Detailed Marketing Report: UK Coffee Industry Analysis and Strategies

This report provides a comprehensive analysis of the UK coffee industry. It begins with an executive summary and introduction, highlighting the industry's growth and economic impact, including its contribution to GDP and employment. The report delves into the UK coffee market, examining market size and consumption patterns. It then presents a PESTLE analysis, evaluating the political, economic, social, technological, environmental, and legal factors influencing the industry. A SWOT analysis identifies the strengths, weaknesses, opportunities, and threats faced by coffee businesses. The report also includes a competitor matrix and applies the Boston Consulting Group (BCG) matrix and Ansoff matrix to assess strategic positions and growth opportunities. Market segmentation is discussed to identify target customer segments and marketing strategies. Finally, the report offers recommendations to enhance understanding of the project.

INTRODUCTION TO
MARKETING
1

Executive Summary
This is a summary of Coffee Industry Marketing Report in which covers impact of coffee
industry on UK economy. The present report herein provides a detailed evaluation of the role that
has been played by coffee industry in UK economy. Adequate statistical data has been
demonstrated as to broaden the understanding of report in an effective manner.

Executive Summary.........................................................................................................................2
INTRODUCTION...........................................................................................................................4
TASK 1............................................................................................................................................5
TASK 2..........................................................................................................................................11
TASK 3..........................................................................................................................................13
RECOMMENDATIONS..............................................................................................................14
REFERENCES..............................................................................................................................15
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INTRODUCTION
Coffee industry is one of the fastest and leading growing sectors that provide numerous set
of advantages. In relation with this it has been seen that coffee industry not only helps UK to
increase their GDP but also helps them to strengthen their employment generation margin. As
per the data availed through Project Cafe UK 2019 report it has been analysed that UK coffee
shop sector currently worth 10.1 billion Euro (NEW RESEARCH: 6 things we now know about
the UK coffee shop market. 2019). It has been further evaluated that there is an 8.7% robust in
the growth of branded coffee shops in the year 2018 as it reached to 8,149 stores. This report
include overview of UK Coffee Market along with SWOT, PESTLE analysis further
accompanied with The Boston consulting and Ansoff matrix. Furthermore, various market
segments along with relatable approaches and marketing strategies are covered in this report as
to provide a detailed analysis on present research topic. Lastly, formative recommendations have
been provided in this report as to widen the project understanding.
TASK 1
UK Coffee Market
United Kingdom is mainly known for utilization of instant coffee. That led towards
increasing the turnover upto 810 million Euro in the year 2017 which is corresponding to 54% of
the overall 1.5 billion Euro turnovers in an overall manner which is generated by all the related
products of coffee that are sold in retail sector. As per the estimation it has been observed that
average number of two cups of coffee has been consumer per day that makes an average of 95
million coffee cups are being consumed on a daily basis in UK.
As per the published data from Economies and Business Research (CEBR) it has been
assessed that overall impact of UK coffee industry put remarkable contribution on the United
Kingdom economy (UK Coffee Market Analysis Published. 2018). It further helps in increasing
employment with UK providences. This happened due to induced multiplier impact in which
employees those who are associated with both direct and indirect activities of coffee expend their
income on domestic services and goods. There are mainly three types of major impact of UK
coffee market measured for four form of economic indicators that has been mainly considered
are employee compensation, Gross Value Added (GVA) contributions to GDP, turnover (or
gross output), and employee compensation.

As per the investigation of coffee that are associated with activities in national accounting
framework along with Cebr’s input –output modelling showed that, overall estimated number of
210,323 jobs in the year 2017 has been recorded due to employment supported by activities
related to coffee it further includes, induced, direct and indirect impact. Furthermore, in the year
2017 total estimation of 5.2 billion Euro employee compensation has been supported by
activities related to coffee that further include, direct, indirect and induced impact. UK coffee
market related activities showed 9.1 Euro estimation in the year 2017 on total estimated GVA
along with induced, direct, indirect impact.
Figure 1Allegra World Coffee Portal
Source: 15 Jan 2019
As per according to Allegra customer data is has been seen that top most companies are
moving their strategies towards coffee-focused strategies by seeing high growth opportunities in
this sector. Thus, as per the published report it has been analysed that current growing coffee
culture in UK market effectively fuelling economies within country including surge in sales of
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coffee related products within retail sector. It further boosts macroecomies factors that are related
to jobs along with disposable income (Tucker, 2017).
PESTLE Analysis
Coffee industry is one of the most widespread drinks in UK as it has been estimated that
average number of two cups has been consumed on a day. Further it has been seen that there is a
rapid increase in employment due to activities related to coffee industry. Mentioned below there
is a PESTLE done:
POLITICAL:
Due to high standards particularly related to methods of producing coffee increases
pressure on business organisations to conduct their trade in an ethical manner that include,
economically, socially and environmentally responsible manner. In relation to this fair trade
market are used by coffee companies in which coffee shop industries can bring differentiation in
their products and can further can socially responsible reputation.
ECONOMICAL:
Coffee industries within UK acts as a foundation for high end economy. There is a bit
difficulty for coffee production to build a sectorial linkages’ with trade established.
SOCIAL:
Health consciousness among population especially young people leads towards making
coffee as a less attractive choice (Samper and Quiñones-Ruiz, 2017). It brings competition
through the medium of substitutes of herbal teas, energy drinks and more. Thus, with the
changing attitudes such as, soy milks, chai lattes, and de-caf drinks coffee industry can give
tough competition.
TECHNOLOGICAL:
With the help of High-tech equipment along with premium equipment customers are
becoming more conversant related to wide range specialised fresh coffee. Thus, coffee industries
can provide wide range of cold and hot beverages by taking advantage of high tech equipment.
ENVIRIONMENTAL:
It is important for Coffee shops those who are contributing their contribution in coffee
industry to take care of proper maintenance of quality and take care of living standards of
population in order to ensure positive and long terms sustainability.
LEGAL

New taxes imposed by government lead towards creating numerous obstacles such as,
Sugar tax that has been imposed by UK which states that reduction in sugary content drinks by
20%.
Thus, with the above analysis it has been evaluated that it become necessary for coffee
industries to increase their product quality and try out to bring wide flavours in their products as
to ensure high end growth. Furthermore, it has been advised to coffee business units to adopt
coffee quality programme in order to improve their balance of supply and demand.
SWOT
Strength: With the help of strong ethical values along with well-built ethical mission statement
companies can gain more attraction of customers. One of the major strength that has been hold
by costa coffee is their consumer loyalty which stimulates their long term sustainability.
Weaknesses: With the speedy competition in coffee sector it becomes hard for
companies like Costa Coffee to perform their operations. Along with this, health related
consciousness among individuals lead towards less growth.
Opportunities: Companies can take advantage of co-branding with the other
manufacturers of the sector of food and drink. Along with this by taking advantage of brand
franchising companies can take the opportunity to expand their global operations in new
different markets.
Threats: Threat of competition and change in market trend along with change in
consumer preferences bring threat factor in coffee industries within UK.
COMPETITOR MATRIX
It acts as one of the best tool with the help of which company can easily able to define
wide range of new opportunities in order to grow. With the help of this, improved products and
new services along with advanced marketing strategies can be framed to gain more advantages.
Furthermore, with the help of competitor matrix, formative comparison against other competitors
can be done.
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As, per the above mentioned analysis, it has been evaluated that costa coffee is one of the
leading company within UK coffee sector as it gained estimated amount of 733.9 billion Euro in
the year 2013 along with having 1,552 number of outlets. This as been seen that costa coffee is
taking large market share as compared to other competitors.
THE BOSTON CONSULTING MATRIX
BCG matrix is also known as a growth-share matrix which acts as a corporate planning
tool. With the help of this, company can effectively understand their strategic position and can
find out more opportunities for business growth (Möller and Parvinen, 2015). This framework
was coined by Boston Consulting Group with the help of which business units with coffee
industries can evaluate their relative market share along with actual market growth rate.
Mentioned below there is a proper defining of four quadrants has been done:
DOGS:

This band hold low base market share and perform slowly into growing market. In
simple terms, this band have negative cash returns but not always as some dogs may prove to be
profitable. For this, companies can take advantage of some effective strategies like, liquidation,
divestiture and retrenchment.
CASH COWS:
It is most profitable band. In this companies with coffee industries are required to invest
their cash into stars that are gained from cows for further growth (Arsel and Moisander, 2015). In
this regard, companies can take advantage of related strategies like, retrenchment, product
development, diversification and divestiture in order to innovate new products and processes.
STARS:
It acts primary units within which company is required to invest their money as in this
there is expectancy for stars to become cash cows and lead towards generating more positive
cash flows. But with the advancement in technology there is a change for star to become cash
cow and further dog.
QUESTION MARKS:
` This is required more consideration as in this there is an potential for gain market share
and rise as a star. But in this there is not a surety to gain high success even after investing more
amount that lead towards eventually become dogs. Thus, for this it is essential for companies to
put close consideration and decide whether investment is worth or not. For this companies can
take advantage of some major strategic choice such as, market development, product
development, market penetration and divestiture.
ANSOFF MATRIX
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Market Penetration: In this newly started companies with coffee industry are take
advantage of strategy which is relating providing extreme satisfaction to their customers by
offering them what they want (Charlesworth, 2014). This is done so to increase loyal consumer
base and gain short term benefits.
Product Development: In this, companies those who are performing within coffee
industry can announce their new product by adding some qualitative measures into it as to
develop their product as to increase their sales by bringing a new range of product in existing
market.
Market Development: In this factor, companies within Coffee industry launch their
existing product range into new market segment as to increase their sales margin.
Diversification: Strongly established companies within coffee industry can take
advantage of diversify their business into more market segment as to increase their long term
sustainable effectiveness.
In relation with Costa Coffee company can stuck towards market penetration in their
early years as to establish themselves on the UK market place. Along with this they can use
various innovative measures such as, they can provide desired products as per their customers
such as, cappuccinos, coffees and espressos along with their names written on it as to give a
personal touch. This can be done with an intention to increase sales by effectively satisfying their
customers.

TASK 2
Identification to customer segment
Market Segmentation: It is usually seen that an organisation is not capable to target the
whole marketplace and so, the enterprise segments the market on the basis of certain parameters.
It is after then that the entity picks out one aspect on the basis of which the organisation devises a
marketing strategy. Coffee market is one of the fast growing markets which provides
opportunities for Costa Coffee to significantly segment the market and target effective customer
segments with a view to enhance the sales and profitability of entity. In this relation, market
segmentation can be done on the following basis:-
Socio-demographic: Under this, the marketplace is segmented on the basis of attributes
or characteristics of population like age, ethnicity, gender, occupation, marital status, income
level etc. In this regard, British Coffee Association (BCA) has revealed that coffee consumption
within United Kingdom has reached 95 million cups within a day in the year 2018 from 70
million cups within 2008, reflecting a 25 million increase over a period of last 10 years. Further,
a survey conducted by a governmental agency reveals that 65% of coffee is drunk at home while
25% is consumed within office and the rest is drunk in bars, restaurants and shops. Further, it is
seen that people belonging to age group of over 72 years and the Baby Boomer generation (53-
71 years) are most inclined towards drinking coffee, as a stress booster or reliever consuming an
average of 2.2 cups in a day. The survey also depicted that people belonging to below 20 years of
age consume least coffee at the rate of just 0.5 cups in a day. The millennial section in this regard
consumes 1.3 cups/day and Generation X (38-52 years) consumes 2.1 cups/day (UK COFFEE
WEEK 2018: BRITS NOW DRINKING 95 MILLION CUPS OF COFFEE A DAY, SURVEY
FINDS, 2019). This presents opportunities for Costa Coffee to gain the attention of older and
Baby Boomer generation to significantly the sales and profits of organisation.
Psychographics: Here, the segmentation of marketplace is carried out in accordance with
attitudes, hobbies, lifestyles and personality traits of individuals. In this regard, it is usually seen
that the older and Baby Boomer generation of United Kingdom has the lifestyle as well as the
habit wherein they consume a large quantum of coffee in a day averaging to 2.2 cups per day
(UK’s Dynamic Coffee Market, 2018). Further, a huge quantum of population of UK is found to
be consuming specialty coffee as they possess a certain kind of likelihood towards this type of
coffee.
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Behavioural Segmentation:
Behavioural market segment is mainly based on actual buying behaviour of consumers. In this
segmentations of market are done as per according to their response, attitude, knowledge and use
towards a product.
This segment can prove to be best for “Costa Coffee as in this they can effectively
observe loyalty of customers and provide them best effective service and let them experience
most excellent products and services provided by company. Furthermore, company is required to
collected related behavioural data that include, gender, income, age, occupation and location as
to make strategies for further growth (McWilliams, 2015). Behavioural market segment can
prove to be very effective for company as with the help of this “Costa Coffee can effectively able
to take sharp insight on customer’s behaviour which acts as one of the strongest element for their
market growth.
TASK 3
Marketing mix :-
This is been considered as one of a crucial marketing tool which could help an
organisation in promoting their products and services in front of target customers based on
different range of segments that are available for the same. In present context, it can be said that
Costa Coffee which is one of world’s famous brand within the coffee industry is looking forward
to expand its business at international level in the countries where it has not been expended itself
yet. In order to do so marketing mix has been developed in regards to Costa Coffee to identify
the target customers where different range of segments are going to be included. This may
majorly contains different range of elements started with P and these are product, price, place,
promotion, people, process and Physical evidence which helps in targeting the identified
segment. Since Costa Coffee has been dealing in range of coffee products, mainly roasted coffee
that is helping them in in loving a good position in the market. Here, actually company has
targeted both women and men with the age from 12 to 65, income level and taste considering
behavioural segmentation. Basically, it is been considered as the segment to whom Costa Coffee
has targeted and started offering coffee products and services. For the same a detailed marketing
mix has been developed underneath:
Product (Product description): A product is an item that is built or produced to satisfy
the needs of a certain group of people. The product can be intangible or tangible as it can be in