Detailed Business Analysis Report: Costa Coffee's UK Operations

This report presents a comprehensive business analysis of Costa Coffee, focusing on its operations in the United Kingdom. The introduction provides an overview of Costa Coffee, its market position, and its significance in the UK beverage industry. The main body of the report addresses key aspects of the business, including administrative details, business strategy, product portfolio, management structure, and customer segments. The report includes a detailed competitor analysis, comparing Costa Coffee with its rivals in terms of financial strength, products, quality, product range, services, and customer attitude. Furthermore, the analysis delves into Costa Coffee's financial performance, evaluating key financial ratios to assess profitability, liquidity, and working capital. The report also examines the company's mission, goals, and objectives, providing recommendations for performance improvement and expansion. The conclusion summarizes the key findings, emphasizing the importance of strategic planning and market analysis for success in the competitive coffee market. The report utilizes qualitative research methods to gather and analyze information from various sources, including company documents, industry reports, and customer reviews.

SMALL BUSINESS
ENTERPRISE

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
Question 1........................................................................................................................................1
Section 1: Business, Administrative & Contact Information.................................................1
Section 2: Introduction...........................................................................................................1
Section 3: Business Strategy..................................................................................................3
Section 4: The Business Portfolio..........................................................................................3
Section 5: Management & Ownership...................................................................................4
Section 6: Current Customers.................................................................................................5
Question 2 Competitor Analysis......................................................................................................6
Question 3: Recommendation to organisation for improvement.....................................................9
Question 4: Expansion and Performance Suggestions...................................................................10
Question 5: Analysis of Plans and objectives................................................................................10
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................12

INTRODUCTION
Small sized business organisation is one of the reason for increased competition in
market. They give employment to large number of people in United-Kingdom. The report has
been prepared considering retailers in UK, specifically dealing in beverages. A brief overview on
how businesses operate and function with objective of achieving set targets and maintain high
market share, is represented in this report. Product range offered by business and their quality
plays an important role in creating brand image. Costa is a coffee-house in United-Kingdom
dealing in beverages, mainly coffee, sandwiches, tea or drinks (Storey, 2016.). Further, in the
present project particular store is considered of Costa which located at DLR station and
Woolwich. Financial position of company would be outlined in this report. As there is increased
competition in coffee market due to higher consumption of coffee the analysis of competitors
and assessment of plans and objectives are conducted along with recommendations on
improvement in performance.
MAIN BODY
Question 1
Section 1: Business, Administrative & Contact Information
1.1 Business name: Costa coffee
1.2 Business type: Foods and beverages
1.3 Telephone number: [phone]
1.4 E-mail address: www.costacoffee.com
1.5 Physical address or location: Woolwich New Rd, London SE18 6EU, United
Kingdom
Section 2: Introduction
2.1 Company History
Costa is a coffee-house company, headquartered in Dunstable, Bedfordshire. Company
deals in beverages sector and second the largest coffee-house behind Starbucks in United-
Kingdom. Located at various locations in London UK, supplying roasted coffee at coffee shops.
Company has 2121 restaurants in UK and 3401 shops across globe in 31 other nations. It was
founded in year 1971 by two Italian brothers which are Sergio and Bruno Costa. It opens first

coffee shop in London in 1978 and acquired by Whitbread Plc in the year 1995. In the year 2007
it overtakes to the Starbucks in as the largest coffee shop in UK market. As per the recent survey,
Costa coffee opens Paradise Roastery in Basildon with worth of 38 million GBP. It is in coffee
shop and beverage sectors with product range of Coffee, tea, sandwiches and iced drinks. Last
years reported net income of company was 153 million pounds. Its only subsidiary company of
Whitbread Plc. Company acquired 79 stores of Coffee Heaven for 36 million pounds. One of its
store at Greenwich DLR Station is deeply analysed for the purpose of analysing Small business
enterprise.
2.2 Overview of Company's Business
United-Kingdom has become country of coffee drinkers, sales reported of 2.3 billion cups
approximately each period as per previous year 2016. Following are the significant trends for
Costa in coffee market of the country.
1. Company had increase of 11.2 percent in its sales in 2016.
2. Contribution to overall growth of coffee-shop chain, as UK has become country of coffee
drinkers.
3. It is one of the successful sector of retail in the economy. As per estimation of 2020 the
market may generate revenue of 6 billion dollars in over 9400 stores.
4. Not at all surprising, the leaders in given sector are Starbucks, Costa Coffee and Cafe
Nero, collectively reflects 53 percent of coffee-market.
5. Happenings in market is taking place like Cafe Nero came up with Harris+Hole which
was earlier owned by Tesco Plc. Company is presently following strategy aiming at
business growth in United-Kingdom focusing on global growth of the company
(Williams and Martinez, 2014). To support future growth building capabilities and
creating a successful platform efficient and newer technology is being used in the
organisation. Costa has unique model for property strategy which give competitive edge
to company.
2.3 Key Sector Trends
Revenue of coffee shops industry is: worth of 6 Billion GBP.

Annual Growth as within 2013-2018: 5.7%
Businesses: 6,242
Employment: 121,189
Section 3: Business Strategy
3.1 Mission statement
To become the most successful coffee business anywhere in the world as measured by
customer preference and return on investment.
3.2 Business Goals and Objectives
Goal of Costa coffee located in DLR station and Woolwich is, “To Expand Business In
UK And China With Over 1,000 New Coffee Shops” (Briggs, 2015).
Objectives are: To provide coffee products at the lowest costs along with hygienic and
higher quality as compared to rivals.
Analysed branch of Costa coffee opened cost foundation which has objectives are to
relieve poverty, advance education and the health and environment of coffee-growing
communities around the world
Section 4: The Business Portfolio
4.1 Products and services of the company:
Coffee, tea, ice drinks as well as sandwiches
4.2 USP:
Unique selling proposition of Costa in DLR station and Woolwich is higher quality of
goods at the lower cost.
4.3 Financial information:
Financial ratio Method of performing
its calculation
Analysis that what ratio tells
Gross profit
ratio
Gross profit / net sales
*100
Net margin for company is 13.59% and gross
margin is 87.90% for 2006-16. This reflects that

= 2730 / 3106*100
= 87.90%
company has been expending higher on indirect
expenses but it maintains good liquidity to meet
current financial liabilities. On the basis of this, it
can be pertained that, Costa coffee of DLR station
and Woolwich branch managed and reduced it cost
of sales as well as indirect expenses up to the better
level.
Net profit ratio Net profit / net sales *100
= 422 / 3106
= 13.59%
Current ratio Current assets / current
liabilities
= 287 / 839
= 0.34:1
Those ratios which represent about the capability
of company in terms of fulfilling short-term
obligation within an accounting period is
considered as liquidity ratios. Under this, current
and quick two types of the ratios included and
value of them in selected branch of Costa coffee is
0.34:1 and 0.28:1 respectively. On the basis of this,
liquidity position and performance are not well in
the relevant industry.
Quick or acid
test ratio
Current assets – (closing
stock + prepaid expenses)
/ current liabilities
= 287 – (48+0) / 839
= 0.28:1
Working
capital
Current assets – current
liabilities
= 287−839
= -552
According to the working capital ratio, Costa
coffee of DLR station and Woolwich not able to
make payments of the short-term liabilities. The
reason is that, it has negative working capitals
which are worth of -552.
Section 5: Management & Ownership
5.1 Organisational structure of the business

Section 6: Current Customers
Segment: Hangout places
Target group: Middle as well as higher income group of people
Positioning: Become the best coffee maker
Therefore, present customers of the Costa coffee's DLR station and Woolwich branch as
per the target market are upper middle class of people. Along with this, privileged class of people
are also consumers of the selected branch. When considering to the demographic aspect
according to age then customers of analysed branch of Costa coffee are students, youngsters,
professionals, families as well as mature adults (Rodenberg, 2016).

Illustration 1: Current customers of Costa coffee, DLR station Woolwich, London
(Source: Rodenberg, 2016)
Question 2 Competitor Analysis.
Element Scale
of
busines
s
Strength Weaknesses Rival A Rival B Significan
ce to
consumer
Research
methodology
Financially
Strong
1 Organisation is
having 2.26 price to
sales ratio.
Company is
serving
fewer
countries.
Starbuc
ks
Greegs 1, as UK
has
become
country of
coffee
drinkers.
Qualitative research
methodologies and
small business
enterprises as
example.
Products

Price 2 Company offers
reduced prices than
rival sellers. To
attract more
customers by such
accessible prices.
High prices
may not
attract lower
income
group
customers.
2- Very
expensi
ve
beverag
es
offered,
good
value
for
money
but not
for
custome
rs.
Low
custome
r base
can also
afford
product
s
offered.
As the
compan
y offers
accessib
le
prices.
1 Journals
Quality 3 The quality offered
by company is best, it
has been using a very
good quality beans
(Mason and Brown,
2013).
Using the
best quality
raw material
would result
in high
expenditure
for the
company,
accordingly
cost of
products
would be
higher to
company.
Providin
g the
best
quality
products
to its
custome
rs.
It has
great
quality
items
used
without
compro
mising
with
custome
rs
health.
1 Websites
Product range 1 Company is known
for its Delicious
Few
consumers
1 3 1 Articles

beverages. may not
prefer such
high-priced
beverages.
Services
Fastness 3-
Excelle
nt
Cafe has very fast
speed of delivering
the order, which
attracts more
customers.
Making
customers
wait at times
for long is
not a good
for image of
brand.
1-
Cappuc
cino
Service
is fast.
1-
Mocha
service
is very
slow.
1 Customer reviews
Attitude 5-
Good
Restaurants requires
to come up with new
services they lack.
Sometimes
customer
have to wait
too long to
give their
order.
1-Order
was
served
in time.
3-
Waiters
were
not
serving
quick,
also
misund
erstood
the
order.
1 Customer reviews
Skilfulness 1 Retailer has good
knowledge of coffee
beans.
Being in a
nation who
is coffee
lover the
company
has to be
very
3-
Manage
rs seems
to have
thoroug
h
knowled
5- Not
sure of
having
expertis
e in
organis
1 Articles

cautious
about
choosing it
product
range.
ge of
Coffee
market
and raw
material
used for
their
product
i.e.
Coffee
beans.
ation.
Question 3: Recommendation to organisation for improvement.
Costa is the highest market share holder in United-Kingdom having approximately 40
percent if UK's market share. In the present project, Costa coffee's branch situated in DLR
station and Woolwich is considered. It has been focusing on increasing its market share but it
does not focus on promotional strategies. Costa is recommended to implement promotional
strategies, to reach its target of having more branches. To achieve the targets set it is advised to
company located at DLR station and Woolwich to develop four P's marketing strategy with aims
of Market segmentation, Expansion, Improvising quality of products and cost management for
effective prices. It can be advised to the Costa coffee that, it needs to establish new branch in the
Maktby Street Market of UK.
Shop located at DLR station and Woolwich has been working upon its product range by
not restricting to only a specific age group but it offers products considering demands and
preferences of all consumers (Goss, 2015). Though it has mostly focused on niche market,
substantial customers are from high middle class.
Due to its higher price policy, low income customers are not much attracting to Costa
coffee-shops of DLR station and Woolwich. Company may come with accessible priced
products to attract new customers from low income group in the suggested UK market i.e.

Maltby Street. Accordingly, it would hold the highest market share and take over customers from
Cafe Nero, who is offering reduced prices for same products.
Question 4: Expansion and Performance Suggestions.
Company has number of stores in United-Kingdom but fewer in other countries, it has to
focus on expansion of outlets in other countries like China and India where people are fond of
coffee. The Costa coffee of DLR station and Woolwich needs to expand the business and open
new branch in Maltby Street market of UK. Additionally, it is recommended to improve its
services to consumers like fast delivery of orders and attending them as soon as they enter in
Maltby Street market. (Stewart. and Gapp, 2014). This would accordingly increase the customer
loyalty and retain them for long term.
Having large number of stores in United-Kingdom Costa neglected that it could also
expand in other market like Maltby Street than in operating at present. It has to go for Market
segmentation strategy to analyse which geographical region is fond of coffee so that company
can open new stores at such places.
In order to analyse performance of existing branch and new market like DLR station and
Woolwich and Maltby Street respectively, it needs to consider market share as well as
satisfaction level of consumers. The reason is that, when people are more satisfied from existing
branch i.e. DLR station and Woolwich then they will attract in higher quantity towards potential
branch. Therefore, market share, revenue and sales as well as profit will affect in positive
direction of the new branch which will open in Maltby Street.
Question 5: Analysis of Plans and objectives.
Main Objectives Strategies Evaluation Revision
Required
New Targets
Planned
Integrity Public Relation
Strategy
4- Smart and
Appropriate
Communication
Process followed.
New loyalty card
or updation in old
one.
New product
range
Product
Development
2- Not projected
smartly.
Accessible
product range
Assessing the
preferences of
most of the
targeted

consumers.
Retaining
customers
Market
Development
3- Smart Expansion in new
market like
Germany or
France.
(Rundshagen,
Sommer and
Moss, 2014)
Conducting a
survey to identify
customer review'
for company and
its products.
Improvement in
Services offered
Benchmark
Strategy
4- Appropriate
and Smart.
It has set
standards and no
revision required
in them.
Choose one
organisation from
world dealing in
same sector and
make it as bench
mark for practices
followed in given
sector.
CONCLUSION
With this report, it can be concluded that Costa has very good financial stability at
present. Company has good financial liquidity and performance, only lacks in managing its
indirect expenses. Contribution to overall coffee-chain is very high from Costa. Company has
improved its sales from past year which reflects it has got success in increasing market share.
Starbucks and Cafe Nero are very close competitors to Costa they are dealing in same product
range. Analysis conducted revealed that it is not easy for Costa to snatch customers from rivals.
Though Nero is not very high priced but gives great competition in terms of low income
customers demography (Curran and Burrows, 2015). Company does not focus on promotional
strategies thus recommendations are provided in case, to improvise its customer branding. At last
objectives of company are viewed and it has been found that Smart strategies are followed by
company along with required advices has been made in areas for improvement.

REFERENCES
Books and Journals
Blackburn, R.A., Hart, M. and Wainwright, T., 2013. Small business performance: business,
strategy and owner-manager characteristics. Journal of small business and enterprise
development. 20(1). pp.8-27.
Curran, J. and Burrows, R., 2015. The social analysis of small business: some emerging themes.
Entrepreneurship in Europe (Routledge Revivals): The Social Processes. pp.164.
Goss, D., 2015. Small Business and Society (Routledge Revivals). Routledge.
Mason, C. and Brown, R., 2013. Creating good public policy to support high-growth firms.
Small Business Economics. pp.1-15.
Rundshagen, V., Sommer, G. and Moss, S., 2014. Enterprise, creativity and small business.
Entertainment Management: Towards Best Practice. pp.202.
Stewart, H. and Gapp, R., 2014. Achieving effective sustainable management: A small‐medium
enterprise case study. Corporate Social Responsibility and Environmental Management.
21(1). pp.52-64.
Storey, D.J., 2016. Understanding the small business sector. Routledge.
Williams, C.C. and Martinez, A., 2014. Do small business start-ups test-trade in the informal
economy? Evidence from a UK survey. International Journal of Entrepreneurship and
Small Business. 22(1). pp.1-16.
Online
Briggs, F., 2015. Costa Aims To Expand Business In UK And China With Over 1,000 New Coffee
Shops. [Online]. Available through:
<https://www.forbes.com/sites/fionabriggs/2015/04/28/costa-aims-to-expand-business-in-
uk-and-china-with-over-1000-new-coffee-shops/#2f9bc306318c> [Accessed on 16th
September 2017].
Rodenberg, J., 2016. Costa Coffee vs Starbucks Business Intelligence. [Pdf]. Available through:
<https://www.rodenberg.nl/publications/publications/COSTA_COFFEE_vs_STARBUCK
S.pdf> [Accessed on 16th September 2017].

Whitbread PLC. 2017. (http://www.marketwatch.com/investing/stock/wtb/profile)