighting issues in the hot beverages market and negative financial equity. Recommendations include product advertising, establishing partnerships, conducting customer surveys to introduce new products, and reviewing financial performance measurements. The case also examines the potential merger with Accor Hotels, discussing challenges related to working capital, fluctuating asset liquidity, and pricing strategies. It suggests Café Direct respond positively to the Accor Hotels proposal while considering the implications for brand uniqueness and ethical sourcing. The analysis stresses the importance of market analysis, financial planning, and strategic decision-making for business development.

Running head: CAFÉ DIRECT AND CAFÉ DIRECT CONSULTANCY – CASE STUDY
CAFÉ DIRECT AND CAFÉ DIRECT CONSULTANCY – CASE STUDY
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CAFÉ DIRECT AND CAFÉ DIRECT CONSULTANCY – CASE STUDY1
Café Direct
Café Direct is a trading organization that aims to provide the growers of tea, coffee
beans and cocoa with a larger size of the purchase price of the concerned products. The Café
Direct has been one of the first brands to bear the Fairtrade Certification mark1. The
following essay deals with the challenges faced by Café Direct according to the given case
study. The essay proceeds further to put forth three recommendations that the concern might
need to address in the current scenario. The essay proceeds towards the conclusion with the
explanation of the reasons that underlie the suggested recommendations.
According to the SWOT analysis based on the given case study, Café Direct faces
challenges due to the increase in the number of the private label products that exist in the
market (Please refer to the Appendix I). The brand faces an issue with the major relaunches
that it had undergone twice since its inception. This step was undertaken by the concerned
company in order to attract more clients to the company by relaunching the brand. The
company might also face challenges in the current global market due to the fact that the
company deals only in the hot drinks like coffee, tea and other beverages. The competitors of
the company in the market are found to have been offering their customers with the variations
in the beverages that they have been offering to the clients. The global competitors like
Starbucks, Greggs or Costa do have an upper hand in the matters pertaining to the various
versions of the beverages that they are capable of providing to the concerned clients. This
might lead to the decrease in the client base of the company in discussion, Café Direct. The
concerned organization also faces a negativity in the financial position during the end of the
year 2016. It faces the challenge of being stuck in the negative equity by the year 2020.
In order to cope with the challenges, the company might need to undertake certain
steps. The company might put forth the advertisements of the products that it aims to sale to
1 Cafedirect.co.uk (2018) <https://www.cafedirect.co.uk/> accessed 13 March 2018

CAFÉ DIRECT AND CAFÉ DIRECT CONSULTANCY – CASE STUDY2
the potential clients. The clients must be made aware of the various products that the
company aims to provide them with. The concerned management must attempt to introduce
the various products to the potential consumers of the company. The company is known for
the various types of the organic coffee blends that they provide to their consumers2. The
company is known to have observed the various ethical issues that are involved in the
marketing of the same. The criticism concerned management of the organization might invest
in the various methods of advertising in order to allow the potential consumers to have a
sound knowledge of the products that they offer3. The company does not own retail stores
wherein the consumers might visit in order to procure the products. The company must focus
on establishing partnerships with the other organizations and shops that might help them to
increase their potential client base.
The other challenge faced by the company in discussion, Café Direct is the fact that
the company provides its customers with only the hot beverages unlike the other competitors
of the company. In order to resolve this issue, the company might conduct a survey of the
concerned client base. This might help the concerned company to form a better understanding
of the demands and the needs of the clients. The understanding of the client needs might help
the concerned company to launch the products that would best suit the needs of the clients.
The company might try to add value to the various products that they aim to introduce to the
existing as well as the potential customers of the company. In order to do so the company
might conduct the needed surveys over the various platforms. The concerned management
might introduce the creativity in the manufacture of the products that the company might plan
on launching in the concerned market4. The company might also help the potential clients to
2 Confino J, 'Café Direct Seeks To Push The Frontiers Of The Fairtrade Movement' (the Guardian,
2018) <https://www.theguardian.com/sustainable-business/cafe-direct-fairtrade-movement-coffee-competition>
accessed 13 March 2018
3 Heerde, Harald J. Van, et al. "Price and advertising effectiveness over the business cycle." Journal of
Marketing Research 50.2 (2013): 177-193.
4 Zikmund, William G., et al. Business research methods. Cengage Learning, 2013.

CAFÉ DIRECT AND CAFÉ DIRECT CONSULTANCY – CASE STUDY3
have a slight hint on the upcoming products. This might help in building the anticipation of
the clients as well as opens an avenue for them to put in their suggestions on the issue5.
The third challenge that the company has been facing is the fact that the company has
been functioning in the negative financial condition by the end of the year 2016 and might be
stuck at the same area till the year 2020. In order to recover from this situation, the concerned
management might attempt to consider the reviewing of the measurements of the financial
performances of the company6. These financial measurements might help the concerned
management to gain insight into the facts pertaining to the coverage of the production cost,
alignment of the overhead costs with the sales profit, the capability of the concerned
company to sustain the operations based on the profits that they earn. The concerned
management of the company must tend to focus on the operations of all the departments that
has been functioning within the organization. It is advisable to develop the entire system of
the organization in a systematic fashion from the initial days of the company. The early
investment in the infrastructure might help the concerned organization to deal with the
problems that the concern might face in the later stages of its journey7. The concerned
management of the concern is advised to conduct an assessment of the employees at regular
intervals in order to keep them motivated towards the betterment of the company. The
concerned management of the concern is also advised to apply the appropriate strategies that
might help them in the improvement of the financial performance of the company.
Thus, from the above discussion it might clearly be observed that the company in
discussion needs to implement a few changes in the management and the operations of the
5 Castellion, George, and Stephen K. Markham. "Perspective: new product failure rates: influence of
argumentum ad populum and self‐interest." Journal of Product Innovation Management 30.5 (2013): 976-979.
6 The Guardian, 'Cafédirect - Still Redefining Fair Trade' (the Guardian, 2018)
<https://www.theguardian.com/sustainable-business/cafedirect-redefining-fair-trade> accessed 13
March 2018
7 Ingenbleek, Paul, Ruud T. Frambach, and Theo MM Verhallen. "Best practices for new product
pricing: Impact on market performance and price level under different conditions." Journal of Product
Innovation Management 30.3 (2013): 560-573.

CAFÉ DIRECT AND CAFÉ DIRECT CONSULTANCY – CASE STUDY4
company in order to recover from the challenges that it is observed to have been facing. The
essay puts forth recommendations that might help the management of the company in the
recovery of the state of Café Direct.

CAFÉ DIRECT AND CAFÉ DIRECT CONSULTANCY – CASE STUDY5
The company that aims at introducing changes in the operations might face a few
challenges during the process of the implementation of the changes. The following essay
deals with the various challenges that Café Direct might face during the implementation of
the recommendations that are stated above.
The company is recommended to advertise for the products that it might aim to launch
in the concerned market. The company might face a number of challenges in the activity of
advertisements for the products8. The company should take care of the fact that the
advertisement that it aims to air for the concerned products reaches the potential target
customers during the time that might dedicate to the entertainment media wherein the
company might be advertising.
The company might also face challenges in the matters pertaining to the launch of the
new products in the market. The challenges in this field might be present in the form of the
similar products that are already present in the target market that the concerned organization
aims to capture9. The already existent products in the market might prove to be a hindrance
for the concerned organization in the launch of the new products.
The concerned company, Café Direct might also face some challenges in the matters
that deal with the improvement in the financial conditions that the concern has been facing.
The existing staff of the organization might not accept the changes that the concerned
management implements in order to boost the financial performance of the company10. The
8 Tsao, Shou-Min, and Wei-Hao Lien. "Family management and internationalization: The impact on
firm performance and innovation." Management International Review 53.2 (2013): 189-213.
9 Cavaco, Sandra, and Patricia Crifo. "CSR and financial performance: complementarity between
environmental, social and business behaviours." Applied Economics 46.27 (2014): 3323-3338.
10 Trudgen, Ryan, and Susan Freeman. "Measuring the performance of born-global firms throughout
their development process: The roles of initial market selection and internationalisation speed." Management
International Review54.4 (2014): 551-579.

CAFÉ DIRECT AND CAFÉ DIRECT CONSULTANCY – CASE STUDY6
management of the concern might also face opposition from the clients in the matters that
pertain to the hike of the prices in the products that have already been present in the market11.
Thus, from the above discussion it might be concluded that the concerned company
might face issues in the implementation of the afore-mentioned recommendations in the
various fields related to the same.
11 Rodriguez-Fernandez, Mercedes. "Social responsibility and financial performance: The role of good
corporate governance." BRQ Business Research Quarterly 19.2 (2016): 137-151.

CAFÉ DIRECT AND CAFÉ DIRECT CONSULTANCY – CASE STUDY7
Café Direct Consultancy
Accor Hotels is a French group of multinational hotels that has been operational in
over 90 countries all over the world. The chain of hotels is headquartered at Paris, France and
is being headed by the current CEO, Sebastien Bazin12. Café Direct is recommended to
respond to the proposal laid by the Accor Hotels in a positive tone and accept the offer. The
following essay aims at viewing the challenges that might be faced by the company in
discussion, Accor Hotels. The essay also takes into account the potential suppliers at the
Sunshine Co-operative and the River Co-operative. The essay also aims to provide
recommendations based on the proposal that has been extended by the multinational hotel
chain, Accor Hotels.
The merger of the organizations, Café Direct and Accor Hotels, do at the initial
instance seem to be a fruitful one. However, on close introspection it might be found that the
concerned merger has some challenges for Café Direct as well. The company in discussion,
Café Direct, has currently been facing some limitations in the operational capacity of the
concern. The company has been facing a lack sufficient working capital in the recent times.
The average unit retail or the AUR has been observed to be increasing over the time period of
2010-2012 which has led to the decrease in the return of sales or the ROS during the same
time period. The liquidity of the assets of the concerned company are observed to be
continuously fluctuating, however they have not been observed to enter in to the negative
realms.
The commitment towards the proposed merger with the Accor Hotels demands a huge
time period from the concerned company, Café Direct. The cash reserves and the long term
as well as the current assets of the company have been observed to have gone through a huge
12 Accorhotels.group, 'Accorhotels Group – Worldwide Leader In Hospitality And Services – Feel
Welcome' (Accorhotels.group, 2018) <http://www.accorhotels.group/en> accessed 13 March 2018

CAFÉ DIRECT AND CAFÉ DIRECT CONSULTANCY – CASE STUDY8
drop over the last six years. There has also been observed a drop in the investment income of
over 90% over the same time period13. The merger might also jeopardize the goodwill that
has been created by Café Direct over the long duration of time since the inception of the
company. The offer that has been extended by the Accor Hotels tend to demand a great
amount of organic coffee that might not be possible for Café Direct to produce
independently. There might also arise discrepancies between the pricing strategy of both the
organizations.
The pricing strategy of Café Direct is based on the minimum pricing strategy while
that of Accor Hotels is based on the pressure pricing strategy. The major concern that might
be faced by the concerned company is the request on the part of Accor Hotels for the
reduction in the prices of the organic coffee that is to be supplied by Café Direct based on the
huge volumes of the supply. This might prove to be a hindrance in the merger due to the
lowering of the rate of the profit that Café Direct had been expecting from the deal. This
would in turn affect the growers of the organic coffee which would be vehemently against the
ethical principles that are followed by Café Direct. The merger of Café Direct with Accor
Hotels might lead to the loss of the brand uniqueness of the former. This might render Café
Direct to lose its own identity as a separate brand and instead be recognized as a mere
supplier to an internationally acknowledged chain of multinational hotels.
The company in discussion, Café Direct, is advised to accept the assistance from both
the co-operatives for the initial two years in order to meet the demands of the multinational
chain of hotels, Accor Hotels. The company in discussion, Café Direct must confirm with the
River Co-operative regarding the matters that pertain to the illegal activities that are
associated with the procurement of the cocoa leaves and the global issue of child labor14. The
13 Davies, Iain A., Bob Doherty, and Simon Knox. "The rise and stall of a fair trade pioneer: The
Cafédirect story." Journal of Business Ethics 92.1 (2010): 127-147.
14 Achim, Monica-Violeta, and N. S. Borlea. "Environmental performances-way to boost up financial
performances of companies." Environmental engineering and management journal 13.4 (2014): 991-1005.

CAFÉ DIRECT AND CAFÉ DIRECT CONSULTANCY – CASE STUDY9
company should confirm with these details as these pertain to the ethical standards that are
maintained by the concerned company15. The River Co-operative demonstrates a larger
capacity of the production and have been currently involved in the process of the production.
However, the quality of the product that is delivered by the company since there have been
past cases wherein the delivered products that the company have been rejected. The River
Co-operative, despite the shortcomings in the quality of the product, might boast of having
good storage facilities. The figures of the co-operative that reveal the productions of the
organic coffee demonstrate discrepancies that might lead to risking the reputation that might
have been built by Café Direct.
The Sunshine Co-operative might initially need the investments on the part of Café
Direct in the core area that might need improvements. The collaboration of Sunshine Co-
operative and Café Direct might prove to be beneficial for both the companies in the due
course of time16. The collaboration with the Sunshine Co-operative might provide with
greater scope for the expansion in the organic production of the coffee beans. The
collaboration might also help Café Direct to bring about an improvement in the corporate
social performance of the organization on the successful restoration of the needed stability in
the field of finance17. This collaboration might also help Café Direct with the continuation of
the investment that the company extends towards the farmers who intend to put forth the
efforts that are needed to produce the organic coffee.
In conclusion to the above essay it might be said that the proposal extended by the
Accor Hotels towards Café Direct should be accepted by the concerned organization. the
organization might also consider the collaboration with the River Co-operative and the
15 Chun, Jinseok S., et al. "How does corporate ethics contribute to firm financial performance? The
mediating role of collective organizational commitment and organizational citizenship behavior." Journal of
Management 39.4 (2013): 853-877.
16 Datamonitor, Cafédirect Case Study (Datamonitor 2008)
17 Sodeyfi, Setareh. "Review of literature on the nexus of financial leverage, product quality, &
business conditions." International Journal of Economic Perspectives 10.2 (2016): 146-150.

CAFÉ DIRECT AND CAFÉ DIRECT CONSULTANCY – CASE STUDY10
Sunshine Co-operative in order to be able to deliver to the needs and demands of the
multinational chain of hotels in the matters pertaining to the sale of organic coffee. The
company in discussion is observe to have a bright prospective in the matters that pertain to
the worldwide supply and recognition of the organic coffee that the company provides to its
client base. Thus, considering all aspects of the situation, it is recommendable for Café Direct
to accept the proposal extended by Accor Hotels.

CAFÉ DIRECT AND CAFÉ DIRECT CONSULTANCY – CASE STUDY11
The following essay deals with the various advantages and disadvantages of the use of
the case studies in the exploration of the management issues that are faced by the
organizations discussed in the concerned case studies.
The advantages of using the case studies in the exploration of the management issues
in the concerned company is the fact that the case studies might involve the narrative
techniques that might help the concerned reader to understand the scenario in a better manner
even in the cases where the concerned reader might not have sound knowledge on the given
topic18. The case studies put forth the problems faced by the concerned company in a
descriptive manner which helps the reader to understand the current situation of the company
in a better manner19. The case study approach helps the concerned company to put forth the
various types of information regarding the problems that it might have been facing. This
helps the readers of the concerned case study to explore the ideas that are presented within
the case study and build on the theories on the given programs or the given dynamics
involved in the project.
The case study approaches towards the exploration of the various management issues
in the organizations have several disadvantages too. The experts in the field suggest that the
case studies often tend to be unreliable and qualitative. The case studies generally relate to
the various single projects or a small group of projects. The results of the case studies,
however, might not reflect the overall performance of the concerned organization20. The case
study approach has another great disadvantage. The case study approach loses in on the
external validity and gains in the internal validity as the findings of the case study might only
be valid in the cases that are similar to the case study in discussion.
18 De Massis, Alfredo, and Josip Kotlar. "The case study method in family business research:
Guidelines for qualitative scholarship." Journal of Family Business Strategy 5.1 (2014): 15-29.
19 Hancock, Dawson R., and Bob Algozzine. Doing case study research: A practical guide for
beginning researchers. Teachers College Press, 2016.
20 Moriarty, Sandra, et al. Advertising: Principles and practice. Pearson Australia, 2014.